On Episode 849 of The Core Report, financial journalist Govindraj Ethiraj talks to Vibhuti Garg, Director at South Asia at Institute for Energy Economics and Financial Analysis (IEEFA) as well as Dr. Jaijit Bhattacharya, President of the Centre for Domestic Economy Policy (CDEP) Research.

SHOW NOTES

(00:00) Stories of the Day

(00:50) Global markets ride on unbelievable exuberance

(05:41) IMF official says countries must pass on true cost of energy to users and reduce subsidies

(07:27) Is India geared for peak power demand given gas supplies are restrained?

(17:04) Have India’s moves to free up imports for exporting companies and industries worked, particularly in textiles and apparel?

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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 Friday the 17th of April and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital

Our top stories and themes…

Global markets ride on unbelievable exuberance.

The IMF says countries must pass on true cost of energy to users and reduce subsidies.

Is India geared for peak power demand given gas supplies are restrained?

Have India's moves to free up imports for exporting companies and industries worked particularly in textiles and apparel?

Markets, The Bubble, Oil, The Rupee and China

One missile fired in the state of Hormuz and that could blow up the entire ceasefire right now with Iran on one side and the United States and Israel on the other. And yet stock markets are behaving as if the war is over.

The problems created by the war including the fact that oil and gas fields in the Gulf are not functioning and will not come back on full stream for months. All of this will somehow be fixed with a wave of a hand or a magic wand. Which only illustrates that stock markets at this time, particularly Wall Street, are not the best benchmark for assessing overall risk appetite and behaviour.

The S&P 500 hit a record high on Wednesday reflecting investor optimism that a peace deal could be reached before the war in Iran could inflict significant damage on corporate America. The New York Times reported adding that, amazingly, the index had already erased its losses during the war in Iran and is now two percent higher than what it was before the fighting began in late February. So this would mean, at least interpretationally, that things are better off today than they were before the war started.

The mere posture towards peace has helped to placate the stock market, the New York Times report says, adding, since the ceasefire took hold last week investors have noted a shift in tone by the Trump administration that reflects a desire to end the conflict soon. Analysts at Barclays told the NYT that the market is trading, assuming that we've seen the worst of the conflict. The S&P now is on course for the third straight week of gains and that's the kind of winning streak not seen since October and has risen about 10 percent since the 30th of March, which was the bottom of the current sell-off.

Elsewhere, this is not just in the U.S. by the way, Taiwan overtook the UK in stock market value as its tech firms regained favour amidst hopes of that same de-escalation. Taiwan's market capitalisation rose to $4.14 trillion as of Wednesday, making it the world's 7th largest according to Bloomberg data, which shows the combined value of companies with a primary listing on Taiwan. The UK market was at about $4.09 trillion.

The Indian markets, according to my calculations, are just under $5 trillion, not very far ahead. The TAIX index in Taiwan has also recouped all losses driven by the Iran war and it was actually one of the first major markets to do so and to of course hit a record high according to the Bloomberg report. Now, global markets have risen for the 10th straight day to record highs.

Oil prices, as we've pointed out before as well, are thus a better indicator of market sentiment since there are more measured institutional investors driving trades there. Oil prices rose on Thursday, reversing earlier declines as doubts once again emerged over the ceasefire and its outcomes. Reuters said Brent crude futures were about $0.81 up to about $95.74 on Thursday morning.

And back home, the Nifty 50 and Sensex were off their highs and the Sensex was down 122 points to $77,998. The Nifty was down 34 points to $24,196. The broader markets did better.

The Nifty mid cap and small cap indices were up 0.6 and 0.8% higher. Now, the markets are likely to be steady here till there are further positive developments or would remain broadly range bound. The hope is, of course, a return to focus on fundamentals and results season that has already started.

The rupee closed slightly stronger on Thursday, though, despite the markets falling, as of course it too rode on the higher optimism for a deal to end the war. The rupee closed at Rs 93.19 against the dollar, which is up about 0.2% from its previous lows, according to Reuters, which added that Wipro, the IT major, announced a record share buyback of about Rs 15,000 crore or $1.6 billion on Thursday after reporting a slight quarterly revenue miss, consolidated sales for Wipro, which is the fourth largest IT company for the three months ended March 31st, were up 7.7% to about Rs 22,236 crore or about $2.6 billion. And that was slightly lower than the average analyst estimate of Rs 24,363 crore, according to LSEG data quoted by Reuters.

Elsewhere, China's economic growth has rebounded more than expected in the first quarter, suggesting limited spillovers so far from the war, according to a Bloomberg report, adding that thanks to strong manufacturing and exports, GDP expanded 5% from a year ago, which is the fastest in three quarters. GDP also saw the quickest sequential growth since the final three months of 2024. High-tech output was up 12.5% in the first quarter, faster than the 6.4% gain in manufacturing as a whole.

Industrial robots and integrated circuits were up 33% and 24%. Manufacturing overall is about a third of economic growth in the quarter in China.

IMF Reccomendation

The International Monetary Fund's new fiscal affairs chief, Rodrigo Valdez, said countries should skip fuel subsidies to help their citizens deal with a shortage of oil and the corresponding surge in energy prices and opt instead for targeted temporary cash transfers that do not obscure higher prices and keep demand high.

He said that we don't have oil, we don't have energy, and energy needs to be more expensive for everybody so that the adjustment happens and we consume less, in an interview to Reuters. The IMF on Tuesday cut its growth outlook thanks to war-driven energy price spikes and supply disruptions and said that the global economy could be driven to the brink of a recession if the war widens and oil stays above $100 a barrel through 2027. He said, and this is something that the core report has pointed out as well, that you can pass through higher energy prices and then you can do other things to help.

According to him, it's a global shock and if countries suppress the price signal, the global price will be higher and it's very important to give price signals so demand can adjust. Meanwhile, a Bloomberg report says that India's LNG or liquefied natural gas importers have accelerated purchases from the spot market, taking advantage of a recent dip in prices. Bharat Petroleum, Gale India, Gujarat State Petroleum Corporation bought shipments for delivery between April and June at below $16 per million British thermal units, according to spoke to Bloomberg.

Earlier, Indian buyers had limited spot purchases and had cancelled tenders because offers were too expensive. India's LNG deliveries are down about 14 percent compared with the same time last year on a 30-day moving average, according to ship data compiled by Bloomberg.

Power Demand This Summer

A hotter-than-normal summer is emerging as a primary catalyst of sorts for the Indian power sector, with peak electricity demand forecast at 275 to 285 gigawatts.

Most of India is expected to face a higher number of heatwave days in May and June, according to the India Meteorological Department, and approximately half the country is projected to see above-normal maximum temperatures during this period and we're talking about the next month. Remember, we are in May and already seeing very high temperatures. Analysts who spoke to Business Standard said that they expect power demand to jump 8 to 12 percent year-on-year and every 1 degree Celsius rise above 24 degrees Celsius historically adds about 2 percent to demand.

Now, India's current installed generation capacity is about 524 gigawatts, while last year's peak demand was 250 gigawatts. That's 2425. But last year, gas-based plants were ready to kick in on shortfalls of power, but this year there is little or no gas thanks to that West Asia crisis and diversion of gas to domestic use.

The government has, however, said that coal stocks are available with coal-based plants at about 58 million tonnes, which is sufficient to run plants for an average of 19 days at an 85 percent plant load factor, and we'll come to why that is important in a moment. So, given that we are set to see higher peaks during the day and evenings, what is the overall power supply situation looking like and how is it or how are regulators likely to balance between coal, gas and renewables this hot summer? I reached out to Vibhuti Garg, the director for South Asia at the Institute for Energy Economics and Financial Analysis, and I began by asking her how the overall demand and supply situation was looking like right now and how it would likely to balance going forward.

INTERVIEW TRANSCRIPT

Vibhuti Garg: Yes, India is approaching or we have already approached summer. So in terms of the overall demand, if you look at India has about 245 gigawatt of daily peak demand. And in terms of how this capacity is being met, if you look at from the generation perspective, still constitutes about 70% of the capacity which is meeting that demand.

So while on the installed capacity side, its share has gone down. So coal is now around 48% of the total installed capacity. But in terms of generation or in terms of how much it's constitute in terms of meeting the demand, it's still high around 70%.

But definitely over the last few years, we have seen how share of renewable has gone up from six to 7% just like couple of years ago, three, four years ago, to now about 25-26% of that demand is being met through renewable energy and primarily solar during daytime. So I think the role of solar meeting this demand has becoming more and more incremental, as well as you know, it's becoming now the backbone in terms of how the demand especially during summer months when we are seeing if you look at even the demand curve, it's like a duck shape. And we have two peaks now in India.

One is during noon, the daytime peak and one is the evening peak. And this daytime peak is largely being met through solar. So which given India's huge solar potential and I think we are using solar to our advantage.

Govindraj Ethiraj: Right. And how are things looking in the context of the energy shock that we are facing? I mean, is that affecting any of our production capacity current or anticipated because of let's say heat waves and so on?

Vibhuti Garg: India is much better prepared because we were discussing coal still plays a role in terms of meeting that demand and that coal is largely domestically produced. So India has ramped up coal-based capacity and also to ensure that given with all the disruptions also happening because of the West Asia conflict, where India is not able to run its gas-based plant. So India has asked Tata Mundra plant to run, which is about 4 gigawatt of capacity to start running from April 1st and ensure that it is available during peak summers.

There are other things as well, which India is kind of preparing itself by adding more and more renewables, also ensuring there is enough hydro also hopefully will be available if we have decent monsoons. But at the same time, India has also asked most of these coal-based plants not to go for maintenance during peak summers because we would have filled that gap by generating more from gas-based capacity. But given that we are not able to allocate gas to power sector, which was largely being done from the imports.

So coal will have to play a big role.

Govindraj Ethiraj: And what's the gap that you're seeing which coal is filling up or will fill up? But what's the gap because of those gas-based power plants not running right now?

Vibhuti Garg: It's about 10 to 12 gigawatts. So it's not substantial. We have installed battery energy storage, but we are still, India has been a little laggard till now, but we have a lot more capacity coming up.

And once that capacity comes up, to me that evening peak will also diminish. So I think the kind of capacity that we are talking about is 10 to 12 gigawatt as of now.

Govindraj Ethiraj: Right. So that's about 5%.

Vibhuti Garg: Yeah, India retired 5 gigawatt of gas-based capacity last year because it was extremely, extremely expensive to run those plants. So yeah, they were actually kind of a stranded capacity where, you know, they were not kind of being deployed or used by any distribution companies because it was extremely expensive to buy that gas-based power.

Govindraj Ethiraj: Right. As you look ahead, what you're saying is that even if we are going to hit new peaks in terms of demand this summer, we will be able to meet it through our enhanced coal generation capacity. Is that right?

Vibhuti Garg: Not only coal, I would say renewables. India added about 55 gigawatt of capacity in the financial year 2025-2026. So we are very well positioned.

Even in the last one month alone, we have seen how renewable share of generation has gone up tremendously. And that was not just arising out of the West Asia conflict, but the huge capacity that we have added. And as I said, there are a lot of CNI consumers as well who are building up that capacity.

And even under the PM Ujjwala scheme, where the solar rooftop penetration has increased tremendously, and we had about 8 to 9 gigawatt most solar rooftop being installed. I think that's playing a big role. So coal will play a big role for evening peaks, but not day peaks.

So renewables, 26 to 27% of generation coming from all non-fossil fuel sources is really big now in terms of the overall generation mix as well.

Govindraj Ethiraj: Right. So, and when we say, if we were to put a number, so just so that we understand the difference between morning and evening, you said 240 gigawatt is the total demand roughly. What is it in the evening peak and what is it in the day peak?

Vibhuti Garg: During day peak, it's somewhere around, you know, 235 to 240 gigawatt. And in the evenings, when the AC load starts picking up, it reaches around 245. And during summer months, the day peak is much higher.

So it's like on an average, yes, evening peaks are much higher, but last year alone, you know, it's mostly around 2pm or 3pm when India hits the maximum peak demand, which can be met through solar.

Govindraj Ethiraj: Right. Are there any other trends that you're seeing in terms of either generation or demand or other demand and generation in the next few months in the context of all the other challenges?

Vibhuti Garg: There are few changes that are happening. You saw how there was big queues for, you know, sudden surge in demand for electric cookstoves because of lack of, you know, LPG supplies. So that will kind of increase your electricity demand again.

And there is some, you know, behavioural pattern change as well. People are now more kind of, you know, accepting the shift towards electric cooking in the urban areas where there's more reliable supplies. So I think that will shift the demand as well.

We are also seeing how the electric vehicle sales just in the month of March alone has gone up. So there'll be much more demand push coming from electric vehicles. And then given that India is also positioning itself by opening up more and more data centres, it will be again restricted to maybe some clusters, but we will see much, much higher demand coming from these data centres as well.

So yes, we will see further demand profile changing, further demand going up much, much higher with these new demand factors kind of playing a big role.

Govindraj Ethiraj: So you've talked about induction cooking stoves and the spike that will come from that as well as charging of electric vehicles. All of that combined, what will it add to in terms of total demand? And are we equally well positioned as we were till now?

Vibhuti Garg: We are expecting about 270 gigawatt of peak demand this year. And it's gonna be combination of factors, the one we just spoke, and maybe also the climatic factors will also play a big role. So last year, we had a better year in terms of, you know, unlike 2024, where the heatwaves were very, very strong.

Last year was a much pleasant year. We didn't see that kind of demand growth. But this year again, we are expecting because of heatwave conditions and all the other drivers that we spoke about, the demand might hit 270 gigawatt.

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

Vibhuti Garg: It was a pleasure being here. Thank you so much.

India’s Import-Export Moves

India's cumulative textile and apparel exports last fiscal year, 25-26, saw a degrowth of 2.21 percent, that means it was minus, while exports in March were down 14 percent or minus 14 percent according to export data released by the Ministry of Commerce and reported by the Economic Times.

Textile exports were down about 9.9 percent, while apparel exports were down about 19 percent in the same period. This is March of 2026. Indian exporters, including in the textile sector, have been facing high tariffs from the United States for most of the last financial year.

One way to mitigate the higher costs incurred here in production is to reduce the cost of raw materials and one way to do that is to reduce the import duties on those raw materials like viscose staple fibre. Some of that has been done, but imports of raw materials have also faced hurdles in India, including through the imposition of quality control orders, a non-tariff barrier effectively, and that's held back a lot of imports. Have rolling back QCOs, which was done a few months ago, worked? And what do we need to introduce more friendly tariff and import regimes for Indian producers of textile or apparel, or essentially how do we make them more competitive? I reached out to Dr. Jaijit Bhattacharya, President of the Centre for Domestic Economy Policy Research or CDEP.in, an independent think tank who has studied this matter, and I began by asking him how he was viewing the textile and apparel industry's challenges in this world of higher tariffs.

INTERVIEW TRANSCRIPT

Jaijit Bhattacharya: So, Govind, let me just clarify. When we say duties, people mix up between anti-dumping duties and basic custom duties. They're two different things.

You know, I'm all for reducing the basic custom duties as long as there is parity. What I mean by parity is that there are fundamentally different cost structures that India and the rest of the world has. To give you a quick example, natural gas, which is critical for many industries in India, sells for about $2 per MMBTU in Russia, US, and China.

In India, it sells for $14 per MMBTU. So we can take a strategic decision and say all natural gas and downstream industries should not be operating in India. We should shut them down because the costs are different.

Or we can decide that let's give a level playing field in terms of this particular raw material, which is natural gas, and therefore put enough duties so that Russian, and a Chinese, and an American, and an Indian manufacturer are all on the same base. So that's one part of duties. The second, which is anti-dumping duty, is not really a duty in a regular sense.

It's a punitive action by the government for those who are indulging in illegal trade. It's almost like smuggling. It is basically selling the goods at a predatory pricing with the intent of destroying India's capacities.

Now, all of us have been seeing the Iran war. What did the Americans do is go and bomb the factories. You either put a bomb on the factories, or you price the goods so low that those factories shut down.

Outcome is the same. The country loses its ability to produce fundamental goods within the country, and therefore we are import dependent. So all the talk about strategic autonomy goes out of the window because we are dependent on imports from a whole bunch of other countries, and in India's case, largely from China.

So anti-dumping duty is not really duties in that sense. It's a punishment being given to those who are not following the global trade rules. It's a WTO compliant tool that is given.

And hence, for those who are even mentioning that we should take the anti-dumping duty out, do not really understand how global trade happens.

Govindraj Ethiraj: So that's anti-dumping duty, which of course is levied from time to time. How would you see the current import duty structure in the context of what domestic manufacturers are paying, or in the way they are able to build it into their total cost of production?

Jaijit Bhattacharya: So most of the basic customs duty is very little from the textiles perspective. In fact, where it is, it's causing an inverted duty structure. And let me explain what that means.

So inverted duty structure means that the downstream product, the upstream product is coming at a higher tax than the downstream. And so why should I even import the upstream raw material and manufacture in India? Because I can get the downstream manufactured outside and bring it tax-free into the country.

So let me take the example of dissolving grade wood pulp or rayon grade wood pulp, which is very critical in what you mentioned, VSF, viscose staple fibre. So you take wood from the forest or from bamboo, make a pulp out of it, and then you turn that into a viscose staple fibre. Now, when we import the viscose staple fibre from the ASEAN countries, specifically Indonesia, it comes at zero duty.

Zero, right? There's no custom duty. That's because of the India-ASEAN pre-trade agreement.

But what Indians need and the Indian manufacturers need is the wood pulp, which is having an FSC certification. The FSC certification ensures that it's a sustainable, responsible wood that's coming in, that we're not cutting tropical forests and then turning that into your and my shirt. It's coming from a cultivated forest.

And if we don't have that certificate, we can't export, right? So because we're a large exporting country of textiles, we need to have that. Now, that grade of wood pulp, when it comes to India, there is a 2.5% duty on top of it. In fact, if it comes from various other places, it adds up to about 4% of duty. So the raw material comes at 4% duty. The product downstream comes at 0% duty.

That's completely distorting manufacturing in this country.

Govindraj Ethiraj: Okay. So if we were to, again, sticking to textiles, make it in a very broad sense, help make India's textile industry more competitive so that it can export competitively as well. And that's obviously an issue that became pretty stark in the last year or so.

What do we need to do?

Jaijit Bhattacharya: Now, again, there are some narratives that we need to bust to begin with. The narrative is that let's have free flow of raw materials and then suddenly we'll become the largest exporter of textiles in the world. Now, to begin with, there is free flow of textiles as long as people play by the rules.

We cannot have predatory pricing. So let's not throw anti-dumping duties out because that is not duties. That's a penalisation.

You take that out, we are having free flow of goods. Now, why is it that we are not having exports happening? It's not because we are not efficient in manufacturing or there is the upstream within India is costing too high.

Those are not the reasons because from 2021 onwards, because again, you took the example of VSF, there is no duty on the VSF being imported into India. And VSF is coming at zero duty from ASEAN countries. So from 2021 onwards, what has been the growth in textiles exports in this country?

Nothing. If you look at last year from November onwards, even the QCO was removed. So from November of 2025 till now, has there been a growth in the export of textiles?

The answer is no. So data shows that the narrative that we should have free flow of raw materials without any anti-dumping duty, without any QCO is wrong as shown by data. And therefore, what is stopping us from exporting?

What is stopping us is the fact that we are not a least developed country. How does that make an implication? A least developed country gets access to the European markets and the US markets at a significantly lower duty.

So Indian textile attracts a 12% duty in the EU, Pakistan, Sri Lanka, Honduras, Philippines, and so on. They come in into EU at zero duty. In fact, in 2019 in US, whatever benefit that India was getting under the GSP, the generalised system of preference for countries which are not very, very developed, that was removed by the then President Trump of the US, who's again, current President of US.

So we did not get that benefit. Whereas countries such as Vietnam have, or Bangladesh, for example, they have got a free trade agreement on textiles with the EU. They get special access to the US market.

And Indian textiles gets hit by a 12% disadvantage because of the trade rules. So instead of focussing on the trade rules, which really matters, what we see is narratives, which is trying to split the Indian textile industry into upstream and downstream and pit them against each other and make them fight. Whereas that is not the problem, as clearly shown by the data.

The problem is we need to negotiate the rates for accessing these markets.

Govindraj Ethiraj: Right. I mean, on import specifically, I mean, even if our duties were low to non-existent, the fact is that we've had fairly, let's say, stringent quality control orders. And the process of getting a quality control order for a specific import itself has been, from all the exporters or importers that I've spoken to, quite challenging.

And that is what causes the blockage, not so much the duty itself, isn't it?

Jaijit Bhattacharya: Let's assume QCO is a problem, right? And if the process of QCO is your problem, let's fix the process, right? We had so many issues with ease of doing business, did we throw away all the rules and say, do whatever you want?

We went through a process and that I was working with DPIT and Amitabh Pant in that point in time to initiate the ease of doing business. We went through a lot of discussions to say, how do we make life simpler? If the process of QCO is an issue, let's fix the process.

Now, as I mentioned, from November 2025, there is no QCO. It has been taken out. The more of upstream will be consumed and that's well-known.

Unless the upstream is based outside of the country, then it's a different problem. They will dump and run away and go to another market and destroy that market. But that's not going to happen if the upstreams are within the country.

And that's really what we're talking about when we say a resilient India and supply chain resilience, a strategic autonomy, they're all different sides of the same problem. And we can't simply throw away the upstream and say, well, let's just import because that doesn't help in strengthening the industry.

Govindraj Ethiraj: Right. Last question, partly linked to the conversation so far. If we are to make India's garment export, and I'm talking now specifically about garment and apparel exports more competitive, what do we need to do onshore?

Apart from, let's say, whatever may or may not happen on the trade agreements or the tariffs, as we've been seeing in the last year or so.

Jaijit Bhattacharya: See, once goods come to the factories of each of our manufacturers, they're extremely efficient. The inefficiencies start from outside of the gate of the factory. And therefore, ensuring that logistics cost comes down even further.

Let me state for the record that the government has done an incredibly awesome job in fine tuning the supply chain and the logistics compared to what it was earlier. But obviously, there is scope to do more and ensure that there is more of railway lines being used because that's a much cheaper mode of transportation. And ensuring that there is enough logistics, the warehousing, and other such facilities in place, which reduces the cost of transportation.

Once the goods come to the factories, well, we are as competitive, if not more competitive than anyone else in the world.

Govindraj Ethiraj: Right. That's a good note to end on today. Thank you so much for joining me.

Jaijit Bhattacharya: Thank you, Govind. It's always a pleasure talking to you.