On Episode 967 of The Core Report, financial journalist Govindraj Ethiraj talks to Vivek Rathi, National Director of Research at Knight Frank India. We also caught up with Dr. Hal Brands, Henry A. Kissinger Distinguished Professor of Global Affairs at Johns Hopkins SAIS on the sidelines of the Elara India Dialogue 2026.

SHOW NOTES

(00:00) Stories of the Day

(01:00) Bond Markets Are Still Dragging Stocks Down

(02:46) Total overseas flows has brought in $137 billion

(05:26) India Is Increasingly Importing Gold From The UAE And Why That Is A Problem

(07:16) The Striking Contrast In Performance Of India’s Budget Homes Versus Premium Housing Sales

(17:19) What Motivates Donald Trump On Iran And Tariffs?

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Thursday, the 3rd of September, and this is Govindraj Ethiraj, broadcasting and streaming weekdays from Mumbai.

India's financial capital are top stories and themes.

Bond markets are still dragging stocks down.

Total overseas flows are now at $137 billion, including 127 of NRI deposits.

India is increasingly importing gold from the UAE, and why that's a problem.

The striking contrast in performance between India's budget homes and premium homes.

And what motivates Donald Trump on the Iran war as well as the tariff war?

Markets, NRI Deposits and the Rupee

We're still tracking the global bond market, which continued to fall on Wednesday. What this means is that borrowing costs are now hitting multi-decade highs as yields rise, even as the war in West Asia drives up energy prices and, of course, inflation and inflationary concerns. Sovereign bond yields are a reference point for asset prices across financial markets, and the higher price of money means elevated mortgage rates for consumers and tough choices for government spending as funding costs climb, according to a Reuters report.

The war is now resumed at levels last seen in July, and quite evidently, there is more to come. More on what keeps the war going for Trump coming up. Oil prices, however, fell on Wednesday after climbing to more than a one-month high earlier on Wednesday, with traders looking at the risk of supply disruptions following these overnight strikes by the United States and Iran against signs that crude supplies continue to reach the market, according to that Reuters report, which added that Brent crude futures were down slightly to about $94.08, so just above $94 on Wednesday.

Back to bonds. The yield on 10-year U.S. Treasuries, which sets the tone for borrowing costs across the world economy, has hit a three-year high and now nearing the 5% level. That could obviously unsettle the already unsettled stock markets.

Japan's 10-year yield was above 3% for the first time in 30 years, and the German 10-year bond yields were stuck at the highest since 2011 and Britain's equivalent at its highest since 2008. So, in general, as prices fall, yields rise, and vice versa. With all this in the background, India's major indices fell for the third session, and the Sensex fell 373 points to 76,570.

The Nifty 50 was down 141 points to 23,914. In the broader markets, the Nifty mid-cap and small-cap were down 0.5 and 0.37% each. Total forex flows from the FCNR window has crossed $127 billion, and total flows, including from external commercial borrowings, is now at $137 billion as of 31 August.

The Reserve Bank of India special swap window also attracted additional inflows through external commercial borrowings and overseas foreign currency borrowings, and the total amount under these two categories were $5 billion for OFCBs and about $3.8 billion for ECBs. The FCNR B window closed on 31 August, but banks can still avail of the swap facility for deposits already contracted until September 11.

And some reactions now to that. Madhvi Arora, Chief Economist of MK Security said that the higher than expected FCNR mobilisation of $137 billion likely explains why the Reserve Bank chose to close that window early. With this, she says the core banking system liquidity could peak above 10 trillion rupees or that's 10 lakh crore rupees in September.

With the liquidity impact now larger than anticipated, she says that some durable liquidity absorption tools are likely to be deployed, including Forex's shorter 10-hour sell by swaps. She also says that it is important to recognise that this represents a future dollar-denominated debt liability with an indirect fiscal cost through lower Reserve Bank of India dividends potentially amounting to about 1 trillion rupees or 100,000 crore rupees cumulatively, and the funds raised therefore need to be deployed judiciously and productively to mitigate these first-order costs. Arvind Chari, another frequent guest on the core report and Chief Investment Strategist at Q India UK affiliate of Quantum Advisors India says we should move to liquidity management and net of existing short forward.

This is $90 billion of new liquidity. Pre-FCNR, this was about 250,000 crores and today it's about 11 lakh crores. And he says that this will need a combination of market stabilisation schemes, open market operation sales, and ironically, CRR or cash reserve ratio hike to absorb, especially as monetary policy moves to tightening.

He also says the Reserve Bank will eventually have to start building up long forwards to repay these liabilities. This is a huge amount to build up and repay given India's average surplus balance of payments tends to be about 20 to 30 billion dollars a year. On the other hand, we do have time as a portion of the FCNR deposits would be a five-year 10-hour.

Elsewhere, the Japanese credit trading agency JCRA has upgraded India's sovereign rating from BBB plus to A minus signalling stronger confidence in India's economic fundamentals and credit worthiness.

With this, the rupee ended more or less flat on Wednesday after moving in a narrow range, thanks to continued support from the Reserve Bank of India, which offset rising dollar demand from importers and the impact of a spike in oil prices and treasury yields, according to Reuters, which added that the rupee closed at Rs.

94.97 after having closed at Rs. 94.95 on Tuesday. Now, gold prices have hit their lowest in more than three weeks on Wednesday now, thanks to a stronger dollar, and were down at $4,302 per ounce on Wednesday morning.

More on gold and India coming up in a moment. Meanwhile, a report in Business Standard said that commercial vehicle sales have accelerated in August with major manufacturers like Ashok Leyland, Tata Motors, and Mahindra reporting very strong double-digit growth as freight movement, infrastructure activity, and fleet replacement demand supported the market ahead of a festive season. Now, last year had seen a sales slowdown because there was uncertainty in the market ahead of the goods and services tax changes, that's GST changes, remember they came in September, but sequential sales and retail registrations indicate that underlying demand is also strengthened according to the Business Standard report.

Gold Imports From The UAE

Gold imports from the UAE are a major cause of the jump in overall gold imports, and the government should review the lower tariff offered on gold under the India UAE FTA, or Free Trade Agreement, according to the Global Trade Research Initiative, which has argued this in a note. Now, here's the data.

India's gold bar imports jumped about 47% from 7.5 billion in April to June 2025 to 11 billion in April to June 2026, despite the import duty being raised from 6% to 15% in the middle of May. Now, part of the increase in value obviously reflected the higher international gold prices, but what the GTRI is arguing is that country-wise data shows that the exceptionally high growth of imports from the UAE was a key reason for the overall surge. So, in June, to take a specific month, India imported gold worth about 649 million from the UAE, and that is up about 175% from the 235 million imported in June 2025.

In contrast, imports from the rest of the world fell about 18% from 1.6 billion to 1.32 billion. So, the UAE share in India's monthly gold imports are now at about 33% for June 2026 versus only about 13% last year. All of this says the GTRI makes a review of the gold tariff concession under the India-UAE FTA necessary as UAE is not a gold-producing country.

Gold meeting the agreement's rule of origin can enter India at a 14% tariff compared to the normal rate of 15%. Even this one-percentage-point advantage can be commercially significant in high-value, low-margin bullion trade and encourages importers to source or route more gold to the UAE, the GTRI has argued. The core report, of course, has argued in the past that we should do away with customs duty completely because it seems to serve very little purpose.

Performance Between India's Budget Homes And Premium Homes

Mumbai property registrations hit a 14 year high in August. Stamp duty collections crossed about 1100 crore rupees according to Knight Frank India via some 12,500 plus property registrations. The stamp duty figure was 11% increase and the highest as we said in over 14 years.

Stamp duty collections were also up 12% year-on-year reflecting sustained home buyer demand despite a high base according to Knight Frank. However, the larger question is what is the market looking like when you step back and look beyond Mumbai into the top cities or six or seven major cities where home sales are documented. I reached out to Vivek Rathi, National Director of Research at Knight Frank India and based out of Mumbai and I began by asking him what he's been seeing in the last few months including across the different categories from the budget or the affordable housing right up till the premium housing.

INTERVIEW TRANSCRIPT

Vivek Rathi: So, the housing market, when you look at the broad trends, particularly the YTD performance of housing sales across the top 6-8 cities, it has largely shown stability and resilience. And why I am saying this is continued headwinds have been coming in terms of, you know, increase in property prices to the war that began in the West Asia region. And then, obviously, interest rate unwinding has not happened at the same pace as was expected, both in the source capital markets in the US and Europe region, as well as in India.

And yes, you know, and there has been, you know, AI led disruption, which has created some threat in terms of livelihoods in a particular segment. In the backdrop of all of this, we are still in the 6th year of this housing upcycle. Volumes are holding up some markets like NCR, which have witnessed a decline of 10-15% in sales volume.

And at the same time, property prices continue to climb up in all of these markets without exception. Highlights, one, to the fact that consumers continue to maintain a positive sentiment for home buying. Second, from the supply side as well, there have been great efforts in terms of launching products where consumers are interested, focussing on execution.

This is the headline trend. In the backdrop, what you see is there's some contrast in performance in the lower segment and the higher value segments, wherein the lower value segment has continued to shrink further, and the higher value segment is what is driving growth or the stability that you see in the numbers.

Govindraj Ethiraj: So, can you define the segments? So, when you say lower value, do you mean sub 50 lakh rupees?

Vivek Rathi: So, different ways of looking at in terms of the government definitions, whether it is to do with RBI or GST, it is closer to 40-45 lakhs or RBI 60-65 lakhs for private sector lending. When the industry looks at it, generally 50 lakh ticket size of housing, that has continued to shrink. So, from about 55% demand share about 6 years ago, it's down to about 15-16% now.

And even the latest period, which is 2026 period until date, it has shrunk by another 15-20% in terms of volume. Whereas, the mid segment, which is segments above 50 lakhs, whether it is 50 lakhs to 1CR and 1 crore to 2 crore and further higher value segments to crore to 5 crore, all of these have continued to grow. The segment of 1 to 3CR is where the traction is particularly led by some of these markets like Mumbai, Delhi, Bangalore.

Having said so, across all categories, we have continued to see price growth.

Govindraj Ethiraj: And in all these cases, when you say there is de-growth and there is growth, including that 1 to 3 crore, you're talking about volume or number of units sold, right? Not the value.

Vivek Rathi: So, volume, now what happens as a result of a strong price growth is ultimately the value of total sales has also grown across these markets, including NCR. And why this has happened is, like I said, one, the value of respective properties have gone up and the mix of properties, which is selling now versus say a year ago, has moved in favour of the higher value segment. So, net-net, when you see developers reporting their numbers, most of them will report higher revenue numbers, even while they may continue to sell just about the same level of units in this.

Govindraj Ethiraj: So, this is what is happening in the backdrop, right? How would you classify between primary and secondary sales in all these sets of data that you are referring to?

Vivek Rathi: So, largely primary is 55-60% in the sales volume that you see. The remaining will be the secondary sales. Growth is largely coming in both of these segments.

It's very difficult to say how much of it, but even in our primary numbers, when we saw, it is closer to 1 to 2% growth in the first half of this year. NCR witnessed a de-growth, but all of the other markets have a 1 to 3% growth. When we look at the basket of primary and secondary sales for markets like Mumbai, Hyderabad, Pune, Kolkata, these have grown by 6 to 7% in the latest period, which means continued traction even in the secondary market.

Govindraj Ethiraj: Right, and would the price rises be higher in primary sales versus secondary sales?

Vivek Rathi: Yes, primary markets, because it is developer-led, there is a quicker revision when it comes to price hikes, affecting price hikes. Primary market has led the price hike phenomena. Secondary markets have played a catch-on and that catch-on has not happened.

Same momentum in very old properties. So, largely properties with up to 5-10 year old timelines into the life cycle have kind of participated in this, but older properties which are 20-30 year old have not participated in the same.

Govindraj Ethiraj: Right, and when you say prices are still rising, what would be the average and is this skewed by some specific markets or is it across the country?

Vivek Rathi: So, price rise is a phenomena which we've seen across the country. Just like NCR, Hyderabad, Mumbai have continued to record price rise. The momentum has been strongest in prime markets, suburban markets, where you have both commercial activity as well as a steady supply of premium projects, where configurations are on the higher side of the market spectrum.

So, markets where you have 3BHKs, 4BHKs, those are the segments which are recording a faster growth in terms of price rise.

Govindraj Ethiraj: And you said markets like NCR, it slowed down. So, what could be the reason?

Vivek Rathi: So, what has happened is in terms of volume, when you look at the market, large part of the sale in NCR is happening in Gurgaon and their inventory has concentrated in the higher value segments, which means volume participation has been suffering. People who are looking at an inventory under say 2CR, 1.5CR, 2CR have to look outside of Gurgaon and that is where the overall volume has suffered in case of NCR. So, that is one big reason.

Otherwise, even in the higher value segment, Gurgaon continues to do well both in terms of volume and price growth.

Govindraj Ethiraj: And I'll come to Outlook in a moment. Do you have a sense from your vantage point how people in a general sense are financing their purchases?

Vivek Rathi: So, largely, most of our surveys indicate about 80 to 85% financed with mortgage and that is broad spectrum for the entire market. But very different in the lower and higher value segment. In lower value segment, it will be like close to 98, 99%.

When I'm saying lower value, it will be up to say 50 lakhs or even 70, 80 lakhs. But in the higher value segment, the wealth effect starts to come into the play and people do access other means of savings that they have, whether it is their quitties or it is other PF and LIC kind of avenues which they have had access to fulfil their desire to purchase property. When it comes to the luxury segment or ultra luxury segment, which are properties beyond say 50, 60CR, there is completely a wealth phenomenon.

Depending on the performance on wealth, outlook on wealth is how they have demonstrated growth or stability in terms of volume.

Govindraj Ethiraj: What's your general outlook like for the next few months? How are you seeing the market?

Vivek Rathi: I think one is clearly there are signs that we are not in the same momentum as two years ago or three years ago when we were in the middle of this up cycle. On one hand, you will see developers continuing to launch new products. By the same time, they would make offers or flexible payment schemes for consumers to kind of decide quickly and get into the deal.

This is also a festive season in the next three to four months is when developers will also try to maximise the impact of all of their offerings. So overall, this period, this year as well, the result of this year is expected to remain good in terms of volume. Post that is when we will see who kind of buckles in terms of the standoff, both in terms of demand and supply, considering the fact that I highlighted how sales momentum has moderated in the last six months, 12 months.

Govindraj Ethiraj: Thank you so much for joining me, Vivek.

Vivek Rathi: Sure. Thanks.

What Motivates Donald Trump On The Iran War As Well As The Tariff War?

Hostilities have resumed in West Asia and clearly America or US President Donald Trump are not walking away from this one for a while but what are the reasons and motivations for President Trump staying in the war against Iran and equally what is driving his tariff agenda which metamorphoses into new forms each time there is some pushback from either outside or inside for instance the US courts. Remember for both these cases that's the war in West Asia and tariffs India stands to be and has been affected economically and quite severely on several fronts even as the tariff war started in April last year and graduated into a real war on the 28th of February this year. I spoke with Hal Brands, author of several books in geopolitics and a senior fellow at the American Enterprise Institute where he studies US foreign policy and defence strategy and put these questions to him.

Dr. Brands is also a Henry Kissinger Distinguished Professor of Global Affairs at the Johns Hopkins School of Advanced International Studies and a columnist for Bloomberg Opinion. He previously worked as Special Assistant to the Secretary of Defence for Strategic Planning and Lead Writer for the National Defence Strategy Commission and I spoke with him on the sidelines of the Elara India Dialogue 2026 in Mumbai earlier this week.

INTERVIEW TRANSCRIPT

Govindraj Ethiraj: There are two or three things which are perhaps a little newer than other things. So the tariff wards seem to have receded a little bit, the West Asia wards seem to have receded a little bit, but then again we saw some flare-ups on Monday, that's 31st of August. But as you try and make sense of what's going on, if you can, tell us about how we should be viewing it sitting here, which is obviously several thousand miles away, and as businesses, as investors, and partners.

Hal Brands: I think the overarching theme of Trump's foreign policy, to the extent that there is one, is that he has been trying to pretty radically renegotiate America's relationship with the world. And so Trump absolutely believes that the United States is, and should remain, the world's most powerful actor. In many ways, he has been throwing America's weight around more aggressively on the international stage than his predecessors did.

But he also believes that the U.S. has been getting the short end of various relationships that it's been engaged in for a long, long time to come. He thinks that about pretty much any trade relationship in which the U.S. runs a trade deficit with another country. He thinks that about most U.S. alliance relationships. And in general, he thinks that the U.S. has been getting insufficiently rewarded for the public goods it provides the world, or other services that it might provide. I might quarrel with that definition of the problem. I think U.S. relationships have been more balanced than Trump suggests, but I think that is the way that he sees the world. And so his overarching objective, whether it comes to trying to get allies to pay more in terms of defence spending, or trying to renegotiate trade deals, has basically been to try to extract greater benefit and greater leverage out of those relationships. Right. And where does the war fit in this?

It's interesting. I think the Iran war is in one sense fully consistent with the policies that Trump pursued going back to his first term. And in another sense, it is very idiosyncratic.

And so Trump has been hawkish toward Iran since 2017. He campaigned back in 2016 on the deal that the U.S. needed to get out of the Iran nuclear deal. He did that.

He ordered the strike that killed Qasem Soleimani during his first term. And then we've seen a continuation of that during his second term. And if you go back to the 1980s, you can see that Trump has long believed that the Islamic Republic of Iran is an enemy of the United States and needs to be treated a little bit more roughly.

But it's idiosyncratic in the sense that I think what Trump actually wanted to achieve with Iran was a similar renegotiation to what I just talked about. His first preference was to get what he would have considered to be a better nuclear deal with Iran. And that was the goal he was really striving toward through the spring of 2025.

And in fact, when Israel first attacked Iran in June 2025, Trump was initially hostile to that action, but he changed his tune after seeing how successful the Israelis were and seeing that it had opened a chance to try to halt the Iranian nuclear programme by force. And then the challenge was after that war, at some point, you were going to have to go back because the Iranians were going to start rebuilding their missile programmes, perhaps rebuilding nuclear programmes, and ensure that they couldn't do that. And then there was a weird concatenation of factors that involved everything from the Iranian protests that broke out at the very end of last year to the successful U.S. intervention in Venezuela that persuaded Trump that now was a better time to go ahead and make a bigger move against the regime. It's a strange story that in one way is fully consistent with the larger body of Trump's foreign policy, and in other ways, I think, was simply more contingent and dependent on events.

Govindraj Ethiraj: And I'll come back to the foreign policy part, but within the administration, who is the key driver for these thought processes, or who are the people who are the key drivers for these thought processes?

Hal Brands: Donald Trump. And this is the big difference from the first term. During the first term, Trump had a number of very strong, independent-minded advisors in place who, in many cases, disagreed with Trump fundamentally on policy issues.

And in many cases, were able to push Trump in a more mainstream direction or constrain him in some fashion or another. And Trump made clear that that's not what he wanted the second time around. And so he picked his cabinet this time around almost purely on the basis of political and personal loyalty.

And what we've seen is a much more unconstrained version of Trump in the second term.

Govindraj Ethiraj: Right. And the Iran war is not going as planned, and that's quite clear. There has been some success, maybe, on Venezuela, and we've seen the announcement of a new deal, which also there are varying versions on what exactly it means, but we'll come to that.

And the tariff war also hasn't gone as planned because that's been struck down by the Supreme Court itself now. There are other variations being tried out. What could all of this do to Trump, considering that if viewed objectively, he's not had all the successes that he wanted?

And what could that lead to?

Hal Brands: Well, I think it depends on the issue. On tariffs, Trump is not going to back down. Tariffs are his signature issue of his entire presidency.

And what we've seen is that he tries one tariff authority, and when it is challenged or struck down, he simply tries another one. And so there's some speculation that the Section 301 tariffs relating to forced labour practises that he recently imposed may be struck down by the Supreme Court. If that's the case, he'll simply do another 301 investigation or rely on another tariff authority.

And so there may remain some instability due to the fact that this administration tends to be extremely sloppy when it comes to the legality of the tariffs. But Trump is strategically committed to maintaining high levels of tariffs. On Iran, Trump would prefer to just be done with the situation.

The problem is that he can't easily extricate himself because there's no clear, quick path to a decisive victory. And if he walks away from the situation, which he might be tempted to do, it's going to Iran and control the Strait of Hormuz. And it will be a massive humiliation for him personally and a massive blow to US power and the region and beyond.

And so he's a little bit stuck. And essentially, since the first week of the war ended and the regime didn't collapse, he's been veering between alternative strategies, escalation, negotiation, economic pressure to try to bring about a favourable result. The economic pressure seems to be working okay at the moment.

The blockade is constraining Iranian oil exports. The US has been able to extract some oil through shipments through the Strait of Hormuz. It's not yet clear that it will cause the regime to fall, but I think this is the strategy that the president will pursue because it gives him an alternative to either escalating or conceding at the moment.

Govindraj Ethiraj: Right. And how are you seeing things from within America, for instance, inflation and the potential of interest rates rising and what consumers are going through? And can all of that have any impact on, let's say, midterm elections or his policies even before midterms?

And essentially from here outside again, what does the next two years look like?

Hal Brands: The reality is that many of Trump's policies are not particularly popular in the United States. Most Americans have a negative view of the economy. Inflation has remained sticky.

Affordability is a major issue. Many Americans are critical of the Iran war in particular. And so I think it's been clear for a few months that the president is going to have an uphill fight going into the midterm elections.

I don't think that the midterm elections are going to result in dramatic changes in the way that Trump governs the country. His policy preferences are pretty well established. On foreign policy in particular, the president has a lot of authority and it's very difficult for Congress to compel a change in direction.

And even if the Democrats do take both the House and the Senate, their majorities will not be sufficient to allow them to pass major legislation over Trump's veto. And so he will be a somewhat more constrained and harassed president after the midterms if the Democrats control the House and the Senate. But I don't expect dramatic changes in the direction of US policy.

Govindraj Ethiraj: And viewed from an India point of view, since we are meeting here, how do you see India negotiating or engaging, particularly since we are talking about a bilateral investment treaty? And how could it be given how you've described Trump so far?

Hal Brands: I think the US-India relationship is possibly the biggest surprise of Trump's second term, where expectations were pretty favourable for the US-India relationship. Certainly in the United States, and I think among many Indian observers as well, Trump and Prime Minister Modi had gotten on well during Trump's first term. There had been basically a generation-long tradition of growing US-India strategic cooperation dating back to the early 2000s.

In some ways, the US-India relationship during the first year of Trump's administration was a victim of his desire to bring about a quick end to the war in Ukraine, which put India in the crosshairs due to its energy relationship with Russia. It was also a victim of sort of personality and circumstance. And it's been widely reported that one of the things that soured the relationship between Washington and Delhi was the fact that Pakistan was willing to nominate President Trump for the Nobel Peace Prize for his supposed role in negotiating a ceasefire last spring, and the fact that Prime Minister Modi declined to do so.

And so, in many ways, this is, I think, just a reminder of how volatile personalistic rulers and personalistic diplomacy can be. I do think that the strategic case for US-India cooperation is very strong over the long term. And so, this is an area where I expect there will be a reversion of the mean after the President leaves office.

JioHotstar Goes International

Jio Star which is also India's largest video streaming platform is expanding overseas for the first time launching in the UK, Canada and Singapore.

Jio Hotstar is run by Jio Star which is a joint venture between Walt Disney and Reliance Industries and will offer more than 160,000 hours of content in over 12 languages including English, Hindi and Gujarati according to the company in a report quoted by Bloomberg.