IMF Raises Growth Targets For India
LG Electronics saw a blowout opening on Tuesday, so much so the stock jumped 50% in its debut and hit a market capitalisation of $13 billion
On Episode 703 of The Core Report, financial journalist Govindraj Ethiraj talks to Madan Sabnavis, Chief Economist at Bank of Baroda as well as Vikas Jain, Founder and Chief Investment Officer at Multipl.
SHOW NOTES
(00:00) Stories of the Day
(00:50) LG has blockbuster debut on Indian bourses
(03:41) IMF raises growth targets for India
(07:41) Decoding the Nobel Economics Prize through an India lens
(14:54) How are small equity investors responding to the gold and silver rise?
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 [email protected].
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Good morning, it's Wednesday, the 15th of October, and this is Govindraj Ethiraj, broadcasting and streaming weekdays, usually from Mumbai, India's financial capital, but presently in transit, and attending conferences for the next two days, so we may have shorter editions.
Our top stories and themes.
The IMF raises growth forecasts for India
LG Electronics has a blockbuster debut on Indian bosses
Decoding the Nobel Economics Prize through an India lens,
And how are small equity investors responding to the gold and silver price rise?
Are companies pricing their IPOs more conservatively?...
…Well, that's one reason, or at least one of many reasons why LG Electronics saw a blowout opening on Tuesday, so much so the stock jumped 50% in its debut and hit a market capitalisation of $13 billion, surpassing its parent company in South Korea, whose market cap is only around $9 billion. Remember the other big brand IPO that listed on Monday, but also saw a tepid listing, but Tata Capital does not have the same brand franchise and attraction, or for that matter, does not even belong to the same industry as LG Electronics, at least at this point.
Now, LG is a consumer-facing brand, Tata Capital less so, and of course priced its offer more aggressively, and the reason we are talking about both of them together is because they were the two big brand IPOs this week. LG's IPO saw the highest bids ever since 2008, according to Reuters, and its valuation also ranked higher than other listed consumer goods peers like Whirlpool, Voltas, and Havels, which are valued between $1.7 and $10.4 billion. Elsewhere, data centre mania is now picking up steam in India, even as many analysts worldwide are questioning the AI bubble, or rather asking if there is an AI bubble.
Plans take time to fructify, but it is clear that what was on the drawing board between six months to a year ago is now translating into announcements. After TCS announced a $6 to $7 billion investment in data centres, something the market did not quite welcome, Google has now said it will invest about $15 billion in a data centre along with the Adani Group. Now the location is interesting, it's Vishakhapatnam on the east coast of India, a place I happened to visit just three weeks ago, coincidentally.
The data centre will be set up by Adani Enterprises through its joint venture Adani Connects, along with Google, and hopes to be India's largest AI data centre campus along with new green energy infrastructure. This $15 billion will go over five years, that's 2026 to 2030. The project will feature gigawatt scale data centre operations, a robust subsea cable network, and clean energy infrastructure to support the most advanced AI workloads in India, according to an official release.
And the interesting part is that the companies plan to co-invest in new transmission lines, clean energy generation, and innovative energy storage systems in Andhra Pradesh. So these initiatives will not only power the data centre, but also strengthen India's electricity grid. Data centres are lower down the AI value chain, but in area India has some advantages and we'll see some fair degree of upstream and downstream investments, including of course, most critically, the energy required to power them.
Data centres also need fairly cutting edge semiconductor chips, but that's another story. On Tuesday, the Sensex and Nifty were down. The Sensex was down 297 points to 82,029.
The Nifty 50 was down 81 points to 25,145. In the broader markets, the Nifty Mid-Cap 100 was down 0.75%, and the Nifty Small-Cap 100 was down 0.89%. So all in all, fairly steady. The International Monetary Fund on Tuesday raised India's GDP growth forecast for 25-26 by 20 basis points to 6.6%, citing a strong first quarter that more than offset the increase in the US effective rate, according to its latest World Economic Outlook report.
The IMF also revised the growth forecast for 26-27 by 20 basis points to 6.2% as part of that WEO update.
Gold Continues Its Run
The interesting thing is it's not often that you see institutional investors projecting ever higher target prices for assets that are already and clearly so heated up.
Gold prices jumped to a record high above $4,100 on Tuesday, supported by rising expectations of a US Federal Reserve rate cut, and of course, safe haven demand, even as we saw fresh trade tensions between China and the United States. Spot gold was up to $4,128 per ounce after hitting a record high of $4,179 earlier in the session. Just to remind ourselves, gold has risen 57% this year and crossed the 4,100 mark for the first time on Monday.
If there is one indicator that sums up the sheer quantum of fear now in the global economy, it's the price of gold. And then of course, there is strong central bank buying driven by a desire to de-dollarise and essentially reduce dependence on the United States and the United States dollar. The latest China-US spat shows that the war will be a prolonged one, and countries like China have long memories and can now be expected to retaliate at every turn on the road, as they did a week ago when they imposed export controls on rare earths.
The United States may have moved on or thought it moved on after a few quick punches, but most countries, as it appears, will now respond with much greater long-term thinking and strategy, which could be damaging perhaps for everyone. As DHL Express CEO John Pearson told me in the Core Reports Weekend Edition, one country may be withdrawing, but there are 299 who are coming closer. And elsewhere, the overall gems and jewellery exports sector saw a 6.55% growth in September to about $2.9 billion.
Despite strong global headwinds as festive and wedding season demands gained momentum according to the Gem and Jewellery Export Promotion Council on Tuesday,
China vs the US…Again
The United States and China on Tuesday began charging additional port fees on ocean shipping firms that move everything from holiday toys to crude oil as the trade war is now extended into the high seas according to Reuters. Now, China kicked off the action this time by announcing more export controls on rare earths, following which President Donald Trump threatened to raise tariffs on Chinese goods to 100%.
Now, both sides have in the last day or two tried to walk back somewhat, hinting at possible cooperation and reconciliation. China, meanwhile, said it has begun collecting special charges on US-owned, operated, built, or flagged vessels, but clarified that Chinese-built ships would be exempt from those levies according to Reuters. Meanwhile, China's Commerce Ministry on Tuesday urged the United States to rectify its erroneous practices and pursue dialogue and consultation.
Instead, if the US chooses confrontation, China will see it through to the end. If it chooses dialogue, China's door remains open, it said. Now, all of this sounds very familiar because it is, and it only happened a few months ago.
In a related move, Beijing also imposed sanctions on Tuesday against five US-linked subsidiaries of South Korean shipbuilder Hanwha Ocean, which it said had assisted and supported a US probe into Chinese trade practices, according to Reuters. A Shanghai-based consultant who advises global companies on trade with China told Reuters the new fees may not be very disruptive to the industry and any rising costs probably would be captured in higher prices. What are we going to do? Stop shipping? Trade is already pretty disrupted with the United States, but companies are finding a way, the consultant told Reuters.
And this is something that we, again, to go back to that conversation with the DHL Express CEO is something that we resonate with or we've heard something similar earlier. The Nobel Prize.
What does the latest Nobel Prize in Economics signify?
Like we mentioned yesterday, the 2025 Nobel Prize in Economic Sciences has been awarded to Joel Mokir, Philippe Aguillon, and Peter Howitt for their work on innovation-driven economic growth.
Mokir, a professor at Northwestern University in the United States, received half of the prize for identifying the prerequisites of sustained growth through technological progress. The other half was jointly conferred to French economist Aguillon of Collège de France and Howitt of Brown University for developing the theory of sustained growth through creative destruction. The Royal Swedish Academy of Sciences, which is responsible for selecting Nobel laureates in physics, chemistry, and economic sciences, said, over the last two centuries, for the first time in history, the world has seen sustained economic growth.
This has lifted vast numbers of people out of poverty and laid the foundation of our prosperity. This year's laureates in economic sciences explain how innovation provides the impetus for further progress. So how do we view this latest Nobel Prize sitting in India through a policy as well as business lens? So I reached out to Madan Sabnavis, chief economist of Bank of Baroda, and I began by asking him what he took away.
INTERVIEW TRANSCRIPT
Madan Sabnavis: So broadly what it means is that both at the macro and micro levels, innovation is very much important to move ahead as far as growth is concerned. For example, if you're looking at a micro level, if you're looking at companies, you need to constantly innovate because there are certain points of time when your products or service which you're providing becomes so listened to. It means that you could be left out in the race and there could be other companies which could be getting ahead of you.
I think normal examples which people give will say what happened to Kodak or if you look at the music industry, how the cassette industry gave wealth to the CD, from CDs we have gone to the internet from where you keep a downstream music. So I think even at the national level, for example, if you look at countries, I think the innovation that is the higher use of technology is something which is required to drive the economies ahead. Because what we say in economics is that if you go back to the Industrial Revolution, everything starts with invention, then at some point of time there's imitation, then there is, of course, decaying of the existing products and services, then you get into a new cycle of innovation, and that's how the economies generally move.
So this is what I think these economists also spoke of creative destruction which takes place, where new technologies and new ideas actually take over the existing ideas. So I think this is what the basic concept is. So today when we are talking of things like AI, for example, I think that's a very good example, a very thing which is very close to everyone as to how this is something which could bring about a sea change in the way in which economies behave right at the micro level as well as at the macro level.
The basic thought process is that what we learned in the textbook in economics saying that diminishing returns always sets in once you use labour and capital. The only way to go beyond is to make sure that you have innovation, more technology which is in place, which can improve productivity. So I think that is what their work is all about and something which holds everywhere in the world.
Govindraj Ethiraj: Right. Why is it that you feel this concept is now more important than before? We've seen some form of creative destruction, as you define, as the Nobel Prize Committee's words say as well, in the past too.
Madan Sabnavis: It's become more important today because there is more competition which is taking place across countries and everybody wants to grow at a faster rate. So the only way you can do it is through higher innovation because there are a fixed amount of resources there which you cannot really multiply. The idea is actually that given the kind of resources which you have, how do you actually get higher productivity?
So this is where innovation actually comes into the picture. Even if you look at the Indian economy, look at what our policymakers have been doing, when you're trying to focus a lot on things like say renewables or you're looking in terms of EVs, I think these are the kind of innovations which are there which are going to drive the economy because there are other kinds of constraints which come in because everybody's more conscious of climate. So we have to make sure that the growth process is also linked to sustainability.
So I think that's where the major glue is and I think when India talks of startups, like we have the largest number of startups, the kind of programmes which the government has started for Startup India, for example, how do you try to fund these kind of enterprises, make more people come up with these new ideas, the FinTech industry which has come up. So these are all enablers of growth and something which is able to save on time so that you don't go through the process of physically putting things together but you use more technology, more innovation. I think you're able to save a lot of time and that's how we move forward as far as India is concerned.
When we are talking of becoming a developed economy, I think this is going to be the crux of it because there are a fixed amount of resources you have. Now the advantage today is because we have globalisation, funding is something which the economists have spoken of. Now the thing is that funds need not necessarily come from within the country, you could also get it from outside.
So for example, when you're talking of foreign direct investment, that is the way in which we managed to jump a number of steps. All the products which we used to import in the 1980s are being made in India because of the FDI that comes in, we have access to all these brands. So this is a good example because I think the economists also did talk in terms of increasing savings, interest rates, all these become important because when there is research and development to be funded, the question is where do you get the money from.
So today we're able to jump a number of steps because of globalisation, able to leverage it and make sure that growth proceeds in the desired way. Right. Two questions.
Govindraj Ethiraj: So one is you've answered partly the India aspect and how we need to view it. The second is that the Nobel committee statement also says that if something works, we not only need to know that something works, but also need to have scientific explanations for why. And this was often lacking prior to the industrial revolution, which made it difficult to build upon new discoveries and inventions.
Again, my question is really how do we view it from our lens that's in India? Secondly, the fact that this Nobel prize has been given at this time, does it suggest a gap between, let's say the innovation world, which may be more driven by the private sector versus what public policy is doing or aspiring to do?
Madan Sabnavis: No, actually I see some kind of synergies between the two. At the end of the day, all this comes from the private sector. So when you're talking of public sector, public policy, that is actually providing a kind of framework under which the private sector can operate.
Now, when we're talking of looking at what works, what does not work, we are not really sure to begin with whether things really work or not. So I think when you're doing R&D, when you're experimenting, there will definitely be a case of saying that some things will be working, some will not be working. So at the end of the day, you need to see that things will have to be more prescriptive.
I think that's what they're talking about, meaning that you do something which finally works, but to get to this prescriptive stage, you also need to experiment a lot. So that is where you really require resources. So even when people say that you look at this entire startup concept, 75% to 80% of them do not really last or they're not really sustainable.
It's to say that this is the kind of ratio which you have, but unless you experiment, only then will you know what works and what doesn't work. So that is what the crux is and the ability to support it in terms of funding, in terms of appropriate policy. I think that is what is really in the domain of the government.
How do you make sure that it happens? And that's where I think India can take quite a bit of pride that we have probably done the right things to ensure that these things keep going on.
Govindraj Ethiraj: Madan, thank you so much for joining me.
Madan Sabnavis: Thanks.
Are Investors Switching?
Gold and silver prices are soaring, and so are prices of exchange-traded funds traded on stock exchanges. And for those who came in late, are fully backed up by physical metal almost by the end of the day when you hit buy on your app or trading screen. But not only are prices up more than 57% for gold, as we discussed earlier, institutions like Bank of America on Monday have raised price forecasts for precious metals, lifting their 2026 outlook for gold to $5,000 an ounce and for silver to $65 an ounce.
How are mutual fund investors who have been steady, and notably in the post-COVID years, responding to these sudden jumps in gold and silver prices? After all, equities have been broadly stagnant in the last year, at least if you were to look at the benchmark indices. And are investors changing their approach? I caught up with Vikas Jain, founder and CIO of Multiple, a mutual fund investment platform amongst other things, who also ran a small experiment on ground at the recent Global Fintech Festival in Mumbai to find out the latest flavour in investing, so to speak.
INTERVIEW TRANSCRIPT
Vikas Jain: In terms of the equity markets, the behaviour has not at all been surprising for us. Based on our model last year itself, we had felt that valuations were rich and very ripe for a time correction, which is exactly what we have seen over the last one year. But with this time correction, valuations certainly are getting more reasonable.
They are still not cheap, especially certain segments of the market like small and mid-cap, I think, are still a bit elevated in terms of the valuations. When this kind of a correction happens, people do get jittery, and they start looking for alternatives. And the economic uncertainty, especially arising from the tariffs and the geopolitical situation, has caused a shift towards gold and silver as an alternative.
And both the rally in those asset classes, as well as the environment, have brought up that interest. Now, when we look at retail investors, whom we have been talking to on the ground, whether it is our users or through a recent campaign that we did around the Global FinTech Festival, where we ran shuttle buses for the attendees from the Bandra-Kurla metro station to the GFF event because of the chaotic traffic situation. We were just trying to solve a pain point at the same time, while taking the opportunity to understand what investors are thinking.
And we do realise that the interest has spiked in gold and silver, apart from equities, which persists, of course, because equities still remain the mainstay for the youngsters whom we have been interacting with in terms of their future investment goals. Because when you say equities, you mean through mutual funds, right? Yeah, through mutual funds, because that is what we are doing.
And that is what I think a lot of youngsters are also doing, SIPs. Of course, a lot of people are participating directly in the markets as well. We have seen that in terms of the number of TMAT accounts, which has increased over the last three years.
But even the mutual fund growth has been terrific, in the sense that almost 20% plus growth has been there, with almost $900 billion in mutual fund investments in India today. Also, another change that we are seeing in investors is, unlike just chasing returns blindly, which is always the case, they have been starting to think from a more purposeful lens now, in terms of their goals and how they can invest for their goals. Of course, the returns mirage still exists, and that is what is pushed to them, because that is what is sold to them hard, in terms of, this is what has done really well in the last one year, and that is the easiest to sell.
But it's good to know that the awareness is increasing, and at least the thought process is getting seeded, where they want to look at more holistic personal finance, rather than just choosing asset classes. That is still going to take time. So right now, I think there is a lot of interest in gold and silver bullion, because of the rally that has happened.
And also, it has become easier to invest, right? There are alternatives available in terms of the ETFs, in terms of the digital gold and digital silver options available through various fintech platforms. Certainly, people want to take exposure to that.
Govindraj Ethiraj: And you see people switching fast, as in, I mean, what's the sort of, you know, the average, let's say, switching rate, if one could pinpoint that, versus, let's say, the way people have moved into gold and silver, particularly in recent weeks and months.
Vikas Jain: When people are just chasing returns, generally, without any deeper understanding, maybe they would move, say, 5-10% of their portfolio to the asset classes, which are doing really well. But when they are looking at something purposefully, right, say like mutual fund SIPs, when they're attaching it to a goal, there, the stickiness or the amount being allocated is much higher. And also, in terms of the behaviour change, we were looking at some MAMFI data.
So people who used to remain invested in, you know, their mutual fund investments for more than five years ago, it was just about 20%. Today, that number has more than doubled to 40% plus. So 40% plus mutual fund investors have remained invested for more than four years.
So suddenly, mutual fund investments are getting more purposeful, more aligned. Of course, it is still linked to their long-term requirements like retirement or kids' higher education and all. And that is what, through this campaign, we were trying to propagate that mutual funds can be utilised even for the short-term goals, even for their spends.
So spendvesting is what we call our product, and which is like investing for your spends, wherein people can save for their travel, for their jewellery, gadgets, etc. And through a gamut of mutual funds, not just equity mutual funds, because generally, when we say mutual funds, people think it is equity. But there are a lot of other options, which we shared with these users, and they were pleasantly surprised that, okay, there are other options beyond equities and mutual funds which can fulfil their goals.
Govindraj Ethiraj: Last question. I know the Global FinTech Festival happened, and you guys were there quite actively helping people and so on. But what's the largest sort of tech takeaway from this festival for you?
I mean, you as an individual in the financial services space.
Vikas Jain: So the overarching theme of this year's Global FinTech Festival was AI, and how AI can help take quality financial advice or solutions to masses, solutions which have been till now available only to the top 1%. How AI and digital can help to take it to the larger masses, where rather than just being sold products, they can actually be given advice and provided their solutions based on their needs, which exist, which maybe they don't realise because they are not aware today. But through technology, even the awareness, how it can be improved is something that I think all the FinTechs are working on.
From a product point of view also, how these solutions can be provided in a most seamless manner without too much human intervention is what the focus has been. And we are also focussing on the same.
Govindraj Ethiraj: Right, Vikas. Thank you so much for joining me as always. Thank you.
Vikas Jain: Thank you, Govind.
