Expeditors International of Washington, Inc. ($EXPD)

All right. Thank you, everyone, for joining us today. This is an Onyx webinar really focused on India and how it's going to be navigating its future in a rapidly changing environment. And today, we're going to spend about 45 minutes presenting, and we'll have about 15 minutes for Q&A here at the end. If you could please submit questions throughout. [Operator Instructions] And at the end of this, if you would please complete a survey that you'll receive via e-mail, that will give you an opportunity to get the slides that we're presenting here today for you to use. In terms of future webinars, please feel free to use this QR code in order to access the link to sign up for our e-mails, and that will include notifications about webinars. We publish a lot of our work on LinkedIn as well as our blog, the Vantage Point blog. You can find the QR codes for this here as well. So if you'd like to keep up to date with what we're thinking, what we're currently forecasting, then this is the best way to do that as well. Just to give you a quick introduction to Onyx. Basically, our goal is to help clients really anticipate and understand their geopolitical and regulatory and economic risks to their supply chains as well as their opportunities. And we really try and focus on helping clients build more resilient and sustainable and efficient supply chains. We do this a couple of ways with our clients. We really do this through a project and retainer model, and we work with all sorts of different roles. So trade and compliance, sourcing and manufacturing, transportation, logistics and distribution. And we also work with strategy roles. And again, we do this really as a way to help these clients build out that resiliency that is so needed in this environment. Today, I'll be introducing Shiv Nalapat. Shiv has spent the last decade really building out his capabilities in intelligence and also journalism. He has spent -- he has just joined Onyx very recently. So this will be his first webinar. So we're excited to have him. And his expertise is really on India in all of its depth. So with that, I'll introduce Shiv and ask him to come on.

Hi, everyone.

All right. All yours, Shiv.

Thanks, Melissa. So -- yes, so today, what I really want to do is just take a step back from what is often the prevailing narrative around India and the optimism, the comparisons to China, the idea of India as the next global manufacturing hub and instead maybe frame a more grounded sort of forward-looking discussion, yes. So if we can move to the next slide, Melissa? Yes. So the way that we've sort of framed this is really just to position India globally, what that looks like. And then after that, what we've tried to do is identify 3 primary structural challenges that India will have and how it -- what that India has and how it has responded to those and what that policy trajectory is likely to look like for -- over the next, say, 5- to 10-year horizon. And following that, what kind of implications those might have to manufacturers and exporters? And hopefully, I can finish up on time, and we'll have about 15 minutes or so for Q&A. Yes. So just really, really quickly, I think it's probably really worth trying to understand -- trying to step back and look at how India's development model really differs from China's because much of that expectation around India is still implicitly shaped by that comparison. So really, China's growth model was built on centralized coordination. You had large-scale public investment and really a clear focus on building out complete industrial value chains, I'd say. And it really had the fiscal capacity to do this and the institutional structure to really pull off a whole system-wide transformation across manufacturing, logistics and infrastructure. And it's managed to do this within a relatively sort of compressed time frame. But India really operates quite differently as a federal democracy. Economic policy is really not just shaped at the national level, but really across states, and implementation is very much decentralized and coordination is uneven. And fundamentally, that changes what is possible. China's policy orientation has been towards self-sufficiency and control and building out their domestic capabilities across the entire value chain. But I would say India's orientation is a lot more pragmatic. It is about diversification and hedging and sort of selective integration into global systems, picking and choosing where -- what it wants to do and where it can do it and who it wants to deal with. And here, even the foundations of growth are different. China really built its trajectory on heavy industry and deep manufacturing ecosystems. But India's real strength and foundation is -- was services and now as we move over the next 5 to 10 years, infrastructure and high tech as well. And India is quite unconventional in the sense that it seems to have leapfrogged that manufacturing stage that countries developmental path usually goes through. So India still has a very, very large agriculture sector, but manufacturing still accounts for only about 12% of output and the rest really comes from services. But yes, I guess the most important point here is that India does not and realistically cannot match China when we're talking about the level of logistics and process efficiency, certainly not in the near term. So when we generally talk about India's export ambitions, it's really critical to recognize that the path it's on is very, very different structurally. It's not a delayed version of China's trajectory, let's put it that way. It's a different model altogether. Melissa, could we move on to the next one? Yes. So this is essentially how we've thought to frame the webinar, the 3 challenges that we've sought to look at, the first of which is India's existing competitive base. India is trying to build out its export competitiveness from a starting point where its export composition has remained relatively stable over time and where deep integrated manufacturing ecosystems, particularly in higher-value segments, they're still very much in the infant -- developing stage. So it's not really a blank slate where India is coming from. And the second challenge here is infrastructure and more specifically the interaction between India's own, I guess, infrastructural ambitions and the fiscal reality that it faces. So India has over the last decade or so, clearly accelerated its logistics build-out. But it is very much doing so now in what is very much a constrained sort of fiscal environment. So what it's had to do there is what it means is that any public investments have now become very targeted. Infrastructure investments are now corridor-based and very -- and phased, let's say, not really systemic in the way that we've seen in other economies, China being the most notable one. And the third challenge, of course, is governance. and more specifically, the fact that India's economic sort of lay of the landscape is fundamentally shaped at the state level. So you have execution varies, administrative capability varies. And as a result of that outcomes also vary. And that introduces a degree of, I'd say, internal divergence, internal fragmentation that has real, real implications for competitiveness on a manufacturing level as well as on an export level. But what's interesting is not just the challenges, but how India has sort of responded to them. To the first of them, India has moved towards, I guess, identifying strategic sectors and using targeted incentives really to attract private capital or foreign investment. It's not a state-led industrialization model. And really, it's an attempt to, I guess, accelerate or catalyze ecosystem development through really, really targeted interventions. But to the second, the response here has been quite realistic, pragmatic. What they're looking for really is an incremental infrastructure build-out, particularly through logistics corridors and industrial corridors rather than attempting a full-scale transformation. And here with the third, the response has struggled a little bit simply because there's -- they can -- there's oftentimes a lot of friction between the federal government and state governments and limited coordination, which means that divergence across states is not only persisting, but in many cases, also widening. So just to sum it up, the opportunity in India is real, but very simplistically put, it is concentrated, and infrastructure improvements are happening, but they are looking uneven. And your operating condition as a manufacturer or an exporter will really depend quite heavily on where you're located in the country and not just at the national policy outlook. But yes, so I thought maybe now it might just be worth looking at India's trade policy. So India still maintains some of the highest tariffs and non-tariff barriers. And quite honestly, the -- where we're at right now with the kind of uncertainty around the global trade environment and more so over the last, say, 8 to 9 months or so, we have seen a bit of a recalibration that India is sort of undertaking. And what remains consistent across all of this is very much the intent. But India has started looking for particular sectors, industrial inputs and machinery, especially at the intermediate goods level, where it sees an opportunity to sort of liberalize and open out its economy more. And something that we've seen over the last 2 to 3 years as well is that India is becoming a lot more amenable to establishing bilateral trade partnerships with other countries. We saw this with several trade deals that made prior to the -- prior to this year, prior to 2026. But I think that's also -- that's very much been accelerated this year. We've seen India signed BTAs with New Zealand, with Oman, with Bahrain and of course, the 2 major ones -- with the U.K. as well. And the 2 major ones, which are very much in the pipeline, which is the one with the EU bloc and the U.S. trade deal as well. But at the same time, India is coming from a place where it has been quite protectionist and those inclinations will still persist, especially when it comes to sensitive sectors like agriculture. The reason I mentioned agriculture here is because it still forms a huge part of India's economy. And agricultural unions still wield a lot of political power, and there's a very large electric -- very large voter base that needs to be catered to there. So from a political standpoint, liberalizing an economy like agriculture in India will have very, very severe ramifications. And if India was to do something like that, it would need to be telegraphed over a good 10- to 15-year period with deep consultations with these agricultural trade unions as well. It's similar in certain consumer goods sectors as well. But amid this sort of trade environment, India is also responding to national security concerns, trade-related concerns as well. So we are likely to see a little bit more stringent, I guess, monitoring over strong -- over rules of origin and foreign investment coming in and general security screening there. But at the same time, India, I think now is trying to rewire its trade architecture also to align with global standards. So one example that comes to mind, of course, is the CBAM regulations in the EU. Yes. So with this slide, the point that I really want to make is how India's trade policy has evolved over the last decade. I think when the current government came into power in 2014, I think there was an acknowledgment there that India sort of missed the initial export competitiveness boat. And what followed from that acknowledgment was a gradual push towards launching a more holistic export push and building out India's manufacturing capacity as well. So we did see the Make-in-India initiative launched then. And that was a period for about -- from 2014 to about 2018. And then I think in 2019, 2020 is when India had another sort of policy inflection moment where it realized it needed to accelerate its ambitions or like sort of increase the scope of its ambitions, which is when we saw India's flagship scheme, the Production Linked Incentive scheme be launched as well as other sectoral incentives as well as its key logistics push, which is the Gati Shakti logistics model. And then these -- I think its approach seemed to be validated as we entered the COVID pandemic, and we did see the drive to this China Plus One model and India sort of realized that it could position itself as an alternative. But where we are now, of course, is in a very, very uncertain trade environment. So India has displayed, I would say, a great degree of nimbleness in trying to recalibrate its trade policy and focus more on these bilateral partnerships, let's put it that way. So yes, if we can sort of now just move to India's PLI scheme and specifically because I think this underpins -- really underpins or rather represents where India is trying to build out its export competitiveness strategically. It was initially introduced with considerable ambition covering a wide range of sectors and aiming to rapidly scale manufacturing. But since then, the outcomes have been mixed. And now we're seeing a shift toward refinement rather. So rather than expanding the scheme broadly, the focus is moving towards making it more accessible and more effective, lowering investment thresholds, making time lines more realistic and improving implementation, improving disbursements, which has often been a complaint by many manufacturers who have availed of the scheme. Alongside this, we are also seeing emerging priorities in areas like artificial intelligence and data infrastructure and semiconductors. But even here, the approach is quite pragmatic. It's not -- India is not attempting to really compete with the U.S. or China in frontier AI development, but it's focusing on AI diffusion. The semiconductor push on the other hand, is more of a long-term ambition. But just to move now to -- move the focus now to India's export composition. And this is really where the conversation becomes more grounded because the instinct here is always to look at growth -- export growth rates, how fast exports are increasing, which sectors are expanding. But it makes sense to also look at what is actually being exported and how that is changing over time. And if you look at the data there, over the last decade, we haven't really seen a rapid transformation in export composition. It's pretty much been relatively stable across all major export categories. The one clear exception here is electronics and electronic equipment, where we have seen a meaningful increase. But even there, it's important to unpack what that growth means. This expansion has been driven by largely assembly-led manufacturing rather than deep domestic value addition, which actually brings me to my next point because when we talk about moving up the value chain, we're not just talking about exporting more. We're talking about how much value is being created domestically with those exports. So the first takeaway there with the visual on the right is that export transformation has been inherently slow. It's not just a function of policy direction. It depends on supply chains, supplier ecosystems, workforce skill depth and integration into global production networks. So these are structural features, and they will evolve over longer periods. Yes. So now if -- having looked at the export composition, we might just turn our focus to how goods actually move through the system. We begin to see how these logistics -- how these various elements interact with this challenge. So from the point of production, goods move through multiple stages, inland transport, handling nodes, consolidation points and finally to ports or airports. And each of these stages introduces its own set of constraints. So road transport can be affected by congestion. Inland handling involves multiple touch points, each coming with their own sort of delays and coordination between nodes many of the time across states is never seamless. So the point here is that by the time goods actually reach the port, the cumulative effect of these frictions is compounded and sort of already embedded in the system. The point here is not that any single stage is sort of broken, but just that these frictions are incrementally sort of buildup in this multilayered sort of fashion. Can we move Melissa? Yes? So just from a sort of national level, what we've also looked at is a comparison -- logistics performance comparison of India and some peer Asian countries, specifically the ASEAN countries. And the key takeout here is that India's logistics performance has improved over the past few years. There has been progress in tracking customs processes and service quality. But overall, India still ranks very much in that mid-tier position. It's broadly comparable to countries like Vietnam in some areas, but still very much lags places like Malaysia and Thailand, particularly when it comes to infrastructure quality and overall system integration. And -- but that gap is not -- is quite honestly, not accidental. Those countries have cumulatively invested a lot into building out that coordination and execution. But in India's case, it's been quite fragmented. And one of the key reasons for that is because India is dealing with these fiscal constraints as well. As interest payments on its public debt take up a larger share of government expenditure year-on-year, the room for any large-scale public investment becomes more constrained. So while infra will remain a priority, it cannot expand indefinitely. So what this means is that logistics improvement will continue to be targeted rather than expansive. But yes, so this brings us to India's Dedicated Freight Corridors, which I'd say are one of the most significant sort of structural upgrades India has undertaken, but it's quite critical to understand what they do and what they don't do. The benefit -- the real benefit of these DFCs is that they separate freight from passenger traffic. So that alone will improve reliability significantly. Freight trains are no longer sort of subject to the same level of disruption and scheduling becomes more predictable. And that predictability has very immediate short-term sort of value. For exporters looking to plan shipments, they can do it with a little bit more certainty and coordination with buyers. But what it doesn't really do just yet is dramatically reduce costs. And the reason for that is that, that really depends on system-wide efficiency, not just track level improvement. So for cost to really come down, you will need these corridors to be utilized more efficiently, which will take time and then more seamless integration with ports and then more efficient sort of first mile and last mile connectivity. But to move on, if we look at now gateway capacity, specifically ports and air cargo, we are seeing that capacity is expanding, and throughput is increasing year-on-year. And Importantly, this expansion is broadly keeping pace with trade volumes. So from a pure capacity perspective, ports and airports are unlikely to be the binding constraint going forward. But what that does is really shifts the question. So if the gateways are functioning, then where is it sort of -- where are frictions? And the answer sort of lies in how efficiently goods can move to those gateways. In other words, the constraint shifts inland because it means that further improvements in export performance are less about expanding throughput or capacity at these endpoints and more about improving connectivity and coordination within the country itself. If we can move on to the next slide. Yes. So we've also looked at the export release times, of course, at the seaports and the air cargo complexes, which are the endpoints, but also at the internal nodes, the Inland Container Depots and the integrated check posts. Those -- I'd say we've seen meaningful improvements in clearance times pre-2002, but more recently, that pace of improvement has slowed because once the major inefficiencies are addressed, any further gains are harder to sort of achieve. At inland nodes, these ICDs and integrated check posts, we see noticeable improvement still single-digit sort of year-on-year improvements. But that's also partly because these areas started late, they started from generally a lower base. But the main takeout here is that performance still remains quite uneven when we compare India to regional peers as well. It has very much a mixed picture at these major gateway nodes, India is reasonably competitive, but the consistency across locations still remains a challenge. What we've done also is we've looked at labor as well and labor availability in particular. And this is one area where it's quite unsurprising that India has a very, very clear advantage. And that's certainly true. India has a large and a growing workforce and especially in manufacturing as well, it far outcompetes Asian peers. But here, what matters for manufacturing is not just the availability of labor, but the availability of reliable production-ready labor. And here, the point that I want to really drive home is that we see a lot of divergence across states. Certain regions, as we'll see a little bit later on, have developed very, very strong labor ecosystems often tied to specific sectors or industries. For example, Tamil Nadu has deep capabilities in automotive and electronics manufacturing. Karnataka has built strength in electronics and aerospace. Gujarat has industrial and chemical clusters as well. And these ecosystems haven't really emerged overnight. They're a result of the first movers among the states who just generated sustained investment and provided consistent policy support and industry presence. The thing is once established; they tend to sort of reinforce themselves. So for companies, the question is not really whether labor exists in India. It's really where the right combination of skills, reliability and supporting infrastructure exists. So that makes location decisions very, very critical. Can we move on, Melissa? Yes. So we've also looked at a state level where FDI seems to have concentrated. And it really sort of reinforces that point about state level divergence. FDI in India is not at all evenly distributed. It's just a handful of states really that attract most of it, those that have built strong industrial ecosystems and really demonstrated execution capacity, relative execution capacity over the last, I would say, about 10 years or so. And this creates what we might call path dependence. So investment flows to where capabilities already exist and those -- which lead to those capabilities then strengthening, which then increases that state level divergence. This doesn't really mean that new regions won't emerge. In fact, if we move to the next slide, we're already seeing that in states like Uttar Pradesh, Telangana and Andhra Pradesh. But these emerging hubs are building on existing strengths, connectivity, policy support and just general sectoral focus. And it will take time for them to reach the same level of depth as your more established clusters and hubs. So if we map this out geographically there, so we can -- what we can see is that India is at a state level, it's very much cluster driven, established export hubs, Tamil Nadu, Maharashtra, Gujarat, Karnataka, really, really anchor, I'd say, India's export performance simply because they benefit from these deeper ecosystems, better logistics connectivity and more skilled and experienced sort of labor pools. These emerging hubs are gaining traction, but very much still in development. And their own competitiveness will depend on how effectively, I'd say they can build and sustain their own sort of ecosystems over time.

All right. Thank you very much, Shiv. So I think we're going to move now to question and answer. And I'm also going to invite Leo to join us. Leo is a senior consultant who has an expertise within supply chain design. And Leo, I want to start quickly with you before we turn to some additional questions. I think -- I know that you've done some work within -- focused on India and the broader region. What trends are you kind of seeing in projects within India?

Yes. So I can tell you that over the past 11 years that I have worked in supply chain design projects that I've seen a strong shift on the customers looking at sourcing their -- shifting their sourcing locations from China to the Western countries. So looking at Malaysia, looking at India, looking at Vietnam examples going from Hong Kong to Hanoi, but now looking at Malaysia, but always having a small presence in India, but now India has become more of an interest. Then with that said, more customers are now asking a question of where should I put a fulfillment center or a DC in Asia Pacific. So with this is basically the demand is growing in Asia so much now that it used to be that customers will bring the cargo to the U.S. or to Europe and only bring back the demand that is required in Asia Pacific. But now that the demand is sufficient, customers are asking, should we have a DC or a fulfillment center in Asia Pacific and where? And this answer is dependent on your customer profile. But the point is that now you have to consider if you're starting to just look into India, looking to what are the critical points or cities where you should have the distribution network in India as well. So you're not just looking at the sourcing but also looking at where should I have a DC. Then a third trend that I'm seeing is multiple country consolidation. And this is as you're moving away from China, you're now having different suppliers all over in the Western countries from Asia, which means that now you have multiple containers that you have to move from different locations. But many customers are asking, well, what if I combine this cargo, consolidate it in a single port of origin, and that will leave me time to negotiate with my steamship line, my forwarders and then have a better rate. That would also give me stability on my transit times. And it sounds good on paper. But when we have done these studies, we realize that, first of all, you have actually an increase of transit times by 14 days -- 10 to 14 days. But then the cost also increases because you see that, first, moving the cargo from one country to another tends to be expensive because that provider may not have cargo to move back to the original country. Also, you need additional paperwork when you actually move from another country, and you have now to -- there's a requirement of having the original goods from the port that you're actually exporting the products from. So it's a lot of more complexity around that the customers may not see this. But basically, these trends is what I'm seeing. One is the source of goods is shifting away from China to Western countries. There is now the need for having network design projects or DCs in Asia Pacific and MCC, the multi-country consolidation.

That makes sense. And I think one of the key messages that Shiv has delivered here is the differences between each state, some of the difficulties of moving between states. And so I'm curious in terms of the studies that you've completed, what do you see as some kind of takeaway for people who do want to operate within this space?

Yes. I saw that as well that when we have this network design and looking at where should we put a DC for now serving demand in India as well, it's not the same as what you have in the U.S. in terms of road infrastructure. So there's not a lot of standardized regulations such as how many miles a driver can actually travel or the roads, the conditions as well. It's improving. It's getting better, don't get me wrong, but it's not the same as what you see in the U.S. and Europe. So what we have seen is it's better to have a good manufacturer that has a strong presence because basically, the transportation could have congestions that will severely disrupt your supply chain. So you have to make sure that your supplier is reliable, but also look at already third-party logistics providers that are having a good or strong presence in major metropolitan cities so that you can rely on them because they're moving cargo constantly between these cities, and you know there's going to be consistency when you move between them.

Excellent. I appreciate that. And we're getting some questions in from the audience as well. Please do continue to send those in. We have some questions as well from registration. So please feel free to jump in with those. But for now, I think one of the things that people -- we got asked quite a bit leading into this was really around how India is being impacted by Iran. And of course, that's something that's on everyone's mind. So Shiv, when you're thinking about immediate impacts on India from this crisis in the Hormuz Strait from U.S. and Israeli strikes on Iran and Iran's response in the broader region, what do you see as kind of the short-term immediate issues?

Yes. Thanks, Melissa. It's a really important question. So quite honestly, on the economic side, the first issue is energy. I mean India's government has sort of said that crude supply is still relatively secure. But the fact of the matter is that India's own strategic reserves, the estimates sort of vary. But if you were to add them up and then you also add up whatever crude inventories are there at the refineries, we're talking about a 50-day to 70-day sort of buffer time that they have, after which is when we really move into that sort of crisis zone. So there is a little bit of wiggle room or breathing room that India has on the crude side. But where that doesn't exist and what we're actually seeing our play as a bit of a crisis in India now is with LPG, liquefied petroleum gas because India doesn't have any strategic reserves for this. And this is -- India's -- I think what's become quite evident now is very much a sort of dependence -- the dependence that India has on just a handful of Middle Eastern states for their LPG, specifically Qatar, UAE and Kuwait. So that's the first realization, of course, that the Indian government will have made and will now need to address. But with energy -- with an energy crisis like this, whether it manifests via crude or LPG, this also has political risks, right? India's -- next month, for example, India is going to 5 elections. And I'd say about 3 of those states, Kerala, Tamil Nadu and West Bengal, West Bengal being the electorally most significant just because of its huge population. The energy crisis that we're seeing play out across India is definitely going to be turning into a voter issue as well, whereas initial sort of analysis would have corruption or your more general cost of living affordability issues as your main hot button topics. Now we could look at voter behavior being completely defined by this -- the economic and energy security that we're facing right now. We're seeing hotel unions protesting. We're seeing transport unions protesting. So it does very much have significant economic and political ramifications. Yes, go ahead. Go ahead, Melissa.

So when we're talking about the specific local environment being so incredibly important within India, it seems like that can have really operational impacts as we're looking at these particular states. In terms of kind of the broader impacts on the political environment, how do you view -- taking a step back from an individual election, how do you view them?

So I would say it would very much depend on how the government responds to this from a communications and a messaging standpoint. And in my own view, it hasn't been -- the current -- the incumbent government hasn't been very good at that. We saw this play out even at the early stages of the COVID-19 pandemic. I remember the date, in fact, was March 28. I think the government came out with an announcement that the entire country was going into a lockdown 12 to 14 hours before it did. So you can just imagine the kind of chaos that it would cause across the entire country, right? So the messaging has to be a little bit more transparent on this. But if you're looking at the political risk that it might cause the incumbent government on the longer term, that's -- I would say that's a little bit less of an issue simply because there's a lot of fragmentation within India's political opposition. The current sort of political coalition led by the BJP, we saw it play out in the elections. They had a record percentage of voters voting for them. And the second largest party, of course, is the -- fundamentally the Indian National Congress. And we saw their vote share fall from the previous election. So because of the frictions between various opposition parties, the INC or whether it's other regional parties, they're not able to really put up the unified front as a real alternative to the government that we're seeing right now.

And in terms of -- so it sounds like a lot of the focus is on energy, but also the secondary impacts from that. So it's not just being able to import oil but -- or natural gas, but also LPG in particular, which has its own kind of political associated repercussions. And down the line, I think what we're seeing in a lot of places is just this impact on the cost to produce, right? So India has very much a capability to refine oil, and it could do so from many different places. It's obviously going to cost more. Natural gas is a little bit more difficult to get on the open market. Certainly, it's a smaller, less liquid market. And ultimately, the impact on production costs within India is the big question. There is a bit of an advantage in that India remains very coal dependent for its electricity. Does that sound about right to you, Shiv?

Yes, yes, that's right. And I also think, obviously, there could be lots of twists in the tale over the next month, 1.5 months. That sort of strategic approach that India has always had since really independence, the principle of non-alignment can actually work in India's favor if it manages to do so -- if it manages to do so sensitively because as a result of that, certainly when it comes to crude, it can find -- it can -- it has more sort of diverse crude import portfolio. Russia, for instance, might be one of the biggest benefiters of -- in relation to India's crude sort of imports. But once again, how much will that weigh on India-U.S. tensions and the trade deal that they're also negotiating. So this principle of hedging, let's put it that way, it has pros and cons.

We've got a question specifically about the U.S. trade deal. So maybe we could dive into that a little bit. Shiv, can you speak to how you see that playing out? What are you currently seeing from the Indian side?

So -- I mean, I would say over the last 5 to 6 years, what's become really evident just across the international sort of trade policy circles is that India is very difficult to negotiate with. So they drive a hard bargain simply because they're very cautious about the economic and political sort of impacts that liberalizing their economy might have and perhaps overly so in certain areas. So even with the India EU deal and with the India-U.S. deal, it's taken years and years and in some cases, even decades to get where we are right now. And I'd say when President Trump came into power earlier this year, there was a lot of optimism in -- sorry, earlier last year. There was a lot of optimism in India that the relationship -- the political relationship between Modi and Trump might actually get this over. And then what happened was the Liberation Day tariffs, which nobody really saw coming in or nobody saw coming in that sort of fashion. So I think given the kind of uncertainty that we now have with the U.S.'s own sort of tariff strategy and tariff architecture and also now with the Supreme Court ruling on the Supreme Court IEEPA ruling, India won't be in any hurry to push things through specifically because they will want to know what legal -- they'll want some more legal clarity on the U.S.'s tariff strategy and whether this deal might be -- the foundations of this deal itself might collapse at any point in time.

So you believe -- so we've seen like in a couple of other places, right? We've seen Malaysia come out and say explicitly, we're not adhering to this deal. And frankly, it was somewhat driven by the events of Iran. Maybe I would love to have Suryo want to ask, but to understand a little bit more deeply. But there is a lot of sense of concern for Iran and its population, and it's resulted in this kind of pushback on the Malaysia deal. We've also seen the United States making some important concessions, right? So now not much detail has emerged yet, but we had -- we've heard that USTR Greer is willing to make some concessions on steel derivatives with the EU, for instance. And it's an interesting time where the United States seems to be heavily constrained. The administration seems to have limited bandwidth to maneuver here and might be more open to concessions. Do you think India might press more aggressively here?

I certainly think so, given the way that they've negotiated in the past. I would say it's very much in their strategic interest to draw this out -- at this point in time to sort of draw it out and not jump into something too hastily. Just to see what kind of pressure it can exert on the U.S. and what kind of concessions or whether it can sort of water down some of the commitments it has made to the U.S. in the original sort of U.S.- India trade framework because if I remember the number, I think it was about $500 billion in investments over, I think, a 10-year period of time or so. I'm not sure if the time frame was 10 years. But that is a significant amount. I mean, it's difficult to see how you do something like that. So -- but ultimately, it's just a framework. So it's not been legally vetted. So I think, yes, it would be in India's sort of strategic interest to do that, to protract it out, draw it out as much as possible.

And I think that -- I think there's this question for a lot of negotiators right now is, do you act now while the U.S. administration is obviously in some distress, essentially facing pretty significant net negative popular perceptions on particularly the war? Or do you wait to see what happens post midterms and see how the administration fares there. You may come out of the end of the midterms with a more powerful Trump administration, more willing and able to take on some of these more retributional actions or we may see a further weakening. And so the question is, when do you act? And it sounds like India may choose to act sooner rather than later.

Yes. So that's the thing, right? You mentioned the midterms. But of course, there is the Section 301 tariffs as well, which is a little bit more of an immediate sort of issue. So we have time lines for that as well, right? So at the end of May is when I understand the hearings and the consultation period ends. So I think we'll have a little bit more clarity between that end May period and end June period, which is also when I think the 122s expire, the Section 122 tariffs. So we'll have a little bit more clarity on the U.S.'s trade approach, not just towards India, but globally.

More broadly. And I think one of the questions is essentially where will the tariffs land. And while all we can do is kind of look at the constraints and likelihoods, right? I would say that I tend to believe that the United States really needs to keep India in a relatively good position compared to other sourcing markets just simply because of its scale. And if you think about the United States essentially pursuing decoupling from China, which I believe it still is, ultimately, it really needs that manufacturing base. There's not much choice from the United States. That doesn't mean that we might see a few points difference, right? And that could be significant for those moving goods in and out of India.

Yes, you know this -- yes, go ahead, sorry.

I was going to add that what I've seen as well on other customers is that they're now splitting the sourcing in different countries so that depending on the tariff, you have sourcing in India for products going into certain regions in Latin America and then other sourcing going into the U.S. and really depends on the products and the tariffs that you have. But basically, you are now splitting your sourcing, which maybe you are already doing it at some portion, but now you have the excuse to do it so that you don't pay the tariffs. So it's something to consider as well.

Absolutely. And so we only have about 2 minutes left. So I want to make sure we got to at least one more of these questions. One of them is about the relationship between India and China. Specifically, how are trade relations between these 2 playing out?

So more recently, we have seen a bit of a thaw between India and China. We've seen more diplomatic engagement. We've seen more disengagement at -- troop disengagement at these border areas. I think there have been about 24 or 25 rounds of negotiations, but it's the more recent ones where we're actually seeing some actual progress being made there. And then recently, India has also relaxed some of its rules on Chinese investment. So I don't think India's approach to China is going to -- long-term strategic approach to China is going to change at all. But it's -- I think it's promising to see that a softening of tensions between the 2 since the Galwan Valley clash, I believe it was in 2022 (sic) [ 2020 ]. And also in the near term, it very much makes sense for India to maintain strong relations with China simply because China has huge, huge economic leverage over India. I mean, as far as input dependence goes on a manufacturing level, it's without the raw materials and inputs coming in from China, India will very, very much struggle to build out its own sort of ecosystem there.

That makes sense. All right. Well, we're at the hour. I don't want to keep anyone longer than we should. So thank you very much for joining us. Please do fill out that survey so that you can receive the materials from this call, and we appreciate your time. Thank you.

Thanks, everyone.