On Episode 1009 of The Core Report, financial journalist Govindraj Ethiraj talks to Manas Majumdar, Partner and Leader - Oil & Gas, Fuels & Resources at PWC India as well as Ketan Dalal, Tax Expert and Founder at Katalyst Advisors.

SHOW NOTES

(00:00) The Take

(04:41) Indian IT Stocks Are Beating Chip Stocks

(08:05) Why India Is Now A Swing Country In Petroleum Refining

(19:55) US Once Again Allows India To Buy Oil From Russia

(20:17) How Foreign Investors Face A Double Whammy On Their Capital Gains Tax

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Monday the 19th of October and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital presently smogged out.

The Take

Why isn't India producing a homegrown rival to chat GPT, minting a chip making giant like NVIDIA or designing airborne electric vehicles? For a nation boasting some of the world's premier engineering talent, the absence of bleeding edge deep tech innovation is a glaring puzzle which continues to baffle many. The usual suspect is a lack of research and development or R&D spending which languishes at a mere 0.8% of GDP.

But an insightful discussion I had last week led me to frame the problem differently. During an investor meet organised by SBI Mutual Fund and Amundi, I sat down with the founders of three leading consumer internet companies, Urban Company, Xego and Misho. I asked Abhiraj Singh Bhal, the founder of Urban Company, what drove him to start his business? He told me about moving back from Singapore in 2014, freshly married and getting into his first home after a stint at Boston Consulting Group.

His wife gave him a simple task, hire a carpenter to hang some paintings. The first carpenter he tracked down via an online directory ghosted him. The second never showed up.

The third finally arrived in the evening empty-handed, claiming he was only there to survey the job and would only return the next day to fix it. What struck Abhiraj, he told me, was the profound market failure staring him in the face. He had dollars to spend, but unlike other industries where products aggressively compete for your wallet, the local supply side was structurally broken.

That frustration birthed Urban Company, earlier Urban Clap, a digital bridge connecting consumers with a reliable supply of home services. I realised this story repeats itself across the subcontinent's digital economy. Alok Bajpai pivoted his expertise from the European travel tech giant Amadeus to found Ixigo, bringing order to India's chaotic travel booking market.

Mishore, launched in 2014, organised a highly fragmented supply chain to become an e-commerce behemoth. Its CFO Dinesh Bansal told me that the platform now accounts for roughly 40% of all e-commerce shipments in the country. So what do these ventures have to do with deep tech innovation? Actually, everything.

The founders driving these platforms are the innovation agents of our era. Almost universally, my panellists and their extended top tech held degrees from the elite Indian institutes of technology or IITs. Sceptics often sneer at this allocation of human capital.

Why, they ask, are elite engineers optimising the 20-minute delivery of hot idli vada while Silicon Valley builds world-conquering large language models? The answer is that the smartest minds naturally gravitate towards the most immediate glaring inefficiencies in their environment. Our brightest engineers are effectively compensating for the failures of the Indian state. They're forced to build complex software, including some of the most sophisticated payment systems in the world, merely to bypass decaying urban infrastructure, unreliable supply chains, and a profound deficit of trust in basic services.

If you asked me what India should do to spur innovation, I would point to our daily realities. While many engineers are now undeniably building space tech, drone tech, and AI tools, others are perhaps trying to see whether they can solve for existence. Obviously, there is no venture capital waiting to fund most of these areas, if one can call them that, though garbage and climate are seeing some investments in some lateral ways.

But it is challenging to dream up the next generation of artificial intelligence when your daily reality involves navigating unbreathable air, garbage-strewn streets, potholes, and the labyrinthine, often abused challenge of simply doing business. And yet, rather than addressing these foundational deficits, the government is often tempted to play venture capitalist, deploying taxpayer money to subsidise risky startups. While there may be strategic logic in funding certain sectors, it's largely a misdirection of focus.

It's less about a lack of funds and more about a lack of mind space. It has long been my case that India cannot become a developed AI-driven superpower if its citizens are still battling 20th century urban squalor. We have the smart capital and the smart brains.

We need to fix the physical environment and the basics of daily life. Once the state clears the path of everyday friction, our entrepreneurs will naturally raise their gaze to the future.

And that brings us to the top stories and themes…

Indian IT stocks are beating global chip stocks.

U.S. once again allows India to buy oil from Russia.

Why India is now a swing country in petroleum refining

And how foreign investors face a double whammy in their capital gains tax.

Markets, Oil, IT Stocks and Indonesia

The last week has seen some strains of bullishness in the markets. Could it continue? Well, if only oil prices would oblige and they don't seem to be in the mood right now. Brent touched $110 a barrel for the first time since May on Friday on worries that escalation tensions in the Middle East could further tighten supplies.

Brent crude futures were at about $109.86, finally the highest since the 19th of May. More on oil and prices shortly. But the good news, however, was that India's IT stocks outperformed global semiconductor shares by the widest margin on record last week, with analysts expecting the trend to continue as the artificial intelligence trade wobbles, a Bloomberg report said.

An index of India's biggest software exporters was up about 12% for the week compared to a 7.2% drop in the MSCI gauge of global chip stocks. AI shares have been falling in recent days thanks to slowing revenue growth, worries about infrastructure financing, and fears of rate hikes that have fuelled concerns that the companies are overvalued. Back home, foreign portfolio investors have pulled out about $5.5 billion from Indian equities in October so far thanks to elevated crude oil prices, higher U.S. bond yields, and a stronger dollar.

The latest outflow follows a net withdrawal of about 35,000 crores in September, which is net sales. With the latest selling, cumulative foreign portfolio investor outflow from Indian equities in 2026 has crossed $32 billion. And on Friday, the benchmark indices were higher for the second session as oil prices remained under pressure.

The Sensex was up 413 points to 74,729 and the Nifty 50 was up 148 points to 23,146. The Nifty mid-cap was up and the small-cap index was slightly down on Friday. Elsewhere on Wall Street, another burst of selling in technology shares drove the Nonstack 100 to its worst peak since the April 2025 tariff turmoil, a Bloomberg report said, adding that chipmakers fell for the eighth straight day, the longest slide since 2008.

Corweave, a cloud computing services provider whose bonds recently hit levels that typically reflect distress, fell about 12%. The S&P 500 lost 1.1%. And oil, of course, as we mentioned earlier, has shot up, which also puts pressure on treasuries. Back in the region, Indonesia's stock market is no longer worthy of emerging markets status, according to MSCI.

And the index provider said it intends to cut it from a suite of products tracked by global investors, which is a major setback. Jakarta's stocks fell almost 10% to a six-year low in early trading on Friday, and that was its weakest level since August. MSCI said reforms to address problems have not made sufficient progress and that even a downgrade to frontier status would not reflect the severity of issues, and instead it proposed to downgrade Indonesia to standalone status, which would exclude Indonesian stocks from global indices tracked by billions of dollars in passive investments, forcing funds that follow or are ranked against the indices to sell, a Reuters report said.

Elsewhere, the government has asked its fuel retailers to stop buying ethanol made from sugar and key sugarcane-based feedstocks in a move that may help keep prices of sugar down. This is to take effect in India's new supplier that starts November 1, a Bloomberg report said, adding that no offers have been sought for ethanol produced from sugarcane juice, sugar, sugar syrup, and bee-heavy molasses in this tender, according to a tender document.

Why India Is Now A Swing Country In Petroleum Refining

A severe global diesel shortage has helped Indian refiners raise the share of petroleum products in India's gross exports by value in the July-September quarter to its highest in about 12 quarters.

According to data from the Petroleum Planning and Analysis Cell reported by BusinessLine, the share of petroleum products in India's gross exports by value stood at about 11% in July, about the same in August and September, averaging at about 11% for the second quarter. This is something that we've been reporting, and also the fact that the rising share of India's petroleum exports is also helping India's overall merchandise export numbers and thus the balance of payments. India is interestingly and uniquely placed in this present crisis, wherein it has large refining capacity but not the domestic crew to feed it, importing close to 90% of it.

Nevertheless, in the current market, it's the refined product which is facing the big shortfall. I spoke with Manas Majumdar, Partner and Leader, Oil & Gas, Fuels & Resources at PWC India, and I began by asking him how he was assessing India's refining capacity against global demand for products like diesel.

INTERVIEW TRANSCRIPT

Manas Majumdar: Let's start with the fact that India has already got significant refining capacity, right? We are the fourth largest refining hub. We have 250 million, I think 260 million tonnes of refining capacity right now.

Our consumption domestically is around the 200-210. So there is anyway additional capacity, which by the way, many refineries were exporting, definitely the private ones for sure. Many of them are anyway export orientated, right?

So of that 250 million, the biggest play is around the diesel exports, right? Even ATF as well, aviation fuel, less on the petrol or MS motor spirit side that we would see, but definitely on diesel. Diesel accounts for close to 100 million tonnes of that entire refinery capacity.

Again, this is a slate of the refinery. This goes up. I mean, typically diesel is about 40% of the slate.

You can swing your capacities by plus minus 5%, which is by the way, what many Indian refineries did, including also Reliance when LPG was in shortfall, right? So there is significant, 100 million tonnes is nothing to scoff at, right? And a significant chunk of that is getting exported, as I said, mostly from the private refineries.

So India is playing that role, especially in this crisis situation. There are multiple crises, right? So one is the supply of food and then there is Russia itself getting hampered in terms of its own refinery.

So in fact, I would go so far as to say, again, your podcast is over provocative statements. You know, OPEC used to be the swing producer of crude. India is now becoming the swing producer of diesel, right?

Because, you know, that's where the capacity is coming into play.

Govindraj Ethiraj: Right. And you said 100 million tonnes of diesel that we produce. So what's the domestic demand currently like and where is it going in the next year or so versus the current export pickup?

Manas Majumdar: See, diesel has actually been going up, interestingly, in the last month or so that we've been seeing has been growing. Typically, diesel has been going in low single digits, right? Two, three percent.

That's, in fact, our longer term view that it will be in that one to two percent range that is happening because, of course, vehicle efficiencies, but also the fact that the mix is changing. There is some bit of electric and gas that is also coming into the play in commercial vehicles. Having said that, we are seeing more consumption happening, more vehicular movement happening, and hence diesel going up in terms of volumes domestically.

If I remember, we domestically used to consume last year. I don't have current numbers. Last year was about close to 90 million tonnes.

So we had definite capacity to do. Of that 90 million tonnes, some also goes to, you have to understand, in neighbouring countries, right, which is also kind of considered India, which is Nepal, Bangladesh, Sri Lanka. Indian oil itself, for example, supplies to Nepal, Sri Lanka.

So there is supply. And of the remaining, of course, as I said, the private refineries do. As of, I think, last month, diesel supplies from private refiners was some 0.6 million barrels, right, which would be close to, on an annualised basis, 8 million tonnes or more from one person, one entity, right. So significant plays that are happening. And multiple cargoes. We anyway used to supply to Europe and Africa to some extent.

And now the US has also gotten into that. In fact, Russia also. Let me, I should mention that we talk about Russia supplying crude to India.

We are again refining and sending it back to Russia. Same as we are getting crude from US and supplying it back. So again, goes back to that first message of being the refining hub of the world.

Govindraj Ethiraj: Interesting. So you're saying that the levy that we have in terms of exports of diesel is about 10 million tonnes a year as per roughly in terms of current capacity. And that can go up a little bit because there are some capacities, but yeah.

Yeah. So let's say the price signals are such, which they are right now, that the demand for diesel goes up and there is a considerable premium that some countries would be willing to pay, which could be the case, let's say in the United States right now. What happens in situations like that?

Manas Majumdar: See, this is where it's less economics and more political, where, you know, again, the refineries are in India and they have to service the Indian market first, right? If you were to go purely by economics, probably large parts of it would have gone out of India because Indian pump prices are in that sense slightly controlled and they only get shifted once in a while. I don't see that increasing significantly.

Having said that, some of the upcoming capacities, for example, let's say the Rajasthan HRRL refinery that is coming up, even the new refinery that BPCL is planning in Andhra Pradesh, those will have additional diesel capacity, which will be beyond what the domestic requirements would be. Again, let me take the BPCL example itself. It's a coastal refinery and hence its ability to service, say, to Russia, back to the Baltic routes or even Southeast Asia.

One also has to understand in early periods of this Gulf crisis, many people had rationed diesel usage, many of these countries. I mean, our neighbouring country itself had done. They said, don't go to office.

We never had that problem. So, India could potentially supply even more diesel. It's just that, you know, obviously, the focus being more on servicing the domestic market first, which also is growing.

So, it's a balance, right? I mean, address this while also look at markets elsewhere. This will potentially get addressed more in the upcoming capacity.

Govindraj Ethiraj: But you're saying that in a way, of course, a lot of the majority of the refining capacity is state-owned in India, also state-owned companies. But you're saying that even if, let's say, prices are sky high for diesel internationally, it's not like diesel meant for domestic markets will get diverted.

Manas Majumdar: I mean, see, not in a direct fashion. If some traders do that, that's a separate thing. In any case, you would have recollected that even in the supplies that are happening, while there is no direct destination control orders, etc., that are there, there was a little bit of a hesitation and supply to B2B or commercial customers, industrial customers, right?

So, if some trader were to use that route, that would also potentially have got clamped on. Retail, anyway, you can do, because there is only so much that you can get from pumps, etc. None of the refiners themselves are directly doing that, obviously, because they are state-owned to that extent.

The private refiners are free to do what they choose to do. And one of them are export-orientated. So, they will continue to do that.

Govindraj Ethiraj: Right. Yeah. Half of Reliance's capacity is export-orientated.

But the government is also imposing export duties, which keeps going up and down every 15 days, right?

Manas Majumdar: It had gone up in the early parts of this year, then it had gone down, because they wanted even the Indian refineries to make some money somewhere. I mean, the government is economically also prudent. I mean, they're not heartless.

They did increase the prices, pump prices, they're allowing some bit. But again, the focus remains for the PSUs, oil marketing companies, to service the Indian market, especially when it is growing, and they're literally getting into a festive season. Slightly dampened, but we are still seeing green shoots.

So, that will be the focus. Exports, to the extent that there is available, they are letting happen. But bulk of it is, of course, private refiners.

Govindraj Ethiraj: Right. And just to come back to capacity. So, could this change after a few years?

For example, let's say we've heard of Nigeria setting up new capacity. Now, maybe that's for domestic, but obviously, a situation like this will lead to more expansion and fresh capacity. So, there is capacity already on the way, which you talked about, and there could be other capacity that's coming up.

So, my question really is, on the product side, could things change after a few years, in terms of overall capacity and supply?

Manas Majumdar: Yeah, yeah. They would, they would, right? I mean, see, China also has significant, China and US have significant money.

In fact, US, there's a significant refining play that it used to do, because they take a lot of food from Canada. Canada does not have as much refining, but new refineries are not coming up. In fact, even in US, one of the talks is of Reliance setting up a refinery, integrated petrochemical complex.

So, there will capacity come up. And this goes back to my other favourite maxim that the death of oil is too early called, right? So, that is not going to happen.

What will change, of course, going forward is the trade flows, right? So, India supplied a significant portion to Africa and Europe. Europe will have zero refining capacity addition.

We know that. So, that will continue to the Africa portion, means get little changed, I would say within Africa. So, for example, the Dangote refinery, which is coming up, would service certain central parts of Africa, right?

But South Africa would still not be supplied. Parts of West Africa would not be supplied on Ghana side, right? So, Africa as a continent may still get supplied.

Dangote also has further expansion beyond the refinery they're commissioning. But even this refinery also has to get stabilised. Same as, you know, is happening with our Rajasthan refinery.

It is a complex machinery. We are talking about significant Nelson complexity in this indices. So, the demand remains, the routes or the trade flows would change, is how I would highlight it.

Govindraj Ethiraj: Right.Last question, Manas. So, you said that, you know, one way the government is trying to balance the books for oil marketing companies is to allow them to export at higher realisations in order to take some, let's say, buffer on the... Some respite.

It will not address, but some. Yeah, some respite, because obviously they're taking losses on the domestic front. So, do you feel a price hike is imminent?

Manas Majumdar: I would think so. It's also fairly sensitive. Again, most of these questions are part economic, part political, right? So, it's a festive season right now.

They don't want anything happening. We also have the Rabi season coming upon us. And hence, any significant increases will have multiplier effects thereof, right?

I am not hearing anything to that extent. That is why maybe some of these export leeways are happening. There is also this whole crude sourcing benefit that they're looking at.

I think the RBI created this single dollar window where they were saying that, you know, they'll create Forex hub for... Right now, oil companies, in a sense, are all on their own. They're procuring crude on their own, right?

So, at least the Forex part of it could be addressed to RBI while they still have to diversify. So, these are bits that they're doing to help them. Immediately to answer your question, we are not hearing anything of the sort.

There is hope which still remains that this thing gets resolved soon. We are getting a lot more supply from UAE, for example, from Fujairah. I think we talked about it last time.

Russia has dipped from what it was like, I think, a month ago, couple of months ago. July, I think, was peak of Russian oil and US remains. And now UAE has gone up significantly.

Saudi, on the other hand, is a challenge because now even the Red Sea route is a little challenge, right? So, it's a juggling ball situation. We know all the balls, in the sense, we're able to take that analogy further.

We know where you have to play with. But, you know, something gets more stronger and something gets lighter.

Govindraj Ethiraj: Right. Manas, thank you so much for sharing your thoughts and joining us.

Manas Majumdar: Thank you.

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US President Donald Trump has meanwhile suspended, and somewhat expectedly, key tariffs and sanctions targeting Russia, which will help major buyers of Russian energy, including India.

On Saturday, he evoked a waiver provision in the Lindsey Graham Sanctioning Russia and Iran Act of 2026, which avoids an immediate confrontation with countries that continue to purchase Russian energy, like India, China, and Turkey.

How Foreign Investors Face A Double Whammy On Their Capital Gains Tax

Finance Minister Nirmala Sitharaman last week said that the government is open to hearing suggestions on the removal of long-term capital gains tax during consultations for the upcoming union budget. She was speaking at the Bloomberg New Economy Forum in Delhi.

The Finance Minister noted that investors both in India and overseas have been discussing the capital gains and different asset classes, including the securities transaction tax. Her comments and subsequent outreach to her colleagues in the Ministry of Finance by some media outlets appear to give the impression that the government is once again weighing the need, if not the prospect, of lowering this tax, often pointed to as a reason for foreign portfolio investors fleeing, though not the only one. While no immediate reaction can be expected, it's obviously worth highlighting that the problem is not just in the tax, but also the fact that foreign portfolio investors pay tax on rupee gains and not on dollar gains or losses as the case might be, which compounds the problem, particularly in an era of a depreciating currency.

I spoke to Ketan Dalal, well-known tax expert, founder of Catalyst Advisors, and earlier part of BWC India's leadership team, and I began by asking him what he felt was the way forward.

INTERVIEW TRANSCRIPT

Ketan Dalal: So, I'll just divide this into two baskets, you know, one is the tax rate or the taxation itself and the second is the fact that the foreign portfolio investors are taxed in rupee terms and not in dollar terms, we'll come to that in a minute. So, if you look at Taiwan, China, Indonesia, Brazil, Russia, they either have DIL or very minimal capital gains tax. So, that's I think a much larger issue of whether there should be a tax at all or not because obviously the investors are looking at comparable options and I'm not saying each of these is comparable on a sort of apple to apple basis but we have to recognise that they have options and they have exercised those options and for example, Korea and Taiwan in spite of a recent fall over the last two, three years have made a significant return with very little depreciation of the respective currencies against the dollar or far less than India.

The second point is not something with the FM I think has expressly spoken but I think it is very important, one of the greatest disadvantages to win that foreign portfolios investor face is that the taxation of capital gains is in rupee terms and not in dollar terms or whatever currency, let's take dollar as an example. So, say somebody has invested three years back when the rupee-dollar parity was 75 say and today it is 96. So, if you have invested $100,000 and invested 75 lakhs at that point in time and today the price is say 95 lakhs, you are taking back the same $100,000 or in fact a little less but you are taxed at 24% or 15% depending on short term, long term.

So, let's say long term, you are taxed at 15% on 20 lakhs even though in dollar terms you have made zero. Now, the reality is that they are looking at dollar returns not on rupee returns. So, I think and this by the way, this taxation in foreign currency was there if I remember about 10 years back, 10-11 years back.

They amended the then section 48 and whatever the new section of course has reflected the carry forward in the new act, they amended it expressly and at that point of time also I was very surprised because I think the taxation should be definitely in dollar terms and not in rupee terms.

Govindraj Ethiraj: Yeah. So, you are saying that if this was addressed, would we need to address this along with the fact that there is tax at all? I think so.

Ketan Dalal: I think so. It is not just one thing because remember that in other currencies or in other jurisdictions, whatever gain they make in dollar terms also is anyway subjected to middle tax or minimal tax. So, I think it's not an either or situation.

I think you have to address both and you have to reduce the rate or make it zero or at least make it very nominal. You can't have 24% on short term and 15% on long term which is what the rates are today including surcharge and cess. So, you have to bring it down substantially or make it zero and you have to make it taxable if at all taxable in dollar terms and not in rupee.

So, let's say it is 5 for long term and 10 for short term. Let's assume for a minute. The 5 on long term and the 10 on short term in my example should be in dollar terms.

The combined effect of the two I think will give foreign portfolio investors a lot of comfort. I mean you've seen the pullout, right? I mean I have some numbers from a 2300 net outflow in say October 25.

It reached to a peak of 1,22,000 crores in March and after that each month 40,000 to 50,000 crores on a net basis has been pulled out every single month since then and I don't think the depth of the market can take it. I mean we've seen the way the sensex has built because the liquid stocks are being sort of dumped because that's the one they can sell more.

Govindraj Ethiraj: Right and we've seen about 5 billion dollars or close to 50,000 crores even for the month of October. The other way of asking the same question I guess Kirtan is that why is the government then resisting this? I mean I think the maths of this is quite evident to everyone.

Ketan Dalal: Well, I really don't know. I think the feeling in the government over a period of time has been that FBIs are making a lot of money and they can afford to pay this tax. That I think has been the underlying assumption.

At some point it may have been true but it has definitely not been true throughout because had it been there we wouldn't have seen those pullouts. So I think also remember circumstances have changed dramatically. The risk of investing cross-border moving has dramatically increased.

I mean we are living in the hookah world, the bani world and far more than a copy nature of a hookah and a bani. So I think we have to recognise also the change circumstances. The issue really is Govind, unless you recognise and acknowledge the existence of a problem you cannot address that problem and we do have that problem and we need to address it.

If you don't bring back the foreign portfolio investors and of course even the foreign direct investors and that's a discussion we had in a different context earlier. I think both are badly needed and otherwise we are seeing the rupee issue and I know 88% of our oil is imported and look at 65 or 70 to a dollar at 85 and look at a 110 plus a 25 to 30 freight cost which was one-tenth of that number or one-fifth of that number a few months ago and you are not looking at a palatable situation to put it very mildly.

Govindraj Ethiraj: Right and is there a middle path here at all? I mean either in the rate of tax or for example as you pointed out because a lot of the rupee tax is thanks to depreciation of the rupee itself which could have been different if the rupee had appreciated or if the rupee was steady. So is there some middle path here?

Ketan Dalal: Yeah I mean I think so. It's never all or none kind of scenario Govind. So I would say if there were to be a middle path I would look at three things.

Reduce the rate so as an example I gave you let's say 5 and 10 on long-term and short-term. Make it taxable in any case only in forex terms and not in rupee terms and there's a third aspect Govind. Today there are lots of restrictions on setting of losses.

So for example short-term loss can be set off against both long-term and short-term but long-term capital loss cannot be set off against anything other than long-term. So if a foreign portfolio investor has a long-term loss he's held SAAS for say 2 or 3 years and he does not have long-term capital gain. He can't set off.

Now if you honestly ask me that is again the concept of real income also logically what are we trying to disincentivize? Are we trying to disincentivize somebody holding long-term? I would have thought if at all it would have been the other way around.

So I think these three things combination a. Reduce the rate if you can't make it real. After the reduction at least make it taxable in forex terms and number three allow the set off of short-term and long-term losses based on the concept of real income rather than artificially boxing them in a manner that the net result is suboptimal from a foreign portfolio investor perspective.

Govindraj Ethiraj: Got it. Ketan, thank you so much for joining me.

Ketan Dalal: Thank you, Govind. Thank you for having me.