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Blog resource for 6th Form, with contributions from teachers and students.
Thursday, 23 May 2024
Thinking about the work we did on innovation...
Monday, 12 September 2022
India overtakes UK to become the 5th biggest economy
This is a typical one-sided article - it tells you everything good but makes no mention of obstacles. Last week's Moneyweek does, so if you want a contrasting view go look it up:
India is quietly laying claim to economic superpower status
The rise of China has been the biggest story in the global economy in recent decades.
Published by
12 Sep 2022
The rise of China has been the biggest story in the global economy in recent decades. But amid concern about its stumbling property market and global fears about inflation, the emergence of its neighbour, India, as a potential new economic superpower may be going under the radar.
You won’t find mention of it in Liz Truss’s blueprint for a “modern brilliant Britain”, but the UK has just been overtaken by India as the world’s fifth biggest economy. The nation of 1.4 billion people is on track to move into third place behind the US and China by 2030, according to economists.
And while the world became familiar with Chinese business titans such as Alibaba founder Jack Ma, the staggering wealth accumulated in recent years by Indian billionaires Gautam Adani and Mukesh Ambani has been less well publicised.
Adani, in particular, has come to represent India’s growing economic strength thanks to the rapid expansion of his Adani Group conglomerate, which covers everything from ports to airports, and solar power to television. Having entered the global Top 10 when he became Asia’s richest person in February, he is now ranked third with a fortune of $143bn (£123bn) and is closing fast on second-placed Amazon boss Jeff Bezos.
India was for many years seen as the poor relation to China, held back by a sclerotic, sprawling state sector and labyrinthine bureaucracy. It still has enormous problems of poverty and poor infrastructure, but it is beginning to emerge as a rival to its large neighbour with the kind of economic growth figures that were once the pride of Beijing.
Gross domestic product (GDP) grew by 13.8% in the second quarter of this year as pandemic controls were lifted and manufacturing and services boomed. Although double-digit growth is unlikely to be repeated in subsequent quarters, India is still on track to expand by 7% this year as it benefits from economic liberalisation in the private sector, a rapidly growing working population, and the realignment of global supply chains away from China.
“India has overtaken the UK to become the world’s fifth-largest economy,” says Shilan Shah, senior India economist at the consultancy Capital Economics, citing recent updated figures from the International Monetary Fund. “Looking ahead, India looks set to continue its march up the global rankings. In all, we think India will overtake Germany and Japan to become the third-largest economy in the world within the next decade.”
A key part of India’s continued rise will be its ability to grow its manufacturing sector and challenge China as the world’s No 1 exporter. India has already benefited from a large, well-educated, often English-speaking middle-class, helping the country to develop world-class IT and pharmaceutical sectors. It also has strong consumer demand, which accounts for about 55% of the economy compared with less than 40% in China.
Now the trick will be to benefit from its youthful working population to position itself as a manufacturing power to rival China, where an ageing labour force and rising pay levels are reducing its competitive edge. With a geopolitical wedge opening up between China and the west, India also has the opportunity to grow in reshaped international supply chains.
Nguyen Trinh, emerging markets economist at Natixis bank in Hong Kong, says the outlook is promising for India if it can keep investing.
“Indian demand is expected to be strong due to its demographics,” she says, “which is rather favourable with rising working-age population that will push for demand for essentials such as food and energy as well as infrastructure investment. The normalisation of activities post-Covid as well as an increase in government spending, particularly in infrastructure investment, is helping growth. Consumption rose in double digits and investment is accelerating.”
As with many aspects of India’s economic rise, Adani’s story is instructive. Now 60, the billionaire dropped out of Gujarat University, moved to Mumbai, and began trading diamonds before expanding into ports, construction and – latterly, but very profitably – renewable energy.
These widespread industrial interests have dovetailed perfectly with the country’s thirst for growth and seen his Adani Group holdings on the Indian stock market rocket in value. His main listed company, Adani Enterprises, has grown 50-fold in value in the past five years, while Adani Green Energy, which looks after its push into solar power, has doubled in value in the past year. The group is ploughing $70bn into green energy projects by 2030 with the aim of becoming the world’s largest renewable-energy producer – ironic given the controversy over its plans to expand coal mining in Australia.
Another important symmetry comes from Adani’s origins in the western state of Gujarat, which is also the power base of the Indian prime minister, Narendra Modi. Modi’s market reforms, which have included cutting corporation tax from 35% to 25% and opening up India to more foreign investment, have freed up entrepreneurs such as Adani and the man he overtook as the country’s richest person, Mukesh Ambani, head of Reliance Industries, and another Gujarati. Adani is close to Modi who has been known to use the tycoon’s private jet for campaign trips.
Nowhere is the local and global ambition of Adani more clearly illustrated than in Mundra, the Arabian Sea port which he wants to become the world’s largest by the end of the decade. With Modi’s government rolling out a 100tn rupees ($1.35bn, £1.1tn) infrastructure programme – it aims to build 25,000km of new roads in the current financial year alone – Adani is well placed to profit at every stage as the necessary raw materials are shipped in, turned into goods and services, and then sent back out around the world through Mundra.
This article was written by Martin Farrer from The Guardian and was legally licensed through the Industry Dive Content Marketplace.
Tuesday, 19 September 2017
In light of our HS2 conversation...
India: the "almost-perfect" emerging-market investment story
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Want to ride on a Shinkansen? Of course you do. Everyone wants to ride on a bullet train. But unless you get to Japan at some point in the next few years, you might find that most of India rides on one before you do.
This week, Japan’s prime minister Shinzo Abe headed to India to lay the first stone in a Japanese-financed $17bn bullet train project set to cover the 310 miles between Mumbai and the industrial city of Ahmedabad. This is exciting stuff. That’s partly because bullet trains are amazing in themselves – this one will cut the journey time from eight hours to under three.
It is partly because the Japanese have offered a fabulous deal on the finance – and are signing various other investment deals along the way. But the really interesting thing is the speed of delivery of the project: India’s prime minister Narendra Modi first decided to bring high-speed trains to India only two years ago.
Two years from thought to first stone laying is quite something for a major infrastructure project. For comparison, you might note that the new tram system in Edinburgh, where I live, was first proposed in 2001. It was completed in 2014. It covers 8.7 miles. Very slowly.
“My good friend prime minister Narendra Modi is a far-sighted leader”, said Abe this week. Such compliments are a rare thing in politics. Perhaps Modi is far-sighted; it is certainly true that he is prepared to make decisions that bring nasty short term pain – and hit growth – with a view to long-term gain.
Late last year, he brought chaos to India’s economy with the abolition of two large-denomination banknotes in an attempt to move towards a clean and taxpaying digital economy. The consumer economy stalled; there were huge lines at the banks; and everyone working in the black economy found themselves having to choose between coming clean or losing their savings. But Modi held firm.
He has done the same with this summer’s implementation of a national goods and services tax. It has subdued growth across the board – but should pay huge dividends as it slashes corruption, simplifies the tax system and boosts revenues.
This is all good. But it is just the icing on the cake of an almost perfect emerging-markets story. India has fabulous demographics (two-thirds of the population are of working age); a booming middle class keen on consumption; a fast-shrinking current account deficit (under 1& of GDP); a government committed to housing and infrastructure spending (there is a kind-sounding “Housing for All” scheme on the go); and a low fiscal deficit (down to 3.5%).
It also has a high level of foreign-exchange reserves (about $400bn) and inflation looks to be properly under control (down to more like 2% nowadays, compared to about 6% a year ago).
Some of these things could reverse if the oil price rises again – the current-account deficit would rise again, for example. But for now, while there are some worries around employment and credit growth, the macro environment looks mightily impressive (imagine how thrilled we would all be if the UK’s numbers looked anything as good).
India’s stockmarket looks good, too. It is one of the few emerging markets with real depth and breadth: you can get exposure to pretty much any part of the economy you want via a listed company (not all are top quality, of course, but that’s not exactly an emerging-market specific problem).
Finally, it is worth noting that India’s stockmarket is supported by local investors rather than just by the fickle international investors who cause so much volatility in emerging markets (they were the ones who sold so energetically when Donald Trump was elected and when the geopolitics around North Korea started to heat up last month, for example).
You will all be wanting to rush in...
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Monday, 5 October 2015
India's economic reforms:
Saturday, 2 May 2015
Which EME to use as an example in essays:
You won't be able to absorb everything in here, but think in terms of the global context questions - what is India doing that is good for its economy? - (reducing government ownership of assets, reducing regulations), what does it need to do (infrastructure) etc. etc. Think particularly about supply-side polices, which really have been (will be) the key for India, and are probably the key obstacles elsewhere. Skim read and make some notes on key points
India – the coming force
Perhaps most importantly, it is taking small but deliberate steps towards removing the bureaucratic hurdles for which it has become notorious.
Hopes are high for what can be achieved by India’s prime minister Narendra Modi, who came to office in May 2014, and finance minister Arun Jaitley. And they are fortunate in their timing: India’s economy is on a much sounder footing than at any time over the last seven years.
Year on year growth in the fourth quarter of 2014 weighed in at 7.5% (higher than China’s), inflation is falling, low commodity prices are helping a country that imports more than 80% of its energy needs and the current account deficit is declining.
“Ours is the only economy of larger economies that is growing at 7%-7.5%,” says Venkat Nageswar, chief general manager and regional head of East Asia at State Bank of India. “We are expecting growth at 8%, making India the best of the pack [of major world economies] in terms of overall growth.”
So far, so good. But India doesn’t exactly have a glowing track record when it comes to transparency in business transactions, especially those involving auction of government assets. The nation has long been perceived as one where crony capitalism thrives and kickbacks are par for the course.
This is changing. The new establishment has concluded the reallocation of coal blocks in a smooth and timely manner. The government also raised Rp1.1tr ($17.45bn) from a telecom spectrum auction this year — a process that was widely praised for the speedy and transparent manner in which it was done. All this reassures investors.
India’s prospects, then, look promising. But there is still much to be done for that potential to be achieved. Important areas of reform remain to be tackled, notably recapitalising the banking system, increasing the country’s power capacity and improving infrastructure.
He has been particularly active in trying to woo overseas investors, with high profile visits to several countries, including Brazil, France, Germany and the US.
India’s equity markets are also receiving unprecedented levels of attention from investors eyeing the large and growing consumer base, with over 62% of the population in the 15-59 year age bracket.
With China’s economy slowing, Brazil rocked by scandal and recession and Russia frozen out of world affairs and now beginning to pay the price, the world is increasingly looking to India to pick up the slack.
India’s underdeveloped infrastructure has proved to be the biggest stumbling block in its growth. Power disruptions, a very low rate of electrification and problems related to power evacuation — the process by which generated power is made available to the distribution network — make it hard to run factory operations consistently.
All the positive sentiment in the world cannot overcome frustrating bureaucracy, however, and the complexity of rules and processes related to obtaining permissions for new projects has often thwarted the hopes of those looking to build infrastructure in the country, said market participants.
The improving macroeconomic picture is evident in the increasing dovishness of the country’s central bank. The Reserve Bank of India has cut rates twice this year, by 25bp each time, with the latest cut coming on March 4.
“Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation,” said the central bank in a release on the day of the second rate cut.
“The investment climate has changed in sentiment terms but it will take some time for it crystallise into on-the-ground capital expenditure,” says one India-based head of debt capital markets. “Even if people have taken decisions to commit, giving orders for capex and funding requirements takes time as most large plants have gestation periods of two to three years.
http://www.emergingmarkets.org/Article/3450133/Indiathe-coming-force.html?LS=EMS1158867