On Episode 858 of The Core Report, financial journalist Govindraj Ethiraj talks to Victor Vanya, Director and Co-Founder at EMA Solutions as well as Ajay Srivastava Founder of the Global Trade Research Initiative (GTRI).

SHOW NOTES

(00:00) Stories of the Day

(01:19) Markets take solace from potential back-channel developments in Iran-US negotiations

(04:02) Why India’s agriculture sector may not be much affected by a deficient monsoon

(05:04) How electricity markets are responding to record demand

(14:51) With more FTAs under the belt, this time NZ, what does it mean for India’s trade environment?

(24:47) Why Adidas shares are rising

(26:21) And how the world’s largest aviation industry is running out of mechanics to service its aircraft

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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 Tuesday the 28th of April and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

Before we start a quick update, while the core report as you know ranks consistently in the top three business news podcasts in India on Spotify and Apple, we're also in the top 10, that's number six in news podcasts on Apple, that's all news podcasts. So thank you as always for listening in and your good wishes which keep coming our way and keep us going.

Our top stories and themes now…

The markets take solace from potential back-channel developments in the Iran-U.S. negotiations

Why India's agriculture sector may not be much affected by a deficient monsoon

How electricity markets are responding to record demand

With more free trade agreements under the belt, this time New Zealand, what does it mean for India's trade environment

Why Adidas shares are rising and finally how the world's largest aviation industry is running out of mechanics to service its aircraft.

War and the Monsoons

Well the week has begun on another positive and uncertain note which is of course the norm nowadays with no clear sense on where the war in West Asia is going. It is of course possible that most of the negotiations have shifted to back-channel where they should have stayed to start with.

Now that is of course the hope but that is also how it seems to appear when you look at the developments from outside. But oil prices were higher on Monday morning and Reuters reported Iran's apparently boarding two cargo ships near the state of Hormuz as tensions remained high there. International benchmark Brent futures for June were at about $106.73 on Monday morning and US West Texas intermediate futures were up to about $95.30. Though uncertainty continues to loom large Iran has offered a new proposal to the United States according to a report in Axios which many are now not believing for reopening the state of Hormuz and ending the war while suggesting that nuclear talks be deferred.

The Nifty 50 and the Sensex ended near the day's high as sentiment improved. As we said the Nifty 50 was up 194 points to 24,092 and the Sensex was up 639 points to 77,303. The broader markets outperformed the benchmark indices.

The Nifty mid-cap and small cap indices were up 1.4 and 1.9 percent each. Elsewhere in gold, analysts have raised their annual gold price forecasts now according to a Reuters poll which said that strong central bank demand and economic uncertainty is expected to offset risks from surging inflation and hawkish policy bets because of the conflict in West Asia. The poll also found that the gold rally is expected to resume once tensions ease.

The survey was of 31 analysts and traders conducted over the past three weeks and the median gold forecast was 4,916 dollars per ounce for 2026 and this compares with 4,746 dollars to an ounce about three months ago. Spot gold on Monday was at 4,707 dollars per ounce so there is an upside from these figures but it's obviously not all that much if you go by the way prices have been moving in the past. Elsewhere in corporate news and also a mega deal, Sun Pharmaceuticals will buy US drug maker Organon in an all-cash deal valued at 11.75 billion dollars including debt for the largest overseas acquisition by an Indian pharma company according to a Reuters report which adds that the move comes as Sun, India's biggest drug maker by market value, steps up a push into higher margin speciality medicines with a sharper focus on areas like dermatology, oncology and obesity to offset declining US sales.

Meanwhile even as India is now facing and grappling with heat waves and more on that shortly as well there is rising concern about the impact of a deficient monsoon. Former agriculture secretary Siraj Hussain has pointed out in an article in Money Control that with the Indian meteorological department forecasting southwest monsoon rainfall of 92 percent of the long period average it means a high probability of drought but he says Indian agriculture is better prepared now to face that deficient monsoon than when it faced two consecutive years of monsoon failures in 2014 and 2015. This he says is because gross irrigation ratio has increased from 45 percent in 2014 to about 56 percent now and gross irrigated area he says has gone up from about 96.5 million hectares in 2014 to 122 million hectares in 2026.

Several rain fed areas now have access to irrigation so they will hopefully be much less impacted by lower monsoon rains he says.

Electricity Demand

Spot electricity prices in India are fluctuating dramatically through the day peaking at night when solar generation drops but high evening temperatures obviously send up demand for cooling. A Bloomberg report says prices at the Indian energy exchange the nation's biggest power trading exchange have been rising to a maximum regulatory limit of 10 rupees per kilowatt hour after sunset before falling to about a tenth of that or one-tenth of that during the day.

The swing captures the plight of a grid flush with supplies during the day but starved at night when 150 gigawatts of solar capacity switches off according to that Bloomberg report. On Saturday as we reported yesterday as well peak consumption has touched 256 gigawatts beating the previous high of 252 gigawatts on Friday. Both days had shot ahead of an earlier record in 2024.

With early projections on rising temperatures and heat waves the government has been preparing for demand to potentially reach 283 gigawatts this season according to that Bloomberg report. I reached out to Victor Vanya director and co-founder of EMA solutions an electricity data analytics company and I began by asking him how he was seeing the movement in electricity prices.

INTERVIEW TRANSCRIPT

Victor Vanya: So, as you have seen that the prices have gone up drastically in the electricity market. We've seen that around 12 to 14 hours in a day, the prices are touching 10 rupees, which is the maximum price on the spot markets or power exchanges. While the solar hour prices have been below 3 rupees and mostly closer to 2 rupees.

That's because of a lot of surplus solar we have. I think we are at the, not only demand touched the record high, the solar generation also touched record high. So, that's another key aspect which happened this week.

Again, that's because of the record solar generation we added recently. The main challenge we are facing now is because till last week or 10 days back, we were observing that there are heatwaves, but they're scattered across the country. But now from 13th or 14th of April, we saw that the heatwave spread across the country uniformly.

Everywhere across the country, if you see there is heat across. And that caused the demand to surge drastically. And the surplus which is available with us also gone.

In this case, that's the stress which has built up and then that caused the prices to go up. And that's the 10 rupees zone in almost 12 to 14 hours of the day.

Govindraj Ethiraj: And how are you seeing the supply and demand, particularly towards evening, which is when the solar power typically mostly switches off?

Victor Vanya: So, another factor we have to also note that we have the record solar generation and record thermal generation, which is coal-based generation. So, these are the two records we broke recently this week. If you look at thermal generation as such, coal generation touched around close to 4,400 mu per day.

That in itself is a record. And again, what we were doing in the recent past is we have increased our availabilities of thermal generators, which are coal-based generators, by reducing our outage levels. Usually, if you look at outages, they are in the range of 45,000 to 55,000 megawatt.

That's a normal range. Now, if you look at, we have brought down that level to around 30 to 35,000 megawatt. That means we have maximised our generation capacity, especially thermal generation capacity in order to meet the growing demand, the impact which we are seeing in the last 10 days.

Thanks to the efficiency levels of the plant and there also, because summer is something is very stressful zone for the power plants to operate at their peak efficiency. But still, we are trying to achieve that. That in itself is a record, something which I think is a great job done by our thermal power plants.

But this again causes a lot of stress on the plants. We've been observing that the forced outage levels are also gone up by around 5 gigawatt in the last one week. That's again increasing.

That's above normal situation we observed from the last one month. And that again is an outcome of this stress being built. But all being said, thermal and solar are again are the heroes.

They are helping us efficiently meet the growing demand.

Govindraj Ethiraj: And when you say forced outage, you mean the plants are shut down or some of the plants are shut down? Yeah, forced outages caused due to technical issues.

Victor Vanya: They're not the ones planned. Actually, they're not the plant tenants or fuel related issue. They're all very less.

Forced outage is purely technical aspect. Right. So you're saying that number was 5 gigawatts in the last week.

No, that is by 5 gigawatt in the last one week. Usually it's in the range of 20 gigawatt something. Now we are in the range of 25 to 30.

That's the range we are looking at.

Govindraj Ethiraj: So you're saying on any normal day, you have about 20 gigawatts of outages in thermal power?

Victor Vanya: No, if you look at total outages, forced plus plant together, the average range of outage is around 45 to 55. That's the average range. But now we are looking at around 30 to 35 because we have brought in all the available power plants online and trying to maximise the generation from the available thermal power plants barring forced outages, which are again out of control.

Govindraj Ethiraj: And just to back up a little bit, how much of electricity gets traded versus how much of it is, you know, long-term direct supply contracts and so on?

Victor Vanya: So usually the traded capacity is around 9 to 10%, which is traded in the entire short-term market, including power exchanges and 90% is on the long-term. And out of it, most of the quantum goes through power exchanges, maybe 5 to 6% goes through power exchanges. And the one change which happened in the last 10 days after the prices shot up is the volumes on day head market and real-time market have drastically gone down more than half.

Again, that volume has shifted to the bilateral market because there is a price cap and essentially it becomes difficult for buyers who are willing to pay higher price and get issued supplies. They are not able to get power in the day head or real-time markets. And those guys move to the short-term markets out of the day head and real-time markets.

Govindraj Ethiraj: Right. So how are you seeing the next month or so, given that heatwaves are predicted to continue and obviously the load on the grid also is going to be high or higher?

Victor Vanya: So again, one big relief is today. So in the west coast and as well as some southern states, we are receiving rains from I think 5 o'clock today. That's something despite we are expecting, because this is something awaited and we see that at least next few days till the first week of May, there will be scattered rains and then after that again, we also expect the heatwave to be back again for a while.

And then last week of May, we see that the monsoon will kick in in southern part of India and that will bring the, I can say, big relief which we need. And one additional relief we are expecting is the increasing hydrogenation, which kicked in early by a month because the amount of generation we are getting has gone up by around 60-70% in the last one week. That's again thanks to the increasing heat and then the increased melting in the northern Himalayan belt.

That's another positive respite which is coming in this week on and which will also continue in the month of May.

Govindraj Ethiraj: Do you have a figure in megawatts, how much it was earlier and how much it went up to roughly for hydrogen?

Victor Vanya: So now we're getting around 25 gigawatt is the peak which we are able to get and we were getting around 18-20 last one week back. That's difference we have and then that's again started growing up because hydro once it starts melting up, it goes up very fast and then we are expecting this to reach around 40-45 gigawatt by next month.

Govindraj Ethiraj: So has hydro also hit a record like thermal and solar?

Victor Vanya: So that's not a record in itself but you can see that in the month of April, the level of hydrogenation happening is in a record in the last 4-5 years. That's one of the highest numbers.

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

Victor Vanya: Thank you.

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India has ramped up coal and gas fired power generation last week as peak demand hit that record 256 gigawatts over the weekend amidst heat waves according to data reported by Reuters.

India operated about 9.6 gigawatts of gas fired capacity and ramped up coal fired generation to about 187 gigawatts according to grid India data reported by Reuters. NTPC the largest thermal power company is procuring gas through the Indian gas exchange and operating plants as advised by grid India according to officials. India expects peak power demand to reach around 270 gigawatts this year and there is confidence of meeting it.

India-New Zealand FTA

India and New Zealand on Monday signed a free trade agreement aimed at boosting two-way trade and investment and it was signed in the presence of visiting New Zealand Trade and Investment Minister Todd McClay. The FTA lowers tariffs significantly on goods, expands market access, and eases entry for select agricultural products and the agreement will see New Zealand eliminate duties on all Indian exports while India will reduce tariffs on 95 percent of exports from New Zealand.

The government said the forward-looking agreement will also facilitate 20 billion dollars in investment into India and that will deepen cooperation in trade, services, investment, innovation, mobility, agriculture, productivity, and education while creating pathways for skilled talent and students. So with FTAs with New Zealand, the United Kingdom, and the European Union in place, all of which are work in progress, where do we stand in terms of overall trade and also what's the current status of the India-US trade deal given that the Supreme Court had earlier reversed Trump's tariffs including the 26 percent last tariff imposed on India. I reached out to Ajay Srivastava, founder of the Delhi-based Global Trade Research Initiative, and I began by asking him how he was seeing the cumulative impact of all these FTAs at this point.

INTERVIEW TRANSCRIPT

Ajay Srivastava: New Zealand is a small country of 5.2 million population. Of course, Indian diaspora with 3 lakh people is big, almost about 5% of population. But in this FTA, we'll not be getting much on the export of merchandise side, because about more than 60% of India's goods already enter New Zealand at zero MFN tariffs.

They will not gain from this. Rest 40%, which are important products like textiles, leather, engineering goods, auto components, they will gain from the tariff elimination from the New Zealand. Second is, there will be a good gain on the mobility and services side.

For example, Indian students who are studying there, they'll get to work up to 20 hours per week. That's very good for them. Once they graduate, they can stay in New Zealand for three years.

So work visa for three years for them. And if for a PhD student, it will be for four years. Students going there, they can stay for three, four years, that's a good thing.

And then professionals from India who wants to try jobs, for 5000 of them, New Zealand can accommodate them for up to three years. And there's one new category for students or for professionals who wants to travel there, they can travel and work for up to one year, 1000 vacancies for them also. So it's a good considering New Zealand is a small country, they are accommodating so many of our students and professionals.

So that should be the real gain from this. So less gains on goods, but good gains on services and mobility side.

Govindraj Ethiraj: Right. And I was seeing wine, for example, that's something that you do see in stores here. I mean, in terms of New Zealand wine, but most of the benefits appear to be spread over 10 years, like in the other India, UK, FTAs and so on.

Is that right?

Ajay Srivastava: Yeah. So in wine, we are following a strategy, uniform strategy for almost all the FTAs, UK, EU, FTA, earlier Australia, then New Zealand. So we say our tariffs are 150%.

We say we'll cut these to say 100%. And then from 100%, we bring it down to 50% or 25%, depending on the price per bottle. If price is less than $5, no duty cuts.

If between $5 to $15, duties will cut from say 150% to 50% in 10 years. If above $15, then tariffs will come down to 25% in 10 years. So it's a calibrated thing we are offering the similar treatment to all our FTA partners.

Govindraj Ethiraj: Right. So the total trade between India and New Zealand is about $2 billion. And there is also a mention of New Zealand investing about $20 billion in the next 15 years.

Does that seem feasible given the size of trade right now?

Ajay Srivastava: I'm sceptical on this part, even though it's a headline for most of the newspapers. And because in the past 25 years, New Zealand invested less than $600 million in India. Now suddenly in the next 15 years, going from less than $600 million in 25 years to $15, $20 billion is a big, big task.

Of course, from New Zealand side, they say it comes with some carriers which are not properly mentioned, but it's a India will continue to grow at the similar rate it was growing in the past. What is that growth rate is not defined, but FTA defines that as about 10%. So if India's GDP is more than 9.5% or 10%, then only this will kick in. That's hard right now, considering even today's this year's GDP is far lower than this. So I take this as a pinch of salt. But the good thing is that, I mean, it's a statement of intent.

I think they'll be working on that. And let's see how far it is achieved.

Govindraj Ethiraj: Right. You know, we have seven FTAs, according to a note that you've put out in the last five years, including Mauritius, UAE, Australia, EFTA, UK, and Oman. And there's a trade deal with the United States.

A lot of this is work in progress, including UK, EU, and I don't know, US is work in progress, or is it already in progress? But how do you see the cumulative impact of all of this?

Ajay Srivastava: So cumulative impact is if we consider all the FTAs, we also include the FTAs with EU, because that has been announced, negotiations concluded, we have signed a joint statement with the US. If we include all these, then we have done 20 FTAs covering all major economies except China. Even with China, we have a small preferential trade agreement called Asia Pacific Trade Agreement.

So we have done FTAs with all economies. And we have to see how the exports grow. In the past FTAs, the data, for example, if we see the data for ASEAN, Japan, and South Korean FTAs, which were signed in 2010-11, our imports have grown at a faster pace than our exports to them.

That means trade deficit has been consistently increasing. Now with these countries like Switzerland, or UK, and most of the European countries and US, we have a trade surplus. Even before we signed FTAs with ASEAN, Japan, Korea, we had trade deficit.

But that has increased. These countries, developed countries like US, UK, European Union, we have a trade surplus. So we have to see whether our trade surplus increases over time, or something else happens.

We have to keep our fingers crossed.

Govindraj Ethiraj: Right. And to come to the US now. So where do we stand right now in terms of, I know there were fresh negotiations between both trade representatives in the last week.

But are we bound to pay tariffs? Are we not bound to pay tariffs? What are exporters likely facing?

Ajay Srivastava: So when US Supreme Court outlawed their reciprocal tariff on Feb 20th, US immediately imposed Section 122 tariff at the rate of 10%. This means any country, whether they have an FTA with US or not, US will be charging 10% uniform tariff on all of them over and above their existing tariffs. So countries are asking, why should we do FTA?

When we have to pay 10%, you have an FTA, you don't have an FTA. If you have an FTA, you have to surrender so many liberties, you have to give so much market access. So there is no point, you can't justify the FTA with the US.

Not only India, no country in the world can justify an FTA with US under the present circumstances. That's why we have seen Malaysia has walked out of the FTAs. They start talking about these things, murmuring, no decisions are taken.

But if we talk about logic, if we discuss across the table, there is no logic to doing FTA with US for any country. Forget about India.

Govindraj Ethiraj: So the current deal, when exporters are currently being subject to 10% plus most favoured nation duties, is that the current position? Yes. So for example, in the case of let's say garments or diamonds or gems and jewellery, what would it be?

Ajay Srivastava: So for example, for garments, if the tariff on gen shirts is 12%, so total tariff will be 10%, 22%. Even after the FTA, you have to pay 22%.

Govindraj Ethiraj: Right. So and the proposed tariff before the Supreme Court judgement was 26%.

Ajay Srivastava: It was 25%. Initially announced was 26%. It was then brought down to 25%.

And then after in the joint statement to be negotiated to bring it down from 25% to 18%. Supreme Court even quashed that 18%.

Govindraj Ethiraj: Right. Would you say that at this point of time, exporters to the US, particularly in areas like garments again, are on a somewhat level playing field? Yes, everybody has to pay the same tariffs.

Okay, last question. So as you look ahead, where do you feel the negotiations with the United States are going? And could we assume that all the other FTAs which are coming close to operation, or being operationalised are on track?

Ajay Srivastava: Yeah, so I say, New Zealand will be 20th FTA if we consider also the FTA with the US and European Union done. US, we heard that our team went last week to Washington for negotiating it further. So we don't know what's happening on the US front right now.

I don't see any logic on that. So all the FTAs are on track. US, I'm sceptical because it doesn't make sense because of US Supreme Court judgement.

So we have to wait for doing an FTA with the US for some more time till things are clearer. The thing which is not clear is that what we are getting returned after offering so many concessions to US, we are not getting any return.

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

Ajay Srivastava: Thank you.

Adidas Shares

For German sportswear company Adidas shares were up on Monday after Kenya's Sebastian Sawe became the first person to run a marathon in under two hours in an official race accomplishing his feat wearing the brand's Adizero Adios Pro Evo 3 trainers according to Reuters. Sawe ran to victory in the London marathon in one hour 59 minutes and 30 seconds. The sub-two-hour marathon has been one of sport's biggest goals for years according to that Reuters report and after that race Sawe held up his $500 Adizero Adios Pro Evo 3 trainers with WR and sub-two written on it in black marker pen.

He also beat the previous world record of two hours 35 seconds set at the Chicago marathon in October 23 by the late Kelvin Kipton. Ethiopia's Yomif Kejelcha finished second in his marathon debut and tixed a CIFA broker women-only world record which was hers. All three were wearing Adidas Adizero trainers which are set to go on sale on Thursday.

The shoes use innovative foam and carbon-plated soles and ultralight components and weigh an average of 97 grammes which is 30% less than its predecessor and improves running economy by 1.6 according to Adidas whose shares were up 2% in mid-morning on Monday although they're down 18% since the start of the year on concerns of the group's exposure to U.S. tariffs and the impact of the conflict in the Middle East according to Reuters.

A Skill Loss to US Aviation

The U.S. aviation the world's largest worth over $89 billion in revenue is hunting high and low for aviation mechanics. More than 40% of America's aviation mechanics are over 60 and fast approaching retirement according to a report from Oliver Wyman Management Consultants and the Aviation Technician Education Council or ATEC quoted by the Wall Street Journal and because airlines face a massive backlog of new plane orders these air mechanics are maintaining some of the oldest passenger and cargo fleets in decades and that means the work is steadily mounting says the report.

Next year the labour shortage is projected to hit nearly 7,000 certificated mechanics in North America 12% fewer than the industry actually needs and that does not include an estimated shortfall of 15,000 non-certificated maintenance personnel. Thanks to this entry-level salaries have soared about 50% since 2020 according to officials at a staffing firm that spoke to the Wall Street Journal who also said that they try to market it as a path to a six-figure career. The shortage in aircraft maintenance technicians took root more than two decades ago.

Airlines slowed hiring even before the global financial crisis as they underwent restructuring and bankruptcies and the shortages began to appear in the late 2010s then in the pandemic many senior technicians were laid off or took voluntary retirements. The analyst told Wall Street Journal that even if we can replace them all one for one we are going to lose a lot of experience and skill.