On Episode 943 of The Core Report, financial journalist Govindraj Ethiraj talks to Siddharth Pai, Founder & Managing Partner at Siana Capital as well as Devang Shah, Head - Fixed Income at Axis Mutual Fund.

SHOW NOTES

(00:00) The Take: Thank You Mr. Gadkari

(04:02) Foreign Investor Flows Are Picking Up And Markets Are Better Poised

(06:47) The Costs And Benefits Behind India’s Strategy Of Attracting Dollars.

(08:06) Gold Prices Are Rising Again

(22:38) Why Everyone Is Talking About Forward Deployment Engineers (FDEs)

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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 Monday the 10th of August and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital

The Take: Thank you, Mr. Gadkari

For many months, a dark cloud of consumer suspicion has hung over India's vehicle owners.

The culprit is E20, petrol blended with 20% ethanol. The government's intention, naturally, were noble. India imports roughly 90% of its crude oil, a massive economic vulnerability.

Blending petrol with domestically produced ethanol distilled from crops like sugarcane, corn, and wheat has been billed as a silver bullet to slash the import bill and, of course, green the economy. But drivers haven't been buying the government's assurances. A steady stream of social media reports, coupled with videos in many cases depicting damaged engine parts, have documented a litany of glitches in cars and two-wheelers running on the E20 blend.

Now, the panic has also proven impervious to government counterclaims and it hardly helps that the auto industry itself has offered a masterclass in mixed messaging. Most recently, the Society of Indian Automobile Manufacturers, or CIAM, which represents major automakers, highlighted E20 problems in a report that somehow made it to public domain, only to hastily backtrack. Now, the numbers are in, and Indian consumers are doing what they do best when faced with a flawed mandate.

They are voting with their wallets. While overall auto sales across categories logged another blowout month in July, petrol vehicle sales have hit a wall. Over the past year, petrol car shares of the passenger vehicle market have fallen from about 48% to 42%.

Where are those buyers going? Well, to the alternatives. The market share for compressed natural gas, CNG, hybrids, and electric vehicles has surged to about 40.6%, or just a percentage point shy of petrol. Meanwhile, and interestingly, the share of diesel vehicles has been more or less steady at just under 18%, despite the government paring back on diesel subsidies a while ago.

Why? Because diesel does not blend with ethanol. For the anxious Indian motorists, diesel has almost become like a pure safe haven. The government is testing diesel blended with isobutanol, by the way, but that looming headache is a story for another day.

The panic at the dealership level is palpable. Sai Giridhar, Vice President of the Federation of Automobile Dealers Associations, or FADA, representing over 15,000 dealerships and 30,000 outlets, told the Core Report last week that despite erecting posters and aggressively counselling buyers on the safety of E20, consumer apprehension is not going away. And here is where the ironies of public policy compound.

India's government set out to reduce the nation's dependence on fossil fuels by forcing drivers to adopt an ethanol blend. But by not managing the rollout effectively and the public relations surrounding it, the government only succeeded in terrifying the motoring public. But in doing so, it has accelerated a mass migration of sorts towards entirely different alternative fuels.

At this pace, CNG hybrids and EVs will overtake petrol outright in a matter of months. The state has achieved its objective, albeit in a somewhat backward fashion. In a final stroke of political irony, the E20 fiasco has somehow been hung entirely around the neck of Nitin Gadkari, India's Roads Minister, rather than the Energy Minister, whose portfolio actually dictates fuel production and distribution.

Mr. Gadkari has taken a beating in the court of opinion. But given that his ethanol crusade has inadvertently turbocharged the adoption of alternative vehicles, perhaps we do owe the minister a debt of gratitude. In the messy world of public policy, outcomes often matter more than the competence of the effort.

And that brings us to the top stories and themes…

Foreign investor flows are picking up and markets are better poised this week, at least at start.

The cost and benefit behind India's strategy of attracting dollars.

Why everyone is talking about forward deployment engineers.

And gold prices are rising again.

Markets, Gold and Foreign Inflows

Well, all eyes are still on the state of Hormaz and the current status of negotiations. Iran said on Sunday that a deal with Oman defining new shipping lanes in the state of Hormaz was in its final stages, but reiterated that the state would only reopen once the United States met other conditions.

US officials told Reuters on Friday that an agreement between Iran and Oman was closed and could soon reopen the waterway, which carries about 20% of global oil and liquefied natural gas or LNG shipments. The question for months, of course, is who do you believe? Markets tend to follow the Trump administration's promises, and that includes Indian markets as well. A CNBC report pointed out over the weekend that the Trump administration last week sparked fresh enthusiasm that the US and Iran could soon strike a deal on the state of Hormaz, and that drove down oil prices and sent stocks up only for no deal to emerge.

Now, if that sounds familiar, says that CNBC report, it may be because President Donald Trump has claimed dozens of times that the US is close to an agreement that will end the war it began more than five months ago. But investors have reacted each time with more optimism and less pragmatism and sent stocks soaring. And that is perhaps the nature of the market, not that we did not know it, but it's useful to remind ourselves of the present, past and future of how markets behave and when.

Reuters also reported that Iran's Foreign Minister Abbas Araqchi said Iran and the US are not engaged in talks and Tehran will not stop them as long as Washington breaches an interim deal signed in June, adding that messages were being exchanged via intermediaries. Brent crude prices were up about a dollar on Friday amidst all that uncertainty and Brent crude futures were at about $83.55 a battle on Friday. On the same day, India's benchmark indices were down, both the Sensex and Nifty 50 thanks to financials and then rising crude oil prices, which we just talked about.

The BSE Sensex was down 455 points to close at 78,499. The Nifty 50 was down 65 points to close at 24,570. The Nifty mid cap was up slightly and the Nifty small cap was down slightly.

Overall for the week, the Sensex and the Nifty were down 0.8 and 0.5 percent. Last week also saw the Reserve Bank of India's credit policy not touching interest rates and some market volatility thanks to the new closing auction mechanism for stocks with derivative contracts. Now, while the West Asia situation continues to be fluid, foreign portfolio investors are continuing to be net positive into August, bringing in a little over a billion dollars in the first week of August as compared to a little over $2 billion in all of July.

Remember, these numbers might seem small, but remember that we've been seeing heavy selling or net selling in previous months. Meanwhile, a note from stock broker Jeffries quoted by Reuters says that India's market outlook is strengthening as bank credit growth reaches its fastest pace in more than a decade, even as foreign equity inflows resume and central bank measures support the rupee. Jeffries, global head of equity strategy, said there are some positives to be aware of as regards the Indian domestic story.

The most important signal, Christopher Wood said, is the acceleration in domestic lending, which has climbed to 17 to 18 percent year on year, led by corporate lending of about 20 percent. Loans to agriculture and retail borrowers are also expanding at healthy rates, underscoring broad-based demand. He also points out that policy-driven inflows are adding a macro cushion.

The Reserve Bank's foreign currency inflow scheme, including non-resident deposits, external commercial borrowings, and foreign currency bonds, has mobilised about $41 billion by the end of July, and Jeffries expects inflows to reach about $80 to $100 billion by the September 30th deadline. And we will talk about that in some detail in a moment with our guest. Meanwhile, India's consumer inflation mostly rose in July, making it a second consecutive month above the Reserve Bank's 4% medium-term target, as food prices were higher, according to a Reuters poll.

Uneven rainfall across the country this year has hampered agricultural output, driving food costs higher. Meanwhile, gold prices were up on Friday, hitting their highest in seven weeks after an unexpected drop in U.S. non-farm payrolls for July dashed rate high hopes and set bullion on course for its best week in seven months, according to Reuters. Spot gold was up to about $4,336 per ounce, having risen more than 3 percent to its highest since June 17.

And finally, in a fresh sign that nothing is well in India-U.S. trade relations, the U.S. Senate has passed, with overwhelming majority, a bill that could once again see massive tariffs of up to 100 percent being levied on India on its exports to the U.S. for its import of Russian oil. The Senate voted 86-11 to pass the Lindsay Graham Sanctioning Russia and Iran Act of 2026. There are four countries, including India and China.

The bill is to pass in the House of Representatives before it becomes law, and it will likely be introduced in that House sometime in September after the Congressional summer recess comes to an end, a report in the Hindu newspaper summed up.

The Impact of the Bond Market

The U.S. Federal Reserve and India's Reserve Bank have held interest rates steady in their latest meetings, but another power in the financial world has raised them.

And that's the bond market, where thousands of traders make moment-by-moment decisions that can add up collectively to crucial policy shifts for the world economy, an opinion piece in the New York Times said last week. The bond market is a global giant with more than $58 trillion in assets in the U.S. alone, according to that piece, which adds that it doesn't command headlines the way the stock market does, as we all know. But when the bond market's stock people usually sit up, says the article, adding that what the bond market has been saying lately is that risks are rising, including risks of increased inflation, wars, and tariffs, apart from other geopolitical dislocations.

To bring it back home, I spoke to Devang Shah, head of fixed income at Axis Mutual Fund, and I began by asking him how he was seeing the broadest signals around the world in the fixed income space, including, of course, led by what's happening in the United States and to what extent it's affecting what's going on in the rest of the world.

INTERVIEW TRANSCRIPT

Devang Shah: From a perspective of market, and you rightly highlighted, I think, first and foremost things on fixed income specifically, what is happening is across what we have noticed is that due to tariff, and it's been now like last 18 months, started the tariff uncertainty, okay, and probably then we had this entire Middle East conflict, which actually led to inflation shocks. The inflation shocks have not still come up, where you actually see that inflation has significantly gone above central bank's comfort zone. Problem is that we have started seeing the bottom of interest rate cycles across.

So, how I look at things is, if you'll ask me personally, we believe that the most important perspective going ahead is that some of the central banks have already reacted and started hiking rates. We might see Fed, and which is another largest central bank, probably in the second half of the year that they might look at start to hiking rates. Indian central bank has actually taken a slightly different call and probably tried to solve the problem, which is there in hand, and probably if the inflation goes above their comfort zone, Indian central bank might also look across at hiking rates.

But if you'll ask me to sum it up, 2024 was a year of interest rate cuts. 2025 was probably a realignment to the thought that tariff will lead to higher inflation. Tariff and 2026, the Middle East conflict has probably given put a seal that inflation is going to remain higher.

That is why most of the central banks are now probably looking at higher rates. So, that is how I look at the global landscape as well as the inflation landscape for bond markets.

Govindraj Ethiraj: And how do you see some of the recent events, including in Japan and the US government supporting the yen, which obviously links back to what's happening in the US, which again could link back to what could happen around the world?

Devang Shah: See, what we also need to understand is and rightly highlighted, see all of these, like Japan as an economy has not seen inflation for so many years. But now they're perceiving and they're seeing that inflation, the inflation going up. If you look across it, the very important component is the wages out there.

There's an evaluation and it gives an uptick every year. We have seen two or three years where the wages have constantly increased. So, the economy has started seeing a different level of inflation.

And that is why I think there has been all this intervention from central banks, as well as there has been rate hikes. Do we see a shock because of this on the global markets? I think the general trade or previously what has been had been that if yen depreciates a lot and probably you start seeing a lot of rate hikes from Japanese central banks, then you see impact on US bond, these a lot of unwind of trades and currency.

See, dollar, first of all, is tending all across. Secondly, what we also see is a differential between US yields and Japanese yields are still very, very high. US yields are about four and a half.

The reasons why US treasuries are about four and a half. So, I think Japanese central bank is looking at this point of time, the current macroeconomics development and whatever there is a bit of inflation, they're trying to tame down the inflation. But I don't see that to have a significant impact on all the markets and somewhere down the line, specifically into Indian bond markets.

Govindraj Ethiraj: Got it. So, you said that the Reserve Bank is solving for the moment. Could you elaborate on that?

Devang Shah: So, see, my understanding is that we actually came up with a write-up around this before the jute policy, probably stating somewhat similar what RBI did. See, in 2013, I will give you some bit of colour on that to be simple for your audience also. 2013 also, we had a similar kind of a shock where paper tantrums started going up and people are getting worried about outflows of money from India.

What has happened and why it is similar is because at that point of time, due to paper tantrum, money moved out of India because globally, yields are very, very attractive. In 2025 and 26, a large part of unwind of FII flows happened because of various things. First, because of tariff, people are getting worried about the Indian economic growth story.

Second thing is people are getting worried about this AI trade. And third, this Middle East conflict led to worries about the external sector. India can face vulnerability and that led to outflows.

Overall, when we looked at it is that there are FII outflows to the tune of around 40 to 50 billion and over the last 18 months. And we have also seen that because of this rise in crude prices, you can have a BOP hole. And what I mean by BOP hole is a balance of payment, which is the external sector, which can be vulnerable to the tune of around 30 to 40 billion.

So, I think government and RBI would probably thought about this if they said that, okay, we need to attract flows. In 2013, the general approach was that you follow textbook principle of hiking rates, tightening liquidity, which can probably be a support to the currency. But in this point of time, where currency depreciated because of all of these FII outflows from in the last 15 months from 83 to 96.

So, we've seen a 40 to 50% of depreciation. I think RBI and government thought about measures which can attract flows back in India. And they came up with very, very good solutions.

I think in 2013 also they used this, but at a later stage, in 2026, they probably thought this was the first measure which they should introduce. FCNR deposits to the tube and ECB borrowings, removing of withholding tax. So, basically attract dollar flows, which is the problem right now.

Because the external sector is getting vulnerable, you will have a problem on inflation, you have a problem on growth. So, it's a vicious cycle. So, let's address the problem.

If the problem is addressed, then probably if inflation goes out of whack, we will look at interest rates separately. So, they didn't use interest rates as a tool to manage currency. And that is, as per me, a very, very good solution.

Our view is that measures that they announced in June. So, yesterday's policy was almost status quo, as per expected, and didn't see any kind of impact. But last policy, if you'll ask me, the measures that they announced, which was FCNR, ECB borrowing, and at the same day, same time when RBI was stating the policy, government reduced the withholding tax, all of these measures will probably lead to in the next 6 to 12 months, they already garnered some 40 billion, probably they will get another 40 to 50 billion of flows, which will probably try and solve for the problem as I addressed, that we had seen 50 billion of outflows in the last 12-18 months on FDI. And we will have a problem because of higher crude price of 30-40 billion on balance of payments.

So, that 80-90 billion of outflows is all getting negated by all these measures. So, I think that Armin did a great job last policy and probably now we will reap the benefits into the next quarter on account of all the policy measures they have taken into account.

Govindraj Ethiraj: Right. And since you talked about outflows, I think the Reserve Bank Governor was also asked whether he felt the window could close earlier than the September deadline. And he said no.

So, which suggests that we are obviously to the figure that you quoted looking at 70-80 billion dollars. What's the, I mean, the upside, as you've already pointed out, there must be a downside as well, right, to bringing in so much at such cost.

Devang Shah: See, the downside, I think from a macro perspective is very limited. I'll tell you why. Again, this is my personal view. With all of these money also, we are only solving for one year's problem.

Let's look at what happens next year. Supposedly, I'm not saying that we cannot garner flows incrementally from FDIs in equity markets or the asset classes, but flows have dried up in India because of various things. And if this continues for some point of time, the concern can be on markets that what will be the way forward.

So, I think we are just solving for one year. So, we should not look across onto this and say, okay, we will probably stop this and we should make limited flows. I think, in fact, it should be the other way around.

We should garner as much as flows as possible, give that stability on the external side, and then probably talk about use that capital flows towards growth engine. Because the moment you get such amount of flows, liquidity to the system increases. Liquidity to the system increases, very positive for banking sector, credit growth starts.

Once credit growth starts, you can actually see a revival in the economy at a much more faster pace. So, I think at this point of time, because inflation is managed and somewhere down the line, you don't have so much of food shock inflation. Commodities have just seen an uptick.

It is ex-precious metals. Commodities have seen some bit of pain, but they are not significantly seen uptick and core inflation is manageable. In the next six months, if unless and until we see an inflation shock, I think we should not get worried about too much on the downside and the cost for it.

We should probably use these measures to strengthen our external sector and probably give a very, very strong message on the growth side.

Govindraj Ethiraj: Got it. Which brings me to my sort of market outlook question. How are you seeing, I mean, one is, of course, the interest rate outlook, which you've touched upon already in some ways.

But how are you seeing opportunities within the fixed income space, particularly for those who are looking at it as an asset class?

Devang Shah: In fact, equity markets have not done so great in the last from September to our 24. And if you look at our fixed income markets have done actually reasonably well. We've seen volatility, but they've given decent returns if you hold on for the entire.

I think incrementally, if you ask me, most of the gains are behind us. May I talk about three sets of investors on fixed income and probably bucket them into three different categories. One is who is looking at more of just parking their money in short term solutions.

I think for them, money market strategy is a very, very good solution. They should just look at money market strategies versus traditional solutions which are offered in the market. So any money market fund, you can pick up of the fund out which you like.

I think that's a very, very good strategy for parking your money. The second category is generally more long medium term fixed income investors who has a definite allocation to fixed income, whose time horizon is also slightly longer, one to two years. And they want a tax efficient structure.

I think probably there are two categories which are flushed since the tax changes happen in 2023. One is arbitrage funds, and the second is income plus arbitrage fund or fund category. So I think these are the two categories which are very, very good quasi debt categories.

Large part of the allocation, they function like debt funds only. Over a period of one to two years, they probably outbeat traditional solutions, and they're significantly tax efficient. And the investors who are very tactical, who probably take a view that, okay, now next 12, 18 months, markets are very, very infested.

We're talking about markets, we're talking about equity markets are very, very overvalued. Let's look across at bond markets, or inflation is heating up, economy is going through a bubble phase. Let's look at bond markets.

At that point of time, I think today, that is not the phase which we are in. At that point of time, we generally advise those set of investors to take their call to guild funds. Our view today is that you should allocate large part of your debt money to money market solutions and those tax efficient solutions.

Because we believe that RBI is at the bottom of the interest rate cycle. Interest rates now will go up only, probably they will go at a slower pace, it will go in the second half of the year. So that is why we don't recommend anything on long funds or guild funds at this point of time.

Reduce your duration, park yourself into the money market in short to medium term funds, and probably look at arbitrage and income plus arbitrage as a strategy to invest to weather through this volatility in bond markets.

Govindraj Ethiraj: Right. I mean, I've been seeing some other sort of recent reports on this as well. But how are you seeing the overall quality of paper, particularly on the private side, rather on the private side, which I guess gives the higher returns?

Devang Shah: I think what we give views is rather specific security, as you rightly highlighted about the quality and the credit aspect, how's the credit cycle? I think people are going through a very, very positive growth cycle. Okay, and I'll give you the logic behind that.

One is, I think in the last 12-18 months, we have done two or three big benefits for the economy to actually improve on. One is a lot of schemes which have been announced by government, GST improvement has happened, which has led to GST and the tax cuts have happened, which has led to improving balance sheets of retail people. And somewhere down the line, what has also happened is monetary easing has happened.

Monetary easing, financial conditions got easy, we've got 125 basis of rate cuts, huge liquidity in the system, FCR mine is going to come. So all of this augurs well for credit cycle. So with the demand being strong, with profitability being strong, leverage being reduced, corporate balance sheet strong, bank balance sheets okay, I think for the next 12-18 months, we don't see a credit issue.

And that is why what we are telling clients is within their risk appetite, understanding what they, when they invest into, because credit has volatility. From a cycle perspective, we are reasonably positive. But from spreads perspective, I think we are neutral.

So that is how we say the credit spreads are not very lucrative. But credit cycle is strong. So we don't expect any kind of shocks, like a 2018 episode where we had seen a downward credit cycle and too many defaults.

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

Devang Shah: Thank you.

What are Forward Deployed Engineers?

The term forward deployed engineers sounds like engineers who are at the forefront of fighting a war. Possibly they are, though, of a different kind.

In simplest terms, FDEs, as they are called, are a blend of specialists who are also engineers or having the understanding of engineering skills. FDEs are the folks who are now in big demand in a world with businesses that are seeing rapid AI transition, and they're not easy to find either. I reached out to Siddharth Pai, technology consultant and venture capitalist based out of Bangalore, to ask about FDEs, a concept he wrote about in an article in the Mint newspaper last week, and I asked him to start by defining FDEs.

INTERVIEW TRANSCRIPT

Siddharth Pai: FTE is an interesting term. It's something that's gained currency recently. As you pointed out, Palantir was the first a couple of years ago or so to start using the term.

What it essentially is that an understanding that one can't simply leave everything to AI and the people who are actually integrating AI at enterprises need to have a significant understanding of two things. One, obviously the way the enterprise itself functions and so therefore all the business functionality associated with that enterprise and the specific area that they're focused on, so in finance or in marketing or whatever, each of them has sub-processes which are complex. Accounts payable process, for instance, is very different than a recruiting process and you need to have, even if it's for the same organisation, you need to have significant understanding of not just the organisation but how processes within that organisation work.

Concurrently with having significant technological capability in order to be able to change out the AI capability that's trying to be integrated into this particular firm. So it actually is a sort of difficult to find type of resource that has both very deep technical knowledge as well as very deep business process business capability knowledge, which is a new kind of engineer, very different than what we used to have in the past.

Govindraj Ethiraj: Yeah, and I guess that's sort of my logical next question. So we've always had on-site engineers implementing projects at any point of time. Some of that may have moved offshore, but at the same time, I mean, on-site continues to be a critical part of any large and particularly sensitive project implementation.

So what's changed in that role between what it used to be and what it is today in the context of FDE?

Siddharth Pai: So we're talking about something very, very different. See, in the traditional software development, you have several handoffs. So the main handoff really is when user requirements, that is requirements for that particular system, which are typically documented in English, sometimes in technical English, but nonetheless in English, so that there's a description of what the software is supposed to do, is then turned over to somebody who can design and write the overall design for the system, and in turn is given to the developers who are the actual technical people who write the code to meet those requirements. So you can be a person who is very deep in understanding the business and write what the requirements are, but not have the ability to write a single line of code.

And you can also be on the other end, in this typical way of doing this, an engineer who's extremely capable of writing code or doing whatever it is that's required to those requirements, but in the same time, not understanding the business at all. So let's say I'm a C++ or Python or whatever programmer, I understand Python extremely well, I understand C++ extremely well, it doesn't mean I understand banking, or I understand accounts payable within banking, whereas the industry expert understands accounts payable within banking, but doesn't need to understand Python or C. This is now being brought together.

That's the main difference.

Govindraj Ethiraj: Right. And you've argued that all of this becomes particularly relevant in the context of AI and AI implementation, because it does not fundamentally work the way we think it might, which is the implementation of AI. And these are the sort of talented engineers come domain experts who would be bridging the gap or will need to bridge the gap.

Siddharth Pai: Correct. So let me explain why they're also, you know, in the traditional systems development world, you have what are called deterministic systems. So therefore, say 22 plus 22 is always 44.

It doesn't matter whenever you ask the system, give me the result of x plus y. And if you feed that x is equal to 22, and y is equal to 22, in every instance, the answer you get will be 44. There's no question of it being different at all, it is deterministic.

However, with AI, we are using basically probabilistic techniques to say what the most likely value would be. So of course, this is a silly example. But essentially, what the AI is figuring is not taking x plus y and saying it's equal to 44.

What it's doing is saying what's the most likely answer for 22 plus 22, based on the database I have and based on the models that I have, what's the most likely answer. So to give you a slightly different example, figuring out the next particular word. So if I were to say very, it's more probable from a probabilistic perspective, that the next word after very is good, rather than it being rhinoceros.

You're not going to say very rhinoceros, that's improbable. But very good is a lot more probable. So that's how AI works.

It's trying to figure out the most probable answer, the best fit answer, not the exact answer. So when that is the case, AI can make significant mistakes upstream. So for instance, let's take again this very as an example.

How do you know, see very good, very cold, very rhinoceros is obviously wrong. But then when you start getting a little bit more focused, not necessarily just very good, it could be very cold, very hot, very heavy, very light. You know, I can very good, very cold, very hot, very light can all be correct.

That's why you need the business expert to say, look, in this instance, it has to be very cold, it's not very good. Whereas the AI would just come up with the most probable answer. So it could just give you good and say, okay, I'm right, I've done the right thing and move on and do the next thing, which is where you need the FTE to catch that and say no, no, no.

In every instance, you have to answer very cold, you can't answer very good, because you think that's the most probable answer. That is where the crux lies.

Govindraj Ethiraj: Interesting. And you also pointed out that basically FTE engineers are very much in demand, their compensation levels are much higher. Companies like TCS and others, I'm sure are setting targets to hire these engineers.

My question actually is, can someone actually become an FTE engineer now, you know, starting today? Or instead, is it really people who already had the domain knowledge and therefore are able to mix and merge skills?

Siddharth Pai: You're hitting upon something that is actually the crux of the problem. For not just the Indian IT services, for IT services and consulting in general, the expectation is that you start young and learn on the job. So after you've spent about 10 years on the job, you become an expert in a particular business process area or whatever, or even in programming, right?

Typically, people who have this level of expertise have spent that much amount of time in a particular domain before they have this expertise. So it's likely that you can have it, but it's typically at the middle to senior levels, not at the junior levels. So to just say that we're going to take our campus hires and now call them forward deployment engineers is not going to happen.

So at the same time, you're using more senior people where you can train them. You know, there are people who can be trained, especially the people who already have sufficient technology training, who can be trained on the business aspects pretty easily. It'll take time, but can be trained.

And therefore put them in forward as FDEs. But again, in every instance, these are people with significant experience. So the problem is without that, you have an expertise paradox because here I can make you seem like an expert when you're not.

But I think the main problem here is finding sufficient senior people. There's a reason why they're paid as much. It's a very specific role, which requires a lot of expertise, which isn't something you get coming straight out of engineering school, for instance.

So that's why they command the premier that they command. And like I said, because of the dichotomy in the past where you were either a technical person or a business person, to find somebody who can be both is even more difficult. So even more of a premium today, right?

Can we get there? Yes. Whether it's any IT services firm, they will have to start with their most senior people and over a period of time can probably create more such folks.

Will it be something that they can do at the snap of their fingers? The answer is very definitely not.

Govindraj Ethiraj: Got it, Sid thank you so much. And also for explaining the very interesting term FDE.

Siddharth Pai: My pleasure, Govind.