On Episode 1029 of The Core Report, financial journalist Govindraj Ethiraj talks to Devish Gala, Director of Branding, Marketing & Sales at Navneet Education in an excerpt from our Special Edition. We also feature an excerpt from our recent episode of How India’ Economy Works, hosted by journalist and author Puja Mehra and featuring Rahul Bajoria, Head of India and ASEAN Economic Research at Bank of America

SHOW NOTES

(00:00) Stories of the Day

(01:00) Making Sense Of Markets And AI Trades

(06:29) Inflation Could Trend Higher

(07:06) How Should The RBI Manage The Rupee?

(17:49) A Look At A 67-Year Old, Listed Company That Makes School Text Books In The Age Of AI

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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 9th of November and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital. It's still Diwali season and we've got two more days to go and we have a holiday tomorrow that's a markets holiday and we're going to be back on Wednesday. Meanwhile, we do hope that you're having a fun Diwali season.

And that brings us to our top stories and themes…

Making sense of markets and AI trades

Inflation could trend higher

How should the Reserve Bank of India manage the rupee?

And a look at a 67 year old listed company that makes school textbooks in the age of AI.

Markets, AI, FPIs and Inflation

Markets are not always predictable but can be sometimes quite difficult to explain.

Artificial intelligence or AI trades are a classic point. AI is here to stay, most tech companies vested in its future and investors who back them will tell you. Yet they sell and buy AI stocks like the future of AI is being determined on a 24-hour basis, if not shorter.

On Wednesday last week, the results of the U.S. midterm elections which showed Democrats trouncing the Republicans were out. Along with that came the uncertainty about the future of several data centre projects including in states like Texas which have massive data centres coming up. Texas accounts for nearly 30 percent of U.S. data centre capacity set to come online in 2028, representing by far the largest share of any state.

Bloomberg had reported last and Texas has switched to Democrats with a Democrat governor. And yet on Wednesday, the markets were steady to positive on Wall Street. But on Thursday, the mood changed almost inexplicably.

Heavy selling sent the major three stock averages to their worst one-day losses since April 2025. CNBC reported the Nasdaq composite was down five and a half percent, closing more than 10 percent below its most recent high and putting it in what Wall Street regards as a correction. The S&P 500 was down about four and a half and the Dow Jones was down about three and a half.

Now just when it looked like AI was finished for now, on Friday the mood changed again. The Nasdaq composite rebounded as some investors bought the dip in chip stocks following that sell-off that sent the index into correction territory according to CNBC, adding that the tech-heavy Nasdaq was up about 1.09 percent. The S&P 500 was also up and the Dow Jones Industrial Average was however slightly down.

In Friday's session, shares of Micron Technology were up five percent following a 17 percent decline on Thursday and NVIDIA was up three percent after a nine percent fall on Thursday. You could argue that there were potential policy shifts in the U.S. AI landscape on the horizon and hence the up and down. Analysts I speak to argue that on the contrary, India has offered steady micro and macro data in the last few quarters with no surprises except for external ones like oil prices which everyone is facing.

The missing factor of course has been foreign portfolio investors and consistently lower oil prices and now the foreign portfolio investors are back with some strength. Foreign portfolio investors bought shares worth about 4.9 or close to 5 billion dollars over five sessions last week including their biggest single-day buying session in India in about six years on Thursday according to a Reuters report, thanks to which the Nifty and Sensex were up close to nine percent each which was their strongest performance since February 2021. The Nifty and Sensex also rose for the seventh straight session on Friday, their longest winning streak in 14 months and 26 months each.

Broadly, the benchmarks had jumped more than 10 percent in the seven sessions up till Friday thanks of course once again to a decline in oil prices and the shift in sentiment following the mid-term elections. And interestingly, the gains in India were in stark contrast to South Korea's Kospi and Nikkei of Japan which were down six percent and Taiwan was also down about four and a half percent on Friday which of course was tracking Wall Street on Thursday. Back home, we had a special one-hour Diwali trading session on Sunday in keeping with tradition where the markets were slightly down also presumably because of lower liquidity.

The BSE Sensex was down 26 points to 80,999 and the NSE Nifty 50 was down 43 points to 24,986. The Nifty mid-cap 100 and small cap 100 were both up 0.13 and 0.94 percent each. Analysts told Reuters the recent decline in crude oil prices following the US midterm elections has eased concerns over inflation, India's import bill and pressure on the rupee and of course their strong foreign portfolio investor buying supportive global queues and of course better than expected September quarter earnings which have all helped reinforce the rally.

The question of course is will that rally continue into this week which is a holiday shortened week. The rupee has also benefited from renewed foreign inflows and lower crude oil prices. The rupee was stronger at 93 rupees 90 paise on Friday which is now down only four and a half percent in 2026 after having hit an all-time low of 96 rupees 96 paise in May.

Now some of this could obviously change if crude oil prices start going up again and that was the case on Friday when crude futures were already up on renewed fears of further US strikes on Iran as US President Donald Trump said he would soon decide whether to pursue a peace agreement or destroy what remains of Iran. Brent crude futures were at 98.32 which is up slightly though on a net basis they were down 17 percent last week which according to Reuters would be its steepest weekly percentage fall since the start of the COVID pandemic and its biggest in absolute terms according to data going back to 1988. Gold prices are inching up in India.

Gold prices were around 141,800 rupees per 10 grammes on Friday after falling to about 137,863 rupees earlier this week the lowest level since March 2024. Earlier this year prices had hit a record high of 180,000 rupees approximately Reuters reported. Now Friday was Dhanteras the start of the five-day Diwali festival of lights in much of India which is also considered or was considered auspicious for buying gold.

Speaking of buying annual consumer inflation is likely to rise to about 5.93 percent or just under six percent in October from about 5.54 percent in September according to a forecast in a November 2-6 Reuters poll of 36 economists. The economists have forecasted a range between 5.5 and 6.6 percent half of them expect inflation to be at or above 6 percent in October the upper end of the Reserve Bank of India's target range. Higher food inflation is expected to be the largest contributing factor here which had picked up to 8.2 percent in October from 7.7 percent in September according to the poll.

How Should The RBI Manage The Rupee?

The rupee as we pointed out is strengthening most likely because of foreign portfolio investments picking up but the concern of a high exchange rate and the Reserve Bank of India's response to it cannot be ignored given that while the midterms might create problems for the current Trump administration at home there is little to suggest any change or possible change on the international front including a resumption of hostilities in West Asia via fresh bombing runs which of course would mean that crude oil prices would be impacted which could of course affect the rupee. Now how should the Reserve Bank of be approaching it? Pooja Mehra who anchors how India's economy works for the core spoke with Rahul Bajoria head of India and ASEAN economic research at the Bank of America and asked him whether the Reserve Bank of India should be using its monetary policy tools for managing the exchange rate.

INTERVIEW TRANSCRIPT

Rahul Bajoria: See, in the last two years, right, ever since Governor Malhotra has taken over the RBI, the RBI has been grappling with, I would say, conflicting objectives to a certain extent. I mean, there's inflation, which was quite low in the early part of this term and then has subsequently normalised to a certain extent and now is sort of pinching higher as global commodity prices have moved up. There is growth, which was looking pretty weak, particularly on a high frequency indicators basis in the early part and then has subsequently improved and stabilised with a fair amount of heavy lifting being done by fiscal policy as well.

And then there's the exchange rate, which has been persistently weakening to a certain extent that there's been consistent underperformance, both in terms of where the macro cycle is, where the funding requirements are, and also where the global dynamics are, right, like the rupee has been a persistent underperformer, both against its own history and against other emerging market currencies. Now, within this entire framework, we have seen the central bank, to a large extent, focus on the growth primacy of its policy objectives. Sometime in the early part of this term, it was very clear that there was an emphasis on reviving growth and basically letting the exchange rate move on its own beat.

And so we saw, I would say, within the trilemma of managing between growth, inflation, and the exchange rate, the central bank basically saying that the growth is what is important and need to basically revive growth to a certain extent before we really try to focus on other areas. Now, in the last, I would say, 12 months or so, ever since the GST tax cuts were implemented, and there have been a series of other demand-side stimulus measures, the Indian economy has shown a fair amount of resiliency and rebound, both in terms of high frequency numbers and also, in particular, the monetary sector has seen a bit of an improvement. With this particular objective fulfilled, I think the RBI has correctly pivoted at the margin to thinking about a little bit more on the macro stability element.

And this is where I think the financial stability issue also comes in, is that with growth looking quite OK, the ability of the central bank to focus on inflation, which has moved up, but is moving up from fairly low levels over the last couple of years, and then the exchange rate, which has remained under persistent pressure, and there is a question mark over whether interest rate differentials can help in at least stabilising the exchange rate cycle.

It is what I think the trilemma is all about. Basically, the choice set between what sort of holds primacy in the policy objectives, and I think with growth being consistently above 7% and looks like we will have another quarter of 7% plus growth, this trilemma basically is this choice set between what sort of is the pecking order on which policy gets decided. And at this point in time, with growth looking quite OK, the choice set has become a little bit easier in the sense that the RBI can basically drive its policy with keeping inflation and keeping the exchange rate a little bit more in mind than what was the case a year ago, when it was a bit more conflicting between these three areas.

Puja Mehra: So, before I ask you for your view on what you think the RBI should be doing, let me ask you how you interpret what the RBI is seeing that it is trying to do. So, on the one hand, the Monetary Policy Committee has changed its stance to calibrated tightening. And also, in a recent interview, I think it was at the post-policy press conference, Governor Malhotra said that financial stability, too, he believes is a policy objective.

So, what do you think the RBI is trying to do in this trilemma, where there are three possible policy objectives of which they cannot simultaneously address all three?

Rahul Bajoria: Yeah. So, my sense of, you know, when I was reading the speech that he gave at Cortelia Economic Conflict in early October, my interpretation of financial stability was that it is linked, basically, to both the quantity of money, the price of money, and the external value of the money, right? Like, those are the three primary aspects on which one can gauge financial stability issues.

And at this point in time, if you look at the general dynamic around whether credit growth is a bit too high or a bit too low, I mean, we can have a debate about it. But I do not think there are essentially any imminent signposts of financial instability in India, right? We could think about whether there is a need to kind of recalibrate policy.

And that, I think, is where the signalling of the Monetary Policy Committee was in the October meeting that inflation is high enough for them to sort of think a little bit more about the balance between growth and inflation. But I do not get a sense that there is a feeling within the RBI or even within the markets that the RBI is meaningfully behind the I do not think that is the case at all. But there is a case to be made whether between having an objective around growth and inflation remaining at a particular acceptable level, a minimum amount of growth that we are able to achieve and a maximum amount of inflation we are willing to tolerate, where does the exchange rate sort of sit in?

And I would say to a large extent, the market has digested the comments around financial stability as an attribution to the RBI basically indicating that the willingness to sort of look at interest rate hikes, whether both in quantum and in terms of timing, to be calibrated around exchange rate management. Now, this is an interesting departure because, as Pooja, you know, and I know that since 2013, there has been this great delinking that has happened between monetary policy and exchange rate policy in India. So this particular attribution has been, I would say, at least to me personally, a bit of a surprise.

But at the end of the day, I do not necessarily think that there is an urgency to actually hike interest rates. And this is the point we have tried to make in some of the publications we have done recently, that interest rate differentials, in India's case, have not necessarily brought in a lot of inflows, right? Like if that is the end objective, it is actually growth.

And India being largely seen as an equity market, that growth revival is the, I would say, the necessary condition for capital flows to see a meaningful revival, whether it is in the secondary market through the equity channel or through the primary market through the FDI channel. And in that sense, I would say that interest rates have to be calibrated to manage inflation, no doubt about it. That is the first order priority.

But the second order priority is that we have never really been able to attract fixed income inflows through the channels offering a lot of yield, like that has never been the calling card of the general economic setup. And so I still believe that the RBI will effectively balance between growth and inflation. And the exchange rate is likely to be tackled mostly through regulatory channels, as we have seen with some of the measures that were rolled out in early October.

Most of them were basically designed to relieve the pressure of the market side of things rather than necessarily boosting inflows. And then obviously, the recent attribution by the Ministry of Finance of looking at taxation issues, looking at ease of doing business for foreign investors. I think those are the kind of measures I would look for as far as reviving confidence in the capital flow cycle is concerned.

But broadly speaking, I don't necessarily think that monetary policy will be actively used in order to bring about inflows. I think that's going to be a difficult proposition for a country which is very growth sensitive like India.

Puja Mehra: Lastly, do you want to say what the downside might be if there are aggressive interest rate hikes, keeping inflation in mind or even the exchange rate considerations in mind? What kind of impact that could have on the revival and growth?

Rahul Bajoria: So basically, what we are looking at is an environment where if interest rates were to go up aggressively, we will see the nascent recovery and trade growth, I think, come under question.

And, you know, you might see a period where investment demand, which is showing very nascent signs of revival right in the last few quarters, we have seen both from a credit perspective and from a channel checks perspective that the demand revival basically leading to some incremental capex growth that will start getting questioned at the margin, especially at a time when global interest rates are elevated as well, like the overall cost of capital will be high enough, perhaps for some of these investment projects to either be pushed back or, you know, to be shelved.

And so we would worry about that aspect at the margin, whether it has any meaningful stabilisation effects on the rupee, I think has to be seen from the current account channel.

And I will say to a large extent, the widening in the current account deficit has been a reflection of higher energy prices and higher petrochemical and metal prices in the last 6 to 12 months. Whether that sees a pullback and whether that pullback is coming from the price side or whether it's coming back from the volume side, I would hope it's the price side. I don't think volume compression is a feasible strategy over a longer period of time.

Like India's core USP in terms of attracting capital globally has been the growth story. It's never been that fiscally we have done such a tremendous job over decades that we see a lot of fixed income flows. And so I go back to the basic idea that we get capital from outside because we grow fast and we should be aware of the fact that growth has to be at least a necessary condition in order to justify tightening of monetary conditions and you know whether we are being preemptive in the way monetary policy tackles inflation and exchange rate over a period of time.

A Listed Company That Makes School Text Books In The Age Of AI

Navneet education is a listed Mumbai headquartered publisher of mostly school education linked textbooks and has been doing so in one form or the other since 1959.

There have of course been many changes in recent years including the massive shift to digital learning much of it after covid in 2020 but there's also been a pullback of sorts. Navneet digest books are positioned as simplified learning aids for school children who follow the Maharashtra state board for instance. I recently caught up with Devish Gala director and founding family member of Navneet education and I asked him about how the publishing business was changing and what was keeping their business going apart from school curriculum linked workbooks and practise books.

INTERVIEW TRANSCRIPT

Devish Gala: I'll give you some generic figures. The publishing book business or market of India is about a lakh crore, out of which 70% is in the K-12 business. In K-12 also, government-based products like government textbooks which are state-bought or NCRTs around 55% and private publishers like us who make supplementary products is about 45%.

Govindraj Ethiraj: Well, you said that after COVID we've seen some slowdown and now it's picking up again. Is the growth of this dependent on, let's say, the education that people are trying to get more of or the number of subjects that they're taking up? I'm just trying to understand what could be driving the growth in this or what potentially can drive the growth in this?

Devish Gala: What is driving the growth of physical books is simply the need for more and more supplementary learning in the school and after the school. The way physical books are consumed now versus before is that there has to be an element of digital support. So if your content is delivered in both physical form and somewhat as a supplementary support in digital form, that is what is helping you grow.

Today, any publisher relying only on a physical book is not going to grow. But having said that, the way COVID treated education, which was all in digital, digital first, I think that was a bubble which burst very quickly. People have now shifted back to having a physical book as their anchor.

And like I said, digital is there to support it. So in the school is still physical learning and partially using digital aids. But after school, the students and parents prefer to use supplementary products like ours, but having some kind of digital aid also.

So even at home today, very few people are still relying on only a digital platform to support their learning.

Govindraj Ethiraj: Got it. So the physical textbook is the anchor. That is something that is lying there on the table, even as you might use the PC or laptop, which is next to it and at different points of time in the day.

But inside the school, people are obviously still with textbooks and so on.

Devish Gala: Textbooks and supplementary books like we have workbooks, journals, map books. The physical element still needs to be there. The touch and feel moment still has to be there.

And now specifically when the central government has launched a new framework a few years ago. You mean the new education policy? The new education policy, which is activity based, competency based.

In short, there is a term that is used called VUCA. Volatility, Uncertainty, Complexity and Ambiguity. So the entire framework and entire curriculum that is slowly developing into one policy is going to help students from an early age, learn to be a part of the VUCA world.

Whereas pre-COVID or a little bit today also, I would say still fixed knowledge and fixed career choices, which is now opening up for all possibilities for every student.

Govindraj Ethiraj: Tell us about the publishing side. When I say publishing, I mean the actual publishing and printing. How does that look like?

So you said you're doing almost 20 million titles. You're printing 20 million books in a year. So where does it get printed and what's the distribution set up like?

Devish Gala: So majority of our printing happens in a factory in Ahmedabad. And then we have multiple distribution warehouses across Maharashtra, Gujarat and some CNF facilities across the country.

Govindraj Ethiraj: Are you running at full capacity all the time or is it other times of the year that you?

Devish Gala: So education has always been a seasonal industry, school education mainly. So Q4 and Q1, so February to June is when majority of your business takes place. Because that is when exams are being conducted, plus preparation for next year and then back to school period.

So school business is February, March, April and back to school is May, June, July.

Govindraj Ethiraj: Right. And you're obviously using paper and paper costs keep going up and down and they've been mostly up in recent times. So how has that been affecting the cost of the final product?

Devish Gala: So because we are in a very sensitive market where paying capacity is not always existent. Paper prices have increased, they've dropped also, they possibly are going to increase again. We have passed on that cost in a very marginal manner to the customer because we understand that the mass of the buying happens in tier 2 and below.

So even though raw material prices increase doesn't mean that the paying capacity or purchasing power of anyone is also increasing in the same manner. So we have been sensitive about it, we've not excitedly passed it on down. And most of your paper is sourced from where?

Govindraj Ethiraj: Most of it is through India, through various mills of India. So it's all domestically sourced? No, no, partially is internationally sourced but most of it is.

Right. And your exports are also a significant part. So tell us a little bit about that and I'll come to the production side as well.

Devish Gala: So exports has got nothing to do with content. Exports is basically paper-based stationery like notepads, notebooks and all of that. And recently we ventured into plastics and metals also.

Again that is a demand coming from the buyer side on what is the next thing that they want to venture out. Everyone's interest in India is quite high, right. So the opportunity is coming in also as long as you're a trusted partner, you're a high quality manufacturer, the opportunities keep coming in.

On the geopolitics, I won't talk about it but currently we are in these three categories, paper, plastics, metals for large multi-corps primarily in the US. So 80% of our exports is still to the US, exported to the US.

Govindraj Ethiraj: Okay, so you're supplying let's say to a Walmart or a Target who in turn are obviously selling it in their store. So this is sort of a generic branding, I mean unbranded export from your side but branded by this thing. Okay, and where's the other 20% going?

Some to South America, some to Europe, some to Africa. Then it's split. How is the material or the content itself changing?

I mean I can imagine a situation a decade or two ago or maybe a couple of decades ago where you said okay, here is the pedagogy and once it's done it's going to remain for some time. Is that changed dramatically today? Is it far more dynamic and if so how?

Devish Gala: So today's children are very vocal about the way they want to learn, the way they want to spend their time in and around education and because they are vocal they are not just okay with the root learning patterns. They are not okay with just the benchmark is achieving high marks which was there for maybe a full century. Today there is a lot more activity-based learning available because of digital intervention and students want that practical learning even more.

So the shift from rote learning, from having a fixed knowledge centre which is your school, having to now shift it to school coaching and then back at home using some kind of digital product to enhance and get the concept correct and each child also learns differently. Each child's ability to understand also is very different. So if not a school, if not a coaching then the digital aids, the digital platforms are there to support that.

Govindraj Ethiraj: And how does that work? So I mean tell us about how this would work from or through the eyes of a class 5 student today who's let's say a traditional consumer or could have been a traditional consumer of your supplementary textbook and how they would also access material on the digital side.

Devish Gala: So like I said no physical book today comes without a digital support. Even if in school the teacher is teaching via a whiteboard or blackboard method and now some schools mainly CBSE and really good English medium state board schools have interactive panels, have a projector or screen, have a television which they showcase some kind of digital content. Say I take a 40-minute class.

The first 30 minutes is physical teaching on a blackboard whiteboard and then the 10 minutes is either taken up as quiz or there is image or animated video shown to the child to understand the concept better. Of course the younger you are the amount of digital aid reduces. The older you are it increases.

So schooling is done. Now very few grade 5 students go to coaching so we can skip that. And coming at home of course the parent supports the child in getting the homework done, preparing for the next day if there's a test happening or anything.

But more importantly the student is enabled through the parent's phone or another digital device at home who willingly is wanting to go on it to understand the concept better, to understand what they have learned better and the older the child so a child say of a 10th grade or 12th grade wants really what they end up learning really matters to them because they want to make sure that what they learn is going to be useful for them.

And in today's world with the fast-changing environment of technology I think they are getting to choose what suits them better.