CNBC's Inside India newsletter: Modi in Moscow - What's the latest?

This report is from the CNBC "Inside India" newsletter, which provides timely and insightful news and market commentary on the emerging powerhouse and the big businesses driving its rapid growth. If you find it interesting, you can subscribe here.

The big story

This week, at a country retreat outside Moscow, Indian Prime Minister Narendra Modi and Russian President Vladimir Putin shared a cup of tea.

The NATO meeting in Washington, D.C. may have caused tensions to escalate.

The United States has raised concerns with India about its relationship with Russia, while the 32 national leaders of the military alliance have kept their displeasure with the Moscow meeting private. Additionally, the U.S. has threatened to sanction entities doing business with Russia to defund Putin's onslaught against Kyiv.

India has a longstanding relationship with Russia, despite pushing back against any pressure.

Historically, Moscow has been India's primary weapons supplier. Additionally, Russia has provided India with nuclear fuel since the 1990s and has recently assisted in constructing nuclear reactors.

The motivations behind India's transactional relationship with Russia are revealed through the underlying theme of their trade.

India's consumer inflation is high and unstable, negatively impacting Modi's election results last month. Despite his efforts, the prime minister is struggling to control prices for his citizens. India's relationship with its suppliers is not strategic, as it is purchasing goods from the cheapest supplier.

The share of Russian weapons in India's armed forces has been gradually declining since reaching a high in 2013, while Indian imports of defensive equipment from the West have increased.

"We'd like the optics to be toned down a bit, but overall, I believe we won't jeopardize our relationship due to it."

Even equity investors recognize the lack of threat of retaliation against India and have adjusted their valuations accordingly.

While some investors may alter their perception of India, viewing it as a trading partner with Russia's war machine, it will not affect Indian companies' investment potential. Over half of Aubrey's Global Emerging Markets fund is invested in India.

Besides commerce, India also possesses more profound cultural connections to the West. Numerous Indians dwell in the U.S., Canada, and the United Kingdom and embrace many of their host countries' beliefs.

A long-term energy deal with Russia may have negative consequences for India's trading relationship, despite appearances of caution.

What happens when a nation enters into long-term contracts for low-cost energy from Russia?

Need to know

Beijing claims that India has no right to construct 12 hydropower stations in the disputed northeastern Himalayan region, a week after China's foreign minister and Indian counterpart met in Kazakhstan.

The state of Uttar Pradesh has waived taxes on hybrid cars, making them 10% cheaper. This move has benefited Japan's , whose shares surged by 5.5% after local media reported on the state's tax break.

The wedding of Anant Ambani, the youngest son of Indian billionaire Mukesh Ambani, to Radhika Merchant is in its final phase. The event has generated buzz worldwide with an elite guest list that includes politicians, top CEOs, Bollywood stars, and other celebrities. In March, tech executives including Mark Zuckerberg and Bill Gates attended a lavish three-day pre-wedding celebration.

What happened in the markets?

Despite the upcoming quarterly earnings season, the Indian stock market has remained cautious, with the index remaining broadly flat this week. However, the index has still risen 12% so far this year.

The Indian government bond yield has been benchmarked at 10 years, and now we are waiting for the U.S. inflation data.

This week on Biz Focus Hub, Takeshi Niinami, CEO of one of the oldest Japanese whisky makers, stated that the company is seeking local partners to bottle and distribute its products in India. According to Niinami, the $10.8 billion firm aims to introduce something new to the Indian market by adapting its products to suit India's culture and trends.

The Indian government's upcoming budget will establish the framework for the country's economy over the next five years, as per Nilesh Shah, managing director at Kotak Mahindra Asset Management. The market will closely monitor whether the government can balance the impossible trinity of investing in infrastructure, maintaining fiscal prudence, and supporting the people at the bottom of the economic pyramid.

What's happening next week?

This weekend, there is a glamorous wedding, but here's what's in store for the week ahead.

July 12: India industrial output

July 15: China GDP, India wholesale inflation

July 16: Canada inflation

July 17: U.K. inflation

July 18: U.K. unemployment, ECB interest rate