The Markets Stage A Smart Rebound
The indices rose the highest since February 4 on Wednesday thanks to IT and metal stocks to close higher by over 1 per cent each
On Episode 524 of The Core Report, financial journalist Govindraj Ethiraj talks to Chandrakant Lahariya, Consultant Physician and Founder- Director Foundation for People-centric Health Systems (FPHS) as well as Prabhu Dhamodharan, Convenor at the Indian Texpreneurs Federation.
(00:00) The Take
(04:41) The markets stage a smart rebound. Will they hold?
(07:17) Reliance Retail’s valuation is half of what it had raised funds two years ago as company embarks on cost cuts
(09:46) How India’s apparel export industry hopes to benefit from the latest tariff war
(19:13) India’s obesity levels are rising and why that is an issue individuals and organisations should be talking about
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 Thursday, the 6th of March, and this is Govind Rajatiraj, headquartered in Broadcasting and Streaming, as always, from Mumbai, India's financial capital.
The Take
U.S. President Donald Trump clearly wants to remind India that the threat of reciprocal tariffs is not going away. For whatever reason, it seemingly stays on top of his mind and recall, along with his other trading enemies like China, Canada, Mexico, and of course, India.
India charges us 100% tariffs. The system is not fair to the United States. It never was.
On April 2, reciprocal tariffs kick in. Whatever they tax us, we will tax them. If they use non-monetary tariffs to keep us out of their market, then we will use non-monetary barriers to keep them out of our market, Trump said while addressing a joint session of the U.S. Congress on Tuesday. India's trade minister, who has rushed to the U.S. over the weekend to find some common ground, clearly has his task cut out. So the larger question posed earlier on the core report as well is, what should India do? Now, the simple and straight answer is to use this as an opportunity and reduce tariffs, because we need to.
A new report in the Business Standard by Abhishek Anand of Madras Institute of Development Studies, Soumitra Chatterjee of Johns Hopkins University, Josh Fellman of GH Consulting, and Arvind Subramaniam of Peterson Institute has argued that with manufacturing tariffs averaging 13.4%, more than three times as high as in the U.S. or Europe, and agriculture tariffs even higher than those for manufacturing, India does have one of the most restrictive trade regimes in the world. Moreover, they argue that the tariff system is highly complex.
In 2024, before the rationalisation in the recent union budget, India had no less than 65 different ad valorem applied rates and 145 unique specific tariffs, according to official data submitted by the government to the World Trade Organisation. This is because India imposes a web of CESs on top of its standard most favoured nation rates. And then there are significant non-tariff barriers, like the newly imposed quality control orders or QCOs, which further complicate trade because a quality control order essentially means the Bureau of Indian Standards has to establish that a product is meeting quality standards before that imported product can be sold in India.
In theory, it's a good idea, but in practice, a nightmare for importers going by several accounts. The authors say that India's goal of raising manufacturing's share of GDP and boosting exports has not worked, and the ratio has only declined as has the share of global manufacturing exports that create the maximum jobs. Now, while there are many reasons for all of this, the key argument is also articulated by Dr. Arvind Panagaria, Chairman of the 16th Finance Commission and former Vice Chairman of Niti Aayog, is that exporting requires importing. He told this writer in an interview last year that a good way to think of it is the extreme. Suppose you were to raise the tariffs to a level where your imports are zero, there would be no reason to export. There would be absolutely no reason to export.
And that is what we did for about four to five decades, he told me. Now, back to the authors, they say that if India wants to produce garments competitively, and more on that shortly, it needs to offer firms access to competitively priced inputs, which often come from outside the country. So when the government makes importing man-made fibres difficult, it kills garment export activity, the authors have argued.
They've also outlined several structures and a uniform tariff, including cesses of between 5 and 10% on final goods. This, by the way, is what a reciprocal tariff with the US could also land up at or lead to. India's all trade applied duties is around 17%, while the US is 4%.
By the way, Trump has also emphasised that the United States will retaliate on non-tariff barriers as well, exactly like the QCEOs or quality control orders. This is not the time I would want to be sitting in the Ministry of Commerce and the Department of Foreign Trade. Now, while cutting tariffs, as the authors point out, and others have acknowledged, will create problems and maybe even shocks to domestic industry or parts of it, it is perhaps a good time to return to the path we were following until around eight to nine years ago, which is the point at which average tariffs were lower than what they were today.
A path we have little choice but to adopt, at least in the case of the USA, because we are under close watch, quite evidently. And that brings us to the top stories and themes.
The stock markets stage a smart rebound. Will they hold?
India's apparel export industry actually hopes to benefit from the latest tariff war.
Reliance Retail's valuation is half of what it raised funds at two years ago as the company embarks on cost cuts.
India's obesity levels are rising and why that is an issue individuals and organisations should be talking about.
The Stock Markets Recover Smartly
Maybe the foreign portfolio investors who have been selling consistently in India took a break to focus on Wall Street, where stocks got hammered for the second consecutive day on Tuesday, or maybe it was just what is called a dead cat bounce. Whatever the reason, the indices rose the highest since February 4th on Wednesday, thanks to IT and metal stocks to close higher by over a percentage. A dead cat bounce is called so by the way, because even a dead cat will bounce if dropped from a great height.
Meanwhile, the 30 stock Senzacs retreated from its day's high, but did not fall further and actually closed 740 points higher at 73,730 and the nifty 50 was up 254 points at 22,337. Importantly, the markets recovered after losing and sliding continuously for almost 10 whole trading days and close to 4% in the case of the nifty 50. Broader indices mirrored the benchmarks with small cap shares going ahead as the nifty small cap 100 index was up close to 3%, the nifty mid cap 100 index was up about two and a half percent.
On Wall Street on Tuesday, Tariff Jitter sent the markets diving with the Dow falling 670 points or one and a half percent, the S&P about 1.2 and the Nasdaq composite about 0.3. CNBC reports the tech heavy Nasdaq has now come within striking distance of correction territory, a term that refers to an index falling 10% from a recent peak. Conflicting signals continue to emerge from the Trump administration with the Commerce Secretary there saying the United States might meet Canada and Mexico in the middle to work out tariffs and Trump saying that a little disturbance from the levies was okay. Tariffs are about making America rich again and making America great again and it's happening and it will happen rather quickly, he said.
Incidentally, gains made by the S&P 500 as it rode the victory wave of Trump's victory on election day have now vanished according to reports. Tech stocks have also been beaten down since Trump's inauguration in January and CNBC reported that the tax on imported goods from other countries is starting to look like one on stocks too. Back home, the rupee rose on Wednesday too along with most Asian currencies as the dollar was weaker as well and the rupee closed slightly higher at about 86 rupees 95 paise against the US dollar which was its best single day gain since February 11th according to Reuters.
And of course the good news on oil prices continues with Brent crude prices falling for the third day on Wednesday as traders braced for supply increases from the Organisation of Petroleum Exporting Countries Plus. Lower oil prices will obviously help reduce India's import bill and thus inflationary pressures on the economy. Brent futures fell about $1 and are now around $70 a barrel for a barrel of crude that is.
Reliance Retail Is Cutting Back
In what appears to be an overestimation of market and the shrinking of it, Reliance retail is set to cut back on store expansion and marketing budgets even as it tries to defend the valuation at which it raised funds two years ago according to Bloomberg. Retail and telecom have been the group's diversification bets in recent years in an attempt to reduce dependence on the traditional oil-to-chemicals portfolio which of course continues to do well and has been performing steadily. Reliance retail is overhauling a retail empire that sells everything from a 20-cent soda to a $5,900 Versace dress as they seek to reassure investors and see for an exit option in the form of a public listing, Bloomberg reported, adding that slowing sales is a concern for Reliance retail ventures after brokerages pegged its valuation as low as $50 billion, which is half the amount at which it raised money two years ago. Reliance chairman Mukesh Ambani apparently acknowledged to investors in recent discussions that the retail entity, part of a push to diversify the Reliance empire, had grown too big too quickly as a result of expanding across formats and geographies, while on the other hand, Reliance has been slowing down on expansion for some time now, something that several brokerages who've done channel and market checks have been reporting, including the shutting of stores and terminating leases for them. The decisions are meant to signal progress to investors seeking better valuations after brokerages like Kutuk Institutional Equities and Sanford Bernstein cut the company's valuation in 24, said Bloomberg, and this year Ambit Capital analysts pegged the company's worth $50 billion, a steep discount to the $125 billion valuation Reliance is hoping for an IPO, according to sources who spoke to Bloomberg. Several investors, from the Qatar Investment Authority to General Atlantic, had invested about $8.2 billion between 2020 and 2023 for a roughly 12% stake in the firm, according to Sanford Bernstein analysis. Reliance retail has a very diversified operation that spans about 60 units, ranging from mass-market to luxury superstores, beauty and clothes apps, and of course its quick grocery delivery platform, Jio Mart.
Reliance retail clocked about 273,000 crores of revenue, that's about $31 billion, and about 11,000 crores of profit. In the fiscal year ended March 24, it had about 19,100 stores and about 340 million registered customers, according to that Bloomberg report.
India's Apparel Industry Is Expecting Better Times
With reciprocal tariffs on India by the U.S. now less than a month away, as per President Trump's promise on Tuesday, exporting industries are obviously and furiously examining the options and opportunities if so. There are a lot of granular details on what India could give in exchange, for example, reducing duties on import of cotton from the U.S. in exchange for leniency in apparel exports. Now how this will exactly play out is not clear, but not just to me, but to people in the industry as well.
On the other hand, export of garments jumped to $1.6 billion for the month of January. This is not likely to be a record high, but is definitely a high, particularly for recent times. Prabhu Damodaran, convener at the Coimbatore-based Indian Text Printers Federation, which represents close to 450 spinning, weaving apparel and home textile companies, told me that Indian manufacturers have actually stepped up their imports of machinery in recent months in anticipation of increased business, which suggests that in an era of uncertain tariffs, the apparel and textile industry seems to be more confident of growth than maybe other industries, at least going by that one metric. I reached out to Mr. Damodaran and I began by asking him how the industry was gearing up for the latest deadline of April 2nd for reciprocal tariffs and how that could roll out for India, given all the other tariff wars that were going on.
INTERVIEW TRANSCRIPT
Prabhu Dhamodharan: Actually, now everyone is realizing that trade war is real. So, we are getting a flood of information on a daily basis and every country, every sector will try to minimize the impact and also look for opportunities. Particularly now the recent announcement on the tariffs on Mexico.
Mexico is the 8th largest exporter to the US and around $4 to $4.5 billion of apparel and non-apparel textile items they're exporting every year. Suddenly, the tariff will make the products expensive and particularly if you see the segments around $2.5 billion of cotton apparels they're exporting and around $1.5 billion of cotton apparels and $1 billion of MM of apparel they're exporting. Naturally, the immediate reaction will be buyers will look for alternate supply chains and naturally cotton apparel will come to India and Bangladesh and MM of apparel may move to Vietnam and Cambodia.
This is what the tariffs will make. Number one. Number two, this is the current month's trend.
We don't know what will happen next month compared to the relative terms. We are now cheaper. After some period of time, things may change.
Now, Mr. Trump is not applying his mind on connected countries like Vietnam. How the connected countries they are going to treat, we don't know. And the reciprocal tariffs also, he clearly mentioned that for India also they are looking for a reciprocal tariff.
And within the framework, there are two options for them. One is for applying, for example, if we charge 15% for a particular good and they will also charge 15%, that is one methodology. And the second methodology is if we take the average tariff of a country, our average tariff for the US will be in the range of a particular percent and their tariffs may be lower.
So the different tariff they may impose as a methodology too. And in both scenarios, apparel, we expect that 5 to 6% impact will be there for Indian apparel. So it's not massive.
And in both scenarios, definitely we will have an edge compared to China, Mexico and even other countries. So definitely by going with the current trend, we are confident order flow will increase to India. This is what we are getting the feeling from the buyers and a lot of rapid enquiries are coming to our own members.
And the industry is so active now, everyone expects a surge in orders in the near term.
Govindraj Ethiraj: Can you put this in context of overall Indian exports and the latest numbers to US and overall government exports?
Prabhu Dhamodharan: Indian numbers, first time in January, we witnessed $1.6 billion of apparel exports from India. Normally our monthly run rate used to be in the range of $1.2 to $1.3 billion. It's a healthy sign.
We need to see whether we are sustaining it. I am confident with the plus or minus 2, 3% we can sustain the momentum. From here, if we take $1.5 to $1.6 billion as a base, we need to reach $2 billion a month. That is what real growth is, what we are expecting. And for example, now every developed market, we can see a similar trend. Developed markets don't grow beyond 1% or 2%.
For example, recent data of 2024 of European Union imports, they imported around $92 billion with the year on year growth of 1.3%, 1.5%. So all developed markets will grow 1% or 2% only because of the massive size. So only which countries are grabbing other countries' market share, that is where the game is there. And how the industry is equipped now, we are seeing a lot of activities on expansion space also.
Even if we look into the data of recent import of sewing machine, knitting machines, you know that a lot of apparel making machinery, including processing and knitting and sewing machines, are still import dependent. From April to November, we imported around $1.18 billion of this kind of machinery. That means the industry is gearing up for expansion.
Particularly the knitting machines year on year growth is in the range of 26% and sewing machines in the range of 27%. No, replacement may be minimal because in the last two, three years rapid investments happened post COVID also. So majority of, even we had our channel check with machinery importers at the ecosystem.
Everyone is saying that factories are expanding. Everyone is drawing up their plans too. That is much needed because India needs scale, competitiveness, specialisation.
This is the right time actually to scale up and show the buyers. One of the very important things is that China will always be capacity ready. And whenever inflow comes, they will be ready with option A, B, C, D, E.
And we need to follow that methodology in apparel. We can't say that you give orders and then we will build capacities. Now the opportunity will definitely be there.
Even with the end of all this noise around, we feel that relative terms, we will be least impacted in apparel. I don't know about other sectors. Maybe some sectors have their own concerns, but apparel and home textile and textiles, definitely this will be a positive sign and a very, very important factor.
We need to go to the U.S. with our wish list and also we need to give some kind of a benefit. For example, U.S. cotton, if we import, we are imposing 11% duty. Now China is going to already announce that they are imposing a duty on U.S. cotton. So the U.S. needs customers now. Cotton is a very, very sensitive crop in the U.S. So the U.S. needs India to sell their cotton. What we need to do, our policymakers can take this as an advantage and reduce import duty on cotton and ask the reciprocal methodology or something.
We need to ask, please reduce our apparel so that in one stroke, we can bring a win-win situation by reducing cotton import duty and asking them to reduce apparel duty for us so that we can create more jobs at one stroke.
Govindraj Ethiraj: When you said about the run rate of about one and a half to 1.6 billion dollars, that's total apparel exports, right?
Prabhu Dhamodharan: And of that, how much would go to the U.S.? Around 30-35% we always export to the U.S. Recently, it will increase and a quarter of 30-35% of our dependency is that with the U.S. How much of our cotton imports are we sourcing from the U.S.? Cotton imports are very minimal. We majority, few varieties of cotton like used in home textile, very fine varieties we used to import from the U.S. and Australia. But the numbers are very minimal.
We depend mainly on South India. We are all importing the majority with African cotton because now the 11% import duty created a turbulence because now 11% import duty, it may not be viable for us to import. Now, few African nations due to the facts, whatever we have, the duty is only 5.5%. So, now the industry is using that as an opportunity and importing from African countries.
Govindraj Ethiraj: And of our total cotton consumption for apparel or textile, how much are we importing as a percentage?
Prabhu Dhamodharan: Around 10% to 12% to 15% year on year, it will change. But 10% to 12% we used to import.
Govindraj Ethiraj: Balance 90% or so is met through domestic products.
Prabhu Dhamodharan: Yes, yes. We are one of the largest cotton producing countries. Farmers are also well protected with MSP.
MSP is now higher than the old prices and farmers are getting very fair prices and we have a robust sourcing mechanism also with the CCA in place, Cotton Corporation of India. So, the cotton ecosystem is well protected and the government is also taking a lot of efforts to improve the yield of farmers. They are taking it as a mission mode now.
So, it's the right time to rebalance because of the raw material stage, we should not tax more. It's the right time to use this crisis as an opportunity and reduce the duties for import of US cotton and get the benefit in apparel. Right.
Govindraj Ethiraj: Thank you so much for joining me.
Prabhu Dhamodharan: Thank you.
Talking About Obesity Is Important
March 4th, Tuesday was World Obesity Day. Obesity is rising sharply in India, similar to other countries. But in India, the prevalence of obesity as defined by a body mass index greater or equal to 24 kilograms per metre square is about 11%, which is higher than many other low middle income countries and comparable to rates in high middle income countries.
According to the National Family Health Survey 5, the prevalence of overweight and obesity was about 44% amongst men and 41% amongst women. This is an increase of about 6.3% for men and about 5% compared to NFHS-IV findings. And there is also a divide between urban and rural, which is that about 13 to 50% of the urban population and about 8 to 38% of the rural population are affected.
Obesity is more commonly seen in women compared to men and importantly and critically is increasing in children and adolescents. An important fact to note is that Asian Indian obesity differs from that of white Caucasians as Asian Indians have more tonal, truncal, intra-abdominal and subcutaneous adipose tissue and more on all of that very shortly. Obesity is, and the reason we're talking about is, linked to many lifestyle diseases, being why it's an important issue to discuss at the workplace as well and how to discuss it.
I reached out to Dr. Chandrakant Lahiriya, a well-known primary care physician, health policy researcher and also founder director of the People Centric Health Systems. Dr. Lahiriya spent several years in public health at the World Health Organisation and I began by asking him why he felt there was a big cost and an economic cost to obesity as he had argued in a recent article in The Hindu.
INTERVIEW TRANSCRIPT
Chandrakant Lahariya: So the definition of obesity keeps changing and varies from one country to another country but for a long time one of the accepted approaches to define overweight and obesity was body mass index. Like there is a broader consensus that a body mass index of more than 23 is overweight or obese. In certain European settings it's a 27 which is obesity, in India it's a 25 body mass index which is obesity.
And here I can clarify what body mass index is. So body mass index is your weight in kg divided by your height in metre square. So height in metre square at the denominator and body weight in kg and that gives you body mass index.
So body mass index has been used variably in different countries, different parameters. For Asians and Indians it's a little lower and for other settings it's a little higher. However, now there is a consensus that body mass index is not a very good parameter because what has been realised and this is a concept called thin fat Indian that Indians who are slim and within normal body mass index often have been found to have high body fat.
So one Indian and one European with the same body mass index, Indian might have far greater fat and then European or other population groups may have a much lower fat. So BMI is now discounted and not considered a very good parameter. So there are new parameters such as waist circumference in the female waist circumference more than 80 centimetre.
In a male waist circumference more than 90 is considered obese. Similarly, there are other parameters. So waist to hip ratio or waist to height ratio.
If the waist to height ratio is more than 0.5 then it is considered obesity. So there are multiple definitions but what is broadly agreed and now there is a new definition globally which defines obesity as a clinical obesity that is a clinical condition because of excess fat in your body you are considered obese. Within India now there is a new guideline which has come recently which says that body mass index more than 23 plus some other parameters you are considered obese grade 1 grade 2 obesity.
Grade 1 without clinical conditions and grade 2 with clinical condition but anyone who is more than 23 is obese as per some of the recent Indian definitions.
Govindraj Ethiraj: Right and when you argue that there is a hefty cost to pay and which you also are referring to in economic terms could you explain why you're saying so?
Chandrakant Lahariya: There is a lot of data and evidence emerging of course these are estimates. These estimates indicate that in the year 2019 the total cost of obesity in India was around 28 billion dollars which translates to around 1700 or 1800 rupee per capita per Indian. Now these costs are associated with at least two factors.
One is the cost of health care because obese individuals are likely to have other comorbid conditions such as diabetes, hypertension. I'll talk about the common soil hypothesis a little later. So one of the costs is health care costs.
There is evidence which indicates that obese people spend 32 percent higher on health care than the non-obese person. So there is a definitive cost of health care and obesity. The second cost is a productivity loss.
If someone is obese and has a comorbid condition that individual needs to head to miss the office or workplace or his or her productivity declines. So these are the direct costs but there are many other indirect costs associated with obesity, societal costs and mental health issues which are associated with obesity. So everything put together it translates to that 2019 the cost by 28 billion dollars which translates to approximately one percent of India's GDP which is very high and then what is worrying that there are estimates that this cost is likely to increase to 1.57 percent of GDP by 2030 and there are estimates that if nothing is done or insufficient is done to obesity this cost will further rise. So because obesity is rising at a very high rate like in the last 15 years it has doubled. It has doubled in both children and adults and in the last three decades it has tripled in both age groups. More importantly, obesity in India and the rate of rise in childhood obesity in India is one of the steepest in the world.
Only two countries, Vietnam and Namibia, have a higher childhood obesity rate. So this is worrying. India has a big child and adolescent population.
So all of these are worrying and that's why we need to pay attention and all of these have a cost. If you have obesity in childhood which essentially translates to a longer term complication, I'll briefly introduce the idea of the common soil hypothesis. It is widely accepted and proven scientifically though obesity itself is a chronic disease as defined by WHO and many other associations but obesity and diabetes are closely associated.
Someone who is obese is likely to be diabetic and that has its own cost and we should remember that around 40 percent of Indians have abdominal obesity, adult Indian. There are Indians who have obesity and then this obesity resulting in liver disease, extra liver fat. There is a high cholesterol level which can have a heart related issue and 25 crore Indians are either diabetic or pre-diabetic.
That's one of every four adult Indian diabetics. So this common soil hypothesis, diabeticity or there is a new term which is called ABCD adiposity based chronic disease which is obesity. So adiposity extra fat in the body is essentially a single organ and which has its cost and if it affects an early childhood, if it is rising at the fast rate the way it is happening in India, it is worrying and it requires concrete interventions.
Govindraj Ethiraj: Quick question. So in the context of an individual as in what can I do to test myself and the second is a lot of companies and their employees are listening to this podcast. So what could companies do as an initiative or an effort to do this if so or what should individuals do?
Chandrakant Lahariya: So I think this is a very important point. So one of the things people can do, they should be aware about their weight. Often people are not aware of what their weight is and what their optimal or ideal weight should be.
So one of the broader principles to know your weight is that your height in centimetre and if you are male deduct 100 from that. So if you are 170 centimeters your optimal weight should be 170 minus 100 for men. So 70 kg should be your weight.
So if you are extra weight than 70 kg for a 170 centimetre person then you are overweight and you need to bring your weight in that range. If you are a female person then the value is height in centimetre minus 105 and that will be your optimal weight. So one should be aware of their weight.
Second thing is that if you are extra weight you should definitely modify your diet, increase your physical activity. Anyone whether normal weight or extra weight will benefit by an improved diet or healthier diet or reduced physical activity. Third, what you should do is that everyone should reduce high fat, high salt, high sugar or anything which is ultra processed food and you should increase your fruits, your vegetables, and your legume consumption.
So that's that individual level. But one of the things is that obesity is often likely to be affecting families because the kind of diet everyone eats will affect everyone. So if one person is obese in the family you have a higher cholesterol level it's likely to affect others.
So get your lipid profile done once in every year. So those are the individual levels. The third thing is that workplace.
The workplace should encourage providing a weighing scale in the bathroom or in those areas. Preventive health checkup should have a weight, height and waist circumference measured and similarly there is a body fat composition analysis should be done. So raising awareness about obesity is important and the workplace can contribute.
Most importantly in India we try to normalise excess weight and overweight. We feel offended that someone is overweight and obese and we don't want to tell that person. I would say the best service you can do to someone is don't try to normalise being overweight.
If someone is overweight you should not say you look healthy or fit. You need to have a frank conversation about what is the ideal weight and how much do you weigh. So our societal thinking needs to change.
Individual, family, community and inspiration actions are required and of course there is a lot that can be done on ultra processed food, high fat, high sugar, high salt diet. Some regulations are required. We need to have a community where we can promote physical activities.
Schools are one of the areas where intervention should be done.
Govindraj Ethiraj: Thank you so much for joining me.
Chandrakant Lahariya: Thank you very much for this important conversation.
