On Episode 857 of The Core Report, financial journalist Govindraj Ethiraj talks to Ashok K. Bhattacharya, Editorial Director of the Business Standard as well as Anand Kulkarni, Director at Crisil Ratings.

SHOW NOTES

(00:00) The Take

(04:31) More downgrades are hitting Indian markets as the economy faces second order impact

(07:50) It is time the Government starts addressing the macro economic challenges with specific and visible prescriptions

(19:28) Why India needs electric cars that cost under Rs 10 lakh

(20:53) Aditya Birla Group recently said at 200 million tonnes, it is the larget cement company in the world outside of China, what does that mean?

Check out our Live Earnings tracker: https://earnings.thecore.in/

The Core presents “Navigating Market Risk in 2026” (Wed, 29 April, 8:30am) at The Quorum, Lower Parel

Register at this link: https://luma.com/0etd8b63

—

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 27th of April and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

And just a reminder, this is a holiday shortened week. We have a holiday on Friday and therefore we will not have an edition on that day.

The Take

Financial markets typically serve as forward-looking mechanisms, pricing in tomorrow's realities today. If the sheer exuberance currently gripping Wall Street is any guide, investors have decided that the conflict in West Asia is nearing its end and that artificial intelligence remains the only theme that matters. It is a remarkable, if detached, recovery.

The major indices in the US, that is, have now surged past their levels from February 28th, the day the United States and Israel launched their offensive against Iran. The Dow Jones Industrial Average has erased its wartime losses, while the Nasdaq Composite, thanks to the relentless ascent of stocks like Nvidia, closed at an all-time high over the weekend. Nvidia has reclaimed its October records, vaulting past a staggering $5 trillion market capitalisation as investors are now rushing back into AI semiconductor trades.

Even Intel, a perennial laggard in the AI race, saw a 24% surge, marking its best showing since 1987, according to CNBC. And yet, this breathless rally, putting the Nasdaq up 15% in April and on track for its best month since April 2020, feels increasingly divorced from macroeconomic reality. Investors are wilfully ignoring flashing warning signs.

Brent crude is currently at about $105 a barrel. West Texas Intermediate in the US is about $94. But global supply chains are snarling and there are cascading second-order impacts which are beginning to disrupt quite seriously the global economy.

Even the most insulated of Wall Street executives will soon feel the pinch as astronomical jet fuel costs force major airlines into mass flight cancellations. But the glow of the trading screens masks the pain on real streets even within the US. The tech titans, spending hundreds of billions on AI infrastructure, are funding it by slashing headcounts to enforce ruthless efficiencies.

Following Amazon's historic downsizing, Meta and Microsoft are reportedly preparing another 20,000 job cuts as they continue to from the bloat of pandemic-era hiring. India's Sensex is down about 10% since the start of the year, underperforming most emerging market indices. India's stock markets are better reflecting the economic damage caused by the West Asia War.

But the pain goes deeper. While the US consumer has seemingly absorbed higher pump prices and everyday inflation, countries like India cannot. There are no thousands of American workers abandoning cities because they cannot afford basic necessities like cooking gas as is currently the case in India.

Consequently, the diplomatic push to end the war is being spearheaded by Europe, China and India, the nations with the most to lose. This divergence also highlights a concerning geopolitical reality. Washington has limited domestic incentive to push for peace.

Remember, the war that was supposed to last four to six weeks will shortly enter its ninth. The current administration in the United States is surveying a domestic economy that superficially appears able to weather the storm. This breeds a dangerous self-insulation.

Much like the recent era of tariff wars, which yielded little immediate pain for the American consumer, the current environment seems to have lulled the United States into a false sense of autonomy. A self-insulated United States cannot be relied upon to champion the broader interests of its trading partners or the global economy. Trillions of dollars in newly minted AI wealth may make it seem as though all is well, but paper gains cannot indefinitely outrun geopolitical destruction and energy shocks.

There is no easy policy fix for this disconnect, or maybe it's not a policy fix at all. One can only hope that fundamental market forces will soon restore a much-needed balance before the global bill comes due.

And that brings us to the top stories and themes for today…

More downgrades are hitting Indian markets as the economy now faces second order impacts.

It is time the government starts addressing the macroeconomic challenges with specific and visible prescriptions.

The Aditya Birla Group recently said that at 200 million tonnes, it is now the largest cement company in the world outside of China. What does that mean?

And why India needs electric cars that cost under 10 lakh rupees.

Downgrades, The War, Oil and the Rupee

Peace talks, the second round, are yet to happen and will possibly happen virtually and not in person, going by the disinterest on both sides, that's the United States and Iran. Oil prices swung around in volatile trade on Friday, and Brent crude futures were at about $105 a barrel, and US West Texas intermediate futures were at about $94 a barrel.

Back home, the Indian markets are looking weaker as foreign brokerages issue fundamental calls. JP Morgan has downgraded Indian equities to neutral amidst elevated valuations relative to emerging market peers, earnings risks, dilution concerns, and limited exposure to next-gen technology, according to a report in the Business Standard. That downgrade comes a day after another foreign brokerage, HSBC, also downgraded Indian equities to underweight from neutral, citing rising risks to earnings from higher inflation, elevated energy prices, and a potential slowdown in domestic demand.

JP Morgan, however, believes that India's structural growth story remains strong, and multiple idiosyncratic factors have made other emerging markets appear more attractive on a risk-reward basis. On Friday, the Nifty 50 and Sensex were down after oil prices rose. The Nifty 50 was down 275 points to 23,897, and the Sensex was down 982 points to 76,681.

Broader markets were also down. The Nifty mid-cap and small-cap were down 0.96 and 0.87 each. Reliance Industries missed its quarterly profit expectations on Friday thanks to higher input costs and supply disruptions linked to the Iran War, according to Reuters, who also quoted an executive saying that the war has triggered an unprecedented crunch in Middle East crude supplies, prompting the company to substitute up to half the feedstock at its refineries with shipments from countries including Russia, Venezuela, and Brazil.

Reuters quoted the executive also saying that this is the kind of situation they've never seen. It's totally unprecedented. Never have they seen this kind of shortage in the market.

Core earnings at Reliance is refining business, a key profit driver that contributes nearly a third of the group's earnings before interest depreciation and tax fell about 3.7% in the fourth quarter from a year earlier. Reliance shares are down about 13%. So far in 2026, that's about double the loss in the Nifty 50.

Meanwhile, the rupees valuation versus other major currencies calculated on a trade-weighted basis has fallen to its lowest in more than a decade thanks to a rise in crude oil prices and foreign portfolio outflows. The rupee's 40-currency Real Effective Exchange Rate, which accounts for inflation differentials between different economies, fell to 92.72, according to the latest Reserve Bank of India bulletin released on Thursday and quoted by Reuters. The Real Exchange Effective Rate or REER is now hovering well below its long-run average of 98.25, pointing to a deeply undervalued rupee against historical norms.

The rupee had hit a record low of Rs 95.21 in late March. Analysts at Bank of America Global Research had said that while the rupee is undervalued on a REER basis relative to historical ranges, it is likely to remain under pressure in the near term thanks to dollar demand from a ramp-up in oil imports to secure supplies and by sizable equity outflows amidst heightened risk aversion.

Government Fiscal Strategy

Given the impact of the war in West Asia on India's economy, the government's fiscal policy strategy will have to be revised appropriately, Ashok K. Bhattacharya, Editorial Director of the Business Standard, argued in an editorial piece last week.

According to him, a fiscal deficit of 4.3% for the current year was set as the operational target linked to the prevailing debt level. Both the debt and deficit levels will require appropriate adjustment. The government would do well to prepare a medium-term strategy on the revised markets so the markets have a better sense of the path ahead, he wrote in that column.

According to him, more importantly, such a message will be an important signal for the Reserve Bank of India and the Monetary Policy Committee that will guide monetary policy in coming months. I reached out to Ashok Bhattacharya and I began by asking him where the government should start first and also whether we were standing by for the elections to end.

INTERVIEW TRANSCRIPT

A. K. Bhattacharya: Well, I think it's important for the union government in particular, and I will come to the state governments later, the union government had set a target of around 4.3% of GDP as a fiscal deficit for 2026-27, and a debt reduction level which was not indicated clearly, but there was a target of that by 2030-31, this debt level should come down from around 56.8% of GDP to around 50% plus minus 1 percentage point by 2030-31. I think given what has happened globally as well as given the impact the West Asia conflict will have on India, the first thing would be to decide and let the market participants, let the market players know that what is the new targets that the government is going to aim at, because please remember that whatever be the debt level that the government wants to achieve or whatever may be the borrowing which is the fiscal deficit, be for the current financial year, the markets will be keenly awaiting what kind of a signal it gets.

So if you want the Reserve Bank of India to come out with a more appropriate monetary policy approach to tackling the crisis ahead, if you want the market to respond to it with understanding and knowledge of what is going to be the extent of the challenges in terms of the government's borrowing programme, then I think it's important for the union government to come out maybe after consultation internally as well as other stakeholders.

I don't see that awareness, they must be holding internal meetings, but I think it's important in situations like this to have important meetings with stakeholders, with industry, with the market participants and also the banks. There are some meetings of course, but I think it's important to come out with a new set of numbers, whether it will be 4.5% or whether it will be 4.6% or even 5%, that is a fiscal deficit, is something that the markets would like to know very clearly. Remember that in the COVID time, something similar happened from a fiscal deficit of around 3.6% or so in 2019-20, the fiscal deficit ballooned to 9.2% in the following year. That's because the government came in with its own programme, revenues collapsed. It's important for the union government to take cognisance of these possibilities and assure the markets and economy watchers that this is going to be the approach and something which will encourage the states to follow a similarly prudent path, because the states combined are much more than what the centre is. So if the states also get into similar plans like some giveaways, and they will be hit by the revenues, so therefore the states too need to come out with what is going to be the fiscal deficit plan as percent of GSDP, so that the country as such knows where it stands.

Govindraj Ethiraj: And you're saying that this fiscal deficit number is representative or is a fair enough symptom of the larger malaise and challenge that the economy faces?

A. K. Bhattacharya: It will be a reflection of both the price shock, which has been contained somewhat right now, because of government's strategy to reduce excise duties on petrol and diesel, but certainly it will reflect the supply shock as well. Supply shock not just in terms of petrol and diesel, but also from fertiliser point of view, you look at the chemicals, look at the steel sector, everywhere there is a supply shock and a price shock that are waiting to affect the state of the economy and fiscal deficit will certainly reflect that. So therefore I think once you get that, I mean it's possible that the government will like to do something that it did in the COVID time, which means that essentially it used the banking system to provide more guarantees, so a small part of those guarantees will have to be taken on board by the FISC.

Take the issue of fertilisers, now fertilisers subsidies bill is for the current year is in budgeted at 1.7 lakh crore. Now this is a reduction of 8% over last year. Now clearly 1.7 lakh crore will not be sufficient to meet your fertiliser subsidy bills this year and the government probably cannot think in terms of giving a hit to the farmers and at least there is no preparation at all to pass on the higher prices of fertiliser, which is urea and nitrogenous phosphate and etc etc. So that subsidy will go up from 1.71 lakh crore to most probably 2.5 lakh crore. Now if that happens, this is certainly a big hit on the FISC. So the government must say that this is what I want to do.

Govindraj Ethiraj: Right and since you talked about farmers, the other challenge that we will surely face is a deficient monsoon and the IMD's projections are quite dire considering that it's in several decades that we are seeing such low projections. So what is the expected or rather what would you expect the government to do which is either specific to that or in general?

A. K. Bhattacharya: You know I am worried as an economic commentator, I am worried by the El Nino effect but not as worried from a food sufficiency or food availability point of view. Luckily our stocks are full, we have in spite of taking care of 811 million people with the free food grain scheme, India's food grain stocks are plenty. So even if there is an El Nino effect which affects the Kharif output, I think there would be some bit of a price shock there and the free market prices will go up a little bit but the government will have the value at all to address that concern through the supply side management because we have adequate stocks.

So I am worried but it is not the same level of worry. The real worry on the agricultural side is how do you make sure that you continue to provide the kind of nutrients that is needed for Indian farmers to maintain the food production. The problem of monsoons will be felt, the first order effect will be managed by the government stocks but there will be a second order effect because if the food prices either go up or there is an overall impact of various product prices going up, you will see the rural economy will be under some sort of stress.

Now if the rural economy is under stress then clearly the second order effects will be seen in the way the FMCG sector, the various products that the rural economy consumes, that auto, that will be impacted which in effect will impact the government's revenues, tax revenues from these sectors. So there will be a kind of a vicious cycle if I may use that expression. That is what something that should worry us.

Food grain availability per se, fortunately we are in a good position to tackle that problem.

Govindraj Ethiraj: Last question AKB. So as you've also pointed out and most have observed that basically the government seems to be on a holding pattern till the elections get over which is the state elections across the country. Is that something that is the only reason that could be holding back all of the things that you spoke about or are there other considerations as well?

A. K. Bhattacharya: I think that the government is not holding back on its political plans in a sense that if it wanted to go ahead with connecting the women reservation bill with the delimitation, that issue did not hold back the government. But I think what has happened is on the economic policy front, certainly the government has held itself back because of the ongoing assembly elections. I'm reasonably certain that over a period of time, maybe a quarter or so, the government will start passing on the impact of higher crude oil prices at the retail level.

Remember that the government itself admits that the under recovery on petrol is now around 20 rupees per litre for petrol and almost 100 rupees per litre for diesel. Now clearly this situation cannot be allowed to continue. Some sort of pass through has to be ensured and maybe not be in one go, but over a period of time, maybe three months or four months, something like that, decisions have to be taken.

So I would expect the government to take those hard decisions once the elections are over.

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

A. K. Bhattacharya: Thank you.

EVs in India

India's EV market needs more affordable electric vehicle cars. In the sub-rupees 12 lakh segment where over 3 million passenger vehicles are sold annually, EV penetration is about 1.5 percent compared to about 10 percent in the more than 12 lakh rupee segment. Overall EV penetration across the 4.2 million unit PV or passenger vehicle market stands about 4 to 5 percent according to a report in the business standard.

India's EV market for cars saw a sharp acceleration in 26 that's 25-26 with volumes going about 87 percent up year-on-year to about 233,000 units but the gains were mostly in the higher price packets underlining the deepening affordability divide in adoption. Data shared with business standard by Jatto Dynamics shows that the share of EVs priced between 20 to 30 lakh rupees was up 35 percent from about 24 percent in the previous year. In contrast the less than 10 lakh rupee segment shrank to 6 percent of total sales from 7.2 percent a year earlier.

Analysts speaking to business standards said that the lack of viable mass market products is a bottleneck and unless car manufacturers bring viable mass market electric products into the sub-rupees 10 lakh segment penetration at the lower end is likely to remain gradual. Remember we are only talking about cars right now two wheelers and three wheelers have of course done pretty well in the electric segment.

The World's Largest Cement Company Outside Of China

Ultratech cement of the Aditya Birla group announced last week that it was set to become the world's largest cement company outside of China with 200 million tonnes of capacity and en route to touch 240 million tonnes of cement capacity.

The 200 million tonne mark was achieved with the commissioning of three new cement grinding units with a cumulative capacity of about 8.7 million tonnes per annum. The new units are located in Uttar Pradesh, Jharkhand and Andhra Pradesh and have been strategically positioned to strengthen regional supply serving North India's booming construction corridor, the industrial heartland of Jharkhand and the rapidly urbanising coastal belt of Andhra Pradesh according to the company. Now this is the interesting part Ultratec says it took 36 years to reach 100 million tonnes in 2019 whereas the next 100 million tonnes took less than seven years.

Now of course a lot of this has also happened through acquisition and consolidation. So what does this size that's 200 million tonnes and the growth that we've seen mean in the larger context of India's cement industry and demand and supply patterns. I spoke with Crisil's Anand Kulkarni, Director Corporate and Infrastructure Ratings to get a sense and I began by asking him how he was viewing the latest round of consolidations and growth.

INTERVIEW TRANSCRIPT

Anand Kulkarni: The size and scale are always crucial elements for commodity businesses in general. In cement industry as well, the size and scale plays a significant role in determining any company's competitiveness. So when we talk about scale and size in cement industry, it's really about company's overall production capacity, its regional presence and its market share.

So the cement industry has this unique characteristic of regionalisation where players operate within specific regions due to high transportation cost. So scale and size are more nuanced concept in this industry. It's not just about being big, it's about being big in right regions.

A larger scale in the cement industry provides many benefits. For one, it allows players to lower their production cost compared to some other smaller players. They can also source their key inputs, those are like pet coke or coal, at a better rate given the larger requirements.

And these larger players enjoy better operating leverage as fixed costs are spread over a larger production base. So they have access to larger distributors as well and the wider distributor network which helps them improve their market share and capacity utilisation. And additionally, lastly, they also benefit from diversification.

If a player is large, typically that player would be present in more than one geography and that benefits if there are some region-specific supply or demand shocks. So that's how the size and scale plays a role in cement industry goal.

Govindraj Ethiraj: Right, so and let me ask the question a little differently. So as you said, it is a disaggregated business and it's really a regional play. So where does the economy kick in or economy of scale kick in for a single company versus let's say smaller companies because either way products cannot, let's say, go beyond a certain geographic distance.

Anand Kulkarni: See, I think even the smaller player, let's say somebody is 100, 150 million tonnes or even 200 million tonnes, that doesn't mean that of 10, 15, 20 million tonnes doesn't have economic viability. It's just that there will be some difference in the way they would want to operate. But having said that, there are many players at even a smaller capacity and operating economically in a viable manner.

So it's not really a level beyond which you become viable in this industry, just that maybe a profitability level will be slightly different.

Govindraj Ethiraj: So for a country like India, do we need more large players or do we need more players as long as they are at or located where the markets are?

Anand Kulkarni: So let me give you some perspective. Okay, total capacity in India today is estimated as on March 2026, around 720 to 730 million tonnes. Now, how is this capacity distributed?

South region has, let's say, around 30-32% of capacity because the raw material availability, limestone deposits are higher there. Then you have eastern and northern region, where there is, let's say, around 22 and 18-20% kind of capacities. And then you have central and western, which have relatively smaller capacity.

So it is dependent, that's how the distribution typically is. Now, the capacity doesn't mean that the demand dynamics are also similar. For example, southern region has higher supply, but the demand is comparatively less.

In contrast, western region has lower capacity, but the demand share is slightly higher. So how that happens is, let's say, somebody operating in south can also operate in the region where they can service the neighbouring western markets. And that's why there is a relatively, one can see some balance happening in the country.

So while it is a regional play, but it also has some adjacencies, depending on the demand centres and the supply centres, how you can balance. And hence, there is no single answer, whether we need more regional players or more large pan-India players. Having said that, consolidation is taking place in India.

Last two, two and a half years, we've seen consolidation happening in Indian cement industry.

Govindraj Ethiraj: Yeah, and that was my next question. And what has been, or what have been the two or three factors that have been driving this consolidation at this point?

Anand Kulkarni: So a large number of consolidation that has happened in the past couple of years. It also included some, let's say, very inefficient mines or even some defunct mines, cement production capacities. Those were lying idle.

What has happened is some of these larger players took over some of those facilities, made them operational with some incremental capex, and that capacity became on stream. So that's what one possibility that had happened. Second is, as I was earlier saying, or your earlier question was, at what scale it becomes economically viable.

So let's say during a down cycle, it becomes slightly difficult for comparatively smaller players to operate at a very, very economically viable rate. So we had, the industry had a down cycle in 2025. During that time, some of those viabilities went down, and the larger players did consolidate their position by acquiring some of these capacities.

So it's a stress companies acquired, as well as some smaller companies acquired, and that's how led to consolidation. But it was quite high. I mean, around 11% of installed capacity changed hand between the last two years.

That's the block of two years, and it is highest ever that happened in that block. So that's how the consolidation played out over the last couple of years.

Govindraj Ethiraj: Right. And what do global players, or what kind of role do global players play if so, again, in an industry where you really can't export or import for that matter, the final product?

Anand Kulkarni: Not really a global play. I mean, you have to come to India and work with the ground realities because this is where the practical situation is. So they'll have to work along with Indian counterparts and follow the law of the land.

That's how it is. So it doesn't really have a global play in this industry.

Govindraj Ethiraj: Got it. What's your sort of overall outlook for the rest of the year, Anant? I mean, in terms of demand supply, what are the trends that you're seeing?

We're also still increasing capacity. I mean, the Aditya Billa 200 million tonne announcement came along with the commissioning of fresh capacity. And I'm assuming there's other capacity being created as well.

So what's your outlook in that context?

Anand Kulkarni: So you're right. After what I was talking about consolidation, currently what is happening, there are two things. One is this wired capacities.

Those are in a period of stabilisation, integration, ramping up. That is going on. That is one.

Second, there are several players who have announced greenfield or brownfield capacity additions as well. Now that the consolidation opportunities are comparatively limited. So these capacities are also getting added.

Our sense is capacity additions will continue to remain strong over the next couple of years. We expect around 115 to 125 million tonnes of capacity to be added. And at the same time, incremental demand would be, let's say around 75, 80 million tonnes.

That makes roughly for the incremental capacity, a utilisation level of 65 odd percent, which is comfortable. There is not too much of an issue. But mind you, the timeline of that, let's say it is two to three years period that when we give, the commissioning of that capacity can happen at one point in time.

It's a chunky capacity. So typically once large capacities come on steam, your utilizations go a little down and then gradually ramp up as the demand progressively increases. From the demand side, we see largely you have housing, urban, rural housing, infrastructure, and commercial and industrial demand.

We are expecting a steady state growth. Infra is doing comfortably okay. Rural housing also did fine last year.

Urban housing is slightly sluggish. So this year's monsoon will also define the rural housing demand and overall demand growth. But our sense is mid single digit demand growth will make it comfortable barring some interim couple of quarters of some dip in the capacity utilisation that's possible.

Govindraj Ethiraj: Right. And last sort of question to supplement that. And how are you seeing capacity utilisation right now?

And is that changing or likely to change?

Anand Kulkarni: So we have seen a capacity utilisation level roughly at around 68 odd percent, 68, 69% that has been our assessment. It is slightly lower than what was there in last few quarters. But as I said, 70% is a decent number.

If I take a decadal average, it's been around, let's say 65 odd percent. And it's a comfortable level if it operates beyond 65%.

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

Anand Kulkarni: Sure. Thanks Govind. Nice to speak with you.