On Episode 840 of The Core Report, financial journalist Govindraj Ethiraj talks to Sunil Shah, President at The All India Plastics Manufacturers Association, Jay Kothari, Fund Manager and Senior Vice President, Global Head International Business and Lead Investment Strategist at DSP Asset Managers as well as Dr. Ajit Ranade, Economist and Former Vice Chancellor of Gokhale Institute of Politics and Economics in Pune.

SHOW NOTES

(00:00) Stories of the Day

(00:50) How Indian markets are adjusting to the mixed signals from the US on the war

(04:27) Monsoons could be below average this year

(14:03) Analysing the RBI’s move to defend the rupee

(23:37) The Government has cut duties on petrochemicals and polymer imports. Will it help India’s plastics industry?

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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 Wednesday, the 8th of April and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital, where we've had so many days now of low AQI and clear skies that we are wondering what's wrong.

Our top stories and themes…

How Indian markets are adjusting to the mixed signals from the United States on the war

Monsoons could be below average this year

Analysing the Reserve Bank's move to defend the rupee

And the government has cut duties on petrochemicals and polymer imports, will it help India's plastics industry at this time?

Markets, The War, Gold and The Monsoon

There is an interesting situation developing in the market. The first is a better understanding of America's moves in the current war and an ability to distinguish between rhetoric, loose statements and actual action.

There seems also to be growing acceptance, at least on the part of the core report, that the final objective is to obliterate Iran and the objective will be pursued regardless of any and all statements made and leaks that emanate from Washington DC. The term obliterate of course has been used by the US President Donald J. Trump not once but many times. Equally that the demand to open up the state of Hormuz has no real meaning given that Iran would not get any comfort that the bombing would not continue including on civilians and civilian infrastructure which has already begun in earnest.

Several commentators including in the US are calling these war crimes but that obviously is not deterring the administration there from pursuing its objectives or the means that it is adopting to do so. So the markets have adjusted for now to much of this long war that we will now see in the Gulf. There will be more long-term damage to the major states of the Persian Gulf including Saudi Arabia and the Emirates and to all the countries that buy their oil, gas and intermediate products including India of course but that too does not concern America.

From an India perspective we are falling back on familiar resilience even as we've barely recovered as you know from the 50% tariffs on exports to the United States that were levied for importing oil from Russia which of course now we can without any fear because there are no sanctions at this point. So the stock markets have also begun pricing in the earnings and economic growth downgrades. Morgan Stanley for instance has cut its real GDP forecast for India by 30 basis points to 6.2% for 26-27 from 6.5% earlier thanks to the ongoing conflict.

It expects crude oil prices to average about $95 per barrel this year with gas availability as an additional constraint according to reports. Elevated prices and curtailed industrial supply are raising input costs analysts at Morgan Stanley said forcing selective production cuts and adding to imported inflation and amidst rupee weakness according to that report quoted in Business Standard. On Tuesday a spike in the markets towards the end lifted the Nifty 50 and the Sensex extending its gaining streak to the fourth day.

The 155 points were closed at 23,123 and the Sensex up 507 points to 74,616. The quarterly credit policy is coming up today and the Reserve Bank is expected to keep the repo rate unchanged. Though what the markets will be watching keenly in the Reserve Bank of India governor's speech and statements will be of course the content of that commentary but also I would think the body language.

In the broader markets, the Nifty mid cap and the Nifty small cap were up and down, though foreign investors have sold about 12 billion dollars of stock in March. But what is new, or rather the new data point that's emerged, is about half of that was financials, including bank stocks. That's about six and a half billion. And the rupee, which has been under pressure because of all of this selling, that's overall foreign portfolio selling, closed higher on Tuesday thanks to the unwinding of residual arbitrage positions, according to Reuters, which said that the rupee closed up 0.1 percent at 93 rupees against the U.S. dollar, its strongest closing level since mid-March. And more on rupee and the Reserve Bank shortly.

Oil prices were up above 110 dollars per barrel, as a looming deadline imposed by U.S. President Donald Trump for a deal with Iran threatened escalation in the Middle East and spooked investors, according to that Reuters report. Gold prices gained on Tuesday as the dollar softened and oil prices fell. Spot gold was at about 4674 dollars per ounce on Tuesday morning.

Elsewhere, India is expected to receive below normal monsoon rainfall in 2026, according to private weather forecaster Skymet, as the El Nino weather pattern is set to reduce precipitation in the second half of the June to September rainy season. Monsoon rainfall is expected to be 94 percent of the long period average, or LPA, of 868 millimetres for the four-month period, according to Skymet quoted by Reuters. The IMD forecast, that's the Indian meteorological department forecast, which markets keenly look out for, is expected next week.

So, have the markets adjusted for some or a lot of the bad news at this point, and are thus seeing a bottom of sorts? And what do we know of how and why foreign institutional investors are moving their funds out or in? I spoke with Jay Kothari, fund manager and senior vice president, global head international business and lead investment strategist at DSP asset management, and I began by asking him whether he was seeing more stability or a bottoming out right now.

INTERVIEW TRANSCRIPT

Jay Kothari: I would strongly believe now that I think worst is now getting behind us, of course, notwithstanding this particular war. Even before that, the earnings were kind of looking to bottom out and kind of bounce back over the next two years. Your interest rates were down, the fiscal and monetary stimulus of the government was in place.

So, and the biggest reason why investors, even globally, were kind of staying away from the Indian market was valuations, which still seems to be now kind of have corrected. I definitely see these opportunities as one should not miss out on, and certainly market is bottoming out. Right.

Govindraj Ethiraj: And when you say that valuations have corrected, how would you look at valuations across the board? As in, in some cases, it may have corrected more and some less. I don't know if I can ask you for a more sort of granular response to that.

Jay Kothari: Sure. So I think if you generally look at the valuations when, you know, people were staying away from the Indian market was a comparison to the emerging markets. So when you looked at the emerging markets, which were trading at, let's say, you know, 10 times and India was at 19 times, there was a premium which was assigned to those markets, you know, versus emerging markets and India was looking expensive.

But now that has kind of fallen off the cliff. So now India is kind of trading at, let's say, 17 and a half times, which is kind of below its long-term average multiple of, let's say, 19 times. So it's, you know, almost 14, 15% below its long-term averages, whereas the emerging market has kind of, you know, bounced back very sharply.

Number two is that, you know, we've rarely seen a history and over the last 10 to 20 years, we've never seen a time when India has underperformed the emerging markets by almost 35, 40%. And, you know, this has never happened. And in the times when it has underperformed by 12% or 20% or 25% in the past, whether it was in 2001, whether it was in 2007, eight, whether it was 2018, each time the following 12 months has been a fantastic market recovery by India.

So we feel that, you know, this cannot sustain this underperformance. Hence, I would expect bounce back from Euro.

Govindraj Ethiraj: Right. And that brings me to how foreign portfolio investors have been moving capital out. The month of March seen a record $12 billion outflow.

The month of April has also started with an outflow, maybe somewhere between two and a half to $3 billion. So what is driving this at this point of time? And what could slow it down if so?

Jay Kothari: No. So I think if you just go back in time, you'll realise that the entire selloff in the Indian market started at the start of 2025 when we entered the year thinking everything was going to be all right, but then kind of everything turned on its head. And it was India kind of was coming on with a slightly heavy valuation.

So punchy valuations was one of the reasons. Second, India was looked as an anti-AI trade. There were no companies or sectors which you can directly play AI in.

And hence, people were looking to kind of go to, let's say, China, Taiwan, Korea, and back to the U.S. Third is the earnings were seeing a downgrade. Fourth was interest rates were high. And net-net, therefore, all this led to a lot of kind of flows by FBIs kind of leading to a lot of outflow.

So $18 billion is what they sold last year. That was 2025. So we were anyways coming out from that kind of nervousness into the war, which kind of accentuated because then another problem which we added was the oil prices because India imports almost 85% of its oil requirements.

So out of the five, five and a half million barrels of oil per day, which we consume, almost 80% or four, four and a half million barrels of oil is imported at all of this, including what you mentioned in your podcast on a day-to-day basis is that is coming to the state of orbit. So that tells you that, you know, this has only accentuated. And as far as the FBIs are concerned, now, if you look at the statistics, that, you know, it's never happened.

Rarely in history, we've kind of sold off almost 80 basis points as a percentage of market cap. The average has been 30 basis points and the average sell-off has been $4 billion. This time it's pretty much been $45 billion over the past 18 months, which tells you that, you know, this is absolutely accentuated.

And I think this cannot be sustained and we should mean revert and FBI should come back.

Govindraj Ethiraj: Right. And what's your outlook then if you were to look, assuming, let's say the war drags on in some ways, because that's a safer assumption at this point of time, things remain as they are in terms of, let's say shortages of gas shortages or second order impact in terms of let's say fertilisers and so on. So where do we stand then?

Or how do things look in the next quarter or so?

Jay Kothari: So this will be correlated to what will be the impact on whether it's growth, current account deficits, balance of payments, earnings. So there will certainly, if this kind of prolongs beyond April, May and into the rest of the year, there is definitely going to be an impact on growth. So global growth itself will fall from, let's say, 3.3 percent to maybe 3 percent. India growth could fall from 7 percent estimate to maybe, you know, 6.2, 6.3 percent. So there will be a 70 basis points impact on growth on that. CAD will kind of be impacted what used to be comfortable with 1, 1.5 percent. Now it could go to 2, 2.5 percent. And how do you kind of fund that current account deficits? And our biggest problem was the balance of payment, you know, turning it to negative.

Right. So when you say that the oil tolerance was $90, that's what we meant is that till 90 we were OK, but now at $100, $110 a barrel, and if that sustains, there is going to be a massive kind of impact on growth, earnings, you know, and therefore the interest rates and other issues, including what you said about gas and industrial and household usage. So there is going to be a second order impact.

More importantly, from an FDI point of view, having said all of this, everything at a price, you know, looks good or bad, respectively. The way I would look at it is that if you look at the global overall AUM in terms of the global funds, whether it's global X, US funds or emerging market funds or global funds or Asia, Japan funds, all are underweight on India, anywhere between 2 to 400 basis points, which tells you that which tracks, let's say, 1.2 trillion dollars of assets. Now, if this is the amount of underperformance and with the relative underperformance of India, even if they were to get back to India and just become neutral, you know, almost 20, 30 billion dollars could flow in.

So I think I have a slightly more positive incline towards expecting FDIs to, you know, come back, because having said all of this, Korea-Taiwan did stand out of the last two years, and probably it kind of goes on to the middle of this year because Korea earnings are extremely strong. But I also feel that, you know, when the dust settles, when the AI kind of narrative, you know, cools down, investors will start looking at more diversified markets like India. And if AI were to really impact positively, you know, India has a diversified market and as somebody called it, the AI diffusion, you have 1.4 billion population to kind of use AI and positively use it. And if we can do to, you know, almost 240 billion transactions in UPI, using AI is not going to be a problem.

Govindraj Ethiraj: Right. And last question. So when you talk to investors and you do talk to a lot of them, including overseas, what's the general mood?

I mean, we can see what they're doing, but what are they saying to you?

Jay Kothari: So I think right now, they ideally would have kind of started nibbling into the Indian markets with the expectations of earnings at around, you know, 16-17% for FI27 and FI28. But now with the oil price impact, there could be some earnings downgrade. So already a few of the estimates suggest that there's going to be a 1-1.5% earnings kind of impact. But in terms of incremental, they will have some kind of correlations or lack of it with the oil prices because it becomes an inverse correlation. When oil prices continue to go above $90, the flow of capital certainly kind of reverses because of the nervousness, which it kind of leaves behind in terms of the second and the first order derivative impact of oil prices. So I think there will be some more wait and watch, but I feel first signs of dust settling and the first signs of kind of crude oil going back towards the $90 per barrel, FDIs will come back with a bang in my view.

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

Jay Kothari: Thank you, Govind.

Government Credit Guarantee Scheme

The government is considering a 250,000 crore rupee credit guarantee scheme to support businesses, particularly small and medium enterprises impacted by the crisis, according to a PTI report quoted by Business Standard. Under the scheme, credit guarantee of about 90 percent on loans of up to 100 crore rupees would be provided to lenders in case of default by borrowers due to the ongoing US Iran conflict. The guarantee on bank loans would be provided by the national credit guarantee trustee company, which is a subsidiary of the government. The government would have to provide about 17 to 18,000 crore rupees for this scheme. This scheme was seen as a success during the COVID 19 pandemic and helped many businesses stay afloat and clear their dues.

RBI Protecting the Rupee

State Bank of India had about five billion dollars of bets against the rupee that were impacted by the Reserve Bank of India's crackdown on potential speculators, according to sources who spoke to Bloomberg, which was roughly 20 of the total exposure. And the report added that State Bank of India was estimating losses of about 300 crore rupees, or 32 million dollars, from the forced unwinding of these trades. The hit was seen as manageable, given the bank has total assets of more than 800 billion dollars, they told Bloomberg, and they added that they expected the spot rupee to strengthen as State Bank of India and others exited their positions.

Now, the Reserve Bank has taken several steps to stem the fall of the rupee, which is down more than three percent this year, and also directed lenders to cap daily open positions in the onshore currency market at 100 million dollars by April 10th. And besides this, the Reserve Bank of India also banned banks from offering the most popular instrument for trading the rupee offshore, which also threatened to squeeze the 149 billion dollars a day market, according to that Bloomberg report, which added that the offshore activity is mainly driven out of global financial hubs like Singapore, London, and New York.

To get a sense on how India should be approaching the depreciating rupee at a time like this from a strategic standpoint, I spoke with Dr Ajit Ranade, economist and columnist. I also asked him how he was seeing the Reserve Bank of India's response to the rupee fall and how he felt things could be managed going forward.

INTERVIEW TRANSCRIPT

Ajit Ranade: Govind, this two-step procedure has worked, and it worked remarkably well, because as you know, instantly the rupee jumped up by something like one and a half percent, which is a very big jump in the last 12 years. And it is a crisis situation. I mean, we cannot deny the rupee is under relentless pressure for various reasons.

Geopolitics is part of it, the Iran war is part of it, the pressure of oil prices is part of it, the fact that net FDI for the last couple of years is down to zero or negative is part of it, the pressure on the current account deficit, and the outflow, you know. So, but, you know, all coming at the same time is making it like a crisis situation. Therefore, the RBI had to intervene in a big way, and it was very abrupt.

And in fact, I believe they asked banks to close their positions or cap their limits and put a ban on this supporting the offshore NDF without giving any time limit. They didn't say that this will be effective in a week or two weeks from now. So that's why it was effective.

But, you know, while you have taken care of the crisis in the immediate run, the pressure on the rupee will continue. And therefore, we have to acknowledge that and take steps to address that from a media point of view.

Govindraj Ethiraj: Right. So you've in your column in Mint suggested three or four types of responses. One is, let's say, more long term strategic, like increase foreign direct investment.

And I guess that's desirable, but may not be easy to just do, I mean, by just wishing for it. So what are the other things that the Reserve Bank or the government should be doing at this point?

Ajit Ranade: There are other measures, which are sort of like crisis like situation responses. I'm reminded of what we did in 2013. This was in the context of the paper tantrum, and the rupee kind of quickly slid from 54 to 68, which was a very steep fall.

And that was partly in response to international developments caused by the paper tantrum and what is called the sudden reversals. And so what India did or the Reserve Bank did is open the window to attract non-resident Indians deposits, what is called FCNRB deposits. What they did is they protected the rupee depreciation up to 50%.

So it's like giving them an insurance on rupee depreciation. So when somebody brings in dollars into India, one of the fears or anxieties is about the returns that you get from India will be wiped out by rupee depreciation when you take the dollars out. So what the RBI did was to actually assure them that at least 50%, we will protect.

And that announcement effect itself was good enough to attract $35 billion in a very short span of three, four months. And they also insisted that the dollar deposit should have a minimum duration of stay for three years. So this meant that the dollars would not immediately go out.

So that is something that can be contemplated now. Now, I don't know whether we can pitch it only to NRIs or it can be for global investors. And remember, unlike the paper tantrum of 2013, the interest rates now are much higher.

So to attract these dollar deposits into India, you'll have to actually really give them a much higher rate of return, which ends up being expensive. But of course, it's a fiscal cost we have to bear. So that is one example of what specifically we could do.

Now, going back to 1998, and so on, remember the State Bank of India, research and India bonds. Now, these are longer term bonds. These are not three year deposits, five year, 10 year bonds.

We need to examine that as well. As I said, we need to acknowledge that this is, you know, it's a very sort of crisis like situation to protect the currency in light of factors, which may be beyond our control, but we really need to, you know, take them on and tackle them.

Govindraj Ethiraj: Right. The other point is to do with the non-deliverable forward contracts. And you've argued, as have others, that this is really a price signal, and you have to acknowledge it and respond to it as one should respond to price signals.

So what should be the way forward when it comes to derivative contracts like this?

Ajit Ranade: Yeah, so the non-deliverable forward market offshore is essentially settled in dollars. So there's no rupees going out of India. So people are taking bets on the rupee dollar relationship.

And if they are short selling the rupee, they are expressing a view that they expect rupee depreciation to happen in the future. So this is a price signal. Now, do they know something more than what we do?

Perhaps. So therefore, that signal is very useful for us to know what are the weaknesses, how can we tackle them? Now, what happens is, as with other, you know, financial markets, especially currency markets, there is a tendency for herd behaviour and excessive speculation.

Nobody can define what is excessive. And, you know, people always think back on spooky days of Mrs. Soros taking on the British bomb. But I think those days are, you know, behind us.

We need to, as I said, accept that the NDS carries important pricing. So you can't ban it for sure. In fact, what you need to do is try and see if their activity of rupee, you know, speculation, if you can call it, or price discovery can move onshore.

Countries like Brazil and Indonesia have done it. So what happens is that the settlement which happens in dollars in Singapore or London or New York happens in rupees in the onshore. So therefore, there is less pressure on the dollars forex reserve, foreign exchange reserve of India.

And then, of course, you are, instead of being out of the limits of RBI regulation, it is within your limits. So you can actually be a well-regulated market. But that requires you to examine what are the conditions which will attract this NDF market onshore, at least partially.

So those have to do with cumbersome EKYC procedures, tax treatment of currency derivatives, ease of compliance, documentation, then limits, liquidity. So there are many factors, but all of them were addressed very well, I think, in 2019 taskforce report chaired by a former deputy governor, Usha Thorat. I think a lot of things have been laid out.

So I think progressively we can examine how many of those things we can start implementing. And now we also have the gift city, which is technically sort of a foreign territory for foreigners and non-residents to operate with a lot of tax advantage. So I think is a time to look at deepening the NDF onshore market and bringing it into the regulatory RBI ambit.

Govindraj Ethiraj: Right. Last question, Aditya, as you look ahead, what's your sense? I mean, now taking a more macroeconomic view, given where we are in terms of flows, and what I was trying to say earlier is that you can't just attract foreign direct investment by snapping your fingers.

You know, it'll take time. So what are the things that we should be doing? And therefore, how do you see the rupee going?

As you know, India is somewhat of a unique, large country where we have consistently have had current account deficit that is plugged by capital flows. And these capital flows are in the form of RTI, like you said. FII portfolio flows into the stock market are fickle and can have abrupt reversals.

What has happened in the last few years is that the net FDI, that is inbound minus outbound, has been continuously going down for three, four years in a row. So I think we need to find out what are the underlying causes. I mean, everybody can have their own pet list of things to do, but it all points to ease of doing business, how attractive a destination is India, what are the growth prospects.

So for example, you know, cases like Vodafone and Cayen in terms of tax disputes, or the more recent Tiger Global, these give some kind of anxiety to a foreign investor that the policy could change and the tax treatment could change adversely and leading to significant costs. There's also the issue of BITs, what are called bilateral investment treaties. So many investors want some kind of protection to once an investment or FDI is rooted in India, there should be less fear of confiscation.

I mean, I'm not saying India is prone to doing that, but we had a lot of BITs, but there was a wholesale revision of those BITs about a few years back. And now there is some pressure internationally, even in the WTO, this is being discussed, whether India needs to get back to signing. For example, there are issues like in case of a dispute, be willing to go to international jurisdictions like London, or do you want to insist that it has to be done in a court of law in India, at least as a first return for the first five years and so on.

So these are all matters of detail, but they all of them sort of counted under the ease of doing business. Of course, we have had announcements like Google saying $15 billion in Andhra Pradesh for the data centre. So there are these signs, there are, I mean, India in terms of its underlying growth prospects, structural factors, everything is in place.

So what probably matters is making the business conditions for inviting foreign investment much better than it is today.

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

Ajit Ranade: Thank you, Govind.

Fantastic Plastic

The government has announced a full customs duty exemption on a wide range of petrochemicals, intermediates, and polymers as of April 2nd until June 30th. And this, of course, follows rising costs faced by downstream industries following the war. Now, the duty waiver covers a broad spectrum of products across upstream chemicals, intermediates, and finished polymers, according to a report in industry magazine Polymer Update. Feedstock and basic petrochemicals also included under that exemption list comprise raw materials like methanol, to lean styrene, vinyl chloride monomer, that's VCM, mono ethylene glycol, MEG, acetic acid, and others. These are critical inputs for various downstream industries, including plastics, fibres, solvents, and resins, according to that Polymer Update report.

In the commodity polymer segment, widely used materials like polyethylene, polypropylene, polystyrene, and polyvinyl chloride, or PVC, have also been granted full duty relief, which is expected to help sectors like packaging, infrastructure, and consumer goods manufacturing. Moreover, products in the polyester and resin value chain like PT chips, supporting industries like textiles, coating, construction chemicals, and adhesives, would also be benefited, according to that report.

Now, I reached out to Sunil Shah, president of the roughly 80 year old All India Plastic Manufacturers Association, which mostly represents small and medium enterprises in the plastic space, and I began by asking him how he was seeing the impact of the reduction of import duties.

INTERVIEW TRANSCRIPT

Sunil Shah: So the government has reduced not only for the 40 chemicals but also to the polymers also from 7.5% to 0%. The most important thing is that that's a good gesture from the government and all the imports will be cheaper by 7.5%, that is number one. Number two, but the Indian manufacturers has increased the price to the parity of local prices.

Suppose somebody is giving on a dim prices, the dim prices they have not withdrawn but they have increased the prices to that extent. So what is happening that the export incentive has gone away from the local manufacturer. And second thing is the containers are coming, it's taking time.

So that effect will take time, it will take time. Also for the feedstock, the polymer manufacturers companies will get the advantage of that duty and they should reduce the prices. They have already done it in PVC by 10 rupees and we expect that they will do it soon for other polymers too.

Govindraj Ethiraj: So could you give us a sense on what polymer prices were before February 28th, essentially in the month of February versus what they are today before the duty and after the duty reduction?

Sunil Shah: No, duty reduction is the just few days back. But I'm talking about the from war, I'm talking about generally, I'm not talking specific, there are many polymers. So 90 to 100 rupees now they all gone from 140 to 160 rupees, all gone to that much.

So that's almost 50-60% prices increased for almost every polymer.

Govindraj Ethiraj: Okay, in your association, in terms of the kinds of manufacturers, where is the largest use of plastic? I mean, what kind of products? Mostly packaging, packaging is almost 55 to 60%.

Sunil Shah: Our association is All India Plastic Manufacturers Association. So our association consists of all kinds of manufacturers. But as an industry, we are almost 90% is MSME.

So that MSME has little less holding power basically to stock the material for longer time. The bigger companies do have the 10% bigger companies that are really holding power of stocks and everything. But the smaller company don't have their 15 days, 20 days stocks.

So price increase every day is creating a lot of issue for them.

Govindraj Ethiraj: Right. And you mentioned that there are two problems here. One is, of course, the price, which is about, let's say, on an average 140 to 160, depending on the type of polymer.

And you're also saying there's a supply problem because the material is not coming to the ports.

Sunil Shah: Yeah. So see, there are two ways of looking at it. Number one is a lot of imports are going on in a usual time from Gulf, from China and all these places.

And the sources from the Gulf has already stopped. Government has informed all the propane and butane to be transferred to gas making companies, LPG. So in that case, the poly problem shortage will come very soon.

That's what I envisaged. So the point is that all the polymers is in a shortage because of some reason or other. And prices are going up.

So in these circumstances, all the MSMAs is suffering.

Govindraj Ethiraj: Right. And when you say polypropylene production will see a hit, how much could that be because of this diversion of propane and butane to LPG or cooking gas?

Sunil Shah: We have no idea what's polypropylene people. It's a polymer people and how they will manage that propane and butane. We don't know how much government allow them to manufacture polypropylene.

We don't know that as on today.

Govindraj Ethiraj: In terms of overall polymers, what is the domestic production versus imports versus consumption?

Sunil Shah: It is not like a percentage. Everybody is importing some product or other. Right.

Suppose polypropylene is made in India, but polypropylene is also been imported. PET is made in India. It is imported.

PVC is made in India, but is imported. So percentage varies on the international market. So there is a consistency in the production and there are consistency in the import.

You know, we are going hand on hand. There is no problem for that. Even the price rise once in a month or once in two months, we absorb our price reduction.

We absorb that because we know it's market driven. So we absorb everything. But this kind of steep price rise is really very difficult to adjust, even to pass on to our FLGC and others.

It's very, very difficult.

Govindraj Ethiraj: Right. So you said seven and a half percent reduction in duties. It would appear that if the prices are at about 140 to 160 is not going to make so much of a difference.

Not going to make so much of a difference.

Sunil Shah: Unless the import is going to come from now China or Russia or America, you know, it takes 45 days minimum. Some containers are there in the stream, so that will probably get the advantage. But the other which I booked today will come earliest of 45 days.

Govindraj Ethiraj: And which are the countries that we are importing the most from again in polymer?

Sunil Shah: We are most importing from Gulf countries and China. And now it will be only China is left. Gulf countries ruled out just now.

Unless it is stabilised, they start their plan again and everything so that the government is exploring a lot of countries like Russia and Canada. And all importers are also exploring other countries, how it can work out, you know. And what is the impact of freight on that?

Govindraj Ethiraj: Right. You said that packaging roughly is about more than half of plastic use. And what are the other two, three areas where it's used and where do you think consumers will start seeing the price impact in the market?

Sunil Shah: Price impact. Packaging itself is the first price impact because it is everywhere. Second is the automobile will start looking into it or because automobile 60, 70 depends on the car.

It is plastic or raw materials. Agriculture will look into it because all the pipes and fittings are of plastic industry. So you name it and everybody will affect.

I can tell you that. Telephone, mobile phone price will increase because it is also 60, 70 percent is only plastics in that. So all products, you name it and it will affect very soon.

Govindraj Ethiraj: And do you feel that, you know, for instance, now it's only a month and you said that many of the orders may have come earlier or may have the deals may have been done at prices that were older prices. So when do you feel the price transmission could start happening in some of these products, whether it's pipes or packaging and so on?

Sunil Shah: Everybody started increasing their price. They cannot sustain at this price at all. One rupee, two rupee, four rupee, five rupee people sustained and give it at the old price.

But this kind of steep price rise of 50 percent or 60 percent is not possible. So they have to pass on.

Govindraj Ethiraj: Last question. So they would also be importers who are bringing in the finished product. Let's say if it is packaging material or pipes, as you mentioned, or auto components or plastic parts within automobiles.

So is there a price advantage there? I mean, importing the finished product directly or would they be?

Sunil Shah: We have just only passed one month. So it is difficult to compare that price because people negotiate. Whole world is in the problem.

So who will give which price? Nobody knows about it as on today. So it is difficult to guess as on today.

So which is the impact? So maybe a regular importers may try with their old sellers and they may get some kind of deal, but otherwise it is very difficult to get through the deals these days. Right.

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

Sunil Shah: My pleasure, sir. Thank you very much.

Goodbye Airline CEOs

India's largest airlines continue to see leadership churns. Indigo is seeing its CEO Peter Albers departing, while Willie Walsh, former CEO of British Airways and now the CEO of the International Air Transport Association, or IOTA, is the incoming CEO. Air India has now announced its departure of its CEO Campbell Wilson by August, while the search for a successor has begun. Interestingly, the Tatas, which own Air India, have said that Campbell had indicated his desire to leave the airline in 2024 itself. Campbell, who was formerly the CEO of Scoot, a subsidiary of Singapore Airlines, had joined Air India in July 2022. So, it would appear that he would have indicated his desire to leave within two years of joining.

Air India and Indigo are battling challenges to do, of course, with the present environment, as well as some which are specific to each, and is facing losses in general and considerable scrutiny after a plane crash in Amitabh involving a 787 wide-body aircraft that killed 260 people in June last year. And Indigo, of course, faced massive disruptions in December after there were foul ups in its pilot allocation schedules.