Good morning. It's Monday, the 12th of October, and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital. The take: It's tempting to dive into Elon Musk's latest public spat with the Indian government and Reliance Industries' Mukesh Ambani over its reluctance to authorize his Starlink satellite broadband service, and yet doing so misses the forest for the trees. Musk's current frustrations are merely the predictable fallout from New Delhi's poorly scripted dealings with him more than two years ago. The entire saga should serve as a stark object lesson in the perils of economic negotiation by exception and the cost of trying to outsmart global trade dynamics.
India's trade policy has rarely been described as nimble. For decades, it has penalized its own consumers through prohibitively high tariffs. Until around 2015, it appeared that tariffs were headed down and trade would further liberalize. Instead, the opposite happened. Tariffs began to creep upward again, a trend broken only when US President Donald Trump imposed penal tariffs on Indian exports in April 2025, jolting Delhi's trade mandarins awake.
Enter Elon Musk. In June 2023, the billionaire famously declared himself a fan of Modi and proclaimed that India possessed more promise than any large country in the world. He assured reporters then that Tesla would enter India as soon as humanly possible, and the market was buzzing soon with reports of an impending $24,000 Tesla tailored for India. But there was a catch. Tesla then wanted to test the waters by exporting cars to India first, including from manufacturing locations like China. And Musk, understandably, balked at the country's punitive 110% import duties.
A protracted back and forth ensued, and for a year it appeared that Tesla might actually bend India to its will, raising the hackles of established domestic and multinational automakers, from the likes of Tata and Toyota to Hyundai and BMW, all of whom, either publicly or otherwise, protested the prospect of an unfair advantage. Eventually, in March 2024, the government unveiled a bespoke policy that lowered import taxes on specific electric vehicles for automakers willing to commit at least $500 million and commence domestic manufacturing within three years. The red carpet had been explicitly rolled out for Tesla.
And yet Musk, perhaps sensing that the addressable market for his vehicles was narrower than projected, began to backtrack. In April 2024, citing very heavy Tesla obligations, he abruptly canceled a planned trip to meet Prime Minister Modi. Instead, he landed in Beijing the same week. The promised mega investment never materialized, and India, of course, went into election season around that time. When Tesla finally did enter the market between July and August 2025, it was with a whimper, not a bang. It opened two showrooms in Mumbai and Delhi and began selling fully imported cars.
Thus far, Tesla has sold about a thousand vehicles in India, all Model Ys. And even a record September for auto sales saw just 291 cars being moved. Categorized now as a luxury EV, Tesla is hardly setting the Indian market ablaze. Predictably, competitors are vastly outperforming it. In September 2026, Tata Motors sold about 14,700 electric vehicles, Mahindra about 7,780, JSW MG Motors about 5,200, and the Vietnamese brand VinFast, which only launched last year, about 2,900 units.
All of these cars, admittedly, are lower priced. But even BMW outsold Tesla in the electric segment. And tellingly, Tesla's global arch rival BYD sold 836 cars in September. And while Tesla has received the royal treatment, BYD, burdened by strained China-India relations, has faced heavy regulatory headwinds for the last six years. BYD also has a manufacturing presence in India, though not for cars.
Looking back, Indian policymakers made two fundamental miscalculations. First, they suffered from the illusion that Tesla would replicate the Apple effect, ushering in an entirely new electronics-automotive ecosystem that would galvanize investment and employment. This ignored the reality that India's automotive ecosystem was already highly developed, boasting massive investments over time from nearly every major global auto giant. Wooing Tesla essentially meant discounting the domestic industry's own hard-won successes.
Moreover, by the time India was beginning to make its EV policy moves, the global EV market was maturing rapidly, and Tesla's preeminent brand positioning was already eroding in the face of technologically comparable, better-priced alternatives from companies like Hyundai and Kia, which possessed vast sales and service networks in India.
The second and perhaps graver mistake was the geopolitical gamble, believing that appeasing Musk was a backdoor strategy to win brownie points with Donald Trump, who secured the presidency in November 2024. In hindsight, it's glaringly obvious that attempts to mollycoddle the Trump administration, directly or indirectly, have failed. If anything, each of these maneuvers has backfired spectacularly.
But can India move faster on trade policy? Certainly. The recent free trade agreements with the UK and Europe demonstrate a capacity for agility, though delayed. But conducting trade policy by exception, attempting to contort national frameworks to satisfy the singular demands of even the world's most famous innovator, has proven to be a series of unforced errors.
And that brings us back to Starlink. The rationale for widespread satellite broadband in India, where terrestrial mobile data is cheap and ubiquitous, is debatable in itself, and The Core Report has argued on this several occasions last year. The real error was allowing Musk and his team to believe that changes to India's regulatory architecture could simply be rammed through, or that broadcasting displeasure on social media could force sovereign capital. That impression was likely cemented during the initial, overly eager engagements in 2023. India is now paying the price for projecting weakness in the face of celebrity capital.
And that brings us to our top stories and themes. The markets could come under pressure as West Asia tensions ratchet up again. Why heavy foreign portfolio investor selling, including about $4.5 billion this month, will challenge the Reserve Bank's moves to lift the rupee. A US clampdown on Indian tech workers puts the spotlight back on the country's AI skills, and why Microsoft's Satya wants to put the brakes on AI.
This is The Core Report with Govindraj Ethiraj.
The war against Iran, started by the United States and Israel, continues to have ramifications beyond what the attackers had envisaged or war-gamed. Yemen's Houthis stepped up their attacks on Saudi Arabia with an attack on Riyadh's international airport that killed 12 people and wounded more than 300 others on Saturday. It was the deadliest such attack in the kingdom in more than a decade and comes amidst an escalation of fighting between the Iran-backed Houthis and the Saudi-backed Yemeni government forces.
Reuters reported the Houthi warning on Sunday that airlines, travelers, and airport workers should stay away from Saudi airports, and that Saudi airports and airspace had become a theater of operations for their forces, with the exception of the airports in the holy cities of Mecca and Medina. The Houthis said in a post on X that they urged everyone to take their warnings seriously, and Saudi Arabia bears responsibility for any failed interceptions.
In the US, President Donald Trump said he was considering joining Saudi Arabia in its retaliation against the Houthis after the deadly attack on Riyadh's airport, a move that would effectively pull the US further into a second front in the Iran war. Oil prices that closed over the weekend were at about $104.70. That's Brent crude, which were up slightly, and it does appear that they could be under pressure this week.
So where will oil prices go today? Traders will obviously weigh the tensions in West Asia versus US President Trump's announcement of importing diesel from Russia, which could moderate prices for diesel in the US. Now, this, of course, is a mind-boggling volte-face, even at a time when we're getting used to such dramatic about-turns. Trump on Friday said that Russia will supply more than 4 million tons of diesel to the global market under a deal he struck with President Vladimir Putin during a phone call.
The Treasury Department temporarily waived sanctions on Russian diesel through April 2027 under a general license issued on Friday. So effectively, countries like India could still face US sanctions for importing Russian crude, but the US itself is importing Russian diesel because it's running short of it. Prices are at record highs, and of course, midterm elections are around the corner, and the markets will continue to follow oil prices.
But last week did end well. India's benchmark indices turned around sharply on Friday after a hammering on Thursday, thanks to higher crude oil prices, higher bond yields, and foreign portfolio investor selling. On Friday, the Sensex closed up 879 points to 72,472, and it gained about 8% for the week, ending a record eight-week losing streak. The Nifty closed about 4% higher to about 22,520.
The second-quarter earnings season has begun in earnest, as we've been pointing out, with some focus on IT services companies, with companies like HCL Technologies, Wipro, and Tech Mahindra reporting their September quarter results shortly. TCS, which reported earnings last week, seemed to have delivered better-than-expected numbers, and the stock price responded favorably last week.
The big news for Indian IT was the US government last week suspending eight IT firms, including TCS, Wipro, Cognizant, and Microsoft, from a program that allowed applications for green cards for foreign workers, on the charge that the practice has shut out Americans from the job market. And more on that shortly.
Foreign portfolio investors have resumed heavy selling, in signs that other markets are still looking better or India is looking weaker, including the US, where bond yields are now above 5% and at their highest since 2002. In the month of October alone, foreign portfolio investors have sold more than $4.5 billion, after having sold in September as well. This selling is also putting renewed pressure on the rupee, which is continuing to slide down despite the earlier inflows, including the close to $140 billion via foreign currency non-resident deposits last month.
The Reserve Bank over the weekend rolled out a series of measures to support the sliding rupee, in what is perceived as its strongest action since the last currency crisis in 2013. On Saturday, it announced a series of steps, including opening a special window to meet state-run oil companies' dollar requirements and the introduction of a new China central bank-type tool requiring banks to set aside cash with the Reserve Bank of India for some foreign exchange transactions.
Bloomberg reported the Reserve Bank's surprise announcement on Saturday is expected to support the rupee, which is also Asia's worst-performing currency this year, and closed on Friday a little above its record low of 96 rupees 96 paise per dollar. Now, the Reserve Bank's reserves have fallen by about $51 billion in the four weeks to October 2nd, mostly lost to defending the rupee.
In 2013, the Reserve Bank had introduced a dollar window for oil companies and provided about $12 billion to refiners to help stabilize the currency. Remember, India imports close to 90% of its crude oil requirements. One analyst told Bloomberg that the Reserve Bank's measures represent a virtual shutdown of the market. The dollar demand from hedging and from oil companies will now exit the market. Plus, there are severe restrictions on export and import activities, and thus should see at least a 1% rally in the rupee on Monday.
But the larger problem, of course, is not the vast menu of small steps, but the broadest signal or signaling on where investors believe the economy is going or headed, or the underlying attractiveness of stocks, and of course foreign direct investment, which takes longer to come. Now, that is a problem that these line-by-line responses usually do not address.
The US government said on Thursday it's suspending some major global tech and IT firms, including Microsoft and Cognizant, from a key green card program that allows skilled foreign workers to gain permanent residency through their employment. A Reuters report quoted senior US officials citing alleged fraud as the reason behind the move, saying companies have been using the program to replace American workers with cheaper foreign workers. And this, of course, is another step, and the most recent one in the Trump administration's crackdown on skilled foreign labor.
Companies like TCS on Friday said they do not expect the US action on the green card program to affect their workforce strategy or customer engagements, pointing to their single-digit applications under the program in the last two years and a focus on local hiring. The larger question, of course, is where India stacks up right now in its IT services offerings to clients who are predominantly in markets like the United States, and more importantly, where artificial intelligence is taking the new proposition.
I spoke with Srikanth Velamakanni, chairperson of industry body NASSCOM and also co-founder and group CEO of Fractal Analytics, and I began by asking him how he was reading the latest developments.
