Markets Seek Direction
UBS analysts told Reuters that the Supreme Court's scepticism on tariffs and the slightly weaker dollar are mostly supporting gold
On Episode 720 of The Core Report, financial journalist Govindraj Ethiraj talks to Atul Chaturvedi, Special Advisor, SEA & Chairman at the Asian Palm Oil Alliance (APOA) as well as Amit Pabari, Managing Director at CR Forex Pvt. Ltd.
SHOW NOTES
(00:00) Stories of the Day
(01:00) AI job cuts or AI washing
(03:21) Markets seek direction
(04:52) India’s problem-of-plenty in this crop
(5:47) Why did Indigo report such a sharp loss on account of forex?
(11:20) Soybean is a key bugbear in the India-US BTA discussions. Where do things stand now?
(18:39) Why there could be massive air traffic delays in the US in the coming days.
(20:46) Guess where Google is planning to set up a data centre…
(22:04) Eye on Retail
Register for the 3rd Edition of the Algorand India Summit
https://algorand.co/india-summit-2025
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 Friday, the 7th of November, and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.
Our top stories and themes, and we have lots of them today.
The markets are looking for direction.
Artificial intelligence, job cards, or AI washing.
India's problem-of-plenty in this particular crop.
Why did Indigo report such a sharp loss in the count of foreign exchange?
Soyabean is a key bugbear in the India-U.S. bilateral trade agreement discussions. Where do things stand now?
Why there could be massive air traffic delays in the U.S. in coming days.
Guess where Google is planning to set up its next data centre?
Markets Seek Direction
Indian IT companies are beginning to shrink, as is evident from total headcount numbers every quarter. While artificial intelligence could be the reason for this in recent quarters, it may not always be the case.
There is a term for this, it's called AI washing. This describes companies who say they are cutting jobs because of AI, but that actually may not be the case. Several companies in the United States have said that they're replacing workers with AI.
CNBC reported quoting companies like Klarna, saying it had shrunk its headcount by 40%, in part because of AI. Salesforce laid off about 4,000 customer support roles two months ago, saying that AI can do 50% of the work at that company. But experts interviewed by CNBC said that companies could be AI washing their job cuts.
That is, blaming layoffs on the new technology to cover up business fumbles and old-fashioned cost-cutting. Peter Capelli, a professor of management at the Wharton School and director of its Centre for Human Resources, told CNBC that they spent a lot of time looking carefully at companies that were actually trying to implement AI, and there was very little evidence that it cuts jobs anywhere near like the level that we're talking about. In most cases, it doesn't cut headcount at all, he said.
He also said that using AI and introducing it to save jobs turns out to be an enormously complicated and time-consuming exercise. There's a perception that it's simple and easy and cheap to do. It's actually not.
At least that's the case right now. Nevertheless, U.S. companies announced the most job cuts for any October for the last 20 years, according to data from outplacement firm Challenger Grey and Christmas, Inc., reported by Bloomberg. Companies last month announced about 153,000 job cuts, nearly tripled the number during the same month last year, and driven by the technology and warehousing sectors.
This is the most for any October since 2003, according to that company. Challenger said in the report that some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs is driving belt tightening and hiring freezes. Now, all of this is and could impact downstream demand in the U.S. economy, and we could see some impact in India, too.
Remember, IT services, of course, depends on American companies, but also remember that many of the companies who are downsizing in the U.S. have India arms, including the Global Capabilities Centre, so we'll have to watch that closely. Meanwhile, while U.S. earnings are strong and promises of even better times to come, investors don't seem to be biting like before, according to Bloomberg, adding that buy-the-dip optimism seems to have faded from U.S. stocks right now. Back home, there was little or no news triggers in the market, and a generally weak sentiment prevailed in a fairly volatile day of trade, which saw the benchmark indices spend a little while in the positive territory, but then swinging into the negative.
The Sensex closed 148 points, lower at 83,311, while the Nifty 50 was down 87 points to 25,509. The Nifty Mid Cap 100 was down 0.9%, and the Nifty Small Cap 100 index was down 1.4%. Meanwhile, in what should come as some relief to the gold bulls, gold prices have gone up again to reclaim and cross the $4,000 per ounce level. After the dollar turned weak spot gold was at about $4,011 per ounce on Thursday morning, according to Reuters.
UBS analysts told Reuters that the Supreme Court's scepticism on tariffs, and we'll come to that, and the slightly weaker dollar are mostly supporting gold. The general expectation is that a Federal Reserve rate cut is now back on the table, and that could lift gold prices further. Now, the Supreme Court reference comes after the U.S. Supreme Court justices raised doubts on Wednesday over the legality of President Donald Trump's sweeping tariffs in a case which obviously has implications for global trade.
It is worth noting that courtroom proceedings and utterances should not be construed as judgments, and it's best to wait for that. On the other hand, several reports have suggested that the Trump administration can retain tariffs using several other laws and tools, even if the administration were to lose these cases.
Rice Prices Fall
Rice prices in Asia could fall further thanks to a bumper Indian harvest. Asia's benchmark price dropped to a 10-year low last month, which obviously was good for household budgets, but obviously making life more difficult for farmers in India and Thailand, Bloomberg is reporting. Some importers are sitting on rice inventories that cover three to five months of consumption.
Officials at a rice company told Bloomberg, saying that the market that's in India is facing a swelling surplus. Global rice output is expected to touch about 556 million tonnes in 2025-26. That's a record, according to the United Nations Food and Agriculture Organisation.
On the other hand, the Philippines, which is the world's largest buyer, apparently will extend its ban on overseas purchases till April to support its agriculture industry, according to Bloomberg.
Decoding Forex Losses
Budget airline Indigo posted a wider second quarter loss on Tuesday, thanks to an increase in foreign exchange costs.
Standard on quarterly loss went from 989 crore rupees a year ago to about 2,600 crore rupees for the last quarter. Total expenses were up 18% in the second quarter with Forex costs jumping to about 2,900 crores and accounting for about 13% of expenses. Now, there are two kinds of points here.
One is, of course, what is causing this kind of jump in Forex costs, given that we are seeing a gradual or rather gentle depreciation in the rupee and the question, of course, is, is that the reason or is there something else? The second question is the Reserve Bank of India's aggressive dollar sales to defend the rupee are draining liquidity from the banking system and that's calling for bond purchases to ease the strain, according to traders who told Reuters. I reached out to Amit Pabari, Managing Director and Founder of CR Forex in Mumbai. I posed to him both the questions.
One is, of course, what explained the Indigo results and second, the impact of the Reserve Bank's move to sell dollars aggressively.
INTERVIEW TRANSCRIPT
Amit Pabari: If we see Indigo business model, it is very clear that the revenues are in rupee term and there are few expenses like aircraft, reslander, maintenance contract and spare part procurement which are in dollars. Now, generally the lease rentals are for a 7 to 12 years period. Although they have shown a loss, now the question is whether the loss is of accounting loss or a cash flow loss.
At this point of time, as the rupee has got weaker this time, this is more of an accounting loss where they have to take into account of rupee depreciation and it is actually not a cash flow loss. Now, how a company like Indigo can protect themselves? They have to classify their liabilities into three parts.
First, the near-term liabilities. The near-term liabilities they should hedge via forward. Medium-term liability, they can hedge via options and a longer-term liability, ideally they can hedge via swap.
Why we suggest companies like Indigo to go for a swap option? Because if you see structurally, India as a country is a net importer of goods. So now, because of that, you know historically if you see, dot to dot, 5 years, 10 years, 15 years, 20 years, our currency has got weaker.
In between some years, we might have got some appreciation but end-to-end point, because of structural issues like that, we have always got weaker. I can definitely say that in 2008, the percentage of weakness was much higher as compared to 2025 but till that time we do not have that structural change where you become a net exporter rather than an importer, our currency is going to get weaker. So companies like this, who have longer-term liabilities, they can opt for options and swap model.
And you feel that they are not doing this right now? When you are an importer, we have seen that people do not want to hedge for a longer period of time, because when you hedge for a longer period of time, you incur a premium cost, a swap cost or an option cost. People generally do not want to pay that kind of a cost for, you know, for a longer or medium-term period.
Govindraj Ethiraj: And this can also reverse, right? Let's say the rupee appreciates and could that reversal be also as dramatic?
Amit Pabari: I have said you, this is not a cash flow loss. Say in the next quarter, from 88 rupee moves to 85, we can see that foreign currency lost and changes to foreign currency profit also.
Govindraj Ethiraj: If rupee gets stronger, the numbers can change. Just to sum up this part, I mean, you're saying this is more a function or an outcome of marking to market rather than actual loss? Yeah, in case of Indigo, it is like that only.
Okay. Let me come to another point that's been, let's say, making news in the forex market, which is the Reserve Bank's dollar sales to defend the rupee. There have been reports that this is draining liquidity from the banking system and which is also leading to calls for bond purchases.
How are you seeing this?
Amit Pabari: RBI have been doing a fantastic job in terms of managing the liquidity, in terms of managing the volatility of rupee. And if I see my tenure as a forex analyst, I have seen RBI becoming very proactive. The reason why RBI intervened in the spot market a few months back, because it wanted to reduce the forward position, which was at 99 billion.
Now, once that 99 billion comes to close to 50, 55 billion, it can again restore back to selling forwards to maintain the volatility. So RBI have all the tools and RBI knows exactly when to use which tool to control what kind of a market. So they're doing a fantastic job, nothing to worry.
If the liquidity is low, they are again going to come up with a bond purchase and ensure that the liquidity is in the system.
Govindraj Ethiraj: Right. Amit, thank you so much for joining me.
Amit Pabari: Right. It is always a pleasure.
The Problem With Soya
One issue which is slowing progress in the India-U.S. bilateral trade agreement is the import of genetically modified crops by India of which soya bean is a key one. The U.S. is the second largest exporter of soya beans after Brazil and India, on the other hand, was a large importer.
However, India's cumulative soya bean imports from October to January fell quite sharply. Now, there are, of course, soya beans and soya bean oil. Oil is not a problem for India.
While the recent truce between the United States and China might change things with China reducing tariffs once again on U.S. soya bean, China had already stepped up imports from Brazil, the largest exporter. Brazil is, of course, facing, like India, 50% tariffs on its export to the U.S. and these are the only two countries with that level. India is also seeing strong domestic production and supply and subdued domestic demand.
I spoke with Atul Chaturvedi, the executive chairman of Sri Renuka Sugars and also chairman of the Asian Palm Oil Alliance to get a status check. And I also began by asking him why this continued to be a bugbear in the bilateral talks.
INTERVIEW TRANSCRIPT
Atul Chaturvedi: In fact, if you really look at the soybean scenario as far as the US is concerned, US used to sell almost something like 40 million tonnes of soybeans to China, which last year came down to about 25 million tonnes. Now, they need to find a home and they have a problem with China and China was putting excess duties on US soybeans into that country and obviously, President Trump's vote bank is largely in the US Midwest and that was creating a lot of problems. So, now they want a home for their soybeans and what better place because China is about 1.4 billion people or thereabouts in India at about 1.45 billion people. So, they feel that India could be a very big buyer for US soybeans, but that's not happening and that is the bugbear and now hopefully with China and US, that standoff probably coming to an end and China reducing the import duties by about 20%, I think US beans can start finding a home into China. But what had also happened in the last couple of months was that China bought a lot of from Brazil. In fact, US farmer's problem was gain for the Brazilian farmers and they were selling with impunity and all this is something which is creating problems for obviously, the American president.
Govindraj Ethiraj: So, as things stand today, if China is resuming imports, as you said, you know, these soybean consignments do find a home or will find a home, then is there still pressure on India to import them?
Atul Chaturvedi: No, the pressure on India will definitely be there because they want to pry open the Indian market for genetically modified US beans. Not only beans, but even corn as well. So, US has been trying to pry open the Indian agri-market, but India has its own fair share of issues.
So, if you open up the soybean imports into the country, what happens to the farmers within the country? In any case, the trust on mail for ethanol in the country has already given nightmares to the soybean farmers. In fact, in spite of the fact that the government has raised the minimum support price to something like 53.50, they're still hanging around mid-40s because soybean meal, which is almost 80-82%, is still selling at very low prices, largely because of the DDGS, which comes out of maize ethanol and rice ethanol. So, India also doesn't have a home for excess meal. Unlike China, China required both oil as well as soybean meal. India doesn't require the soybean meal.
Oil is fine, but what are we going to do with the meal, the excess meal and soybean is 82% meal.
Govindraj Ethiraj: But we have been importing from the US in the past.
Atul Chaturvedi: No, we've been importing oil because US oil into India has never been very competitive. It's Argentinian oil, which is much more competitive, and now Brazilian as well. So, US has been a very big exporter of beans to China, and this China-US standoff is creating problems for the US farmers.
Govindraj Ethiraj: Right. Given where the talks are right now, which is obviously, while they're moving, at least externally, they do appear to be in a bit of a log jam. What is the way out, at least from, as seen through the lens of some of these major crops, including soybean and corn?
Atul Chaturvedi: Ultimately, at the end of the day, you've got to have a give-and-take situation. So, the best option is to India giving them a little bit of a leeway as far as soya oil imports into the country is concerned. If others are going to be paying something like 15% import duties, why not give US a little bit of a leeway as far as soybean oil imports into the country is concerned?
And India would be in a position to handle all the exports of soya oil, which USA does. So, I think that is one area which India can certainly open up. And why has that not happened already?
I don't know what is the scenario. Ultimately, that the decision makers or the guys who are actually negotiating would be in a better position to tell. But yes, it will be a big challenge for India to open up its soybean market and even corn market for that matter.
Because corn, in any case, again, there's a big issue how to handle the DDGS, which is one of the byproducts of corn distillation, which is actually killing our soybean meal market and rapeseed market or mustard market and rice bran market. So, these are tough times for Indian negotiators and tough times for the US as well, because their problems with China have actually ended up making life miserable for US farmers and for Indian negotiators as well.
Govindraj Ethiraj: Right. So, as we look ahead and we are now more than six months past the initial tariff announcements, where do you see this headed? Again, as seen through an agri-lens.
Atul Chaturvedi: If this continues for a longer time, we will start accepting it as a way of life and then it should be business as usual, if nothing works out. My take is that the only place where India can open up is soybean oil. And there's another issue in terms of allowing bean imports into the country or corn imports into the country, because India, whether it's good or bad is for others to decide, still has issues as far as genetically modified commodities are concerned.
We still are not opening up the genetically modified agri scenario. And the matter is sub judicious in the Supreme Court and has been hanging around for a very long time now. So, that is also not going to allow government decision makers or negotiators an easy road.
Govindraj Ethiraj: Right. Mr. Chaturvedi, thank you so much for joining me.
Atul Chaturvedi: Thank you very much.
U.S. Traffic Disruptions
An ongoing government shutdown in the United States could lead to massive flight delays and disruptions in the U.S. and possibly extend outward as well following a decision to reduce air traffic control operations by 10%. The move is apparently aimed at taking pressure off air traffic controllers, which has about 3,500 air traffic controllers short of targeted staffing levels and many had been apparently working mandatory overtime in 60 weeks even before the shutdown according to a Reuters report. The Federal Aviation Administration or FAA in the U.S. said capacity reductions at the airport would start at 4% rising to 5% Saturday, 6% Sunday and hit 10% next week according to the Reuters report.
The FAA has said that international flights will be exempt from these cuts. So this shutdown in the U.S. which is of course affecting many other aspects of the economy has forced about 13,000 air traffic controllers and 50,000 Transportation Security Administration agents or TSA agents who do your security checks when you pass through U.S. airports among other things to work without pay. The Trump administration is seeking to increase pressure on Democrats to end the shutdown and pointed to major aviation disruptions which could be a way to force them to reopen the government.
Democrats of course have consistently blamed the Republicans for the shutdown for refusing to negotiate over key healthcare subsidies. Tens of thousands of flights have already been delayed since the shutdown began because of air traffic control shortages. Some 40 airports are likely to be affected including 30 busiest airports like New York City, Washington DC, Chicago, Atlanta, Los Angeles and Dallas which could reduce as many as 1,800 flights and over 268,000 airline seats.
Reuters quoted aviation analytics firm Sirium saying, airlines like United Airlines and American Airlines have said that long haul international and hub-to-hub operations will remain unchanged and the cuts will target regional flying and non-hub domestic routes. The Association of Flight Attendants which represents about 55,000 flight attendants at 20 airlines called the shutdown cruel attacks on all Americans.
Island Data Centres
Data centres could now be headed for remote islands in the oceans as well. Google plans to build a large AI data centre on Australia's remote Indian Ocean outpost of Christmas Island after signing a cloud deal with the Department of Defence earlier this year according to a exclusive Reuters report. Christmas Island is located about 350 kilometres south of Indonesia in the Indian Ocean.
Google is apparently in advanced talks to lease land near the island's airport to construct the data hub, including a deal with a local mining company to secure its energy needs according to Christmas Island officials who spoke to Reuters. Google last month apparently applied for Australian environmental approvals to build this first subsea cable connecting Christmas Islands to the Northern Australian city of Darwin where the United States Marine Corps are based for six months of the year. Christmas Island, which is about 135 square kilometre is best known for its asylum seeker detention centre and annual migration of millions of red crabs and has struggled with poor telecom and lack of job opportunities according to that Google report.
The data centre, however, is being seen as beneficial to Google because of the Indian Ocean location between Africa, Asia and Australia apart from its potential defence applications.
And Its Eye On Retail
India's job market is changing fast. The rise of gig and platform work is blurring the lines between formal and informal employment and also creating new opportunities but also new gaps in protection and policy.
In this excerpt from our special series called Eye on Retail, I spoke with A. Balasubramanian of TeamLease Services and Dr. Arpita Mukherjee of ICRIER to unpack how India's workforce is evolving and what this means for the future of jobs.
TRANSCRIPT
Govindraj Ethiraj: Hi and welcome to Eye on Retail, a special segment from the Core Report. We've been talking about e-commerce and its growth. Now e-commerce is also now quick commerce and there are other elements of commerce that we will come to.
But the more important point is that the industry has been growing. With it, it's been creating jobs and many of those jobs are in the nature of gig workers and that's the segment that we're going to be talking more about today. But as we talk about them, remember that this is an area or a segment which has maybe gone from near zero to maybe half a billion and growing in very short time.
When anything grows in such short period, it's bound to have a lot of other issues accompanying it and some of them could be to do with policy, regulation, law and so on. And it could be to do with the way public perceives these vocations and how they will evolve. To talk about where we are in the context of e-commerce but within specific relevance or specific relation to jobs and the gig economy, I'm joined by two experts.
First, I'm joined by A. Balasubramanian, Senior Vice President at TeamLease Services and I'm also joined by Dr. Arpita Mukherjee, Professor at ICRIER. Dr. Mukherjee has involved in a lot of areas relating to e-commerce including logistics and retail and she's also authored papers on cross-border e-commerce. So all of this I'm sure is going to play a role here. Balasubramanian himself is, as I can see, a startup entrepreneur, perhaps you still are an entrepreneur but you're working for a larger organisation but I'm sure you retain all the genes that are very critical when it comes to the e-commerce world or the entire world of digital commerce that we see because it has been powered by entrepreneurs and gutsy ones at that. So thank you both for joining me.
Bala, let me start with you. I think the idea is to first understand where we have reached today in the context of jobs created, the employment created and what are the kind of issues that we are grappling with.
A. Balasubramanian: People who are in the working age which is broadly understood as 15 to 60 is about 90 crore out of this and within this 90 crore, the number of people who are actually participating in the workforce is about 55 crore, that's about 60 percent. This is what is broadly understood as the labour force participation rate, LFPR. Now within this 55 crore who are actually working or looking for employment essentially, only about 8 crore are part of what we call the formal workforce and what's the broad definition of that?
People who are actively contributing towards provident fund, which means you only have about 15 percent of the overall workforce which is formal and about 85 percent is completely informal. Now gig is roughly about a crore people. I'm talking about the organised gig work.
In one sense even Mandrega is gig. Somebody who's working on some zamindar's land as a you know farmhand is also a gig worker but they come under the category of casual labour. It's seasonal.
Correct. You call them casual workers, I mean you work today, don't work tomorrow, you get paid at the end of the day anyway. Gig workers today is considered to be the people who are working in sort of a semi-formal environment in the larger e-commerce or logistics ecosystem and that itself is about a crore people and of this about 60 lakh people are simply the last mile delivery partners, the riders.
Now the problem is with this one crore people, they are neither formal nor informal. They are formal in a limited sense because they still get their payouts credit to their bank accounts, they're not paid in cash. So the government does have some visibility to how much they earn and so on and so forth but they are not formal in the sense that they are still not under the purview of social security.
Besides this what's encouraging to see is that the FM also announced that gig workers would also be brought under the purview of health care through the PMABRY scheme as well. All those are absolutely the right steps are to be taken in the right direction.
Govindraj Ethiraj: Arpita, if you were to talk about the remuneration now for a moment, most aspects of the remuneration today as I understand are not really fixed when we talk about gig workers. I mean it is linked to productivity or linked to output but not really fixed. How much of an issue is that?
Dr. Arpita Mukherjee: One part it is also something that the gig worker may like to have. For example, that's why our term we call it a self-employment opportunity because I may like to have a choice that I would work for three companies or I may just work in between when I'm going to college to earn extra living. So I go to college, come back, three hours I do, four hours I do the e-commerce for my extra living which pays for my college fees.
The important part is that it is creating an additional income opportunity. When we were doing the service in many cases they call it additional income opportunity. It is almost a worker is taking a decision about when he is available, he logs into the app and when he is not available.
This is a very important point. The second point that Bala raises also like why this category is kept a little flexible is because you know the demand is not always the same. The same model operates even in manufacturing.
During certain period they take in more workers and in certain period they have less workers. So these are the things that we need to think about because the employment pattern have to also follow the business and the demand. Now the third point that I always try to put forward is that there is a debate also whether there is a job displacement or a job creation and our study always shows that there is a job creation.
So because the demand is growing, population is growing and reaching out to the population is important. Whether I need more and more services online or whether more and more people needs urban mobility. Therefore there is always a room for growth.
