Financial Stocks Are Doing Well
There is much bullishness around financials in India which should mean that the markets should benefit
On Episode 757 of The Core Report, financial journalist Govindraj Ethiraj talks to Ranjit Rath, Chairman & Managing Director, Oil India Limited (in an excerpt from our recent Energy Special) as well as Shankkar Aiyar, veteran economic journalist, columnist and author.
SHOW NOTES
(00:00) The Take
(05:38) Financial stocks are doing well in a sign that markets will do well
(08:13) India joins the race for critical minerals with oil giants leading it
(19:48) India opens up visas for Chinese even as the US launches unexpected crackdown on H1B workers
(21:02) MNREGA, a dole in many ways, is now VB-G-RAM-G, what does it mean for workers in specific and the economy in general
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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.
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Good morning, it's Monday, the 22nd of December, and this is Govindraj Ethiraj, broadcasting and streaming weekdays, but in transit right now, and therefore not from Mumbai, India's financial capital.
The Take: The Year Of Resilience
India passed 2025's resilience test, now comes the tough part.
So the year 2025, as we look back, has provided a masterclass in reality. When the United States administration unleashed a 25% reciprocal tariff, following it up with an additional 25% penalty for India's purchase of Russian crude, the consensus amongst the smart set was that the Indian export engine would stall. Add to this the ongoing immigration crackdown, including the latest salvo that is effectively locking out H-1B visa holders, making it a two-pronged attack on goods and services.
And yet, as the year draws to a close, the data does not tell a story of collapse, but of a gritty entrepreneurial adaptation, and maybe some luck. India is surprising both its critics and its champions. One example of this resilience is visible in the latest figures from the Global Trade Research Initiative, or GTRI.
Exports to the U.S. between May and November 2025 followed a distinct V-shaped trajectory, a precipitous decline through September, followed by a robust, if partial, recovery by November. Now, this pattern held true for something like 85% of India's exports. Gems and jewellery, for example, went from $500 million in May to $200 million in September, only to come back to $406 million last month.
While that's still below 19% from the May baseline, the rebound suggests that the death of the Indian exporter was possibly exaggerated, at least for now. Now, this story is mirrored in pharmaceuticals, garments, and even commodities like seafood. Now, while adaptation is the watchword, there is quite likely a price to this survival.
Profitability and margins for U.S.-bound goods are razor-thin or non-existent now, and the same competitive pressures are haunting exporters as they pivot to new markets. Of course, we're not talking about goods like electronics and pharmaceuticals, which are largely exempt from export duties or import duties in the United States. So, for many exporters and manufacturers, keeping the machines running is equally important, it would appear, and hoping for a resolution to the trade tiff, which, by the looks of it, is clearly extending into next year, if not early next year.
The good news is that the tariff rhetoric from Washington seems to have cooled in recent weeks. President Trump has largely shelved the tariff cudgel, though he's been grumbling quite recently about rice dumping, that's dumping of Indian rice. There is an irony at work.
As U.S. consumer prices rise, the administration has begun cutting duties on agriculture imports to preserve affordability, which, of course, has become a key word in itself. Domestically, Indian businesses have managed steady, if tepid, growth in recent quarters. Markets have been disappointed by the lack of fireworks, but given that there are other structural challenges within the Indian economy, this was not a bad year after all, ending with a fairly strong set of macro numbers, including low inflation and low interest rates.
Now, much of this is, of course, due to the nimble policy work by the government, and across the board, rationalisation in consumption taxes or goods and services tax has brought down prices, and a managed depreciation of the rupee, now hovering near 91 to the dollar, has acted as a natural, if incomplete, buffer against the 50% tariff fall. There have been other steps to make life easier for exporters and other reform moves like the new labour code. All of this helps, though the fact that the government is seemingly working hard to resolve this is good enough news for many Indian business people.
Perhaps the most interesting development of 2025 is the surge in foreign direct investment. After a dismal 2024, FDI has come back, anchored by a massive $67 billion commitment from the tech giants, Google, Amazon, and Microsoft, mostly in cloud and AI infrastructure. Meanwhile, global capability centres, or GCCs, continue to proliferate, moving up the value chain into more knowledge-intensive sectors like pharmaceutical R&D and even oil exploration.
Now, India's inherent strengths in services have only been bolstered in a post-COVID world where geography is increasingly irrelevant. But on the other hand, the shadow of artificial intelligence looms large, and the true test of service resilience to that extent lies in the year ahead. So India is still on a delicate footing.
Its geopolitical standing has been tested by a Washington administration that clearly is singling it out, while tech giants are doubling down, others remain cautious. Remember, China has sprinted ahead in AI and electric vehicles, amongst other new tech industries, and that has also attracted portfolio investors who are still pulling their capital out of Indian markets. For emerging market investors, India today stands as a defensive alternative, a hedge against the red-hot but volatile AI stocks of East Asia.
The gains of 2025 provide a comfortable base, but the path to becoming the global power that India aspires to remains a long climb. Resilience is a fine start, but now comes the hard part of real growth.
And that brings us to our top stories and themes…
Financial stocks are doing well in a sign that markets will eventually do so too.
India joins the race for critical minerals with oil giants leading it.
And India opens up visas for Chinese workers even as the US launches an unexpected crackdown on H-1B visa holders.
And the MNREGA, a dole in many ways, is now VBGRMG. So what does all of this mean for workers in specific and the economy in general?
Markets
A Santa rally is looking difficult now. And of course, Christmas is a holiday which leaves three trading sessions to go, including today. On Friday, there was a mild recovery and a strong listing for ICICI Prudential AMC, which closed at a 19% premium, even as the rupee climbed with some help.
The Sensex ended with a gain of 447 points to 84,929. The Nifty 50 was 151 points higher at 25,993. The BSE Mid Cap and Small Cap indices were up about 1.3%. Now, speaking on finance, Sriram Finance was up 5% after the company said it entered into definitive agreements with MUFG Bank.
Now, there is much bullishness around financials in India, as we discussed a few weeks ago as well, which should mean that the markets should benefit because many of these financials, though not all, are benefiting from what's going on in the markets or the general sense of high investor activity. Now, the Japanese seem to be taking particular interest. Japan's MUFG will take a 20% stake in Sriram Finance for $4.4 billion, the company said on Friday.
This is also the largest cross-border investment in India's financial sector. And the deal marks MUFG's biggest commitment in India, surpassing its $1.7 billion investment in previous years. And India's financial sector has now seen about $15 billion worth of deals this year, more than double the 6.5 billion recorded in 2024, according to data quoted by Reuters.
Before MUFG, there was Emirates NBD Banks, $3 billion acquisition of a 60% stake in RBL Bank, and then Sumitomo Mitsui Banking Corporation, which bought a 24% stake in Yes Bank. Elsewhere, the rupee ended on a stronger note at 89 rupees 25 paise versus the US dollar, thanks to a late surge. US dollar-India rupee forward premiums have risen to a three-year peak on Friday, thanks to excess dollar liquidity, traders unwinding positions and hedging demand in the non-deliverable forward market, bankers and Forex advisors told Reuters.
Elsewhere, silver rose to another record high on Friday, thanks to investment demand and supply tightness, while gold rose to a weekly gain, basis expectations of interest rate cuts by the US Federal Reserve. Spot silver is now at $67.14 an ounce, and that ended the week 8.4% higher after hitting a record high of $67.45 in the session. Spot gold is also up slightly, $4,347 per ounce.
Just to remind ourselves, silver has now risen 132% this year, and gold has risen 65% this year.
The Critical Mineral Race
China has triggered a global race for critical minerals and rare earths, while India has reserves of critical minerals, and we will come to what and where shortly.
Extracting them is not simple, and like any mining prospect, it's tough to say how remunerative the find would be till a fair amount of resources have already been poured into the ground, quite literally. And that's like oil, though not in the same magnitude, there is a very high degree of investment involved in scouting, prospecting, and then extracting. Oil India Limited, the oil exploration and refining company owned by the government of India and whose legacy goes back to 1889, says it will take on the challenge of finding and extracting critical minerals in the country and outside.
Now, this is, of course, no easy task, including for a company that's otherwise been focused on finding oil beneath the surface and not minerals. I spoke with Dr. Ranjit Rath, Chairman and Managing Director of Oil India Limited in a special series of conversations ahead of the India Energy Week in January, and I began by asking him to walk us through what critical minerals meant and what he was referring to when he spoke about their extraction. Meanwhile, oil prices edged up on possible disruptions from a U.S. blockade of Venezuelan tankers as the market waits for news about a Russia-Ukraine peace deal, or a possible one.
Brent futures were at about $60.47, and that put Brent and West Texas Intermediate down about 1% for the week, that's last week, after both crude benchmarks fell about 4% last week, according to Reuters, which added that Venezuela pumps out about 1% of global oil supplies. In general, however, 2025 has emerged as one of the calmest years in recent oil market memory, and crude has been, as we know, trading mostly between the low 60s and low 70s, and we have not seen the sharp spikes that typically define oil cycles, according to a report in the Press Trust of India.
TRANSCRIPT
Govindraj Ethiraj: Tell us about vanadium. Tell us about potash. I mean, where do they fit?
Ranjit Rath: Potash is one of the major input for your fertiliser. So today you are import dependent on that. And why are we import dependent on that?
Because potash is not available in the country so far. It is not yet mined so far.
Govindraj Ethiraj: And is that because of the cost of mining it?
Ranjit Rath: It has not been done before. It was never been auctioned. This was lying at a depth of about 500 to 600 metres.
So it was never been attempted. So we thought we will take a pioneering step. Two ways of looking at it.
The drilling component for exploring potash and the harvesting of potash, there is a commonality of the way we drill in oil and gas. And there is a commonality of doing work over in such solution mining. Should we decide to go for solution mining in potash?
Or if we go for a conventional mining, then it's a normal mining. But there is a commonality of approach. As far as Itanagar graphite is concerned, we feel that northeast is a place where we have a significant presence and a lot of data that is available with us in terms of seismic.
That's we do otherwise. But recently we have acquired about 40,000 square kilometre of advanced airborne gravity radiometry data, basis Government of India's campaign. So we thought those data could be an input for such exercises.
And of course, we have got a very good collaborative framework with Geological Survey of India. Therefore, these inputs are helping us to zero down. So we were very choosy in selecting which blocks to be taken.
And then we participated in auction and we wanted to win. As far as vanadium is concerned, while its utility is very well established, what is important is to establish the process flow diagram of this vanadium. So we are collaborating with CSIR lab, say IAMT and NML.
We are also collaborating with Indian Bureau of Mines. We are also collaborating with global players to establish the process flow diagram. And then we will take it forward.
But the first is being an exploration company, we are taking off drilling and exploration of these assets.
Govindraj Ethiraj: So I'll come back to the drilling and exploration. But you know, when we talk about minerals and rare earths, usually they're spoken of together. And obviously the world's attention has been focused on rare earths because of China and the fact that they've been holding back exports to most countries, including India.
So tell us about where rare earths fits in the overall critical minerals outlook.
Ranjit Rath: Rare earths is just another critical mineral. It's a group of minerals. They are primarily occurring in shallow, but a very typical geological setting.
Till now in the country, there was a focus on bulk minerals and hydrothermal minerals. So we were currently, we were earlier focused on limestones, bauxites, iron ores, manganese and hydrothermal is copper, lead, zinc and black. So the thrust on rare earths and critical minerals literally happened last four years or so.
There is something, a concept called obvious geological potential areas with GSI maps. That mapping has already been done. There is a significant thrust from government of India as a two-pronged strategy.
One is enhanced exploration per se. So that GSI and under NCMM, National Critical Mineral Mission, certain identified public sector undertaking like OVL, Oil India, Coal India, then ONGCBJS Limited. Then we have the other Indian Rare Earths Limited and the Department of Atomic Energy.
So we are together pursuing this agenda of doing exploration. Simultaneously, government is also putting thrust because what is more important in this particular value chain is the processing part. So significant thrust is underway to acquire processing technology and also to encourage both private sector and public sector and the research organisations to work on the processing technology.
Govindraj Ethiraj: In the case of China, for example, it's not that they are producing all these minerals. It's that they're processing a lot of it, including, they're producing and importing raw material, processing and sending it back. So they have the processing capacity.
Ranjit Rath: They have established a significant quantum of monopoly in terms of processing facility.
Govindraj Ethiraj: Right. So let me come back to India and the path that you've taken. So if you were to look at this as a young geoscientist, would you say that basically I could now look at drill for anything that subsurface, including oil?
Because what I would think is normally I set out to be an oil engineer or an oil man or a woman, and that's where my career takes me. But what you're saying now is that today your career could go in any direction. You could be drilling for minerals or you could be drilling for oil.
And these are fairly distinct, at least from a user's point of view. You are absolutely right.
Ranjit Rath: These are from a host rock point of view, certain minerals, they have a common presence. Say lithium. You could find out in sedimentary rocks where oil and gas resides.
It also occurs on hard rock where minerals resides. Potash, it is actually coexistence with oil and gas because the potash exploration that we intend to do in Rajasthan, we do foresee that there is a possibility of establishing presence of hydrocarbon there. So there is a commonality, there is an overlap, but probably this is the greatest time from a geoscience point of view to be able to pursue exploration in either of minerals because oil and gas is also a mineral.
So whether it is hard rock mineral, sedimentary rock mineral or liquid fuels, it's a very exciting period.
Govindraj Ethiraj: So if I were to ask you to sort of say where we are in the journey to achieving some level of optimum output and capacity in minerals, as a country first and then as Oil India Limited, where are we?
Ranjit Rath: In minerals we are pretty advanced, whereas critical mineral is concerned, we have got a significant thrust today through international collaborations, through domestic efforts, but we have to cross a certain path, maybe a decade or so.
Govindraj Ethiraj: And in general, maybe one of the last questions on critical minerals before I come to exploration of oil. In general, what is the lay of the land when it comes to the world at large? You said Australia and Argentina and you mentioned Bolivia.
Ranjit Rath: It's like this, if you look at lithium and lithium occurs in two formats, one is hard rock, Australia is full of it. The lithium brine, you have significant presence of lithium brine in Argentina, Bolivia, Chile, that's called ABC for lithium. But lithium is just one such mineral.
You have significant presence of lithium in America, in USA, in Canada, in Russia. Potash is available across the globe in select geographies. All the critical minerals, see oil and gas is just one portfolio.
Critical minerals from an India point of view, there is 24 of them and entire Africa is a destination for critical minerals. Even I would like to say through you to the August audience, India is also having enough of critical minerals. It's a matter of exploration and to prove it.
So significant work has kick-started. It's a matter of time we establish the resource pool.
Govindraj Ethiraj: So the bottom line or top line question. So we are importing more than 80 percent of our crude oil requirements and we're only able to produce 20 percent. I'm talking about crude oil, not natural gas and so on.
When it comes to minerals, where do we stand in terms of what we are?
Ranjit Rath: Minerals, it's across the scope. Like we have enough of bauxite, we have enough of iron ore, we have massive deposits of coal, we have massive deposits of limestone. The entire value chain is in place.
As far as critical mineral is concerned, our import dependency is on a very high order, touching 100. More in terms of the revolutions I would use, revolutions which is happening in EVs or in various other sectors, we are actually buying the finished products. So it will take time to establish the entire value chain.
Govindraj Ethiraj: So I mean my question I guess is that if we were to look a little ahead, could we achieve greater self-sufficiency in minerals, critical minerals, than we have achieved in oil because of what we have or we have been naturally endowed with?
Ranjit Rath: I wish we have greater sufficiency across the value chain for all the natural resources because that's why exploration is very important. Whether you do it for critical minerals, you do it for REs or you do it for natural gas or crude oil. So the story remains the same that greater self-sufficiency is so important for us.
Visa Conundrum
H-1B visa holders with renewable appointments in mid to late December have started receiving emails from the State Department saying that operational constraints had forced consulates to reduce the number of appointments they could take each day, according to a report in the Washington Post.
The bulk of renewable appointments are being rescheduled between March and June, the three lawyers said, who spoke to the Post, and one applicant was given a make-up date in 2027. Now, this does appear that the U.S. government is tightening H-1B entry for Indians, who account for over 70% of H-1B visa holders, but in a way that was not fully expected, and thus is perhaps more damaging since those who leave the U.S., if they do, will find it tough to get back in time and or lose their jobs in the process. Elsewhere, India has reformed its business visa regime to ease movement of foreign engineers and technicians, according to the government, which will boost local firms leaning on Chinese professionals for manufacturing services.
The visas have been eased for factory installation, commissioning, maintenance, and production. Indian businesses predominantly depend on Chinese professionals for such services and to train local staff, especially in factories that deploy Chinese machinery, according to Reuters.
New Laws
Last week, the Parliament repealed the Mahatma Gandhi National Rural Employment Guarantee Act and enacted the Vixit Bharat Guarantee for Rosegard and Ajivika Mission Gramman Law. So, what was once called MNREGA has been replaced by VBGRAMG. Amongst the key highlights, the new law assures 125 days of work instead of 100, splits the burden of funding from 100% on the centre to 40% on most states, mandates a 60-day pause during sowing and harvesting, and focusses specifically on water security, infra, and climate resilience, and replaces the bottom-up structure with a top-down one, and that's integrated with the PM Gatishakti.
So, why has the world's largest job guarantee scheme covering about 741 districts, 2.69 lakh, or 269,000 panchayats, about 121 million workers, with an average expense of 90,000, repealed and replaced, and more importantly, what's the distinction between the two? I reached out to Shankar Raiyer, veteran economic journalist and author, who wrote a column on this theme in the New Indian Express, and I began by asking him to walk us through the two schemes, old and new, from his perspective.
INTERVIEW TRANSCRIPT
Shankkar Aiyar: First Govind, the whole purpose of this alphabet soup replacing another alphabet soup is that you get it right. You have to say Ji Ram Ji, which is basically the burden of alleviating misery has been shifted from Mahatma Gandhi to Lord Ram. That is the top line of this.
But on a broad term, this is a fundamental shift in the approach to the idea of rural employment guarantee. The earlier, the old law was bottom up, which means that panchayats and districts would sort of send in the demands and the money would flow from the centre to the states, which was 100% for wages and materials and all were shared costs. Now what has happened is that you continue to have panchayats and state governments sending up the demand, but whether that job will be there, whether you will get the money depends on a top-down approach, which means the PM's Gati Shakti unit will determine whether a particular district or a panchayat should get a particular job scheme and when it should get and how long it should run.
So from a bottom-up approach, this is shifted to a top-down approach. There is also a 60-day pause for sowing and harvest operations. Now in one sense, it's rational because you don't want to starve farmers of manpower to tend to their fields, whether sowing or harvesting.
On another level, it takes away or at least erodes the bargaining power of labour for pricing wages. So earlier, Manrega was a floor for wages because it enabled labour to challenge and bargain and get better rates, which won't or may or may not be possible. So the good things in this is that the technology induction of GPS and all that stuff will be there and there are four themes, basically climate, water, infrastructure, which will be followed.
The question is whether in the implementation, whether the state has capacity to cut down the corruption, cut down the delayed payments, cut down the unspent allocations. Essentially, does the state have the capacity or state governments have the capacity to make it much more efficient? And that remains a very open question.
As of now, I would say that this is a new name with old challenges.
Govindraj Ethiraj: Right. Shankar, so from an economic impact point of view, clearly this acted as a floor for wages in a generic sense. Does that change?
And from a macro point of view, what are the sort of, the welcome parts of this, including the fact that it's a top-down, as you said, versus maybe what it could have been earlier? And finally, the addendum question is really, if things had to evolve in the older act or the older Manrega act, what would you think they should have been?
Shankkar Aiyar: Well, let's look at the new law. Every book's cover is very promising, Govind. So this one is too, in the sense that the thematic approach is a very interesting approach.
The induction of technology is very welcome. The question is, is there a plan there? See, you're trying to address two things at the same time, and multiple objectives are always a troublesome approach.
So you're trying to address rural unemployment. At the same time, you're trying to make it more efficient for the economy, for economic growth. I mean, both of these at some level will be in conflict.
So for instance, if you say that rural job demand will be satiated, but it will be asterisk conditions will apply, then you may not either satisfy the demand or you may not actually, if the thematic jobs are not available, what do you do? So I would have rather had a more phased approach in it, maybe do a pilot, or maybe they have done a pilot, we don't know. But the top-down approach in one way is good, because you're not going to be just digging holes and filling them.
There's much more bang for the buck. At the same time, you have to be very watchful, because rural wages haven't sort of gone up as much that they should have. One of the reasons why we had a downturn last year was because wages haven't caught up.
I mean, the share of capital in gross domestic product has gone up, and the share of labour has gone down. This is a problematic thing when you have an economy which is 56, 58% or 60% consumption, because private consumption accounts for 60% of the GDP. So you always have to balance this, that there is enough money in the hands of the people to spend so that GDP goes up.
As far as the old law, I mean, you know, all the problems persist. The problem with the old law was that there were always doubts whether it was the labour that was getting the money or the contractors were sort of fudging the records, whether it was a real rural employment scheme, or it was a bookkeeping and accountancy scheme. The biggest problem, Govind, that there has been no audit, no complete audit of NREGA since 2013.
This law also doesn't specify audits. This is the problem in the Indian law drafting. Maybe it will be there in the rules and regulations, but the president has signed it today, so we'll know tomorrow, day after, maybe once the rules and regulations are out.
The second part is that state governments are not exactly in a happy position. Most of them are sort of touching the 3% fiscal deficit GSDP mark. So they are borrowing more.
There's a lot of burden on them because of the freebies and the cash benefit transfers and stuff like that. Now, whether they have the bandwidth, the capacity to fund 40% of the wages. Now, let's look at the arithmetic.
This year we have put out, the budget has said that 86,000 crores or something is the allocation. 40% of this, if it has to come from the states, do the states have 30,000, 35,000 crores? Which states have that kind of money?
Most of the states, the debt to GDP ratio is up and the overborrowing or the burden on debt servicing, the interest burden on state governments. So this is something that may play out in the discussions with the finance commission. Ideally, they should have sort of built this in with the finance commission's report, but maybe it's a sequencing issue.
Govindraj Ethiraj: Let me put the question differently. So for example, if this was a dole broadly and you have cash benefit transfers, both are in a way trying to support the economy from the bottom, whether we've changed this or not, and whichever way we've aligned this particular employment benefit scheme, what does it say about the very structure of the economy?
Shankkar Aiyar: You know, there is a paradox. I mean, you are the fastest growing economy or last quarter GDP was 8.2%. You're the fourth largest economy. And yet at the same time, India is a country which runs the largest food security programme, the largest rural employment programme, the largest healthcare coverage programme, the largest rural housing programme.
I mean, you're feeding, giving free ration food grains to 75% of the population, roughly 817 crores or something. Sorry, 81.7 crores or 817 million. How does that align with the story?
So what I suspect the government will need to do at some point is to recast this welfare umbrella, because you can't have this billowing up all higher and higher and creating distortions, perversions, unintended incentives in the labour market or in the contract market for people to exploit. I think ideally, at least in the urban areas, they should look at whether people can opt for cash transfers instead of free ration, coupon based fertiliser subsidy, time of day use coupons for electricity subsidy. These are things more modern technology enabled ideas should be brought into.
I don't think this model of ask Peter to pay for Paul will sustain beyond a point.
Govindraj Ethiraj: Right. Shankkar, thank you so much for joining me.
Shankkar Aiyar: You're welcome, Govind.
