On Episode 865 of The Core Report, financial journalist Govindraj Ethiraj talks to Dipti Deshpande, Principal Economist at Crisil as well as Sai Giridhar Raj Kumar, Vice President at the Federation of Automobile Dealers Associations (FADA).

SHOW NOTES

(00:00) Stories of the Day

(01:00) Ceasefire break down turns markets nervous again, backchannel negotiations appear to be holding

(04:40) Kiran Mazumdar Shaw of Biocon to transition out with niece with PhD in cancer biology set to take over

(07:16) Why auto sales had another solid April and what is driving it

(18:25) How cash transfers are helping low income households step up consumption

(26:57) Flights in UAE again face restrictions after fresh missile attacks

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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 Wednesday, the 6th of May and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

Our top stories and themes...

A ceasefire breaks down and markets turn nervous again but back-channel negotiations appear to be holding in West Asia.

Kiran Mazumdar-Shaw of Biocon is to transition out with neice, a PhD in cancer biology, set to take over.

Why auto sales had another solid April and what is driving those numbers?

How cash transfers are helping low-income households step up consumption?

And flights in the United Arab Emirates once again face restrictions after fresh missile attacks.

Markets, The War, The Rupee and Oil

In high-stress geopolitical situations, it's useful, as we've noted earlier, to focus less on what is being said and more on what is not.

It is evident that despite an exchange of fire and attacks on UAE's oil facilities by Iran, potentially in violation of ceasefire, the back-channel communication links seem active and have restrained, though not stopped, both the grandstanding as well as large-scale retaliatory attacks, at least for this round, which in itself is a good sign and we can only hope that it lasts and, of course, improves. A fragile truce in the Middle East was under strain on Tuesday after the U.S. and Iran exchanged fire in the Gulf as they fought for control of the state of Hormuz, according to a Reuters report, which also quoted Iran's parliament speaker saying in a social media post on Tuesday that breaches of the four-week-old ceasefire by the United States and its allies had endangered shipping and energy transit through the vital waterway. The U.S. military said on Monday it destroyed six Iranian small boats as well as cruise missiles and drones after President Donald Trump sent the Navy to escort standard tankers through the state in a campaign he called Project Freedom.

The waterway, that's the state of Hormuz, which carries a large share of global oil fertiliser and other commodities, has been almost closed since the U.S. and Israel started attacking Iran on the 28th of February and several merchant ships in the Gulf reported explosions or fires on Monday and an oil port in the UAE, which hosts a large U.S. military base, was set ablaze by Iranian missiles, according to the Reuters report. Brent crude futures fell on Tuesday but was still holding around $114 a barrel or $113.5 to be more specific after rising on Monday. In light of all of this, the Nifty 50 and the Sensex lost some of their gains from Monday.

The Nifty 50 was down 86 points to 24,032 and the Sensex was down 251 points to 77,017. In the broader markets, the Nifty mid-cap and small-cap were down slightly at 0.17 and 0.3 percent each. Meanwhile, a key indicator of confidence in the economy continues to be weak.

The rupee fell to a record low on Tuesday, falling to Rs. 95.43 against the dollar and going beyond the previous all-time low of Rs. 95.33 and finally closed at Rs.

95.28. Reuters report suggested that other oil-sensitive Asian currencies like the Indonesian rupiah and the Philippine peso were also under pressure on Tuesday. Just to put things in perspective, crude prices, which are of course a key source of pressure on the rupee, have gone from about $70 to about $114.15 a barrel after the war started. In related macroeconomic news, currency encirculation in India has jumped in the first 15 days of April.

The spike, which is about 12 percent year-on-year, is the highest since early 2017 after demonetisation extends a rise in cash demand seen over the past six months and through the last financial year, according to central bank data quoted by Reuters. And some more macroeconomic news in the form of an announcement that came Tuesday evening.

New Government Credit Scheme

The government is rolling out an 18,000 crore emergency credit line guarantee scheme aimed at small and medium enterprises in the aviation sector and aims to provide additional credit support to businesses facing liquidity stress because of the situation in West Asia, the government said in a press briefing on Tuesday evening.

Biocon’s Surprise Successor

Meanwhile, in interesting corporate news, you do hear of sons and daughters and sons and daughter-in-laws, but not often of nieces or nephews taking over a company. Kiran Mazumdar founder and chairperson of Biocon said on Tuesday she plans a phased leadership transition over the next five years with her niece Claire Mazumdar expected to take over eventually. Claire is the founding CEO of Bycara Therapeutics, an oncology-focused biotech firm incubated with early backing from Mazumdar and listed in 2024.

Mazumdar said that she was not hanging up her boots anytime soon and she wanted Claire to succeed her in a very phased manner, adding that the transition would move step by step from director to vice chair and eventually chair. Mazumdar founded Biocon, one of the world's leading biosimilars makers, in 1978 in a garage in Bangalore. Biocon has a portfolio of more than 30 biosimilars, 12 of which have been launched commercially and gets most of its revenue from the US and European markets.

Claire has a BS in biological engineering from the Massachusetts Institute of Technology or MIT and an MBA from Stanford Graduate School of Business and a PhD in cancer biology from the Stanford School of Medicine.

India’s Investor Composition

It's always interesting to see the composition of investors in the stock markets and India does seem to be headed towards greater institutionalisation. The share of individual investors that's retail plus high net worth individuals in NSE listed companies has fallen to a five-year low of about 9.11% as of March 31st, 2026, even as mutual funds have risen to about 11.5%, the highest ever and ahead of direct retail ownership according to data put out by Prime Database and reported by Business Standard.

At the same time, foreign investors' shareholdings have fallen further to a 14-year low of 16.1%. So India is evidently moving closer to international stockholding patterns with institutional money but fuelled in this case by systematic investment plans or SIPs in mutual funds, becoming as a whole a dominant force in Indian stock markets. To some more background context of the shift in investor behaviour, in March 2012, the share of mutual funds was 3.2% and the share of individual investors was 8.5% and 14 years later, the share of individual investors has remained roughly the same at 9.1% but the share of mutual funds has gone up to almost 11.5%. So there you are from 3.2% in 2012 to about 11.5% in 2026.

India Auto Sales

It's been another strong month for auto sales in India.

Total auto retail sales grew almost 13% with a record 26 lakh units sold in April compared to 23 lakh units in the same month last year according to the Federation of Automobile Dealers Associations on Tuesday. All of this was thanks to continued tailwinds from GST 2.0 which saw a reduction in rates, particularly entry-level vehicles, that's cars and other vehicles as well. Lower interest rates, rural cash flows and an extended marriage season according to FADA.

Passenger vehicle sales were also at a record 4 lakh units last month as compared to about 3.6 lakh units in April 2025, which is a growth of about 12%. Two-wheelers also saw their best ever monthly numbers at about 19 lakh units in April this year. So what were the different categories that did the best and what was driving this and what was the outlook particularly given the war clouds and literally the absence of clouds which is a poor monsoon on the horizon.

I spoke with Sai Giridhar, Vice President of FADA based out of Jaipur and I began by asking him how he was seeing the numbers.

INTERVIEW TRANSCRIPT

Sai Giridhar Raj Kumar: We've started April on a very strong note. We're saying that April has been a record month for the auto today industry as far as numbers are concerned. So it's never ever been that in a month of April, we've done 26,11,000 vehicles.

And if I walk you through the category, so primarily all the categories have performed well. So it's been a record for all the categories. Only category missing in the segment is the commercial equipment category, wherein you do only about 6,000 vehicles.

Otherwise, if you talk about two-wheeler category, two-wheeler category, the industry has outperformed the expectation. It's done close to 19,16,000 units. Year-on-growth of approximately 13%.

If you talk about commercial vehicles, it is close to 1,99,300 vehicles. Again, a growth of 15%, a record April for commercial vehicle segment. And even in passenger vehicle, if you talk about 4,07,000 vehicles, it is never that in the month of April, passenger vehicles have clobbed 4,07,000 vehicles.

So it's a record month.

Govindraj Ethiraj: Yeah. And within that, so for example, within passenger vehicles, are there any categories and within two-wheelers like a certain CC category, which is driving most of the sales?

Sai Giridhar Raj Kumar: So as of today, we don't go to that depth. We're doing a CC category, but we do a overall view. So overall, if you talk about two-wheeler segment has grown by around 13%.

If you talk about, we do a category split between urban and ruler. So in urban and ruler, if I talk about two-wheeler is strong on both the sides in approximately urban, it is grown by what close to what 14%. And in ruler, the growth is approximately 12.3%. That's the growth. So it's kind of equal as far as urban ruler is concerned in two-wheeler. But if you talk about commercial vehicle, ruler has outplaced urban segment by twice the numbers. So the growth in ruler segment commercial vehicles is 20%.

So now we can say that the commercial vehicle segment is no longer limited to only metro cities. It has gone to the ruler India also. And why it is happening is because it is mainly driven by the freight movement, the infrastructure related activities, which are happening, the new school session, the replacement of buses.

Also, what we probably look over here is the steady single owner operator commercial vehicle users.

Govindraj Ethiraj: Right. Okay, now, if I come to passenger vehicles and cars, rural has grown at 20%. And urban is at 7%.

So does that mean urban is slowing down? Or is it rural, which is accelerating at a level which we've not seen obviously before?

Sai Giridhar Raj Kumar: It is not that the urban is slowing down, it is probably the ruler which is catching on the base. The base of ruler was low for quite some time ruler was not performing well. And we know the obvious reasons the entry segment cars, if you talk about for passenger vehicles, post COVID, the way the prices were increased in the segment, it was a the input cost for the OEMs, be the compliances which you require due to the Indian government norms, the prices went up on a crazy note.

We see this traction coming when this new GST 2.0 norms kicked in. So the cars and the two wheelers became more affordable. The circulation as far as the money is concerned was more in ruler.

We saw this Rabi season going good for the ruler segment. So it's not about urban slowing down. It is about ruler catching up with the Indian pace.

Govindraj Ethiraj: Right. And if you were to look at categories within passenger vehicles, for example, hatchbacks or SUVs, is there any changes from what we've seen in previous months? Or is it roughly the same trend?

Sai Giridhar Raj Kumar: So it's roughly the same trend. Only change which we've seen is from September onwards, the entry level segment cars, they've started doing a comeback, they've started performing. Rest, everything is moving towards SUVs, whether it's sub four metre SUVs or bigger SUVs.

If you see most of the OEMs, the launches are also in the SUV segment only. So in fact, saloon, the options are very limited. If you talk about a three box car, the options are very limited.

There's hardly any new vehicles which are launched in this segment today.

Govindraj Ethiraj: Interesting. And how are you seeing, particularly for the month of April, the sales and sales interest in EVs and hybrids?

Sai Giridhar Raj Kumar: So if you talk about EVs have done pretty well as far as the EV segment is concerned. In fact, if I remember it correctly, in passenger vehicle segment, EV is close to what 5.7% market share. And in two wheeler, that is close to what seven and a half percent market share.

So EVs have started coming back. I think the way forward is definitely for the new energy vehicles. I should not talk about only EVs, it should be the new energy vehicles.

From new energy vehicles, you can even include the CNG because today if you talk about the passenger vehicle segment, the alternate fuels which are there, including EV, CNG, hybrids, strong hybrids, today they capture around 36% of the market as far as passenger vehicle is concerned, which is substantially high. Earlier it used to be dominant with petrol and diesel only. Now you see 36% is done by others.

And going forward, once we have more technology coming in, there are OEMs who are talking about range extenders, there are plug-in hybrids, more plug-in hybrids coming to India, even the hydrogen is around the corner. So probably the future is there. It's not going to be only EVs.

Probably it will be the new energy vehicles, which we should be talking about.

Govindraj Ethiraj: Right. And as you look ahead, Sai, we've got two or three things on the horizon or concerns on the horizon. One of course is a weaker monsoon.

And second is that price rise in petrol and diesel seems imminent, even though it's not happened so far. Do you feel that that could change things a little bit, slow down demand or shift to other alternate fuels, as you said?

Sai Giridhar Raj Kumar: Till date, due to whatever reasons, but the Indian government has managed to perform very well as far as handling the Middle East crisis is concerned. Somewhat we now have a feeling that India is insulated for this Middle East crisis, which I don't think it's true because no country can say that they're insulated because today it's a global platform. Most of the OEMs, when they are getting into agreements with their suppliers, so those suppliers, any which way, have links with multiple countries.

And yes, you rightly pointed out that as far as the fuel price is concerned, fuel prices have been revised at least twice across the globe in multiple countries. India has still date not seen it, but once we have that price increase, what to tell, what extent that price increase will be, because once the prices are increased, it has a direct correlation to the customer's buying decision. Because then the inflation tries to creep in, your transportation becomes expensive, so the cost of living goes up for everyone.

So all these factors, then they try to slow down, at least the auto retail industry. Because as of today, if I talk about the initiatives which have been taken by the government as far as GST is concerned, the RBI initiatives by reducing the repo rates, thrice they have reduced the repo rates. Today, we can confidently say that if you're taking a vehicle on finance, today is you get the lowest rate of interest when you're going in for vehicle finance, or forget about vehicle finance, for any finance, today is the lowest rate of interest.

So the easy availability of finance which is there. So all these ingredients, you see that we see a double digit growth, we see a 13% growth year on year, and it's happening from last what, six, seven months, since this GST reforms came in.

Govindraj Ethiraj: Right. As you look ahead, apart from let's say any of these external factors, do you see demand continuing at the same level that you're seeing currently? And the related question, one of the concerns for the industry about until about maybe six months ago was high inventories.

And I'm talking about dealerships. And that seems to have come down now to less than a month. So does that mean that the production and distribution is now somewhat better matched or evenly matched?

So interesting part is the survey that we did with our members.

Sai Giridhar Raj Kumar: So last month, they were close to what 50% of our members who were saying that they see a positive side as or they see growth in their business for next three months. This month, that 50% has gone up to 56%. As dealers, you do it only when you got bookings, booking pipeline, you got hot prospective, you have good enquiries coming into your showroom, only then you forecast that for next three months, you want to see a rise in the retails.

What do you do from your showrooms? So I don't see any factor as on day, apart from these international factors or probably monsoons, which are probably not in our control. Rest, I think everything falls in place for having or writing on this growth story as far as Indian retail industry is concerned.

Because if you see overall other markets, the trend is on the negative side. So some countries where you have 10% degrowth, and it's happening from month on month basis, it's probably the Indian economy only where the auto retail sector is growing in double digits.

Govindraj Ethiraj: Right. And my other question somewhat linked was about inventories. I mean, does the current inventory level suggest that there is even matching between how much OEMs are producing and how much dealers are selling?

Sai Giridhar Raj Kumar: So as far as inventory is concerned, I guess the only concern was with the passenger vehicle because we've seen last year we were hovering around 70, 75 days of inventories, which was putting an additional burden of cost on the dealerships. Though from last month, if you talk about the inventory has marginally increased by a couple of days, but still it is a healthy sign in the sense that it is still hovering around 28 to 30 days, which we feel is a good or a healthy inventory to keep in. Though our dream is to have an inventory of 21 days as far as passenger vehicle is concerned.

Probably once we cross the 5 million mark in passenger vehicles, we'll probably achieve that 21 day inventory also. But inventory is not a concern though due to this crisis in Middle East, we've got reports that in certain variants or certain models, there was a disruption as far as the production is concerned, but overall till date, nothing to write about.

Govindraj Ethiraj: Right. Sai, thank you so much for joining me.

Sai Giridhar Raj Kumar: Thank you.

Impact of Cash Transfers

We've been hearing about cash transfers ahead of several state elections. The numbers that follow put that effort in perspective.

17 of 28 states and a union territory, that's Delhi, will provide monthly cash transfers this fiscal compared with a mere four in 2019, that's about seven years ago according to a note from Crisil ratings. But it's also becoming evident that the transfers are making a material impact on households and their ability to consume. Cash transfers are being given to a large demographic in rural and urban areas, mostly women or farmers requiring only income or land holding as an eligibility criterion.

Crisil says that for households in the bottom 20% consumption segment, a cash transfer of 1500 rupees is equivalent to covering 74% of monthly expenditure in rural areas and 51% in urban areas. Crisil says they compared median cash transfer across states that 1500 rupees per month with a monthly per capita expenditure in low-income households using the National Statistical Office or NSO's household consumption expenditure survey and the latest available for 23-24. So the note says that given recurring cash transfers are promised mostly fulfilled post-elections marks a durable improvement in the incomes of low-income households in recent years.

On the flip side, the fiscal costs to states is obviously increasing evidence from the rising debt levels since fiscal 25. I reached out to Dipti Deshpande, principal economist at Crisil and I began by asking her how she was seeing the impact of these cash transfers and also importantly the flip side of it.

INTERVIEW TRANSCRIPT

Dipti Deshpande: So yeah, I think, Govind, that's essentially the thing. If you look at consumption right now, that's really the strong story that's helped growth stay afloat over the last year. That's what's bringing some bit of resilience, keeping some bit of confidence in the fact that growth is unlikely to, you know, come down significantly because of the West Asia shock that we are seeing.

So I think what is it that's driving consumption, say, for the last one year and what is it that will keep it afloat for the next couple of years? We talk about, yes, low inflation, low interest rates, but there's upside to that low inflation story now. Agri incomes have been good over the last one to two years, but again, that's likely to see some sort of a jeopardy because of what we are expecting on the El Nino front, for instance.

The other two, three bits, which will linger a little longer in my view, are a little bit of fiscal support. Fiscal support that's come in because we had income tax cuts via GST rationalisation. We did some work a while ago, which typically, you know, which tells you that if there's government spending on infrastructure, which is creating jobs, which is creating incomes for those who have the, you know, highest propensity to consume, that keeps consumption afloat as well.

And we believe that will continue. But a relatively less spoken aspect, which is expected to, you know, start, I wouldn't say drive consumption, so to speak, but create a buffer are these cash transfers. Way back in 2019, we had about four states offering these.

That's gone up to 17. If you look at the amounts that are being given out, these range from, say, a thousand rupees a month to go up to about 2,500 rupees a month. So broadly, I wouldn't say it's a benefit.

I think it's a coincidence that it's come around the time that some sort of inflation shock or income shock is likely to come by because of the external developments. And I think this is one factor which will provide a buffer, provide a consumption, at least for, you know, the short term, so to speak. Flip side, of course, is the fact that, you know, it's an election promise.

It's an election outcome. Of course, it will stay for a couple of years from now on, but there shouldn't be a dependence on that. Over time, there should be some sort of automatic income creation or job creation that comes by, which is really important.

The second is there is a cap to how much can be offered on a continual basis because states do need to trim their fiscal deficits, their debt. When we are doing this, we also looked a little bit into how are the states performing or how is their fiscal position, especially those who are offering more than, you know, what is the median, for instance. So I'd say that over a longer period of time, this may not really be the way to keep spending on this continuously because there will be a cap on this eventually.

At the moment, it's a buffer that's going on. It's a wide scale, large buffer, so to speak.

Govindraj Ethiraj: Right. So if there were to be a transition from, let's say, buffers, to use your term, to, let's say, more income generating measures, I mean, firstly, is that something that you've seen happen at all? And either ways, how could that happen as we look ahead, particularly amongst the states that are already strained fiscally?

Dipti Deshpande: Right. This kind of an unconditional transfer, so to speak, and something that so many states have together taken it up at the same time has not happened in the past. So we need to see how this evolves or transits into something that's more durable in nature, so to speak.

At the moment, I think the nature in which these transfers are being given, etc., you know, make it a lot more supportive in nature. Now, why do I say that is large in size, for instance, the 16th Finance Commission puts the entire size at about 2.6 lakh crores, 0.7% of GDP or so, which is huge, so to speak. It's better incomes, it helps, you know, it's given to those who have an annual income that's less than two and a half to three lakh, don't have another government job, so to speak.

In some states, it's offered to those who are not covered by any social security. So it will elevate some bit of, you know, extreme poverty. I think the gender orientation angle is pretty strong.

Some evidence suggests how it's used. It's used productively, you know, in betterment of family health, education, investment in small farm infrastructure, etc. So it's not entirely something that is being given out without an output that is being seen.

It is creating some sort of a multiplier. So I think it will need to be seen as to how this gets transited into something that's more durable, but in the short term, it is some sort of a support. Over time, obviously, I think we will need to depend upon more skilling, I think expect services to play a bigger role in terms of employment.

There are some services which are very employment intensive, such as, you know, health care is definitely one, parts of trade, education, etc., which may not see so much of automation come by. So I think skilling for those jobs, which may need to be very critical for the future for ageing populations here and abroad, I think some of that can be, you know, focus areas to transit from mere income support to enabling there and empowering people.

Govindraj Ethiraj: Right. Last question. So you've covered this in your report.

So all of this spending is obviously driving consumption and thus economic growth. What's the clear linkage between the amount of money that's being spent and to what extent is it driving growth or therefore coming back into the economy?

Dipti Deshpande: So I think at the moment, we are going to see a lot of that now because we did not have such so much widespread payments of these cash transfers. Most of them got announced in 2025 and some more now in 2026. So clearly, I think in terms of how much it comes back is something we will see only over a period of time.

And more so it needs to be seen in conjunction with some of the other support measures. I mean, if you are to profile someone from a low income household who's receiving this, say a woman, because a large part of the cash transfers are going to women in this case. It's a woman, for example, who's not only receiving these cash transfers.

The household is also receiving free food from, you know, under the centre's programme. If it's a farmer of household, they're also receiving under the PM Kisan, for instance. So when you put all of these together, it's allowing people to take care of a large part of their essential expenditures and move up the ladder.

Our report itself says that for those in extreme bottom 5% in rural areas, it allows them to transit to the 30 to 40% bracket, where the kind of discretionary spends on education, health, services, communication, etc. is much more. So at those levels, you would see some bit of improvement in consumption that's coming by.

It's difficult to single it out because, you know, there is an overlap of the GST rationalisation benefit as well that's coming through and some of the other, you know, government-infra-related income support that's also coming through. It's difficult to really single it out, but I think all of it put together is a consumption support that's in there.

Govindraj Ethiraj: Great. Dipti, thank you so much for joining me.

Dipti Deshpande: Thanks, Govind.

UAE Airspace Re-restricted

The United Arab Emirates has partially closed its airspace for the first time in several weeks after Iran launched missiles and drones towards the Emirates in what seems to be the worst flare-up since the ceasefire began less than a month ago.

A Bloomberg report says the airspace over the Emirates is partially closed and overflying the country is only permitted through certain routes for a week and this will be implemented till the 11th of May. Just a few days ago, as we reported yesterday too, the Emirates Civil Aviation Authority had announced that all restrictions on airspace had been lifted and foreign carriers were allowed to return to normal operations and overfly the country. Now that of course has been curtailed for now.

CBI goes after Reliance

Reliance Industries has handed over documents demanded by the Central Bureau of Investigations investigating a drone import bribery case involving one of its senior vice presidents according to a court order. The order by a New Delhi court issued on Monday night did not specify what documents were demanded by the CBI according to a Reuters report which added that the CBI had earlier arrested a Reliance senior vice president and an official from the aviation regulator accusing them of agreeing to a roughly $16,000 bribe to clear drone import applications by Asteria Aerospace that's owned by Jio Platforms. The court also granted bail to the Reliance executive on a personal bond of a hundred thousand rupees and both he and the government official who is still in custody have denied the allegations.