Fresh Twist To India-US Tariff Deal
US Secretary of Commerce Howard Lutnick met his Indian counterpart in an unscheduled visit to New Delhi on Thursday
On Episode 809 of The Core Report, financial journalist Govindraj Ethiraj talks to Kunal Khattar, Founder at AdvantEdge. We also feature an excerpt from Episode 3 of our series “Eye On Retail”.
SHOW NOTES
(00:00) Stories of the day
(01:09) Fresh twist to India-US tariff deal as US Commerce Secretary Lutnick drops by
(03:37) Why you have to brace for a warmer March and what that could mean.
(04:36) Thousands of companies have filed lawsuits against the US Govt seeking tariff refunds that could touch $130 billion
(05:55) How both US and China are ganging up against India’s subsidies for manufacturing
(07:17) The Government jumps into ride-hailing business. What does this mean for consumers and drivers?
(19:37) CAR revised by DGCA
(20:21) India’s Warehousing Growth
Register for India Finance and Innovation Forum 2026
Eye on Retail, Episode 3:
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 Friday the 27th of February and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital. Before we start, it's Buenos dias to all our listeners in Buenos Aires, Argentina, where we ranked in the top 25 on Apple Podcast last week. So, thank you for listening in and we will surely keep you in our hearts.
Our top stories and themes…
A fresh twist to the India-US tariff deal as US Commerce Secretary Lutnick, who panned India earlier, drops by.
Why you have to brace for a warmer March and what that could mean?
The government jumps into the ride-hailing business with Bharat Taxi, what does that mean for consumers and drivers?
Thousands of companies have filed lawsuits against the US government seeking tariff refunds that could touch $130 billion
And how the US and China are ganging up against India's subsidies for manufacturing.
US-India Trade Deal
Is the latest development in the US-India trade front good news? Well, we don't know, but it does not look like bad news either, given the broad smiles all around in the pictures that have been shared.
US Secretary of Commerce, Howard Lutnick, met his Indian counterpart in an unscheduled visit to Delhi on Thursday, days after the US Supreme Court dismissed US President Donald Trump's sweeping global tariffs, according to a Bloomberg report. US Secretary of Commerce, Howard Lutnick, met India's Minister of Commerce and Industry, Piyush Goyal, in an unscheduled visit to Delhi on Thursday and this obviously comes a few days after the US Supreme Court struck down US President Donald Trump's global tariffs or other reciprocal tariffs, according to a report in Bloomberg. Minister Goyal shared a photo after meeting Lutnick and US Ambassador Sergio Gore, saying they had very fruitful discussions to expand our trade and economic partnership.
As a backdrop, Donald Trump has already warned countries to honour the deals agreed so far and has threatened higher tariffs on goods from nations that play games. His administration imposed a new 10% tariff effective February 24th, which is set to increase to 15%, where appropriate, in coming days. More on that on the US side in a moment.
Amongst other geopolitical developments, India will put together a mutually beneficial free trade agreement with Israel, India's Prime Minister Narendra Modi said on Thursday. Both countries will also pursue joint development, production and transfer of technology in defence, Prime Minister Modi said at the end of his two-day trip to Israel. Back home, the markets continue to sway in the absence of clear direction, gaining and losing ground.
On the same day, the Nifty 50 was up 14 points at 25,496, but the Sensex was down 27 points at 82,248. Broader markets were also mixed. The Nifty mid-cap was up 0.6%, and the Nifty small-cap index was down 0.01%. The Nifty healthcare index is doing well and therefore the pharma stocks too, and that's something that we should be watching for.
Gold prices were up on Thursday as uncertainty over U.S. tariff policies continued to make gold appear attractive, even as investors were waiting for further details on the U.S.-Iran talks. Spot gold was at about $5,182 per ounce on Thursday morning and had hit a more than three-week high on Tuesday. The dollar has eased, making dollar-denominated commodities more affordable for holders of other currencies, according to Reuters, which also added separately that India is likely to record one of its warmest marches on record, with above-average temperatures forecast in key wheat and rapeseed-growing states, potentially cutting yields.
Higher temperatures in March will also boost electricity demand, and all of this could obviously have an impact on commodities, or some of the commodities, and onwards, maybe on inflation. Elsewhere, the rupee was also stronger on Thursday, closing at Rs.90.90, up slightly from Rs.90.94 in the previous session. Oil prices are slightly low now, as those talks between the U.S. and Iran continue.
Brent was trading around $70 a barrel on Thursday after slipping for two days.
Trump’s Tariffs Refunds
U.S. President Donald Trump's far-reaching global tariffs brought in about $130 billion in the 10 months that they were in effect. After a Supreme Court decision dismissing the tariffs, some 1,800 companies have filed lawsuits seeking refunds, according to a Wall Street Journal analysis, with more joining the rolls every day. Some of those lawsuits were actually filed even before that decision came.
Now, it's not clear how and when these refunds will happen, but most, including well-known names like Costco Wholesale, Goodyear Tyre & Rubber, and Barnes & Noble Purchasing, had filed ahead of the Supreme Court ruling, according to the Wall Street Journal report, and more companies have joined them in the day since the court's decision, including FedEx, and lawyers are predicting a deluge of litigation to come. A litigator told Wall Street Journal that, we are talking asbestos level of lawsuits, referring to the thousands of lawsuits filed over decades, seeking recovery for alleged injuries related to that material. But the tariff cases, he said, are all happening at the same time.
Through December 10th, at least 300,000 importers were subject to the tariffs that were ultimately struck down, Customs and Border Protection officials in the U.S. said in a court filing, the total includes many businesses, but also individuals who paid tariffs directly on goods purchased overseas, according to lawyers who spoke to the Wall Street Journal.
US and China vs India on PLI
Both the U.S. and China are going after India on charges of subsidising its manufacturing to their detriment. On Wednesday, the U.S. imposed preliminary duties of 126% on solar imports from India after determining that India unfairly subsidised manufacturing.
The high duties could effectively shut Indian solar panel makers out of the U.S. market, analysts told Bloomberg. A day earlier, the World Trade Organisation's dispute settlement body agreed to establish a panel to examine China's complaint that India's incentive programmes and automotive and renewable energy technologies unfairly favour domestic goods over imports, putting Chinese products at a disadvantage, according to that Bloomberg report. Now, the panel was set up after consultations between the two countries, that's India and China.
The first step in the WTO dispute process failed to resolve China's challenge to India's sector-specific subsidies. Both countries have blamed India's PLI, or production-linked incentive scheme, which was started in 2020 to boost manufacturing. The programme spans 14 sectors, from electronics and pharmaceuticals to solar modules and medical devices, and is worth about 190,000 crore rupees, or $21 billion, according to Bloomberg.
In the solar sector, companies who have benefited are Adani Enterprises, Reliance Industries, and Wari Energies.
Bharat Taxi
A new government-backed taxi service will give drivers a share of profits from the business and charge no commissions, a Reuters report quoted Amit Shah, India's Home Minister and Minister for Cooperation, speaking to drivers at an event late on Monday, saying the service would work under a so-called cooperative model, where drivers could pay 500 rupees to become shareholders and get a share of the profits three years later. The government-backed initiative comes amidst growing complaints by drivers of Uber and Ola, that's the local company, about excessive charges, low fares, and high commissions, said that Reuters report.
Uber said in a statement that India's mobility ecosystem was dynamic and rapidly evolving, and healthy competition ultimately benefited all. The India ride-hailing market is dominated by Uber and companies like Rapido and Ola, who are present across hundreds of towns and cities. Minister Shah said that more than 250,000 drivers had joined Bharat Taxi, where customers can book cabs via a mobile app.
The government plans to take the service countrywide within two years, though right now it's available only in a handful of states, including New Delhi. Customers can also book three-wheeled auto rickshaws and scooters on the same app. I reached out to Kunal Khattar, Founder of venture capital firm AdvantEdge, who also is the first investor in Rapido, and I began by asking him how he was viewing the dynamics behind the launch of this app by the government, and also for a sense on how the ride-hailing industry had evolved in recent years, particularly in terms of unit economics.
INTERVIEW TRANSCRIPT
Kunal Khattar: Bharat Taxi? No, it's an interesting proposition. I mean, let me start by saying that the business of government is not business.
So this is definitely not something that the government should be worrying about. They should focus predominantly on policy and on infrastructure creation. Building technology companies is not that easy.
And especially in a cooperative framework, there is confusion in terms of who's funding this business. You're asking the supply side to fund this business. I don't know, you know, 500 rupees multiplied by, I don't know how many people come on board is sufficient capital to build a successful two-sided marketplace model.
And, you know, building technology businesses are not as simple as they sound, right? It's not just about understanding consumer behaviour, but also right-sharing is about matchmaking, right? You've got a supply side, you've got a demand side, you've got to optimise it and it's a hyper-local play.
And demand patterns vary based on time of day, day of the week, and the pin codes. And these are complex algorithms that get sorted or optimised over a period of time. And if you come in and say, no, we're going to be utopian and no such pricing and no commission structures and all of that, then you pretty much don't have any levers to ensure that equilibrium on a supply and demand is created.
So I mean, long answer short, it's an interesting proposition. We welcome competition in the market, but I think as we've seen in other government initiatives, if you are limiting yourself to creating underlying infrastructure like UPI, I think we've seen great success. But the minute you start getting into commercial businesses where there is customers and there's supply, we've seen limited success in such initiatives.
So let's see.
Govindraj Ethiraj: Okay. Tell us a little bit about where the market is. I mean, you're an early, if not the first investor as I understand in Rapido and there's Ola and there's, of course, Uber.
And we're talking about taxis right now. So what's the market looking like today? And what's changed in the last few years?
Kunal Khattar: I think the markets, well, Rapido itself is growing about 100% year on year. So we're seeing significant growth happening across different form factors. So we were the first check in Rapido.
Focus was on, of course, building a two-sided marketplace, but for two-wheelers initially. For five years, we just thought about building a bike-taxi platform. So from a numbers perspective, I think the market today is roughly about 10 million rides a day.
Rapido has about 50-55% market share. And that's across the three form factors, two-wheelers, three-wheelers, and four-wheelers. And we think that this has the potential to grow 50-60% year on year.
This is all India, right? This is only India. Growth is going to happen as we see more and more three-wheelers come onto the platform.
Because if you look at the total instal base of three-wheelers, only about 8-10% of three-wheelers today have actually come onto the digital. 90% of three-wheelers are still basically generating revenue of customers through the Haley model. So we think there's a lot of potential there.
I think four-wheelers, there is a little bit of a supply constraint there because you need to convince somebody to buy a car to come on the platform. So we are seeing different business models evolve there. That growth is going to be a little slower.
With regards to two-wheelers, there is infinite supply. So there's almost 20 million two-wheeler owners today in India that are either unemployed, working part-time, or students. So you can definitely build supply side there.
And as we see Rapido expanding into newer and newer cities, I think we are now in almost 250 to 300 cities, going to 500 cities, which is where I think a lot of the growth is going to come from as well. Even in the cities that they're present in, I think there is tremendous opportunity for them to grow. So for many reasons, we're pretty bullish about and see probably a 60% to 80% CAGR going forward as well.
Govindraj Ethiraj: Right. So when you say that three-wheelers is now looking more attractive and two-wheelers potentially, how does the margin economics change between four-wheelers and as you go into three-wheelers and then two-wheelers, which you're already in?
Kunal Khattar: So I think there are two sort of vectors here. One is the average order value or AOV. So I think two-wheeler business, we see an AOV of about 45, 50 rupees.
So three-wheelers is some per transaction. Three-wheelers is somewhere between I'd say 150 to 200 rupees. And four-wheelers will be between say 250 to 300.
And that's the average, of course, those minuses there. And you have the premium models like Uber Black or Excel, which could probably be closer to 400 to 500 rupees. So that's the AOVs.
And then you've got the take rate of the subscription model. This is what platforms earn. Traditionally, platforms would take 20 to 30% of the AOV as their take rate.
But what we've seen now is many of them are now working on a fixed subscription model where the supply side pays a fixed contribution or fixed amount every day or every week or every month, and then gets to keep 100% of the revenue that they're generating. So we've seen that transition. And I would say now a majority, if not all of the four-wheelers and to a large extent, three-wheelers are now operating in all these platforms on a subscription model and not a take rate or a revenue share model.
So that change has happened in the last 12 to 15 months.
Govindraj Ethiraj: Right. So as we look ahead, are you saying that the lucrativeness or attractiveness of four-wheelers is reducing for everyone? But the driver who has to buy the car, the platform owner who could potentially have that driver as subscriber or part of the platform.
And therefore, maybe growth is not going to be as much as obviously the other categories.
Kunal Khattar: Going on the contrary, if we move away from a take rate or a rev share model to a subscription model, there is actually more money left on the table for the driver. Assuming a 300 rupee AOV, if a platform was charging 30%, they were retaining 90 rupees on every transaction and the driver was keeping 210 rupees. And this is per transaction.
In a subscription model, a platform will charge a fixed, say, 50 rupees a day or 100 rupees a day. And now if you do seven or eight transactions a day, you get to keep seven times 300, 2100 rupees, 100% of that after paying that 150 to 100 rupees subscription. So there is significantly more take home for the driver, which means that more revenue for the driver means it's more attractive for him.
And therefore, that will encourage more and more people to come onto the platform. So hopefully that will result in higher supply. So platforms are, of course, making less money, which means they have to keep their costs in check.
And I think that is why Rapido in a way is far better suited to work and operate under a subscription model because they've built for the first five years, like I mentioned, they built their entire business running two wheelers. Now in a two wheeler, even if they were charging 25, 30% take rate on a 50 rupee AOV, they were making 10 to 15 rupees. So their whole cost structure was built in such a way that they could break even on a 15 rupees contribution per transaction contribution margin.
So now if they charge 40, 50 rupees per three wheeler or 100 rupees per four wheeler, their costs are so low that they're able to recover and make a profit with that small amount. Whereas Ola and Uber have from day one have been charging 30% on a four wheeler product. That means they were making a contribution margin of 100 rupees per transaction.
Now when they drop that 100 rupees per transaction to 50 rupees a day, they have significantly higher fixed costs. And that's why we've seen losses in both Ola and Uber go up considerably.
Govindraj Ethiraj: Last question to where we started. Bharat Taxi, I guess, I mean, the whole reason for it is to appear more reasonably priced to users as compared to what is being offered today through whatever model, in this case being the cooperative model. So was there so much margin being taken away by these companies that they could have been or countered like Bharat Taxi can be successful or alternatively will Bharat Taxi end up facing the same kind of cost pressures that others are?
Kunal Khattar: Two years ago when platforms were charging 25, 30% take rate or rev share, there was an opportunity for a cooperative business model like Bharat Taxi to exist. Today, if you see all the platforms have moved away from a take rate model to a fixed or the subscription model, which is what Bharat Taxi is proposing, that competitive advantage that Bharat Taxi would have had earlier doesn't exist today. If you compare the price across Bharat Taxi, Rapido and Uber, there's not more than a 5% to 10% difference between them.
I think now what's going to happen is with that little difference between the average order value, customers are going to the platforms where they see the fastest turnaround time. You know, how long it takes from the time you place a request and somebody accepts that and they come. Now, the shortest tag is going to be on platforms that have the highest density of supply, which means the biggest number of, you know, riders or vehicles.
Now, companies that have been around for 7, 8, 10 years, Uber and Rapido have between them 85, 90% of market share, which means they will have the biggest installed base of drivers. So theoretically, they'll have the fastest tag. I think 3 to 5 minutes is what the average time a Rapido or an Uber takes for them to reach you.
Now, Bharat Taxi is starting from zero. For them to build that level of density is going to take time and what we've seen is for you to, if you come in late to the party in businesses like this, you're going to have to give a lot of subsidy for supply to be on your platform because initially, there is very little installed base of users. So you have to build supply ahead of demand because if you bring demand on your platform, there's no supply.
If you go on Bharat Taxi and it's taking 10, 15, 20 minutes, you're not going to go back again, right? Now, first you have to build supply and supply without demand means you have to pay them money just to sit there without any customers and then get customers on. So that is why it's an expensive proposition to build a ride-sharing platform and I think somebody has to realise that because they're coming in so late to the party, for them to build that supply is probably going to require a lot of investments and if 500 rupees per supply is their only source of capital, I think it's going to be tough for them to build momentum, installed base, density, to be able to deliver 3 to 5 percent.
That is what is now people's expectations are that and that's the bare minimum.
Govindraj Ethiraj: Right, and I'm sure we'll revisit this maybe in a few months, if not a little longer. Kunal, thank you so much for joining me.
Kunal Khattar: Thank you so much for having me, Govind.
DGCA Revises CAR
The Director General of Civil Aviation, that's the DGCA in India, has revised the civil aviation requirements on refund of airline tickets and introduced a 48-hour look-in period after booking. It said that during this window, passengers can cancel or amend tickets without paying an additional fee, except for the fare difference for the revised flight. There are other conditions to this, of course, but all of this will take effect from March 26th.
It also said that airlines must not charge for correcting the name of the same passenger if the error is reported within 24 hours of booking when the ticket is bought directly from the airline's website. Some of those earlier conditions are also linked to booking from the airline's website.
Eye on Retail
Eye on Retail is a special series where we decode the present and future of India's e-commerce industry. So as India rushes to build a modern supply chain, its logistics landscape is undergoing a transformation now. Warehousing stock in India has grown to more than 533 million square feet, and a lot of that has actually come from tier two and tier three cities, which added about 100 million square feet in 2024.
So how does the industry invest for this future? What does it need to do to make sure there's maximum synergy as well as efficiency in the way investments are done and in the way, finally, the logistics universe evolves and develops? I spoke to Yogesh Shevade, Head of Logistics and Industrial in India at JLL, and Balbirsingh Khalsa, Executive Director, Industrial Capital Markets, National Director at Knight Frank, and I began by asking them how they were seeing the industry grow.
TRANSCRIPT
Yogesh Shevade: When I look at logistics holistically, I think one of the important aspects of logistics is transportation, and which is one of the costliest currently in India. So there are a lot of opportunities to optimise transportation costs. If you look at overall cost of logistics, transportation contributes to almost 50% of that, whereas warehousing contributes to around 10 to 15%, and labour cost is another major contributor of almost 30%.
So if you are looking at optimising the cost of logistics, I think one thing which we really need to do good is how do we make our transportation efficient. This sector is highly, I would say, fragmented. It needs more organised players to come and play their part to make it more streamlined, which will bring in efficiencies and which will bring in quality also, because a lot of damages that happens during transportation cause problems in terms of cost of returns, cost of repairs kind of thing.
So that is one area where India really needs to focus. I think underlying to that is an infrastructure where government is focussing on creating robust infrastructure, both on road, rail, and waterways. Second part of it is labour.
In labour, although India is the most populous country, but having relevant skill set at those locations in adequate quantity is still a challenge because during peak seasons, I always hear from all the major warehousing operators that they are finding it difficult to get labours to manage that demand. So we really need to build some capacities on skill development side, relevant skills like MHC operators, pallet operators, warehousing staff, which we need to build along with the ecosystem, infrastructure ecosystems like good warehouses, which will support to this infrastructure to make it more efficient. And other aspect of it is automation.
As you rightly said, automation in India is gradually increasing. There is still arbitrage in favour of labour because labour cost is relatively cheaper. But as it is becoming more and more difficult to get adequate amount of labour, companies are looking at having a hybrid model of automation plus labour.
And I believe automation is going to play a good amount of role. E-commerce industry is leading it. They are still not fully automated like they have done it in other countries like US, Europe.
But still, I would say 20 to 25% of their operations are automated in India and the rest, they are dependent on labour. And if the labour crisis skill sets are going to become more scarier or difficult to get, there will be emphasise on adding more automation. And that means your power requirements will go up, your inside warehouse designs might change to accommodate conveyor belts and designs related to that.
And that is going to, I would say, shape a future of infrastructure, what developers need to build and also make it more efficient from operation standpoint. So operational efficiencies will come through design, through labour optimisation, and through automation over the next few years is what I think.
Govindraj Ethiraj: Right. You know, the breakup that you gave, Yogesh, you talked about transportation roughly 50%, warehousing 10 to 15%, labour 30%. Is this similar in other parts of the world as well?
Yogesh Shevade: Generally, what we have seen is warehousing costs in some of the countries are lower than this 5 to 10%. Because of automation upfront capex, what we have seen is manpower to that extent, costs are low. Transportation is more efficient, but yeah, transportation costs are the biggest.
And one of the things which is unique to us is for us, since transportation is little disorganised or fragmented, people are willing to move, take decisions on warehousing locations, four or five kilometres or 10 kilometres away from their preferred locations, because they can negotiate better with transportation guys. And that doesn't impact the cost of transportation in India. But if you go to developed countries, they're very sensitive to kilometres.
They really don't want to go 10 kilometres away from their preferred centre of gravity or kind of location they want to set up warehouse. They are willing to pay a little higher for locations in terms of rent, but they really don't want to go far off from the preferred locations or centre of gravity locations. So transportation plays a very critical role in deciding the location outside India.
And if we become more organised on transportation side, I believe that would also happen.
Govindraj Ethiraj: When you talk about, you know, this, let's say the flexibility or maybe the need to adjust your location. Can you illustrate that with an example as to how it would work in a city like Mumbai or Delhi?
Yogesh Shevade: Yeah. So one of the things which we have seen in a city like Mumbai, Mumbai has two major micro markets. B1D is the biggest warehousing hub, not only in Mumbai, but entire India.
And if you see people earlier reluctant to go beyond toll, because there was additional toll charges, which was levied on transportation. Now people are more willing to go beyond toll because they know that price, they can negotiate better in terms of rental and offset, or they are able to negotiate better on transportation costs to offset that impact. Whereas historically, if you do the analysis, if you are not dependent on location in terms of where you should be, Taloja, which is another micro market, Taloja-Kopoli is equally good.
But because ecosystem is built in B1D, irrespective of whether you want to be in Taloja or B1D, first preference is to go to B1D because of the ecosystem, because of the availability of transportation, because of the availability of relevant manpower. People are taking calls based on the infrastructure or ecosystem availability, rather than scientific way of doing centre of gravity and going to a location which is more for them from a supply chain standpoint.
