India's Biggest Stress Test | The Numbers Game

追加: 2026-05-23

[00:00:00]can impact India's growth trajectory and what happens to the stock markets from here. Understanding what's going on, what might happen next and how to prepare is key to being able to ride out the supply side blow that's been dealt to the Indian economy and to all our lives and to make sense of the economic numbers. I'm joined on NDTV's number game by four super sharp number crunchers, economists and market experts. I want to introduce first Neil Kant Mishra, chief economist at Axis Bank, head of global research at Access Capital, chairperson of Aadhaar and part-time member of the prime minister's economic advisory council, one of the country's most influential voices on microeconomics, markets and policy. We have Ashima Goyel, professor at the Indra Gandhi Institute of Development Research, part past member of the monetary policy of the Reserve Bank of India and amongst India's foremost experts on inflation, monetary policy and macroeconomic stability. We have from Singapore, Samir Aurora, founder and fund manager of Helios Capital, legendary markets investor and one of the sharpest trackers of global markets, foreign capital flows and investor sentiment. And I have Rajiv Mantri, managing director of Navam Capital, investor, entrepreneur and market commentator with strong views on growth, public policy, and the changing structure of the Indian economy. To all my guests, welcome to the numbers game.

[00:01:25]Tonight, the battle is not over seeds.

[00:01:27]It's not about words. It's about growth, inflation, and the future trajectory of the Indian economy. So, let's get started with the numbers game. The first set of numbers are about petrol and diesel prices. petrol and diesel prices up by 3 rupees. But if you look at what's happened in other countries uh since the start of the war in countries like Malaysia, petrol prices up 56%, Pakistan 55%, even in the United States up 45%.

[00:01:55]Uh in China 22%, Japan 10% and in India at this moment just 3.2%. This is as far as petrol is concerned. Let's take a look at diesel prices next. Uh, in Indonesia, diesel prices are up 91%, in Malaysia, 71%, in the US, 48% since the start of the war. In a country like China, 28%, Japan, 11%, India up at this moment by 3.4%. I want to ask Neil Kant Mishra first. Petrol diesel up three rupees. Everyone watching at this time feeling the brunt. And the first question is, is this it or will there be more? Is this the first of many more oil shocks that will hit everyone's pockets?

[00:02:35]Nil Kant Mishra what's your sense >> yes absolutely uh I think uh thing numbers are uh and should rise from here uh this is the only way we can uh allow the market the economy to adjust to the new reality in energy markets um and uh I must say that when you are comparing the increases in other markets uh it also reflects the fact that India has surplus refining capacity so even As oil prices are up about $30 $35 a barrel, uh refining margins where you know crude oil is converted into diesel, petrol or LPG, uh they are also up substantially and India has refining capacity surpluses. So the oil marketing companies are also benefiting from that.

[00:03:23]So the countries that do not have uh adequate refining capacity have had to raise prices by uh much much more than India needs to. Having said that the 3 rupees is I think just the start. Uh our expectation is that there needs to be at least another 15 rupees per liter increase and perhaps the government will raise that over a period of time.

[00:03:45]>> You know there are multiple estimates of how much it would take for oil marketing companies to break. Even you know you're looking at the data on your screen right now. The minister has its own estimate but broadly petrol and diesel will need to go up by at least 18 to 30 rupees for oil marketing companies to break even.

[00:04:03]Neil Khad Mishra gets this show off to a start by saying there will be more at least 15 rupees he thinks Ashimagel what's your sense because as people grapple with the first increase in petroleum prices at the retail level in four years they're wondering how much more are oil are petrol and diesel prices likely to go up by. Why don't you try and explain your perspective on this and then we'll move on.

[00:04:26]Yes, I agree that it will have to go up some more if but it is going to be data based in the sense what is happening to oil prices what is happening in horses because there's a lot of uncertainty there but two facts I would like to flag which is that you know we've had counter cyclical sort of movement in in oil price taxes uh because the last four years oil prices were not raised and oil prices have fallen to 70 over 2425 so OMC's were allowed to make extra profit.

[00:04:57]Similarly, excise taxes were not draw you know I mean the pass through was not given to consumers when oil prices fell.

[00:05:06]The government absorbed some higher taxes. India is one of the highest taxes on diesel and petrol among other countries. You know when you're saying these countries have risen at so much and so so in that sense and in my MPC period during after the Ukraine war counter changes in oil excise really helped keep inflation within the tolerance band so we did not have to raise interest rates too much. Yeah. So I think in India we're going to use multiple policy levers not just you know the pass through of the full amount but something will be absorbed by the fiscal something by OMC's something by consumers >> when the war started the general perception amongst market experts economists and even the amjanta was that the turbulence that we are facing is now linked to the war given that the war is now dragged on 3 months are you now in a zone where you feel that this war is going to impact us structurally and definitely in the medium and long term damage has already been done. This is not linked to whether Iran and the United States and Israel stop bombing each other and whether this war ends that the damage is here. It's going to hit us hit us and hurt us over a sustained period of time. Is that your sense?

[00:06:23]>> No, I don't think it's going to I mean impact us for long but definitely this year's numbers in a macroaggregate sense would be reduced. But before that I think it is very unfair to put all these 1,000 cr a day losses saying that these oil companies are losing,000 crores. It is India is losing,000 crores a day and that is nothing actually because there are four players who should be made to bear this. First is little bit from the oil producing companies that is OMGC and all should not be allowed to get away with high prices. Second is government has to reduce a little bit of the taxes.

[00:07:00]Third is the oil companies themselves that is these oil marketing companies maybe a little bit and then public also has to be passed on but to say that as if these you know if you leave everything you know we are doing it for the oil company or the oil companies oil companies are basically India and in aggregate 1,000 crores a day which is $3 billion a month into let us say it goes on for 6 months is 18 billion according to me it's a ply number if you just see that in the last one year Reserve Bank of India on gold alone would have made a $30 billion profit easily mentally not literally but mentally it can be accounted that you made this additional 30 billion you're not supposed to make on gold in a uh reserve uh account so it could have been easily handled but if you put everything oh oil company's losing it's going bankrupt that's a you know >> interesting point as always from Samir but Rajim Mantri the two points One, nil Kad Mishra says petrol prices need to go up at least by 15 rupees. That's his estimate. The pe the people watching at this time would be aash to hear that.

[00:08:08]The other is does the government pass this all through or do you think they're more because you also understand the economic maneuverings of this government. Are they likely to do it gradually? We've seen the RBI governor, we've seen the prime minister, we've seen the petroleum minister, everyone preparing people for shocks. Are more shocks likely in the next few days and weeks? Raji Mantri >> I agree with what Nilkant said I think that India needs to be going for further raises the reason is we don't know how long this crisis will last for and the sooner we align with the economic realities the better it is so while it is a potentially painful scenario for all consumers for the Indian economy uh I think it's better better to take the pain up front and be aligned with the economic realities rather than trying to push the can push the can down the road So while for the last several weeks oil prices had not gone up at the retail level, the fact is that in the numbers that have just come out for wholesale price inflation, you've seen a big spike in inflation and the concern is and I want to spend some time now talking about inflation numbers. What happens to inflation next? Because this is when it starts hurting the pockets of everyone watching. The fact is that oil and petroleum prices have surged since the start of the war. This is the data that's just come out which says that wholesale inflation has shot up on the nearear basis in the numbers that came out for April 26 to 8.30. If you look back inflation has largely been under control over the past few quarters. It's been under control now it's starting to skyrocket. Now I want to put that to Ashima Goyle first on inflation. We've already seen big numbers from about 2.07 jumping up to 8.30 30 wholesale price inflation. What's your sense of how the needle moves and how is that likely now already to impact the lives of those watching? Ashima Goyel to you first.

[00:10:00]>> Yes, but you know what what we watch what we watch in the NPC what NPC targets is headline inflation and again we saw this during the Ukraine war very large jumps in WPI but the headline inflation stayed stable and the trend of that core inflation was coming down. So again the points I want to make is that our oil or energy intensity have has gone down. So therefore an oil price increase does not impact costs as much as it used to. Say the 70s the earlier oil price shocks and therefore the pass through to consumer prices partly also because of government intervention this countercyclical excise you were talking about is not that much. So although WPI has shot up because it has a large weight for international oil prices but headline inflation consumer basket the weight is much smaller.

[00:10:53]>> But let's look at consumer >> uh inflation numbers and I'll get nil Kant Mishra to explain this because the concern that everyone watching would have this is wholesale uh inflation if you look at consumer inflation that's not moved just so much at this moment in the latest numbers for consumer inflation has gone up from 3.40 to 3.48 for it on a year-on-year change basis.

[00:11:14]It hasn't skyrocketed in quite the way wholesale inflation have. And naturally, people watching Mil Kant would wonder uh in the way that wholesale inflation has gone up, will uh consumer inflation, consumer price index also start going up in the coming weeks in the same fashion.

[00:11:30]Nil Khan Mishra, explain that. Uh as Ashima was saying uh the constitution of the uh CPI basket the consumer price index basket is very different from that of the WPI basket. So uh crude is uh I think close to 4 and a half% of the WPI basket and therefore if uh you know crude prices go up by uh 65% uh you have an uh automatic like 2 and a half% 2.6% 6% increase in the CPI. Uh it is not crude of course because no consumer directly consumes crude but it is petrol and diesel and the combined weight is about 2 and a half 3%. And uh see there are certain other elements that are passing through which which for example plastic price is going up. So packaging for FMCG products is becoming more expensive. Edible oil has gone up because bio through the bofuel linkage crude oil prices go up. Edible oil prices go up. So some of the inflation will start to show up. Our expectation is that uh if we were averaging about four our expectation was an average inflation of about 4% for the CPI and FI27 on a run rate basis if oil prices stay at $100 a barrel for the full year we could very well end up at about 5.3%.

[00:12:51]uh here I think it's very important for uh your viewers to understand as well uh is that uh the price the oil markets are saying that current price may be $105 but the March 27 price so in the oil futures market if you want to buy oil for March 27 delivery uh it is only about $838 $84 uh so this is part of the reason as Ashima was also saying that we need to and I also expect that it will be a gradual increase because uh it is unwise to uh mark to market every month and I think having a graded increase if you can afford to and given that India has a refining surplus we can afford to do that um this increase can be much more graded it need not be as high as what the current prices are indicating.

[00:13:40]One last point um the binding constraint for us is the currency market. See, we have because of the fiscal discipline shown by the government over the last several years, we have the fiscal space to buffer the economy from the increases that are happening globally. But we still need to pay the dollars. And uh when we see that the March 27 prices which till 10 days back were 75 have already started inching up. It is prudent to let the economy adjust to the new realities and also signal to the currency market that we are willing to bear the pain and therefore the attack on the currency can weaken. So I think that is the primary objective for >> let's take a look at how the rupee has been fairing versus the dollar and also compared with other countries since the start of the war. I look at uh the rupee first from 91 in February 26 now at 95.75.

[00:14:33]Nil Kant Mishra makes the point let the rupee slip. That is the hard economic reality. It's also Rajiv Mantri as you know well you know a question loaded in politics. It's not just about economics here. You'll have the opposition attack the government. You'll also have the charge that while elections were going on, the government tried to create this impression that there is not as much of a pain that things are under control.

[00:14:55]The moment election numbers are in and you won the elections, then you let the rupee slip and you let the price of petrol and diesel go up. That's the reality that the government will have to deal with as it makes whatever decisions it does. Rajiv mad.

[00:15:09]No, so these are these are judgments which any uh leader in office will have to make as to what should be uh announced when u uh and frankly the whole situation in the Middle East has been so uncertain that I don't think one can simply ascribe it to elections. I mean practically every other month or every quarter there is some election happening somewhere. Uh another 6 to 9 months again there will be some election happening. Uh so uh I don't think these types of decisions are made by people who are driven by you know election cycles because frankly that's a never- ending uh episode in India.

[00:15:44]>> You're saying it's a never- ending episode. Let me get and see his take on this because this is the reality whether it's Rahul Gandhi Kal Mtab Banerjee they're saying election things in terms they understand. So I'm not surprised that opposition people, opposition members who only understand that language will paint this important economic issue through that lens.

[00:16:05]>> Let's hear from Samir. Samir, >> I agree with Mr. Mantri on this because I also felt all along that this war is going to end and that's why I remained bullish. You know the top guys have been killed in Iran and therefore the 61st guy will not have any follower or skin in the game. So I also went all along thinking it's a short-term thing, it's a 10day thing, 20 thing and maybe the government also thought the the same in that sense. So this one because these things happen in a very compressed period plus minus a few days looks as if you're waiting but as I said I myself have made this in if if you call it an error or something that we all thought that the war will not go on for so long.

[00:16:48]In fact, President Trump himself thought that the war will not go on for so long.

[00:16:51]So if you had been an insider in his uh thinking you would have thought the same. So this one we will let it go and not there are other things we can talk about but this one is not such a serious thing in anyway it would have could have been 10 15 days earlier big deal not Mishra makes the argument let the rupee slide further it's the new economic reality there's very little you can do there is also the politics of if for example if the rupee gets to 100 versus the dollar you know there will be a lot of attacks coming the government's way one is just the brutal reality that you're dealing with the other is having to deal with the political economy and the political management of letting the rupee slide. Ashima go ahead.

[00:17:30]>> Yes. I think markets look only at the nominal rupee but as an academician I like to look at the real effective exchange rate. So one stylized fact in India is that he always had a sharp nominal depreciation during crisis times whether it's the global financial crisis or the Ukraine war and that time markets used to really you know be focused on that and and so out of 35 years only six years have we seen that you don't have a capital account surplus which is enough to cover the current account deficit. So the last two years of these six have been the past two years. So but the rupee has been depreciating throughout 2025 no much before this Iran issue because we had a current account deficit I mean a capital account deficit also. So actually the rupee has overcorrected the real effective exchange rate now is about 92 when 100 is an equilibrium that research shows and throughout history whenever there has been this kind of depreciation it's followed by an appreciation either because of inflation. If the nominal rate depreciates too much, it increases prices and inflation which leads to real depreciation. So it can only be a short-term fix. It can't be a long-term fix. And and that is why it's better to uh and and moreover markets sort of tend to panic as you're saying 100 is a sort of 100 where the oil prices or rupees is a red flag for markets and they say so there are outflows based on that the rupee is going to reach 100 which I'll fulfill. Therefore, you really need and we've throughout the past you know whether it was any of these crisis u because RBI does not come in that much in the initial initial depreciation because whoever's taking out money should take the loss but they come in later and there's a correction towards equilibrium levels not not all the way therefore I mean I think that we've had this depreciation through 25 it did not resolve the deficit it does not work that way because we have Two, our oil imports are inelastic and there's full pass through. Our exports are in competitive markets where large exchange rate volatility does not help them except in a few areas.

[00:19:41]>> I come to the third set of numbers that have been dominating the headlines and this is to do with foreign investment coming into India. I'll start with foreign portfolio in uh investment and if you see the amount of money that foreign investors have taken out of India since the start of the year is 2 lakh cr rupees already more than the amount of money foreign institutional investors took out of the Indian markets in all of last year which was about 1.66 66 kores. This is been a bloodbath. May, March, April, a lot of money going out of the Indian stock markets and even now we're just in the middle of May. Again, you're seeing a very strong negative here. Let me try and get Sami to explain because this is what he understands. I mean, he understands a lot of things, but this is what he's most passionate and charged up about. Is this the way it's likely to stay? Is there anything that you can do?

[00:20:31]anything you want to say to policy makers watching you Samir at this time on how this can potentially change Samir >> so before that fundamentally I disagree with Neil Kan Mishra that we should let currency weaken 200 and all that because because he's thinking that fundamentals affect prices and markets and currencies but I think it's the other way around also that if you look at George Soros's reflexivity that prices affect fundamentals if you did whatever you could to affect the stock market or even the currency fundamentals will improve.

[00:21:06]If you did whatever it took to uh improve interest rate by uh sorry currency by 1% you will save $2 billion a year because we are importing some $180 billion. So I say spend $2 billion in subsidizing the banks and let them raise $50 billion from NRIs. you will need around $2 billion a year from government's pocket because these days the interest rate differentials between India and the world are low. So previously you could get away without out of pocket but if you if you have to spend say 2 3% which is on a 50 billion $1.5 billion a year for 3 years that one and a half billion you will save in 1 minute if currency overall from whatever level it would have reached otherwise it is 1% better. Same thing for the stock market. Uh we all believe that means the government and the system that we should do economy right and the stock market will reflect the fundamentals. No, no, no. Stock market you target directly, it'll affect the fundamentals and this somehow we don't accept and we go out of line with the world and I think whatever it takes and you know these taxes I'm not going to say again and again because I am only one out of maybe 50,000 fi and if they can handle it I can handle it better but it is wrong and everybody knows and nobody says that it is I it is wrong but take it or leave it. We all think that every day if we say it somebody will listen.

[00:22:35]But I'm saying these are easy things to do. It is not easy to change our LLM models and our AI models and our FDI policy and nuclear policy. It is easier to give 1% extra return to the stock market and individuals like us can raise 500 million in a year.

[00:22:52]>> Let me get nil Khan Mish to respond to everything that you're saying. Is this ringing alarm bells uh in policy circles that you travel in nil Kant or does it really not matter as much to the government because okay these are foreign investors they chase returns the rupee is depreciating uh and therefore it doesn't matter says of course it matters the government has to believe it matters the tax measures that have been introduced in recent budgets have to be reversed because that's what will change sentiment and once the market sentiment changes it has a roll-on effect on the real economy as well let Neil Kant respond to that >> yeah First let me clarify you can go and rewind and see what I said. I never said the rupee should be let to slide. Uh all I was trying to say was that one mechanism to protect the rupee from sliding further is to let oil prices rise. That was a very simple intervention. It has now gone into I'm saying it is going to 100 and all that please that is not my >> that's what it looked like.

[00:23:48]>> Yeah but you know anyway so to uh that clarified uh let me address the question. See I think there are um from the FI's perspective in the last two years there have been three major issues. First is that India is part of the EM basket and EM as an asset class were losing money and and 3 four years back India was the only shining em. So Korea had had a coup, China was uninvestable, uh Indonesia had issues, South Africa was struggling with power cuts, Brazil was struggling with political instability. Today uh TSMC's uh index weight is higher than that of India.

[00:24:26]U Korea is generating the two companies in Korea generating more free cash flow than all of corporate India. Uh you have uh South Africa now with power surplus uh and and so as the EM universe has become much more attractive. Uh there's more competition. So the beauty parade got tougher. So the the price to earnings multiple that fi want to come in at is a lot lower than what they would have expected four years back. At the same time I think em as an asset class has started to outperform the US.

[00:24:57]So now flows have started to happen. Um at the current stage I think the concern is primarily about the the the oil prices. Once the currency market has stabilized there is still a lot of panic in the currency market. Once the currency market has stabilized, our economy is actually doing very well. Uh in March and April, the annualized growth rate in my view was well above 7 and a half 8%. So if we are slowing and we have to slow down because oil prices have gone up and they're going to stay high for longer. Um we are slowing from a much higher level. So I think as earnings stabilize I think FIS will start to come back on the on the need to meet liquidity as Samir was saying that uh you know this current currency market panic is mostly about liquidity because you know exporters are panicked so they're not bringing back dollars in time. Importers are excessively hedging.

[00:25:53]Some FBI are excessively hedging. So there is outright panic in the currency market. To stem that you need what you call crowd control measures. So you try to get 30 40 $50 billion. So at a at a strategic level, I think a much simpler solution is to target bond investors. So what you say is a 20% withholding tax on bonds which frankly even China has waved for the index inclusion stuff. You you get included in the two big indices. You get 859$90 billion over two years and that I think will solve the currency market panic. So and that is cheap capital. uh you get dollar funding at 7%. uh if you get private equity funding it comes at 15%. So uh so I think there are solutions to this uh there's no need to panic. Currency market is in panic.

[00:26:39]So we have to take some hard measures and urgent measures. But beyond that I don't think there is much reason as we talk to market operators looking at the Indian markets they're saying the government's decisions on long-term capital gains and securities transaction tax have been counterproductive and now there's data to back it and this crisis is a good opportunity to remedy the problem which was created. Is that your sense as well or do you think that uh it won't send out the right signaling from the government's perspective to try and do this to try and appease the stock market mavens as it were?

[00:27:15]>> No. So, in fact, you know, I've had this uh debate with Mr. Aurora before. Uh I don't think we should tinker around with the tax rates on capital assets again.

[00:27:24]uh there is some argument that ST could be waved because the commitment was there by the government of India earlier that the ST is being imposed uh because capital gains was made to zero uh about this was about 15 20 years ago now when uh LTCG in particular was completely waved off so they had said they putting ST because capital gains tax is zero now that capital gains tax is back there is a case for uh removing the ST but I'm not of the opinion that there should be lower lower taxes or zero taxes I think the place where we have arrived at is is a sensible economic place and we should stay there.

[00:28:00]>> Okay. You know one argument is that foreign investors is staying away on account of the securities tax or the long-term capital gains tax that int that was introduced. The other argument came from the likes of uh fund manager global investor Ruchir Sharma when I spoke to him during the campaign trail and I want to show you a quick excerpt.

[00:28:18]He makes the point that India fundamentally doesn't have a strong AI play in the eyes of global investors which is why foreign investors are not looking at the Indian stock markets yet and therefore it's got really nothing to do with tinkering with taxes on the margins. This is a larger problem in the absence of an AI play. Let's listen very briefly to what Richard Sharma told us on NDV's walk the talk and I'll go across our panel and try and get their perspective on this. Here he is. In America the effect is very different of the like of the war and the other factor which is playing a very big role today in the global economy and in fact if you talk to people on Wall Street they will now speak much more about that than even the war is AI >> that there's a real focus amongst the global investment community if I can say so and particularly in the US that Trump will come and go energy prices will rise and fall the only thing which is here to stay is AI and in America or two the stock market is up uh partly because of AI that you know people think that AI is here to stay and so we have to focus on AI. So I think that's the big difference that as far as an India is concerned the energy crisis what's happening in the Middle East matters deeply to us and unfortunately we are on the wrong side of the AI trade uh just now what's your reading of the state of play in the Indian stock markets the nifty is about 10% down from the beginning of the war uh some sectors like auto royalty are down 15 odd% PSUs are holding firm but it's largely been negative How do you see the Indian stock markets play out over the next few quarters?

[00:29:57]>> Yeah, you know I mean like the thing about the Indian stock market is that we have we tend to swing to extremes which is that 2 years ago the only stock market in the world which was matching up to America in the entire world was India >> and now we have fallen from that where in the last two years we've been among the worst performing stock markets in the world particularly in dollar terms.

[00:30:18]Now these cycles can last. As I said that as long as this AI mania continues, it's very difficult to see capital coming to India.

[00:30:26]>> As long as the AI mania continues.

[00:30:28]>> Yeah, it's very difficult to see capital coming to India because people have sort of convinced that India is not going to benefit at this stage at least of the AI boom because the AI boom at this stage is about building infrastructure is about building semiconductors and plants.

[00:30:46]Let me get Samir to respond to that first. Ruch Sharma's argument that it's the absence of an AI play which is what is keeping foreign investors away from the Indian markets. It has nothing really much to do with uh the tax changes that people like you have been arguing for Samir.

[00:31:00]>> So first of all it is wrong to say that there is one reason.

[00:31:04]>> Sure that I'm also not saying that 100% of the reason is tax. But if taxes uh reduce your returns by 20%, that means normally you're expecting 10% returns in dollar terms and they become eight. How can it not change? It's I mean it's arithmetic. So I nobody can say that taxes don't matter. But the point is AI I was also in US last to last week and um I don't think I can answer the AI question which is so people would say we don't have AI because that is a standard question and I would say that in emerging markets Korea and Taiwan together are now about say 50% weight but these three companies four companies which are directly AI related are maybe 25 30% out of 100. So what are you doing with the balance 70%. Why do you have to take out money from India? Because the AI you can do within that 100. You can make your 13 to 50 if you want. There will be 50 left. So let's talk about the balance 50. Point being nobody's putting 100% in AI. In US also you they can keep saying AI but not 100% of the money is going into semiconductor and Nvidia.

[00:32:10]They are buying regular. In our case they are redeeming from here to buy there. Our weight is around 12% in emerging market somebody can say okay we will give you 8% 6% because we are but they are making us minus so therefore I think it can't be AI alone and AI anywhere 200 countries there still all those countries are going up so AI is one reason tax is one reason our currency weakness is one reason we are close to oil is one reason but we can't say because there are three other reasons we won't do anything about the four three >> that's a good point let nil Khan Mishra come in on the argument that the lack of a strong AI plays what is keeping foreign investors away and while the government is now trying to address that foreign investors think it's too little too late the government obviously will not think that way but they're moving their money out they're moving their money out of India to other emerging markets and uh to the United States and that's the brutal reality you're dealing with >> look uh in the last couple of years u I would say last two years uh the incremental growth in the world and I I would say even if you take the US I would say 60% plus of incremental growth has come from AI investments. So u it is a very important part of uh of the of the incremental growth and as financial markets which chase that incremental growth uh they're looking for those opportunities and therefore they're investing. So uh I I agree with Samir that this is not the only factor. uh we also had a big problem uh back in FY25 when we started to do fiscal and monetary tightening at the same uh at the same time and when we did that the fullear earnings estimate fell by 13% and this was the worst among major markets. So if we start making those policy errors uh uh like you know bringing down credit growth dramatically obviously the investors will get upset.

[00:34:05]U but it is it is hard to deny that uh the the uh that there are just two companies in Korea for example which are generating more free cash flow than all of India put corporate India put together. And when you have a reality like that and those stocks are still trading at seven times earnings uh and India you know despite the correction is at 18 19 times earnings is something that does give pause to investors. Now the fact that as uh ex semiconductor analyst I have seen DAM companies being viciously volatile. uh four years back skinex uh had had very weak profits and today uh it is generating you know 100 billion dollar plus of free cash flow can very easily reverse next year uh so uh and you know in this chasing of AI remember that the world over it is not the government that is working on AI uh you look at what's happening in the US it is it is Google it is open AI it is anthropic all raised by private capital in the in China it is all majors in TSMC which has now more weight than all of India or SK high or Samsung they're all private firms I don't think the government anywhere is actually putting money to work because most governments don't have that kind of money >> Rajim Mantri your take on why foreign investors are looking the other way and the extent to which uh the lack of an AI play is responsible for this Sami argues is not just one there is other money that can come in not just the AI money and all these factor factors together contribute to the way foreign investors look at the Indian markets.

[00:35:44]>> No, so this AI point also is the typical specious and glib talk if I may say so that Sharma keeps occasionally tossing us tossing at us. I don't think at all that is the reason. I mean see one of the biggest structural shifts in the last 7 8 years or rather last five seven years has been the way interest rates have gone up. you have such a fundamental reset of the cost of capital globally that every emerging market will be reviewed in a viewed and reviewed in a very different way now and then secondly on this AI point as well I completely agree agree with Mr. Mistra that uh we don't want that type of concentration of earnings of profitability of corporate power even in just a handful of companies. I mean imagine a stock exchange which is being run by just one two companies uh and and frankly what is the purpose of a stock exchange? The purpose of a stock exchange is to provide capital to companies to grow. So these are economies which are tilting themselves completely onto the AI bandwagon. Now the Indian economy is much larger, much more diversified and has different needs. Uh we we cannot and probably should not aspire or hope for these type of uh developments to take place in India. So I don't think that is the reason. The bigger reason which I have always tried to flag is that we need to keep pushing the pedal on supply side reforms. There are different sectors, there are different uh areas which need to see continuing reforms to happen, continuing liberalization to happen. I think if you keep doing that you'd attract FDI as well as FBI.

[00:37:17]>> Okay. But on the issue of FDI, the fact is that net FDI inflows Ashima Goyle have been negative while FDI in general is cited uh as a success but net FDI has been negative and therefore you've got a lot of uh repatriation of money taking place from India. Is there anything that you would recommend or advocate to the government to try and reverse that change there?

[00:37:41]>> Yes, I think that the push on data centers and so on and I think maybe we should we could open up more to ch FDI from China. Um and uh but overall I think there as I with Rajie that this AI story you know research shows that the greatest benefit from any technology change has come from its application and I think India has highlighted how we are you know moving ahead on application in many areas and the second thing is our diversity this this AI gamble is is is really concentrates a bubble that can be a bubble which can burst tomorrow when it bursts a lot of these big names lose money then India will be there because we are following a very different diversified strategy which I think will work better in the long run.

[00:38:33]>> Okay, you're making a very important argument. I want to put that question to uh Nil Kad Mishra. It's similar in some extent not entirely to the crypto debate about whether it's a bubble whether it'll burst or not. the argument really about the centrality of AI in determining uh growth from here a lot of countries doubling down India of course has the consumption story 1.4 4 billion people. So there are multiple other levers for growth as well. But the argument being made by some is that what was earlier a dividend in terms of our democracy. The youth bulge is now you know not necessarily a curse but now a liability because you've got all these people who are not necessarily at the cutting edge of the AI curve and therefore in the way that the world is shaping India's advantage or India's moment of inflection is potentially now lost. How do you respond to that?

[00:39:23]>> Yeah. So there is a a big concern. So as much as I agree with almost everything that my fellow panelists are saying in terms of the lack of sustainability of some of these growth numbers. So for example, you know, if the free cash flow of these 8 10 companies which used to be say hundred billion 3 years back is now projected to be $800 billion. Uh clearly the market will reward that right? I mean because the markets will chase forward-looking returns. So uh uh so as much as I agree that this may not be sustainable uh because this is all stranded capital uh what are they going to invest in uh and so on so forth but the the the reality is that a lot of money uh has gone in there. Now is India particularly negatively positioned? Uh you see that if you adjust for the sharp decline in IT companies market cap and the price to earnings multiples the overall headline uh performance of India is quite a bit better. I mean it still is underperforming but uh so there is clearly concern that there is there used to be at one point 17 18% of the market which uh has now uh significant risks on how their business models will evolve over the next 5 years and their price to earnings multiples have actually come off. So this is also seen as a concern.

[00:40:42]So over and above the positives on generative AI and the infrastructure that goes in and that is benefiting a specific handful of companies in Asia and a lot of companies in the US uh it actually is seen as a negative for India. But does that mean that uh there is nothing and I heartedly wholeheartedly agree with what Ashima is saying that in the deployment of AI I think India has significant advantages.

[00:41:05]It will it will help solve many of the vicious problems that we have been struggling with uh both in terms of state capacity in terms of bringing down the challenges of health and education and there are already solutions that are starting to get in. So I I am I am quite confident that uh you know these are these are passing fats and you used a may not be in a very appropriate one of crypto but but uh in terms of crowd and herd behavior it does remind you of that kind of a bubble and uh maybe it takes 6 months maybe take 12 months but I do think that uh some of these things are unsustainable. there is uh a lot of cash burn in where the generative AI models and data centers are operating and there is a lot of cash generation in pockets where the cash may not be flowing into the right direction. So maybe the models need to start charging more maybe the world cannot afford to do that uh to to you know all of these uh empty tokens and uh and useless uh sort of activities on AI but uh that correction I think is inevitable. It may take 12 months, it may take 18 months. But till that period, I think India will face headwinds from the sentiment perspective.

[00:42:19]>> In the last part of this broadcast, I want to deal with the impact of the West Asia war on as growth outlook. Now, we're already seeing from bodies like Moody's, the OECD, Ernston Young, multiple bodies lowering India's growth estimates. You've got some of those on your screen right now. Moody's for example is expecting India's growth numbers to come down about8% from 6.8 to 6. Uh OECD is projecting an even bigger fall in India's growth numbers by about 1 and a half% from 7.6 to 6.1. The economic survey uh and this of course happened much earlier projected a much smaller reduction. Morgan Stanley is the outlier projecting an increase. They're imagining that the war gets over in June and then things get better after that.

[00:43:07]But even as you go on and look at all the numbers that have come out from different brokerages, they're projecting uh a very big downside to the Indian economy at least around about a percent or so. Ashima Goyel from everything that we've seen so far and what is already visible to us leaving aside shocks that may still be around the corner. What impact do you think what's already happened has on the growth that we would have otherwise had without this war?

[00:43:36]>> Yes. Again going back to the Ukraine episode where oil prices stayed high for one year. Growth fell from 9 to about 7%. No. So here if it is 2 months, 3 months, 6 months, we we could I think it's about 1% loss in growth is is a is a realistic figure for the for the present. But then we must remember that we are coming from a really high growth angle.

[00:43:59]and and therefore it's not doesn't mean stagnation or anything like that. We're still doing very well and also our strength of of diversity as a counter to these kind of shocks. So and and therefore you know the the whole story about the stock market and inflows and how do you attract more then we have many other things we can do such as improving our current account uh uh deficit increasing productivity and consumption other kinds of I think our strength during after the major poly crisis that we've faced in the last few years was that we went in for structural reform that improved our long run outcome we should do the same thing here a big strategy we can follow is green substitution and this will affect us in the long run. It will really help us reduce our oil vulnerability. It's already come down quite a bit but you know their political resistance to some kinds of reforms that you need power distribution etc. We are already seeing some of those things being pushed through because of this West Asia crisis. So in the long run if you're able to do the right things is it is going to affect our growth positively not negatively. Nilkad Mishra Ashima Goyel saying about a 1% negative impact on India's growth numbers from what's already happened you know can you just do some scenario modeling for us on the basis of what we've seen currently and on the basis of whether this war extends and what more damage happens to the economy how do you see India's growth being impacted by the West Asia crisis nil Khan >> uh great so uh let's start with where we were so we started before the war uh we had a forecast of 7 and half% for FYI 27.

[00:45:42]The estimate we have is about a $15 per barrel on a base of $70 which was last year's average. $15 a barrel is 1% of GDP. So currently because oil prices are averaging give or take $100 maybe slightly higher uh there is a headwind of about 2% of GDP. This is a terms of trade shock. Now the terms of trade shock is split between fiscal intervention because whatever happens uh the ura prices I think are unlikely to go up above 5.3 a kilo. So the government fiscal deficit will go up because the government will intervene and protect. So the 2% is split between the rise in fiscal deficit and growth.

[00:46:22]So whatever the government uh decides to say suppose the fiscal goes up by 1% the impact will be 1%. But as we think about a full year and if you take the oil futures market by the end of the year the expectation is that March 27 oil prices are $83 or $85 a barrel that's 1% impact and I think that the government's uh uh intervention on the fertilizer market on LPG etc will mean that about half of that will I think be taken over.

[00:46:51]So uh the current run rate which may be around 6 and a half 7 as the oil prices are passed through they may sort of dip down a bit once this trade reopens and oil markets sort of stabilize again uh by Feb March next year we could again be upwards of 7% growth so the fullear number may not maybe a bit misleading I think from a run rate perspective 7 and a half to 8% in Feb March slowing down slightly because of the oil prices maybe slowing down further as the fuel prices are raised uh because to protect the currency and then towards the end of the year again picking up as the oil prices start to correct >> interesting Samir your take on this and what do you make of Morgan Stanley predicting as an outlier an uptick in June they're thinking the I mean they seem to know something that nobody else does >> that is Morgan Stanley that is one person in Morgan Stanley so that is you can call his name rather than but let me say big picture that if there is a shorterterm problem. It is okay to say we will do long-term this thing which is useful so that you don't have short-term problems but you can't say that today's currency is weak and weakening and fi are leaving. So let me tell you a 20-year plan to do structural reform on nuclear energy or something. Short-term need short-term uh counter measures because you don't want these things to go to in a spiral or more painful because it's not easy because let's say big picture it's not literal but in a big picture some foreigners might hit their mental stop-loss. You see please note that not everybody's an emerging market fund manager or an Asian manager.

[00:48:28]many of them and the real money is global funds. In that global fund, India has a small cap micro cap allocation of 1%. Let's suppose I buy one small cap stock and it does badly. I bought it because that time I was excited and I thought it'll help. But if it does badly, you blow it off. It doesn't matter to you, but it matters to that stock because it got hit down because it didn't matter to my NAV at that time.

[00:48:54]It's the same thing can happen. You don't want to push it beyond a limit and you can't say if currency has become 15% that don't worry I have a 10-year plan for opening up some new reforms those are they will reflect over time and anyway there is enough capacity in people's minds to do two things together so I think do the structural reforms do the opening up do the energy transition but please look at currency okay don't look at anything else who cares about taxes currency if you hold everything will reverse Tell 20 things that can be done on currency and maybe 18 will be rejected. But don't say that will solve on its own.

[00:49:33]>> That's a good point. I want Rajim Mantri to respond before I conclude this point that Samir makes. There's a fire now.

[00:49:39]Dow the fire. Don't talk about energy transmission, transition, green energy, etc., etc. Deal with the fire. Burn the fire that's burn dow the fire that's burning your feet.

[00:49:48]>> Like Mr. himself said, you can do two things at the same time. It's not an either or. do >> and uh those who need to douse the fire they are sitting in the government I'm sure they are on top of the objectives and the tasks they have to do but I think people in the media should also raise this issue of important changes which will that's the that's the whole point of this conversation I want to push back a little bit on Sami's point uh because we have to raise this in front of even the public and hopefully whoever matters in the government that uh you know I had written about this oil and gas uh uh uh sector yesterday uh that in in 11 12 years time India has actually been a become an even bigger importer of energy now what are we doing in that sector for reforms that sector is ripe for changes we need to make those changes if we going to we have already doubled up in terms of for example civil aviation uh footprint of country number of airports have doubled up. The civil aviation sector is growing very rapidly. Those who have been holding Indigo stock will be very thankful for that. Uh but if you look out over the next four five years, you want to sustain that level of growth. Can you do the same uh thing over without adding anything on the upstream oil and gas side without doing any work any policy reform exploration and production in the country?

[00:51:18]>> Okay.

[00:51:19]>> So I don't think of it as a theoretical discussion. I think it is very important to actually sustain the growth rate and make sure that India stays in at least that 7 to 8% real GDP growth bracket if not double digit. I mean I'm very disappointed people are even stopped talking of double digit growth and the whole mindset appears to be crisis management firefighting everywhere. No one is thinking also a little bit beyond 3 years and beyond next quarter's NA statement. I really enjoyed this conversation because we had different perspectives on offer. Uh to talk about what's happening with the civil aviation sector, the losses and the roots being cut back by Air India uh internationally is a whole different conversation. We just have to do another episode of the numbers game to get there and elsewhere.

[00:52:06]But for the time being from your very busy schedule for taking our time nil Kant Mishra, Sami Rora, Ashima Goyel and Raji Mantri, thank you very much for joining us. very different from the last time we were in the studios talking about the pace and the excitement of the election counting numbers but these numbers as I said extremely significant to the lives of every single person watching and to the larger economy I hope you benefited from this edition of the numbers game for taking out time and joining us on this broadcast thank you very much I'll be back again with another edition of the numbers game till then from all of us here goodbye It is the first anniversary of option dude.

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[00:56:43]>> But first, two big breaking news that's coming and called this the first salvo from Tamarad's new chief minister C.

[00:56:50]Joseph Vijay at the center. He's called the fuel price hike unacceptable. He has argued that the government and oil companies do not reduce prices when crude oil prices are low. How can they increase this price? He's called this unacceptable and said that this fuel price hike after elections to five states has been timed for political convenience. He has also said that the hike would dent income of the poor and middle classes who use two wheelers. The price of essential commodities he has argued will rise. This is uh Joseph Vijay taking on the center over fuel price hike. So that's the big breaking news that's coming in at the moment and that ties in to our top story this evening and that's the political face off over the fuel price hike. The government of course categorically saying global crude oil price situation has led to this fuel price hike. But the opposition has questioned why this hike was brought in soon after elections to the five states were concluded.

[00:57:57]demanding answers from the government.

[00:57:59]Rahul Gandhi even stated that this was a mistake of the government and the burden for that mistake is being borne by the common man. However, government sources have categorically said that the government and oil companies have been absorbing up to thousand crores of the oil shock on a daily basis in terms of losses. They've said that the under recovery of petrol is at 26 rupees a litter. Diesel under recovery at over 82 rupees a litter. The government sources said that the government is shielding citizens instead of passing on the full impact of the global crude oil shock. It's also said that 2,200 rupee worth of fertilizer bag is still sold to farmers at 240 Hello and welcome. You're on India matters this Friday night. The political thriller in Tamil Nadu is over. The Kerala confusion is done. It's settled.

[00:59:06]But the political heat from another state is just about to reignite once again. And that is the beginning of India matters tonight. The big breaking story from Karnataka where the DK Shivakumar and Siddhar Rameaya fight is all set to reignite with DK Shivakumar making a fresh bid to get his chance at being the chief minister. It's a familiar power play but it has begun again. Today happens to be DK Shivukumar's birthday the 15th of May.

[00:59:38]His supporters have launched a campaign with birthday cakes calling him the chief minister. A poster war has begun.

[00:59:46]Cutouts outside the Congress office are referring to Shiva.