Why The Us Is Intentionally Devaluing The Dollar And What It Means For Gold And India

TITLE: Why the US is Intentionally Devaluing the Dollar (And What It Means for Gold & India) CHANNEL: Thrive by Groww DATE: 2026-06-13 URL: https://youtu.be/4tVBK7ww2E0 ---TRANSCRIPT--- We have two of the most heavyweight voices when it comes to macroeconomics in India today. Both our guests ladies and gentlemen are part of the economic advisory council to the prime minister of India Shri Narendra Modi. They bring their expertise to some of the country’s most important economic conversations. Our first speaker is Shri Neelkanth Mishra. He is chief economist at Axis Bank, head of global research at Axis Capital and one of the most closely followed voices on Indian and global macro trends. His work has helped investors, institutions and policy makers think much more clearly about India’s economic direction. Joining him today is Dr. Sajjid Chinoy, managing director and chief India economist at JP Morgan. He of course is a leading voice as well on macroeconomic policy, global trade, inflation, growth and India’s place on the changing global stage. His insights have contributed meaningfully to policy and market discussions over the years. Leading this conversation ladies and gentlemen today is Monika Halan. A prominent personal finance author, educator and one of India’s most trusted voices when it comes to financial literacy. She is best known for her book Let’s Talk Money and for her work in financial literacy of course. Ladies and gentlemen, please join me in welcoming our speakers for the very first session. Shri Neelkanth Mishra, Dr. Sajjid Chinoy and Monika Halan.

thank you so much absolutely wonderful to see all the people who want to talk about macro and not market up and down so this is fantastic so the session of course is called can India survive what’s coming we are going through a stress test today and I honestly have the two best minds in India to answer some of the questions I have so I just want to begin by saying that we thought that uh so there was a macro consensus that we’re doing super well but again that war that we didn’t want has fractured a lot of what was going like a a story which was going to go well from now on rupee oil um the grow the hit on the growth. So um Neelkanth I want to start with you and you said about two weeks ago that in two weeks if this war doesn’t resolve we’re going to be in deep trouble. Are we there yet?

Uh uh no first thank you for for having me here. Uh I think fantastic audience uh to address our views to um something very strange happened in the last two days. Uh you know for for a while uh physical Brent so there is a uh dated Brent meaning that if you want Brent say oil for say in the next one or two weeks. It had diverged from the uh the the listed Brent prices by $30 to $40 about a month back. 2 days back the premium shrank to zero. So the oil market is already starting to believe that the physical shortage of oil is mostly behind us. Now I’m not saying the problem is solved and that we are totally out of the woods yet. uh we still have to see and deal an agreement but there is clearly uh a very positive development because whatever you may say uh Trump is saying or doing what Iran is saying or doing uh what is remarkable is that in the last week or so what used to be so the 30 40 had shrunk to about 15 20 till last week it has fallen to zero if the shortages continue the strait of hormuz stays blocked we are now hitting really really serious trouble. So, uh, European ATF inventories down 30% in the last 2 months. We’re just about hitting the the seasonal pickup in flights. Bunker fuel inventory in Singapore has been shrinking. Uh, if this doesn’t end in the next two another two weeks or so, um, we will start seeing massive cancellation. So, the economic momentum has already I think weakened. It has been supported by uh some companies over ordering because they are fearful that there would be shortages. So the industry activity has not slowed as fast as perhaps would have been expected. But I do think that we are weeks away from really hard shortages um which will have significantly negative impact on the global economy over the next 6 months.

Right Sajjid? How bad is bad? What are we looking at? Let’s assume that. So this is a war. They’re saying that it’s something like a fishbone that uh President Trump has swallowed. It doesn’t go down. It doesn’t get out. He’s stuck. So, how bad is bad?

Good morning and and thank you for having me here, Monika. Um how bad is bad? I think it’s first important to identify the nature of the shock because it’s different from the last oil shock we had in 22. That was a price shock. There was never a concern about the availability of products and crude and we know how to deal with price shocks. The problem this time is that this is both price and quantity or lack of quantity. Now why has the last month been better than we expected? We all thought if this goes on till the month of May all hell is going to break loose. It hasn’t in India and all of Asia. Why? There’s a deceptive calm and I think it’s important to understand the numbers. There about 13 1.5 million barrels that are offline. That is the largest oil shock in the history that we know. The reason that has not resulted in shortages is because there is about a 10 million barrel draw down of inventories every day. So there’s really no shortage that we are seeing because the first response has been run inventories down. Now we know that’s not a sustainable answer. You can do this for another four or six or 8 weeks, but at some point inventories will hint their operational minimum and then you’ll actually see physical shortages. So there are two ways to respond to this. The first is to avoid shortages because we learned from COVID that these things are nonlinear. When a small business shuts down because of the lack of LNG or LPG, 2 months later, even when supplies are restored, it doesn’t open back up. That’s a nonlinearity. when a gig worker goes back home to their village, they don’t come back. So the first order of business is how do you hustle and get whatever is available and India has done a a good job. We saw in March we really ramped up our crude supplies from Russia and in April our LG imports which were a constraint back in March are almost back to precrisis levels. Now this is beggar thy neighbor. Large countries like India can bid for this on the high sea. Who’s getting really hit? It’s the frontier markets, the Sri Lankas, the Pakistans, the Vietnams of this world. But this is bad in the following sense that even if physical shortages don’t manifest, there’s a growing consensus now that crude prices are going to remain close to $100 a barrel for the next four quarters. So the quantity constraint goes away. The price headwinds remain with us for a long time. The last thing I’ll say is this fishbone analogy is an interesting one. I think it’s clear that the Americans miscalculated. Uh and I think the offramp is a little bit challenging because President Trump may well want a deal better than what Mr. Obama had. But Iran has much more leverage now than they did when Mr. Obama was negotiating a decade ago. So it’s hard to see how you can reach a deal where both sides are uh are you know can claim victory domestically. So this impasse can go on for longer every month it goes on crude is going to remain higher and we’ll talk about the implications in India but this could you know bad could get pretty bad u uh in the coming weeks and months

and the bad essentially is shortages I mean that what we are worried about is not price so much because as a large country and actually I mean yeah we worry about the smaller neighbors but at this moment it’s every man and woman for himself herself right so we’ve got to put on our oxygen masks as a country first So it’s okay. Yeah, it’s terrible that you’re in a bad place, but we are glad that we are a large country. So you know what happens then in terms of u uh the oil shock? What happens if this sustains?

Yeah. So uh I think u as as I I first mentioned Sajjid also I think uh supported that that you will already you know Lufthansa has cut 10% of its flights in May. Uh given that the ATF inventories are down so sharply and the summer season is just taking off. It is quite possible that the hottest season or rather the hottest tourist season in Europe uh could get wiped out. uh you could see southern European nations which are which have 10% of GDP coming from tourism uh starting to see a sharp dip down you’ve already seen UK bond yields going up above 5%. What is also important see as important as the physical shortages and and just to give a very concrete example on fertilizer you know we started doing research that 10 to 20% of global fertilizer capacity comes off the question to ask is who is not getting fertilizer we started looking at country by country and found that India because of bidding and because the government procurement is happening that at least the kharif season doesn’t seem to be badly affected the farmers in countries that do not subsidize and the farmers in countries that cannot subsidize are going to be the worst affected. So if you plot urea prices by corn prices, it is at an all-time high and there’s daylight between the previous highs and the current one which means that if you’re an individual farmer in the US or in Canada or in Australia, uh you’re taking a hard business decision that at $940 $950 at a tonne of urea, I don’t want to buy it. The Indian farmer is still buying it at 5.3 rupees a kilo. U this is because all of us are collectively at a country deciding that you know we will buy so we have buying power. U but I think it is uh there are two other implications which we need to worry about. The first is that if you have a $100 oil there is a significant amount that is getting transferred from the buyer to the seller which is locked up. So for example, the size of the oil market has gone from about $2.4 trillion to maybe about $3.5 to $3.6 trillion which is more than 1% of GDP. So when the seller gets excess funds, they treat it treat it as windfall gains. They don’t spend it. But the buyer has given so much that they don’t have other money to buy other stuff. This is happening even in the US and this is I think a source of slowdown I think globally the point that we have to worry about uh frankly given our large size uh the fact that the government was so fiscally disciplined the last 5 years we have the space the fiscal space to intervene for longer our estimate is fiscal intervention currently is about .1% of GDP every month so we have an economic stabilization fund carried over from last year which is enough for 2 to 2 and 1/2 months. Our biggest concern is the currency. See because you can put the cushion the fiscal cushion and therefore prevent excessive volatility and shock from the economy but you still have to pay the dollars and that is where I think the uh the the pressure may actually start to intensify in many other markets. Most markets are still buffering it so are we but I think that pressure can become very intense.

Yeah. That actually is a very nice segue into the rupee story because you just need more rupees now to buy every dollar. Sajjid you have said so everyone worries about this rupee depreciation we sometimes look at it as the you know strength of our nation that uh rupee is because rupee is weakening we are weak as an economy but I think you have said that it’s actually good for exports but isn’t isn’t the slide too far gone that um sometimes it becomes like a slide that you cannot stop it becomes a self-fulfilling prophecy

thank you So there several layers to unpack here. First before we get to the pressure points, let’s acknowledge that coming into this crisis, at least from a growth and inflation perspective, we had stronger starting points. Unlike CO where it was slowing in the year before CO, you know, last year we saw many cyclical tailwinds, direct tax cuts, GST cuts, monetizing, regulatoring, the lowest inflation in 47 years, a strong monsoon. So growth was you know robust and resilient coming into the shock. Inflation was the 2%. But as they say you know a a chain is only as strong as its weakest link and the weakest link for some time has been the external sector. The current account deficit has been benign 1% of GDP. The problem for a while now has been that capital flows and that requires a whole different conversation have slowed and dried up over the last six quarters. FDI, FBI, ECBS and trade credits. So that’s the original pressure point. In the first best scenario, you want to attract more FDI. You want the basic balance to be flat, which means you want as much FDI as the current account deficit. So you’re not reliant on fickle portfolio flows. But we’re not in the first best world. So the question is, what is the second best world? that absent capital flows given that you’ve been hit with a large negative terms of trade shock right the the shock absorber here the second best has to be the currency there are only two ways to deal with this there’s no magic solution either you run foreign exchange reserves down or you get the rupee to become the shock absorber so on my way here from K parade you know what was I doing I was wearing a seat belt right to take the shock in case we break uh uh right think of the rupee as being the economy’s seat belt right now let me just step back for 30 seconds when you’re hit with a negative terms of trade shock or capital flows dry up the equilibrium underlying unobserved exchange rate is actually weaker. So our job is to say how do we go from the old equilibrium when oil was at 60 and capital flows are 60 billion to the new equilibrium where oil is at 100 and capital flows have dried up. So there is a new equilibrium for the rupee and our job is to guide it there. Currency management is always an art not a science. You want to facilitate the management to the new equilibrium but in a manner that doesn’t unanchor expectation. Otherwise you’re right we saw this in 2013. Weakness begets more weakness and that’s a fine art that the central bank has to do. But for those that argue that no we the rupee should not be allowed to weaken. What is your alternative? The alternative is we’re running 15 billion dollar $15 billion of reserves down every month which itself at some point will generate nervousness. And the lesson from all of this is when this crisis is over how do we go back to the drawing board and understand how do we attract more FDI? That’s the fundamental question here. One very final thing. Let’s not conflate a strong economy with a strong currency. Please, only 13 economies in the world have grown at 7% in the last 100 years. They all relied on export-led growth. They all had undervalued exchange rates to help with export growth.

Neelkanth, do you agree with this one? And uh is there a level that the RBI might be targeting of the rupee just to give the audience a perspective that look this is not over yet.

Look um there’s there’s a lot that Sajjid said absolutely agree with. Uh I just want to add to uh a few more nuances. Uh so when someone asked me what is the balance of payment or you ask me what is the right level of the rupee? What is the right level of the rupee? Basis current oil price December basis December 26 oil price and basis March 27 oil price because see the oil price is in backwardation meaning that the whole world thinks that this is this is not going to last long and then oil prices will normalize. In fact, if you take the March 27 oil price, the rupee needs to appreciate from here. If oil prices remain at 100 for the foreseeable future, the rupee need to depreciate from here. So there is uh it is always a fine line and you have to calibrate. I must say that the rupee market is already in panic. Um we have to acknowledge that we are at a stage where you need crowd control measures. It is not fundamental analysis. Basically the current account deficit the dollars that we need to fund our uh goods and services excess need is only about $32 billion last year. FY26 current account deficit was $32 billion. Net FDI has actually shot up. So gross inbound FDI which was 75 80 for a while 11 months was 90 billion. So if you take March also we don’t know the data but would be very likely 95 96 outbound FDI is flattish but FDI repatriation which is private equity venture capital taking money out because IPOs were happening had jumped up to 50 because the IPO market has been mostly dead for the last four five months uh that number is negative. So net FDI which was 0 to 5 for a while has already now $20 billion. You have external commercial borrowing. So there is no way that you can justify that the balance of payments that is a demand excess supply a demand for dollars is anywhere more than 15 20 billion for the full year and yet RBI has had to intervene by $85 billion in the last 6 months. So which tells you that exporters have panicked. They are keeping dollars out. importers are hedging way more than they used to. Foreign portfolio investors, remember the $800 billion of them have been using the NDF market to aggressively hedge which is the reason why that that window that arbitrage window which was supposed to be a few billion had widened to $70 billion. So the currency market is well now in panic. If I was to give a fundamental value, the USD INR would be lower than where it is right now.

So, so for the audience, this macro ties into the micro story where a lot of people today want a foreign allocation in terms of their investments, but especially through mutual funds, they hit a limit, the RBI limit. Um, is do you think that this possibly is going to stay for a while because we cannot lose more dollars? That’s one and then Sajjid. So I am when I’m buying gold I’m actually hedging my investments. So RBI can stop that but RBI cannot stop me buying gold. So just Neelkanth and then Sajjid quickly.

Yeah that’s a very important question. Uh one very seasoned uh fund manager told me that FBI are not coming because the market is not falling. So see there was there was a stage where the whole world was looking really ugly. So China was uninvestable two two three years back. Korea just had a coup. Thailand had a coup. Uh Brazil was going through political turmoil. Bolsonaro and Lula and you know lots of chaos. Mexico was struggling with the drug menace. Uh Russia has been blocked out. India was the only uh market in the world. uh today uh Korea, Taiwan are doing exceptionally well. Let’s see how long. But anyway, right now they’re doing very well. China is not uninvestable. It is starting to look attractive. Uh so the the PE multiple at which FIS want to buy is lower. Now what is happening because of the incredible uh strengths in the domestic capital flows that the PE multiples are not coming off. Um now one way to correct that would be to allow this capital to get geographically diversified because many of the foreign investors think that this is because stranded capital because you can’t buy foreign equities so you keep buying domestic equities which means that on a balance of payment basis is actually so either FBI’s buy or the Indians buy foreign outside right so so I think uh there is some merit in that argument but I don’t think there is a policy solution to that I mean that markets will take care of itself. From the from the gold perspective, uh this is going to be a very tricky situation for policy makers. I don’t have a very ready prescription. Meaning that this is the first upcycle in gold where Indians are much richer than they used to be. meaning that um the ability to invest in gold,

speculative investment, not the jewelry that my mother or grandmother used to buy once in a while, but uh serious like ETF type investment and that will create new balance of payments pressures. U but I think that that pressure will be linked to a weaker dollar because I think at some point when all of this drama is done, the US has to go back to destroying the dollar’s value. uh because otherwise they cannot be competitive. So whenever that happens I’m I don’t think uh gold will be that big an issue from the balance of payment perspective. Sajjid on this point of gold

just a couple of

I think the gold market has fundamentally changed in 2022 because the biggest players in the gold market buying and selling are now central banks right and the more geopolitical fragmentation you get and the more the concern that FX reserves of countries can be impounded the greater the fraction of reserves that central banks around the world are going to be holding in gold. Now, if you couple that medium-term price acceleration because central banks are moving to this new asset with what Neelkanth said, the speculative demand for gold that Indians are seeing, gold is going to be a big drag. I’m I agree with Neelkanth about last year’s balance of payments. I’m a little bit more concerned about this year. If oil remains at $100 a barrel, it’s a very simple rule of thumb. Every $10 increase in oil is a half a percent of GDP terms of trade shock. Indians are giving more widgets to the rest of the world to import oil. If your starting point on the current account was 1% which is 35 or 40 billion if this is an if $100 persist for the full year, your full year current account is a hundred billion and this is or more than that and this is even without taking into consideration um higher gold imports for example. That’s just the oil impact. If the world slows, exports slow. If the Middle East is under pressure for the next 12 months, remittance is slow. If gas prices are higher, so my sense is the BOP could be more the the past will not be a good predictor for the future.

I want to last two questions. We are going to be out of time. one is that uh I’ve just in the middle of reading the chip war and I’ve understood that unless there is state support for these uh you know frontier technologies you don’t make progress and I believe South Korea is spending 700 billion in AI and one of the reasons they are saying that the FIS have exited is that India is not part of the AI story at all what is your view on the state like is India are doing enough to promote semiconductors the AI data center infrastructure and then Neelkanth same question

yeah no I this is a complex question I try and give you a two-minute answer which is that um one has to make an analytical distinction between investing in AI for strategic purposes for defense purposes for national security and I’m all for that but given India’s per capita level of income given constrained fiscal space. China by the way which is the poster child of industrial policy spends 5% of GDP every year on industrial policy incentives. Think about the opportunity cost of that. So I’m Neelkanth may have a different view. I’m fully of the view that we must identify the economy choke points identify what we need to do for AI. But I’m a little bit wary of making it a growth a broad-based growth strategy like a Korea or a Taiwan for the simple reason that AI from a job creation perspective is much too capital intensive. Let me give you one example and end. Taiwan is the poster child of AI in Asia. Taiwan manufactures all those AI propellers that go to US data centers. It does the logic chips. Korea does memory. Singapore, Malaysia, the the four countries in in the supply chain in Asia. Taiwan last year grew at 9% a year. This is an economy whose potential growth is three grew at 9%. You know what the Taiwanese government did in November? It announced unconditional universal cash transfers because despite 9% GDP growth and 50% growth of exports, a booming economy, this is such a capital intensive technology that the spillover to the labor market to the broader economy was neg was was non-existent. Right? So I so we have to strike a balance. We want to be at parts of the frontier. We want to ensure that we’re not reliant on this from other countries in terms of stress. You want this for national security for you know geopolitical purposes for defense but that is different from saying that data centers and AI has to be my growth strategy because that may give you growth and productivity but won’t give you jobs.

Yeah. So just on the cash transfer thing uh if it is if it is part of my uh national security why would I not do it because I need to be on the frontier of technology this is my strategic edge and if it means cash transfers which in any case India is doing um what is the problem with this model?

No uh the first thing first uh AI in any market is is not about the government. So uh the reason why Taiwan is growing at 9% is because TSMC is the only company in the world which can make 2 nanometer 3 nanometer chips at scale. Uh and they have the capacity. Uh and so they’re generating a lot of value but all of that value is getting stuck in the free cash flow that TSMC has. Uh Korea you know just very famously SK Hynix and Samsung generate more free cash flow than all of corporate India put together. uh because the DRAM cycle has gone up dramatically. Now uh the the AI investments that are happening in the US are being done by private firms not the government. AI investments happening in China while the government is supporting and the ecosystem that level of support as a percentage of GDP even Indian government is giving but a large part of the capex is happening to private sector. So look on the generation of AI the fact that we don’t have the money to burn on large language models uh you know our our startups raise 40 50 hundred million only a few of them uh every 6 months the the US firms raise 30 40 billion thousand times more right so I don’t think we can compete there on chips we from a growth perspective I don’t think it’s a game worth playing chip manufacturing destroys a lot of value over its cycle, right? So you have to be like there are some three or four companies in the world in the last 30 years which have returned cost of capital doing chip manufacturing. TSMC, Samsung

which is where the state comes in.

Yeah. So uh

they’re all state funded.

So

or are twisted by the state.

Yeah. Yeah. But see from a so that’s what I was saying from an economic perspective it makes no sense at all. from a geopolitical strategic perspective makes a lot of sense which is why I mean I’m part of the India semiconductor mission we are I’m part of the committees that approved the fab projects no I’m absolutely committed and I think we need to have those and uh I’m hopeful that when semicon 2.0 happens. So the the last two projects that got approved by the cabinet last week uh uh one of them is actually a display fab is the first display fab that India will have. Uh that was 76,000 crores. So that has been fully allocated now. Uh there is hopefully a bigger scheme coming from the government which will help us get started. But remember this is a 15 20 year journey. From a market perspective, uh it is important to remember that uh DRAM is a viciously I mean it’s even more volatile than normal semiconductors. Maybe this cycle will last another 6 months, another 12 months. But uh the value of AI is not going to be stuck in just the investments, the generation of AI. It will also be about uh what economic value can you extract from it. And that’s where I think Indian firms are going to hit it out of the park. So a lot of the value of AI and frankly at this stage the markets are global markets are focused on segments which are about generation of AI uh and and that’s where every time someone announces a big capex boost then everything goes up 5%. But frankly uh uh the the it’s a deployment story because look at what is happening. SK Hynix, Samsung, Nvidia, TSMC, Broadcom and a few others are generating 700 800 billion dollars of free cash flow every year. The generative AI companies are burning $800 billion a year. uh on top of that the ROC’s of Google and Microsoft and Amazon are dropping because a lot of their pent up the cash savings are being deployed in data centers and returns are not coming.

Yeah, [clears throat]

we have to see a rebalancing because this is not sustainable. So there are deeper issues and so I don’t think we should just jump into AI just because you know the markets are

Sajjid you had a point 10 seconds to say you know there’s if you break this down there’s a resource element production element but I think where India can do very well is the human capital part which is the design whether it’s design in creating an ecosystem that over time designs large language models whether it’s creating a human capital ecosystem research universities that designs commercial applications because we’ve got the IT companies with 30 40 years experience That’s the less resource intensive. One will argue that’s where the value will accrue over time. I think that’s the element that we should be emphasizing more than fabs and and data centers.

Right. And also is it fair to say that it’s when India especially policy and bureaucrats are pushed to a corner that’s where magic happens. So are we at that point? I want to leave the audience with a note of hope that it’s every time we are in a serious crisis that we have taken a giant leap.

Absolutely. We saw this in 1991. We saw this in 2013. We saw this in the pandemic. And I would argue there are two massive crises facing the world. One is what’s happening in the Middle East which is a wakeup sign that this is a whole new world we’re in. This is a world which is going to be extremely shockprone right and so you have to have a new economic architecture to deal with this world that means identifying your choke points not just with energy all of our polysilicon comes from China 90% of our lithium ion batteries come from China right identify the economy’s choke points and try and best mitigate those risks ensure that as an economy and we can have a different discussion on how you do this you become more shock absorbent right And lastly with this whole AI thing when your back is to the wall it’s precisely where bureaucrats, government, industry, academia comes together. So I think never waste a good crisis and I’m very hopeful given the plethora of shocks you know good will come out of this eventually.

You’re fairly integrated into the way the government works. U I mean you were come [laughter] on is there this wake up happening

but this has happened u for a while. So uh you know this is a narrative which is I think very powerful that the Dr. Somanathan committee recommended 23 important reforms to states including uh freeing up land use conversion allowing factories to use more land that they had which was earlier blocked for greening allowing women to work night shifts. some of these uh state government recommendations. So if you do a 36 by 23 uh matrix uh 86% of the boxes got ticked last year. There are many more such reforms uh which they are recommending this year to states. There is a Rajiv Gauba committee which is giving recommendations every month. There was a Jan Vishwas bill 2.0 which was I think has an underwhelming coverage in the media but I think was very powerful in terms of decriminalizing many provisions. So these are all nerdy grassroots reforms that are happening. Some of the changes that have happened on press note 3 allowing say suppose some global company wants to reduce dependency on China. The fastest way to do that is to allow Chinese companies to set up factories in India. And I think some of those changes are starting to happen. But you’re absolutely right and I think we will see energy market reform. Uh say Google getting a data center licenses, data centers getting discom licenses. Uh Maharashtra discom wanting to do an IPO. Uh these are all massive moves which are all driven by the fact that we need to be self-sufficient on energy and some of these stresses are going to last for several decades.

Yeah. Last just 10 seconds. I think in this new world the problem statement has changed. Uh as I said if we have to grow at 8% in per capita dollar terms over the next 22 years to get to $15,000 per capita only 13 economies have done that in the last 100 years. It’s a very rare event and the one thing they all had in common was it was driven by lots of global engagement and strong export growth. Now the question is how does India achieve this in a world that’s shutting down becoming more protectionist becoming more economically balkanized. I’m very happy to note the government has not put down the shutters. In fact, we’ve redoubled on global engagement. And the question is in this more shockprone protectionist world, getting the balance between global engagement but risk mitigation to avoid global choke points is going to be the key balance we have to achieve in the next decade.

Thank you so much. And I can only end this session by telling the audience that you know we might look back at this decade. This 2020s is a very difficult decade. We are 6 years 5 and a half years out of it. But we may look back and say that unless we had this difficult decade, we may not have solved some of the structural problems that are so politically difficult to solve. So and the audience is fairly young and I think I want you to think about the fact that this is actually an opportunity for the country and for each of us. Of course, there is global disorder, but out of this, it is what we make out of it. And I think what I’m hearing is that there is enough understanding within the government, bureaucracy, institutions that we will turn this into a huge opportunity. On that note, thank you so much. Absolutely wonderful to have you.

Thank you very much indeed. I request you to kindly remain seated, sir. We do have a couple of questions that have come in from the audience via slider and we’ll take a couple of them now. The first has come in from Watal Ketcha and the question is uh we have noticed and discussed that the weakening rupee is hitting us hard. How do you see the movement of the rupee in the next 1 to four quarters and how do you think this will impact the earnings of import companies?

the the real effective exchange rate which is usually not very good at predicting u the direction of currency movements is already down about 12%. Um from and it’s back to 2014 levels at a time when the the productivity metrics are actually going up. So the government is doing reform there are lots of positive changes happening. So uh I don’t think if the oil prices are going to follow what the market is assuming which is uh $85 a barrel Brent by December 75 by March the rupee doesn’t need to fall from here if the rupee remains at 95 or say even 93 there is a natural boost to earnings um because a large part of the listed universe Nifty 50 and Nifty 200 is um uh is is is exposed to dollar revenues u and my expectation is that this should at the margin while we’ve seen in April a 1% earnings cut in the forecast uh my expectation is that it should be a 1 to 2% boost to earnings just because of the rupee

thank you uh and the next question is from Arshad he asks as investors we allocate capital based on where we see future growth as you mentioned like Taiwan’s case How can investors today identify the next big winners early before the story becomes consensus?

Uh look, you have to uh uh catch the trend. See, I think AI and which is what uh the two nanometer manufacturing node constraints, but remember I mean I I used to be a a semiconductor analyst 20 25 years back. I’ve covered this sector for a while. Um it is hugely volatile. I mean I’ve seen DRAM companies convertible bonds default in 2003 4. So uh uh there’s a nice anecdote that uh Micron which is one of the three biggest uh memory manufacturers today and generating massive amounts of free cash flow today its headquarters are in Boise Idaho. Idaho is a rural agrarian state in the US. in the 70s when it was about to go bankrupt because the Japanese were coming in hard. Uh they were bailed out by a potato farmer who who bought the stock because he felt that DRAM chips trade trade like potato chips. Uh so so it is a very volatile market. So this is not something that I would venture into. But in terms of opportunities for us, um there is significant opportunity on the energy side. Our uh energy self-sufficiency, we need to electrify a lot more. Only 15% of our energy is in the form of electricity. China was here 20 years back. Today they are at 25 27%. This requires as I was saying telling Monika earlier. We need to uh uh reform energy prices, electrify faster. Uh I also think today that uh the market is underappreciating the strength in the auto market. Uh I think that the economic recovery that was visible before this war hit uh has has completely taken away tension from where the auto market is. I also think that on the manufacturing and construction side we we have significant opportunities ahead. Um a large part of the demand in the next 20 years is going to come from domestic sources. Exports are very important from the perspective of competitiveness but um as we build the houses, the offices, the infrastructure that we need, there will be a lot of industrial. So I I expect these are the sectors where over the next 5 7 10 years you can see significant opportunity.

As per capita incomes grow, there are some very predictable trends, right? that as per uh the household consumption of services tends to increase in a nonlinear manner when you get to $6,000 $7,000 per capita health education bunch of other services become become a larger fraction of your consumption of your consumption basket I’ll say one more thing there’s been a Monika spoke about how even the pandemic spawned this big push towards physical infrastructure we haven’t seen this kind of big push on the government in the last 30 40 years but the gap of where we need to be and where we are is still very large so I would say both infrastructure physical capital accumulation and private services over the next 10 years are natural upshots of 6 7% growth in the economy

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