The Markets Rise For The 6th Straight Day
The decibel levels around a possible tech bubble on Wall Street are rising again
On Episode 660 of The Core Report, financial journalist Govindraj Ethiraj talks to K Ramakrishnan, Managing Director - South Asia at Worldpanel by Numerator as well as Ashok Malik, Partner at The Asia Group, and former Policy Advisor, MEA.
SHOW NOTES
(00:00) Stories of the Day
(01:19) The markets rise for the 6th straight day
(03:30) India is largest underweight market in emerging market investor holdings: Nomura
(06:58) How India’s rural consumer is buying differently and aspirationally. Exclusive insights from Kantar Worldpanel study.
(07:50) Parle is India’s most chosen in-home FMCG brand, Surf Excel enters top 5.
(20:38) India-US relations have endured long term damage even at this point, will it ever recover
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 [email protected].
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Good morning, it's Friday the 22nd of August and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital. If I am sounding a little cheerful, it's because it's not rained all of Thursday, at least where I am in the city.
And this is a long episode and we've got two great conversations, one which will give you some fresh insights on the Indian consumer, which you may not have known, and the second, an authoritative view on what lies ahead on the US-India front, given how badly the relationship has deteriorated. So do stick around till the very end.
Our top stories and themes,
The stock markets rise for the sixth consecutive day, another cause for cheer.
India's the largest underweight market in emerging market investor holdings, says Nomura.
How India's rural consumer is buying differently and aspirationally.
Parle is India's most chosen in-home FMCG brand. Surf Excel enters the top five. All of this is from the World Panel study.
India-US relations have endured long-term damage even at this point. What will it take for them to recover?
Let's look at Wall Street
The decibel levels around a possible tech bubble on Wall Street are rising again. Now, there are always two counter views, but interestingly, the first one comes from none other than Sam Altman, founder of OpenAI and CEO and the man behind ChatGPT, who talked about an AI bubble forming a few days ago. He stands by its importance, which is the importance of AI and what it could do, but he still feels there's a bubble, presumably referring to the valuations.
And then there are counter views which believe that the tech bull cycle will run for a few more years. Now, the answer could be somewhere in between, but we don't know. And if we did, I guess we wouldn't be here.
When stocks and valuations keep rising to all-time highs, the prospect of a bubble is obviously fair to consider. And either for these reasons or because investors are taking out massive profits to enjoy their summer holidays, the markets are now slipping. But also in contrast, they are up considerably from their April lows.
So for the second day in a row, tech stocks dragged markets lower, with the Nasdaq composite falling about 0.7%, and the big guys like Apple, Amazon and Alphabet all falling more than 1% according to CNBC. Palantir, the standout S&P 500 stock, which has more than doubled so far this year, had its sixth consecutive day in the red and lost its place amongst a ranking of the 20 most valuable US companies according to CNBC, which added that Palantir's partly triggered by a report from short-seller Andrew Left's Citron Research, which called the company detached from fundamentals and analysis. Now, the reason we are discussing Wall Street today is to highlight the perils of a single sector bull run, in this case, technology.
Now, this is not to say other sectors are doing badly on Wall Street, but tech stocks have run up to heights which can only be described as stratospheric. And remember, we are talking, as you know, $4 trillion valuations for some stocks. There are, of course, renewed murmurs and questions on what AI can really deliver to organisations and companies who will do the actual spending on it.
So, India's disadvantage is an advantage in contrast. Overall corporate earnings have been weak, though there is some prospect of a pickup thanks to potential goods and services tax or GST rate cuts, which will help consumer product companies and auto companies amongst others. The problem, of course, is foreign institutional investors who continue to sell, though maybe at a slower clip than other times.
A report from Nomura quoted by the Economic Times says that emerging market funds' relative allocations to India as of July end decreased significantly with 41 of their 45 fund samples posting lower relative allocations. In contrast, allocations to Hong Kong-China and Korea have increased materially. It also found that 71% of emerging market funds are underweight India as of end July versus 60% previously, and India is now the largest underweight market in emerging market investor holdings.
All of this, of course, didn't phase Dalal Street, which was up for the 6th straight trading day, though it did come off the day's highs on Thursday. The Sensex was up 143 points to close at 82,001, and it's now up 1,765 points in six straight trading sessions. The Nifty 50 was up 33 points to close at 25,084.
Reliance and ICICI were amongst the big gainers. Reliance has now, as we discussed yesterday, been singled out by the U.S. government for its role in buying Russian oil and exporting refined product like diesel and jet fuel to Europe, something, of course, it's been doing for years, at least the export part. The broader indices were down with the Nifty mid-cap 50 going down 0.5% and the small-cap 50 ending 0.4%. Speaking of earnings, the first quarter earnings for the financial year 2025-2026 is showing early signs of recovery, though growth was limited to select sectors with only 18% of companies receiving an earnings upgrade, according to brokerage Alara Capital.
Aggregate profit after tax for Alara's universe rose about 11% year-on-year on a 6% sales growth broadly in line with estimates. However, the gains were skewed towards cyclical sectors with metals, cement, energy, infrastructure, materials, and financials, excluding banks, contributing to over 60% of the incremental profit after tax growth, it said. Elsewhere, market regulator Securities and Exchange Board is considering fresh steps to cool the country's raging equity derivatives markets by curbing trading in an area or a segment where more than 90% of traders, as per SEBI's own studies, suffer losses.
The steps could include longer maturity derivatives contracts to product suitability rules that limit retail investor participation in riskier segments of the market, something which is, of course, being discussed extensively in recent months and some actions being taken. Stock prices of the Bombay Stock Exchange and brokerage Angel One fell sharply after that statement. The rupee also fell on Thursday as aggressive dollar buying by oil importers was the end of the session.
Put pressure on the rupee even as persistent dollar sales by foreign banks helped offset some of the losses, according to Reuters, which added that the rupee closed down 0.24% at Rs. 87.27 against Rs. 87.06 being its previous close.
Elsewhere, something we discussed in some detail yesterday, both houses of parliament have now passed a bill to ban online games played with money in a move which obviously threatens to shut down the popular fantasy gaming sector. The sudden ban has actually caught the industry by surprise, and it does appear to have been in stealth mode, which is the ban for a while.
India’s Rural Consumer Trends
The overall fast-moving consumer goods market saw a slowdown in volumes in the year ended May 25, according to a World Panel by Numerator, which released the 13th edition of its annual Brand Footprint India report yesterday. The market saw an increase in value terms, among other reasons driven by price increases.
The Brand Footprint report is Kantar World Panel's annual ranking of the most chosen FMCG brands worldwide, and it uses a metric called consumer reach points to measure and compare the success of brands across different markets and regions. So the big development in this report for the last year is the rural consumer as studied over a longer four-year time frame. The report says that even categories which can be distinctly classified as discretionary have shown a sharp increase in terms of penetration, and this includes items like liquid fabric wash, juices, insecticides, feminine hygiene products, all of which have shown penetration increases which are significant.
There's much more, of course. Parle is India's most chosen in-home FMCG brand, and it continues to hold that position for more than a decade now. Surf Excel has entered the top five.
The other brands in the top five are Parle, of course, followed by Britannia, Amul, Clinic Plus, which may surprise some of you, and then Surf Excel. I reached out to K Ramakrishnan, Managing Director of South Asia World Panel by Numerator, and I began by asking him what were the big differences this year, given that they had shifted methodologies somewhat.
INTERVIEW TRANSCRIPT
Govindraj Ethiraj: Ramki, thank you so much for joining me. So, I'm looking at the latest Consumer Connections 2025 report and one of the things that you're doing this time which is different seemingly is your clustered approach where you've defined things by affluent class, urban, middle masses and rural. So, before I come to what you found in that cluster approach, tell us broadly why you decided to go for this approach.
K Ramakrishnan: So, the fundamental reason is that what I would simply put in one word is de-averaging. We tend to, averages tend to mask a lot of realities. I mean, when you look at the average growth of this FMCG category, India is not one country.
It's a bunch of countries rolled into one. So, to that extent, it's difficult to paint one single picture of India altogether. So, therefore, we say that we have to start looking at it as clusters within India and see are there opportunities for growth?
Why should we look at a complete picture where we're saying the growth is slowing down? Can we look at opportunities for growth? And these opportunities for growth may not nearly be geographic in nature.
It's not just north, south, east, west. It can even be by the class of people that we are addressing. It can be by the class of towns that they live in.
So, we broke India into multiple sectors like this and saw where there are opportunities for growth and what are some of the trends that we are able to see. That's the whole purpose of de-averaging India to find details and pockets of growth.
Govindraj Ethiraj: And this is a, is this a radical departure from the past or a sort of minor departure from the past and the previous ways, methodologies of assessment? It's not a, it's actually not a departure at all if you ask me.
K Ramakrishnan: It is just a newer way of looking at it with a little more microscopic in terms of granularity. Looking at it with granularity. I won't say it's a departure.
There are some organisations which do this in their own way. But is there a way in which we can look at the whole of FMCG like this? That's the only reason why we try to do this.
Govindraj Ethiraj: And I mean, just another sort of allied question. What is it that you felt you were clearly missing in previous approaches as opposed to this one?
K Ramakrishnan: Yeah, so one thing that was missing was that the pockets of growth vary not only on the basis of geography, not only on the basis of town class, but also on types of category. So, what is the growth trajectory for one category in one particular cluster need not reflect in other categories. So, therefore, each cluster has to be looked at by each category to see where their growth is.
So, that is what perhaps was missed earlier. So, you look at, tend to look at the South as a big market and let's go South. Rather than that, can it be South, million plus towns among these audiences seems to be a big market.
So, today's media allows you to sharply focus on these people as well. So, that allows you, this kind of a look allows you to measure the impact of the investments or the promotions or whatever you have done in terms of marketing actions around these particular target groups.
Govindraj Ethiraj: Right, so tell us about the findings from this latest round, that's the 2025 and the affluent class versus urban middle masses and rural. So, what's standing out and what are the categories that are doing differently as you're approaching it now in this form?
K Ramakrishnan: So, what it definitely tells me is something about rural areas. In terms of rural, if you see we have made a comparison of four different, two different time points, 2021 and 2025. And we see that even categories which can be distinctly classified as discretionary have shown a sharp increase in terms of their penetration.
This includes things like liquid fabric wash, juices, insecticides, feminine hygiene products, all of them showing penetration increases fairly significantly. Of these feminine hygiene, I would attribute to some extent to a lot of government action in terms of promotion of feminine hygiene etc. But rest of the categories, juices for example, or let's say fabric conditioners for example, can be clearly classified as discretionary, right?
And these four-year periods of 21 to 25 have seen as many uncertainties that you can ask for as they are there. Like there have been inflationary periods, there have been hyperinflationary periods, and there have been cool down periods. But despite all of that, the penetration is growing.
So therefore, there is a distinct need and propensity to consume in the rural consumer. All that requires is an enabling of that. And that enabling seems to come through pack sizes at this moment.
There could be others that need to be explored. So that is one big thing that we learned from this. Second thing that we notice is that convenience as a vector of growth seems to be all-pervading, whether it's affluent or masses, urban or rural.
Everywhere we see convenience as an angle that is really really showing a sharp level of growth. Now this, the extent to which this drives growth can vary depending upon which particular cluster you're addressing. But as a single vector, if you ask a single, one thing that grows across, it seems to be convenient.
So that's why you see convenience foods growing, convenience products, including the liquefaction of some of the personal care products and home care products. All of those are on the top of this angle called convenience. So all we are saying is don't just look at it as what we have indicated as clusters.
There could be cluster suggestions from you, from the media, from clients, and we can look at any which way and cut India and look at the data in a different way than we have done before.
Govindraj Ethiraj: Right. And if I were to say the top line from trying to now understand how the consumer products industry has done in the last year and maybe this year's calendar, what would you say are the takeaways? I mean, one thing that you see that's highlighted is clearly volume growth that's slowing down.
K Ramakrishnan: Volume growth has slowed down. Yes. But the value growth has sharply increased.
So to that extent, what's happening is that it is a reflection of price increases, inflation, and all of those things. So that is definitely happening. At the same time, if you, like I said earlier, if you're able to cluster it down into various groups, you are seeing pockets of growth, even in volume in specific categories in specific markets.
So therefore it is very difficult for me to encompass that into a two minute statement. But if you look at that whole deck, it gives you a complete picture of where the growth is. Yeah.
Govindraj Ethiraj: Okay. And can you build on that a little more when what kind of categories have seen volume going down and which ones have gone up? Okay.
So if you look at the broad consumer FMCG basket, it is heavily led by food, right?
K Ramakrishnan: And food is where the growth is not sufficient. Personal care continues to grow, continues to grow 7-8%. Home care continues to grow.
In fact, home care is faster, in fact. So those are categories where marketer actions, packaging actions, promotion actions, pricing actions, or even content actions are causing a meaningful difference in terms of consumption and consumption behaviour. Food is where there seems to be some level of pressure, especially for the listed companies, so to speak.
I mean, if you read the commentary or if you've heard the commentary of companies around their quarterly performances, they tend to keep talking about urban tightness.
But if you look at it a little closer, there is urban tightness for the listed companies, but there is no urban tightness for the urban consumer, which means that there is a certain level of trading down which is happening, which is from the listed companies to a local brand or a local brand to even unbranded. In any case, in India, it's always going to be a combination of branded, unbranded, and small brands, right?
So this balance keeps changing depending upon how the food inflation moves or how any of the other indices move. So from that point of view, urban tightness is not that much of an issue that there is because there is consumption. It is the action from the marketers which needs to move them up from being unbranded to branded or from small brands to the bigger brands.
That's the action that is required.
Govindraj Ethiraj: And you're saying food is what is shifting the needle, so to speak, or moving the needle when it comes to large consumer product companies. I mean, obviously, they all have high food portfolios or presence of food in their portfolio. So if it were not to be food, you're saying things would have been different?
K Ramakrishnan: Yeah, if it is not food, the growth rates are higher. I mean, if you look at personal care or home care, it is definitely higher. And even within foods, if you see, it is the staples which are growing lesser, right?
So that's where the issue is. So if you look at, let's say, salty snacks, there is still growth. Biscuits, there is marginal, but growth.
If you look at chocolates, there is growth. But if you look at beverages, there is growth, though people may complain of a truncated summer this year, but there is definitely growth in beverages as well. But staples is where there seems to be an issue, which means shifting down between branded, unbranded versus all of those things.
Govindraj Ethiraj: Right. Another thing that I mean, insight that I thought was interesting is the urban middle, which is upgrading to new formats. Could you tell us a little more about that?
We spoke about that, which is the liquid formats, etc.
K Ramakrishnan: And also even in terms of snacking and all of that, the newer introductions, which are things like, let's say, the Korean noodles or the Korean spice in terms of salty snacks and biscuits in the form of this cafe and things like that. Those are the formats that are getting tried on. I mean, there is one part of the report which talks about being out of home.
So if you look at the out of home consumption, out of home tends to be a kind of bellwether for food products. If you start consuming something more out of home, it will ultimately find its way inside the home as well. So if you look at the growth, the incremental volume, a very, very large part of the incremental volume in out of home consumption seems to come from new launches.
So it highlights or underscores the need for new launches. In fact, it's as much as 100 percent in chocolates and as much as about 80 percent in salty snacks. So therefore, that many launches.
Compare that to biscuits. The number of new launches has been the same as last year in biscuits, whereas in the rest of the categories, it's almost twice. So what happens is when you go out of home and start consuming something in terms of food, first of all, you tend to be highly experimental.
So to that extent, you are willing to try the new launches and that, to some extent, finds you growth. And if that experimental attempt or tasting something tends to interest you, it finds its way home. And when it finds its way into in-home consumption, it stays.
So that seems to be the route. So it again underscores the importance of new launches and the interest in the consumer in terms of innovation. So that's what that out of home deck seems to talk fully about.
Govindraj Ethiraj: Right. And, you know, I mean, there are many categories that you study. There's foods, home care, health and beauty, beverages and dairy.
Anything that's standing out in the last year in terms of either consumption trends or I mean, I think you've already pointed out, for example, that new launches have driven a lot of the new consumption in areas like out of home. But what stands out across these categories?
K Ramakrishnan: So across these categories, one thing that I would definitely call out is the higher degree of individualisation in choice. I mean, there was a household purchase, right? Household purchase is still very big, but a lot of individual choices are finding their way.
This is reflected in the number of soap brands that are bought by households in a year or the number of like if it comes to toilet, bathroom cleaner, there's one household purchase. But that doesn't seem to reflect in personal care. There seems to be a larger, wider individualist variety of choice.
And similarly, that has reflected in snacking, that reflects in the food products as well. So that is one definite change that one is able to see.
Govindraj Ethiraj: Interesting. And last question. So, you know, the government has said that it will reduce the goods and services tax on a range of products.
Now, that's a proposal at this point. There's a GST council, the states have to agree. But we're looking at some sharp downward revisions and that is going to pretty much affect almost everything that you cover.
So anything that you can use from experience or history to project what it could be or how it could affect demand?
K Ramakrishnan: Yeah. So in terms of demand, it would definitely change the demand for listed companies for sure. Right.
Because if the GST comes down, hopefully that the drop in GST will get passed on to the consumer in full, which means the difference in pricing between a product offered by a listed or larger company versus what is offered by a local company or unbranded company, the gap will diminish. If the gap diminishes, it definitely benefits these brands and things like that for sure. On the other hand, it is quite possible that if the GST levels are low, it might bring newer players into the GST bracket itself and make it even.
But nevertheless, if you look at the larger scheme of things, who's going to gain more definitely will be the bigger and larger players if the GST rates come down. Because the level of conversion from unbranded to them or from smaller brands to the larger brands is going to be on a slightly higher level if the GST rates come down as promised.
Govindraj Ethiraj: And I mean, a supplement to that, but again, going by history or your experience, do people tend to buy more? And if so, in what categories? Because a lot of what you've said so far is really things that we would consume either ways in different categories.
So what would we really consume more? Maybe food, but what would we really consume more because prices are low? Again, the question is more about the Indian consumer and historically how she or he has behaved.
K Ramakrishnan: There's a whole lot of processed foods, a whole lot of personal care products. These are areas where the consumption would definitely be on the increase. But when it comes to staples, let's say nothing is going to change in atta, nothing is going to change in salt and things like that.
But when it comes to some of the personal care products where the penetration is higher among the higher classes and lower among the mass classes, those are categories in which I would think there will be a change in GST and that will make a difference of penetration increase among the lower consumers. So therefore, it will definitely impact personal care. It will definitely impact processed foods and convenience foods in a big way.
Govindraj Ethiraj: Ramki, thank you so much for joining me.
K Ramakrishnan: My pleasure. Yeah, thanks.
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The Chill Factor
A chill is setting in that will take a long time to recover in the India-U.S. relationship, according to Ashok Malik, newspaper columnist and a partner at the Asia Group and former policy advisor, additional secretary to India's Ministry of External Affairs, until about three years ago. Over the past few weeks, the India-U.S. relationship has near imploded, and the relationship will take a long time to recover to the levels of political trust it has been used to over the past 20 years, Malik has argued in a column last week in the Economic Times. I reached out to him, and I began by asking him how one should view his assessment from a business lens, particularly since businesses have been hoping for some resolution and a return, perhaps hope against hope, to the world before April 2nd, when Trump announced, or rather first announced, his reciprocal tariffs. Well, that is indeed in the rearview mirror now. What does the future hold?
INTERVIEW TRANSCRIPT
Ashok Malik: I'd like to focus on the economy as well because politics is only important for the economy insofar as it affects the economy. Otherwise, it's just bad noise. Two things here.
One, the tariffs. Frankly, if you go a lot 50%, you can make it 500%. It doesn't matter because exports that are not viable at 50% or even 25%, then there's no ceiling on what tariff you want to impose.
It doesn't really matter. There are three sectors which are going to be affected. Thankfully, India's merchandise export exposure to the U.S. is limited, unlike many other Asian countries. Having said that, either you're there or you're not there. If you're involved in that export market, you're going to get hit. The three sectors which are affected immediately, which are gems and jewellery, largely in the Gujarat region, but not exclusively there, shrimps and fisheries, which is in the Andhra Pradesh region, and garments and textiles, which is everywhere from Haryana to Noida, or Gurgaon to Noida, but largely in Tamil Nadu.
There is pain coming for these three sectors should the tariffs persist. Now, how can the tariffs be mitigated? Of course, there are long-term strategies, other markets, but that's all in the long-term or medium run.
In the short run, there will be pain. The government will need to find a mechanism, including fiscal incentives, to mitigate that pain, but some of that pain is going to be there. The other way of resolving the pain is to bring the tariffs issue into a broader trade deal, which was the government's initial strategy.
The Indian trade offer, the numbers the US trade negotiators and Indian trade negotiators closed with, the package they closed with, has been lying in the White House waiting for clearance or some sort of a comment, positive or negative, for a few weeks now. There's been no response. The offer, from what I understand from the Indian negotiators, is fairly ambitious.
From the Indian side, it's the most ambitious trade offer and market access offer India has ever made. Proportionate to where India is, it's a very ambitious offer. It opens up sections of the agriculture market, largely fruits and types of nuts.
It opens up the prospect of energy diversification and imports from the US. It opens up a gamut of US commodities, including a variety of chemicals and industrial intermediates which can be used for manufacturing in India. It gives the US a decided and near permanent strategic and market access or tariff advantage in India.
For whatever reason, President Trump is not convinced. This is where the politics comes in because it is felt both in India and by USTR insiders who have this appreciation that the rejection or non-acceptance of the Indian offer of the trade deal that's been negotiated is not on merits. There is something more at play here.
Something political, something strategic, maybe something personal, I don't want to guess, I don't know. So when you say can we distinguish the politics from the economics in an ideal world, yes. But given where we are with the US, it's not going to be simple.
Govindraj Ethiraj: Right. So just to go back to the headline once again, when we say that it's setting in which will take a long time to recover. So now when you say that, are you saying that even if let's say one is the 25 additional percent tariff or the penal tariff for importing Russian oil, if America walks back on that and we are back to 25 percent, which of course is damaging in any case, you're saying that the chill will continue is really what I'm trying to understand.
Ashok Malik: Look, if America walks back, and this is all theoretical for the moment because it doesn't seem to be a sign of it. If it walks back to the 25 percent, it's delinking India from its accusations that India's funding all the oil trade from Russia's funding the Ukraine war, which is frankly bizarre and exaggerated and ignores a number of other countries, including European countries or including America itself, which continuing a flourishing trade in certain commodities, both direct and indirect with Russia. Even if you remove that, then you're back to 25 percent and going back to the trade deal between India and the US, which could further reduce to 25 percent to something more manageable and create a win-win situation.
Now, that is certainly a possibility. And even if you don't have that trade deal, even the 25 percent remains or the 50 percent remains, there's still a lot of business engagement between India and the US on technology and services and a number of pharmaceuticals, iPhones, which remain outside the tariff ambit for the moment.
Govindraj Ethiraj: Well, electronics and pharmaceuticals, yeah.
Ashok Malik: Absolutely. And you and I are old enough to remember a period in the 80s or early 90s when political relations between India and the US were not bad, but were not great either. But business was continuing to grow.
And that will continue to happen. I think to some degree, both countries or business and industry in both countries in sectors where there is engagement, see each other as mutually irreplaceable in certain sectors, sectors where there is engagement. And that will continue.
What will be missing is the 20-odd years of bipartisan nurturing of the relationship, including the economic relationship and the business relationship in both capitals, which certainly gave a flip to the economic engagement and gave it a certain edge. That has been affected. That's been affected by the sort of rhetoric that has come out of Washington, the recent statements on a variety of issues from security sensitivities that India feels, the whole Russia-Ukraine business, in which India feels correctly that it's been unfairly singled out and blamed.
And the White House spokesperson used the term sanctions for India, which, again, is a very strong term. So that is what I mean by chilling. In theory, even if you sign a trade deal by the end of the year, which I wouldn't bet on, somewhere we need to recognise that trust in public opinion has been affected.
Govindraj Ethiraj: Right. And that's an important point to take note of if I was to think ahead in terms of investing here in terms of capacity and so on. So in your article, again, you refer to the fact that something could have gone wrong from our side as well.
And you also said that as an accountable democracy, we should look at it. Is there a lesson there? Is there anything in the way we've negotiated or the terms of negotiation or the speed of which?
I mean, are there any lessons or takeaways there?
Ashok Malik: From whatever I understand about the trade negotiations, I actually think we did a reasonable job. Now, could we have offered more? Could we have looked at GM produce for non-human consumption, which we have not looked at, I understand.
These are fair questions. OK. Should we consider opening up one sector, the other a little more?
Look, these are very good questions. And as I said, without going into details, which I don't have access to, a tonne of us does. We all have a part of the information, but not all of it.
Obviously, if any conversation does not feature the outcomes which I expected, both sides need to look back, look at and see what they did wrong. But I do feel the sort of response you've seen from the US, both on the trade offer as well as on the politics that both surrounds the trade offer and is extraneous to it. The response from the US, from the Trump administration, I would say, has been disproportionate.
And almost nothing India has said or done merits that sort of a super strong response, almost acerbic response. That view is shared by people both in New Delhi and in Washington. But I'd like to go back to a point you made earlier about if I was an investor, I'd be looking at those factors when talking about India or the business person.
Look, there's a difference. This is not the India of the 1970s. There is irritation, frankly, with the Trump administration, with the president's own remarks, and with certain senior officials from the administration and the manner in which they've spoken about it.
This is not a hostility to all of America or to American business. And even the government here in Delhi is signalling that it wants to keep economic engagement. And it still sees America as, quite honestly, an irreplaceable economic partner.
That goes without saying.
Govindraj Ethiraj: So you've also talked about, I'm assuming this is the plan B, which is looking at the India-China-Russia axis. And I have two questions there, and I'll come to both. And then looking at other trade agreements, including speeding up or accelerating the EU.
We've already signed with the UK, hopefully with the EU, and then other partners, which I'm sure will happen. So to touch upon the India-China-Russia axis, now, obviously, we are seeing a lot of action right now. Oil imports continue, which is obviously good for the economy at this point.
The China factor is also seeming, I mean, at least the relation seems to have eased up. And therefore, we're looking at more investment partnerships or maybe resuming a lot of things that were otherwise on the back burner. How does this all add up to what's going on in the context of what we are facing with the US?
Ashok Malik: You know, to be honest, some of this would have happened irrespective of where we were with the US and should have happened. So if you look at Russia, for instance, the Russian economy is not the world's greatest economy. But it does have certain commodities that it can offer to India, and can be useful for India, as India begins its own manufacturing story.
Of course, energy is one. We did look at Russian energy earlier now. There is a bridge, and there's no reason to discontinue on that bridge, even after the Ukraine border.
I expect as part of India's energy diversification or the crude oil diversification of big refining institutions, some of it will continue to come from Russia, as it will from other countries, including the US. That apart, Russia has commodities like coking coal, which India can use. It is a commodity superpower without being a manufacturing superpower.
In the case of China, quite honestly, China is a systemic rival. It's also a business partner. This is a dilemma many countries face, not just India.
If India is to kickstart its manufacturing aspirations, it will need to engage with China. It will need to buy more components from China. It will need to buy more engineering equipment from China.
It will need to buy more tunnelling machines from China. As we make more iPhones in India, we buy more components from China. And at some point, the individual component manufacturer will say, let me set up a JV in India, which is also happening.
However, post 2020, we need to recognise that Chinese participation in critical sectors of our economy, like telecom or robotics, for instance, or quantum computing or AI, is a no-go area, even in electric vehicles, which electric vehicle is a data ingester. So having electric vehicles come straight from China with supply chains leading back to China is a concern. But having some Chinese role in, let's say, making batteries in India or something, that, again, if you want to make electric vehicle batteries in India, you look at the Koreans or the Chinese as partners.
So it is cautious engagement, but necessary engagement. As for alternative trade deals, I would not say alternative, but complementary trade deals, frankly, we've been a little overcautious on trade for the past few years. We need to open up.
The US deal is certainly one opportunity. The trade agreement with the UAE or Australia are other opportunities. The UK deal has just happened.
The EU deal offers itself as an idea. It won't be the idealistic free trade agreement of the early 2000s. It will be a more narrow and feasible trade agreement.
But both partners, both the EU and India, see the benefit of it. And we also need to engage with countries to our east, so-called Southeast Asian and Indo-Pacific countries. Since RCEP and the China route are seen as difficult, there is, as I have suggested in an article, the CPTPP route, which is a non-China, non-RCEP route.
Of course, it has very high standards, which will need to be sold and incorporated internally. But that's, again, something we need to do for our economy. It's an idea.
I'm not suggesting I have any concrete information to go down that route, but I have suggested that.
Govindraj Ethiraj: Last question. So, you know, you've described this as the summer of 2025, and obviously not a very happy summer. So my question is, you know, as you look ahead, is this the new world?
You know, when you look back and look ahead, both, is this a new world? Because all of this time, from April 2nd, since the Rose Garden reciprocal tariff announcement, we've all been hoping that somewhere things would come back to normal or close to normal. And now it's increasingly clear that it's unlikely to happen, and which is what you're alluding to in your article as well.
So is this something that we should now firmly embrace, as maybe business people, trade negotiators, and maybe politicians as well?
Ashok Malik: Many of our clients at the Asia Group ask us the same question. And to be honest, there is no real answer, because, you know, it's easy for me to say, or anyone to say, let's embrace the new volatility and unpredictability. But nobody can really embrace it happily.
But it's there. And I would be incorrect to tell you that I think it's going away tomorrow morning or next month. I think it's there for some time.
And I suspect some of which will survive President Trump's presidency.
Govindraj Ethiraj: Sombre note to end on. Ashok, thank you so much for joining me.
Ashok Malik: Thank you for having me, Govind.
