On Episode 944 of The Core Report, financial journalist Govindraj Ethiraj talks to Kanika Mahajan, Associate Professor at Ashoka University. We also feature an excerpt from our upcoming Special Edition with Gopal Jain, Managing Partner at Gaja Capital.

SHOW NOTES

(00:00) Stories of the Day

(00:41) Indian Markets Put Up A Fight Against Rising Oil Prices

(04:28) Consolidation In The Solar Space

(08:11) Why Everyone Is Talking About Alternatives As An Investment Approach

(14:22) The Polarisation In The Jobs Market We Have To Watch Closely

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

Good morning, it's Tuesday the 11th of August and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

Our top stories and themes…

Indian markets put up a fight against rising oil prices

Consolidation in the solar space

Why everyone is talking about alternatives as an investment approach

And the polarisation in the jobs market we have to watch closely.

Markets, Chips, AI and Meta

How long can US markets continue to hit record highs? Truth be told, we don't know.

Traders keep looking for new data points to assess the underlying strength of the bull run on Wall Street, and it would appear that all numbers, good or bad, just point to even higher peaks. Stocks held near record highs, with traders looking to the next big data print from the United States, as bets on Federal Reserve interest rate hikes eased. Oil crossed $84 a barrel as a deal to reopen the state of Hormuz remained elusive, and more on that shortly.

On Monday morning, stocks were still looking strong after the S&P 500 index closed at a record on Friday, thanks mostly to soft US jobs. Numbers which suggested interest rate hikes were further away, according to a Bloomberg report, which quoted JP Morgan Chase analysts lifting their S&P 500 year-end target to $8,000 from $7,800, saying a strong earnings season and faster AI monetization than expected for hyperscalers is boosting profit estimates. Meanwhile, Reuters quoted Iran saying it was nearing a final pact with Oman, defining new shipping lanes between them through the state of Hormuz, but repeated that the US must meet other conditions, including compensation and an end to sanctions and military threats, before the strategic waterway is reopened.

It is more than five months since the United States and Israel launched airstrikes on Iran, and back home, all of this might sound like a positive spin on things, but it is a fact that the markets have not fallen in sync with the rise in oil prices we've seen in the last day or two, and the reason is most likely foreign portfolio investment flows in sentiment, if not actuals, on Monday. Stock prices are of course also running on strong earnings in Q1. The Sensex was up 43 points to close at 78,542 and the Nifty 50 was up 13 points to close at 24,583.

In the broader markets, the Nifty mid-cap was up about 0.6% and small-cap was down 0.3%. The rupee was mostly unchanged on Monday, with Reuters reporting a likely intervention by the Reserve Bank of India, which traders, it says, reckon has started to deter fresh short positions on the rupee, which closed at Rs 95.30 per dollar, slightly weaker than its close of Rs 95.20 in the previous session. And gold continues to rise on Monday after prices hit a seven-week high on the weekend, once again thanks to reduced expectations of Federal Reserve rate hikes. Spot gold was up slightly to about $4,345 per ounce on Monday morning, and they had hit, just as we said, their highest price on Friday since June the 17th.

Well, we've talked about US markets hitting all-time highs. In the same vein, Taiwan's semiconductor manufacturing has reported a 45% rise in its monthly sales, which is obviously a sign of sustained demand for AI hardware, despite all the market volatility that we've been seeing. The chipmaker which supplies chips to NVIDIA and Apple crossed $14.5 billion in sales in July, and analysts on average are estimating a roughly 47% increase in sales for the current quarter according to Bloomberg.

TSMC expects its capital expenditure to touch a record of about $60 to $64 billion in 2026, and forecasts its full-year sales to grow a little above 40% in US dollar terms, according to that Bloomberg report. Speaking of AI, Meta Platforms, which runs Facebook and Instagram, introduced a new AI model that's light enough to run on a single computer, allowing users to download and customise the technology, according to a Bloomberg report. We said that the new Muse Glimmer is a distal version of the company's Muse Spark 1.2 model, and is designed with a focus on efficiency to minimise system requirements.

At 30 billion parameters, says the report, the Muse Glimmer is small enough to need only one graphics card to power its work, which will primarily involve agent-like AI tasks such as schedule management and file organisation, according to Meta.

Consolidation in Solar Space

CESC, or once the Calcutta Electric Supply Corporation, said on Monday that its renewable energy platform Purva Green Power will buy a 1.4 gigawatt operational solar portfolio from Renew Solar Power for about Rs 4,859 crore or about $510 million. The transaction is expected to close in two months' time and will be funded by the parent company and hopes to accelerate the group's plans to build a 10 gigawatt renewable energy platform in the next few years.

The portfolio being bought comprises six operating projects across Rajasthan and Karnataka, with more than 90% of the capacity contracted to the government-owned Solar Energy Corporation of India under long-term power purchase agreements, according to a Reuters report. After this acquisition, Purva's contracted renewable energy capacity will increase to about 4.8 gigawatts, including 1.8 gigawatts of operational and 3 gigawatts of underconstruction. CESC is the flagship power utility of the RP Sanjeev Goenka Group and serves about 4.5 million consumers through its power distribution business, which is mostly in the east of India.

A report in Business Standard last month said solar power is now entering a phase of consolidation, moving away from capacity expansion towards systemic reforms including grid integration, dispatchable clean energy architecture, and market reforms. India has about 157 gigawatts of installed generation capacity in solar power. It was only 2.8 gigawatts about 12 years ago.

In fact, in the last year, that's 2025-2026, India saw the highest ever annual solar addition of almost 45 gigawatts, which was even more than the target of 34 gigawatts and twice the record of about 24 gigawatts in 2024-2025. Despite India becoming the world's second largest solar market in 2026 in terms of annual installations, geographical diversification is an challenge or an issue. Seven states account for nearly 85% of total installed solar capacity, according to that Business Standard report.

Adani Airlines?

You may recall the discussion we had on the Adani Group entering the airline industry either by starting an airline or buying one.

Speculation is rife incidentally that they may also buy an airline and there are not too many contenders in the reckoning. Meanwhile, the government on Monday said no government policy in India prevents airport operators from holding substantial equity in all operating scheduled airlines. Business Standard quoted a minister however speaking in parliament saying however the extant contractual agreements relating to some airports under public-private partnership do contain restrictions on scheduled airlines and their group entities associates from holding equity which most likely refers to Mumbai.

The airport authority of India has received a request seeking a waiver from such contractual restrictions which could allow an airport operator to enter the airline business the minister said but also added that the ministry that's the ministry of civil aviation had not yet examined the matter.

Alternatives

In financial markets alternatives are a new way of looking at market investing and their popularity continues to spread. Simply put alternatives are assets different from traditional asset classes like stocks and bonds and can include many types of opportunities from real estate and commodities to hedge funds all of which have become more prominent in the last few years given how markets have been moving or not moving.

So alternatives offer options that are not linked to market performance. So what is the case for investing in alternatives in India? I caught up with Gopal Jain CEO of Mumbai-based Gaja Capital on the core report special edition and I began by asking him why he was highlighting the alternatives options as opposed to the rest of the markets.

EXCERPT TRANSCRIPT

Gopal Jain: Diversification is the first, is the only free lunch in markets. So, first of all, you have to diversify across fixed income and equities. But before that, you have to buy some real assets.

Even realist assets are alternatives. As the great Buffett says, the first purchase in your life has to be a house. People are consuming towards a house as actually saving.

So, savings is important. Savings through alternative starts with savings through real assets. Then, within financial assets, you need to diversify between fixed income and equity.

Within fixed income now, there are many options available. There are fixed income, there's fixed income plus. There's an example of listed alternatives and fixed income, REITs and INVITs.

And similarly, in equities, there are a whole variety of avenues. So, it's not a question of how much. It's a question of whether you do.

It's important to save. It's important to convert those savings into assets. It's important to convert those savings into financial savings.

And it's important to diversify because like you said, you may have years in which there are no returns.

Govindraj Ethiraj: Right. And you talked about alternatives. And you also said that real estate itself is an alternative, which most Indians have already invested in or aspire to invest.

They also invest a lot in gold. These are the two classic investments. So, why should they think differently today from what they've been thinking before?

Gopal Jain: So, in an inflation-heavy economy that we were for most of the last 75 years, I think most people did well by investing in hedges against inflation, which is real estate and gold. I mean, gold is a dollar asset. Without realising it, there was a lot of wisdom in it that people were converting a part of their savings into a dollar asset.

It's a global asset. You buy one gramme of gold, you buy a dollar equivalent. Homes, for the longest time, were reflecting.

India's seen very high inflation over the last 75 years and consistently high inflation. As we are settling into better management of the economy, as inflation is coming down, you will not see the same kind of returns in fixed assets. Therefore, financial assets become important.

As the economy starts growing faster, if you want to tune into the growth of the economy, if you want to tune into the earnings growth of the economy, that's when financial assets come into play. So, what we are seeing is the financialization of savings. The same thing happened in other countries.

India, in some ways, is very similar to where the U.S. was, say, in 1982, right, in terms of median life expectancy, in terms of the median age of the population. And, of course, they were a far more prosperous country even then. But, broadly speaking, you see that as economy settled into a better zone of fiscal and monetary management, then you start seeing the financialization of savings.

And you've seen tremendous financialization of savings in the last 10 years. This is evidenced through the growth of bank deposits. In the last 10 years, bank deposits have grown by 2.5x. We are close to 2.5 crore crores of bank deposits. You've seen mutual fund growth. Mutual fund AUM has grown 6x. It's close to 80 lakh crores.

I mean, these were far smaller numbers if you look at a banking sector 20 years ago or even 10 years ago. If you look at mutual funds, if you look at insurance, so there is evidence that financialization of savings is happening. Financialization of savings is happening because we are settling into a better managed orbit.

Govindraj Ethiraj: So, let's come to alternates, something that you are focused on currently. So, firstly, what does alternates mean in the context that you're talking about? And why should we be spending more time or thinking about it more than perhaps before?

So, alternatives work in large economies.

Gopal Jain: Good news is that now we are a large economy, right? I mean, we are now one of the six large economies. We'll be soon the fourth largest economy.

And this is very simple. Alternatives work in large economies. Until very recently, alternatives as an asset class was not working in India.

But look at the last 10 years, alternatives have grown 43x. That's a dramatic number because it's grown off a small base. And part of the reason it's grown so dramatically is because alternatives are working.

Now, if alternatives are working, then they become an option. They become an option for those investors who can invest in alternatives. How?

They become a part of your portfolio. It's a higher risk product, but it can give you a fixed income plus returns or it can give you equity plus return. And why do you need the higher returns?

It just goes back. Every institution is also finally working for a saver or many savers that those savers need their savings. They need to protect the quality of life post retirement.

Govindraj Ethiraj: And I know you were in a discussion on deep tech at the AI Summit. So, when we talk about deep tech, I mean, again, it seems to mean many things to many people. What does it mean to you?

Gopal Jain: It could be something as simple as we are here, we're looking at materials. It could be new materials. It could be new technical textiles.

I mean, it could be all the way to new models. It could be new space technologies. I mean, reusable rocket is an example of deep tech.

Could be new kinds of fuels. Everybody's thinking of new kinds of propulsion. So, it's a whole variety of things.

You talked about IIT and I think the typical IT peer 35 years ago was interested to go abroad and get a nice job. I think if you go to an IIT Delhi campus, two out of three would want to be entrepreneurs. And I'm sure half of them are thinking about innovation and deep tech innovation because their minds have opened to the possibility that this is possible.

Why is this possible? There is a market for it. There is financing for it.

There is an ecosystem for it, which is they can attract people and work on some things, problems for long periods of time. So, I mean, I don't want to use buzzwords, et cetera, but innovation addresses, deep tech addresses every aspect of human life. Pharma, of course, materials, everything.

Paper - “India's jobs in transition”

A new study out of Ashoka University's public policy group tracking the employment landscape from 2018 to 25 using the periodic labour force survey or PLFS has said there is striking evidence of job polarisation which is that while overall job growth has been positive since 2018 it has been concentrated at the extremes.

The discussion paper titled India's jobs in transition has been authored by Dr. Kanika Mahajan, Dr. Anisha Sharma, Dr. Mansri Wadhwa and Ayesha A and it says that low-skill occupations and agricultural self-employment have driven a large share of the employment expansion over the last seven years and among wage workers low-skilled manual workers jobs grew strongly high-skilled professional roles also expanded though less rapidly while medium-skilled jobs did not grow comparably. Real wages also tell the same story the report says they rose about 23 percent for professionals but fell by about 20 percent for technicians and associate professionals. The trend the report says may be further amplified by the recent wave of AI-led technological change and argues that as AI reshapes occupations timely evidence on these changes is critical to designing effective policy interventions.

I reached out to Kanika Mahajan associate professor at Ashoka one of the co-authors of the report and I began by asking her what according to her was the key finding in the discussion paper.

INTERVIEW TRANSCRIPT

Kanika Mahajan: So there are two key findings. One, if you look at the overall employment growth, there has been a drastic increase in the employment rate by about 10 percentage points, and we've added almost 10 crore workers to our employed numbers. But if you look at the number more closely, the increase has largely come from, A, the agricultural sector.

So almost, I would say, about 4-4.5 crores is simply from the agricultural sector. And post the agricultural sector, if you look at the non-farm employment, which is about 6 crores, a lot of it has largely come from the low-skilled segment. So the low-skilled segment has almost, out of 6 crores, 4 crores has come from there.

So in a way, you can say that almost 8 crores of the total increase in 10.5 has come from either agriculture or low-skilled non-farm rate sector. The second finding, I would say, is around job polarisation. So while it's the lowest-skilled which has seen the maximum increase, if you look at the other part of the skilled spectrum, the next increases actually happen in the highest-skilled ones.

They have witnessed relatively lower fees than the low-skilled ones, and it's the medium-skilled ones, the ones that are more routine in nature, more manual in nature, which have experienced the least increase amongst all the occupations.

Govindraj Ethiraj: Okay, so the figure that I keep hearing, and do correct me on that, is that we need to create roughly 10 million jobs a year to absorb, or no?

Kanika Mahajan: So we need about, I think, 7 to 8 million non-farm jobs for sure.

Govindraj Ethiraj: Yeah, so to that extent, this seems to be filling the gap, isn't it?

Kanika Mahajan: No, I'm like, if you have almost 4 CR coming from agri, then we're still about 2 CR short of non-farm employment, right? So we've only added 6 crores per annum, roughly speaking.

Govindraj Ethiraj: No, you're saying we've added 60 million jobs in the last 7 years, or is it in one year?

Kanika Mahajan: This is aggregate. This is total over the last 10 to 8 years. So if you look at the estimates we've met, and that's because there has been an increase in overall employment.

So the economic survey is not accounting for that. It is accounting for the fact that how much do we need, the assumption made there is, how many jobs do we need to move people out from agri to non-agricultural sector, and to have a structure, have an economy which is more non-farm and less farm. So yes, we are meeting that target.

But where are we meeting the target? It's the low skilled non-farm wage sector. Right.

Govindraj Ethiraj: To what extent is this out of choice, as in people who, let's say, consciously move back to farm, and how much is it because they've been pushed back by various other economic reasons, or for economic reasons, or social reasons?

Kanika Mahajan: It's difficult to verify how much of this is by choice. But if you look at some of these farmer surveys, which are done separately of the periodic labour force survey, and if you look at how many people think that agriculture is a sector that they would want to be, there's a dwindling proportion of people who are interested to be in the agricultural sector. So given that this is, agri is not their first choice.

My hypothesis is that this is not out of choice. This is out of compulsion, because we are not creating enough non-farm jobs.

Govindraj Ethiraj: Right. Let's focus on non-farm for a second. So in terms of non-farm, could you revisit the aggregate of jobs that's been created?

And within that, what is exposed to, let's say, more sensitive, if that's the right word, areas like artificial intelligence and so on, which I guess falls under technology?

Kanika Mahajan: So in the non-farm sector, across these eight years, about six crore jobs have been created, right? Now, first, let me give you a sectoral breakdown. So in terms of services, manufacturing, construction, about 3.3 crores have been added, almost 50%, slightly more than 50% have been added in the services sector. The remaining half-half have been added in manufacturing and construction each. But within the services, it's a low skill. Now, so this is the overall employment, right, in the non-farm sector.

Now, within the non-farm sector, you have further two types of employment. One is, you can go for wages. The other, you can go for self-employment, even within the non-farm sector.

And what we've seen is that out of the six crore increase, almost, I think, four crores has happened in the wage employment, which is a good sign, actually, because self-employment in India tends to be a lot more informal and less remunerated as compared to wage employment. In a way, wage employment also reflects demand, right? Because you're creating jobs in the economy.

You're not just falling on, you're not just a street vendor just because I have no other job. And hence, the only way to earn some money is for me to become a street vendor. And then we look at these four crore jobs, because this is the demand side, right?

And what we wanted to do in the report is to see how the demand for skills is changing, and how the demand for skills is changing in a post-AI world. So these were the two additional questions that we wanted to answer. And what we found is that within these four crore wage increase in wage employee people in the non-farm sector, about half of this has happened in the low-skilled sector.

And the way we capture skills is in two ways. One is in terms of education, and the second is in terms of the distribution of wages. So it's the occupations having the lowest wages, which have generated the most jobs, as well as occupations having the highest wages.

And it's the middle which is missing. Just to give an example, so professionals is a category in the occupational classification, which is towards the highest skill spectrum. And there we've actually seen a 20% increase in real wages, which is large.

But the moment you come down to, say, associate professionals or clerical workers, which is in the range somewhere between medium to high skill, but more in the medium segment, there has actually been a decline of 20% in real wages, which basically shows you that there is a dissonance between demand and supply in a way. You've got more people, you've got more demand at the highest. So even within the skill spectrum, the highest skilled are still demanded.

But the moment you come down a bit, even within the medium to high skill segment, that's where the demand is perhaps falling. It's going on a downward spiral. Then we looked at AI.

So there are multiple frameworks to understand the AI exposure or the AI vulnerability of a job. And there we use the kinds of indices which are being used outside as well, which focus on the tasks which can be done by AI or the abilities which can be done by AI. And again, once we look at this entire distribution, where did these 4 crore jobs maximum come from?

Half of these 4 crore jobs have come from the least 20% AI-exposed occupations, whereas the top 20% have added half, and the one in the middle have added the remaining. So about 60 percentile have added one-fourth than what the lowest skilled have added, while some has also been added at the extreme highest exposure occupations. One should remember that AI can also be complementary to productivity.

Govindraj Ethiraj: So what would be the sort of one-line takeaway from this?

Kanika Mahajan: We have to find jobs for the segment of a population that is transitioning out of agriculture. If they're going to get into the lowest productivity, if that's where the increase in demand is coming from, they will not be happy. The wages are low there, the productivity is low there.

So there are two options. Either you increase the productivity of your electricians and plumbers and your cooks and your helpers, which are basically your lowest skilled occupations, you have to train them better, you have to increase their productivity, or the second is to make them so high skilled that they're able to move to the other end of the spectrum, because that's where the job polarisation is happening. So you have two options.

Either to make them really high skilled so that they can actually work in the changing technological environment, or we have to increase, and we have to do both actually, and increase the productivity of our lowest skilled occupations so that the wages are not so low there. That would be my one sort of policy takeaway.

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

Kanika Mahajan: Thank you.