David Fuller and Eoin Treacy's Comment of the Day
Category - India

    Email of the day on the differences between China's authoritarianism and India's chaotic democracy:

    I have just returned from a visit to India and I visited China last autumn. I was struck by the difference between the two societies. In China I found an almost total absence of religious belief while in India I discovered an almost nationwide attachment to different religions and traditional mysticism. While I saw "tomorrow" all over China in the form of futuristic cities like Shanghai and Hong Kong, I only saw "yesterday 's poverty and superstition" in India. David and you harp on the importance of governance. I heard many Chinese persons state that as long as their material well-being improves, they are prepared to accept the absence of democracy because this enables the government to take action without vested interests standing in its way. In India democratic discussion was said by the persons I met to be an obstacle to rapid and firm decision-taking. What is your opinion on this?

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    How Blackstone Turned India Into Its Most Profitable Market

    This article by George Smith Alexander and Anto Antony for Bloomberg may be of interest to subscribers. Here is a section:

     

    Blackstone’s private equity funds have now invested a total of $3.5 billion in India. The firm is planning to add another $2 billion of such investments in the country over the next five years, Dixit said.

    Its Tactical Opportunities fund acquired a stake last year in an Indian asset reconstruction company that buys bad loans. Blackstone is also looking at insolvent firms put up for sale under the new bankruptcy law that took effect in December 2016, he said.

    At the turn of the century, many Indian industries weren’t fully open to foreign investment, and family-run businesses were wary of ceding control. Private equity has now become a “very important” source of funding for Indian companies’ growth, according to Sunil Sanghai, founder of NovaDhruva Capital Pvt. Blackstone has been successful in aligning its interests with portfolio company executives as well as finding the right time to sell, he said.

    “In the past few years, the investment climate has certainly undergone a positive change,” Sanghai said. “The private equity firms have also matured: they have seen a couple of investing cycles, and they now have experience with Indian companies and Indian management.”

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    China Turns Fiscal Screws While Targeting GDP Growth Around 6.5%

    This article from Bloomberg News may be of interest to subscribers. Here is a section:

    Xi has ratcheted up his drive to curb debt risk, pollution and poverty at a time when the world’s second-largest economy is on a long-term growth slowdown. His efforts to rein in spending contrast with an historic expansion of U.S. borrowing under Donald Trump during a period of economic expansion.

    The 2018 targets “suggest slower growth and a fiscal drag,” said Callum Henderson, a managing director for Asia-Pacific at Eurasia Group in Singapore. “This makes sense for China in the context of the new focus on financial de-risking, poverty alleviation and environmental clean-up, but is less good news at the margin for those economies that have high export exposure to China.”

    Growth handily surpassed 2017’s target with a 6.9 percent expansion that was the first acceleration since 2010. Economists forecast a moderation to 6.5 percent this year amid the ongoing deleveraging drive and trade tensions with the Trump administration and a further deceleration to 6.2 percent in 2019.

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    Will Modi lose the next Lok Sabha election in 2019?

    Thanks to a subscriber for this article by Arvind Kala for which may be of interest to subscribers. Here is a section: 

    Earlier the poor Indian farmer could sell his cow for Rs 25000 when it stopped giving milk. No longer. Now cattle buyers don't step forward lest Hindu goons lynch them.

    So the farmer with an unproductive cow leaves it in some open area, and this cow becomes yet another addition to the tens of thousands of emaciated cows standing around in the countryside.

    Worse, they eat up the farmer's crop. Losing him the little he has.

    India has 120 million cows, according to the last agriculture census. Why would those cow-owners vote for a Modi who impoverishes them?

    When Nanded voted against the BJP and Modi this week, it was speaking for all of rural India. Village voters will pulverize Modi in 2019.

    About urban distress, facts speak. Mahesh Vyas is India's most respected statistician and founder of CMIE, our most credible source on the Indian economy.

    Citing figures, he wrote that demonetization triggered huge job losses. Seven million of them in one year between Jan 2016 and Jan 2017. He was talking of formal jobs in the private sector.

    Those seven milllost jobs means at least 28 million people pauperized, at four people per family, people who depended on those salaries to eat and live.

    Today a failing GST has paralyzed commerce all over India. Small traders and manufacturers just can't cope with the paperwork.

    And they can't afford the services of trained accountants.

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    Indian PM Modi defends globalization at Davos summit

    This article by Paritosh Bansal for Reuters may be of interest to subscribers. Here is a section:


     

    Modi, making the forum’s first speech by an Indian head of state in more than two decades, did not mention Trump by name but he criticized the rise of protectionism in remarks delivered three days before the U.S. President will address the summit.

    “Instead of globalization, the power of protectionism is putting its head up,” Modi said, speaking in Hindi and causing an initial flurry in the audience of business and political leaders as people reached for their translation headsets.

    “Their wish is not only to save themselves from globalization, but to change the natural flow of globalization.”

    Modi is leading a big government and business delegation to the summit in the Swiss ski resort of Davos, aiming to showcase India as a fast-growing economic power and a potential driver of global growth.

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    Ambani's Jio Posts First Profit as Interconnection Fees Drop

    This article by Bhuma Shrivastava for Bloomberg may be of interest to subscribers. Here it is in full: 

    The upstart Indian mobile carrier backed by the country’s richest person posted its first quarterly profit almost 16 months after storming into the market with free calling and data at no charge on an introductory basis.

    Net income at Mukesh Ambani’s Reliance Jio Infocomm Ltd. was 5.04 billion rupees ($79 million) for the three months through December, the company said Friday. It posted operating revenue of 68.79 billion rupees and had 160.1 million subscribers at the end of the quarter.

    Jio’s ability to add subscribers and hold down costs suggests its gains on rivals including No. 1 carrier Bharti Airtel Ltd., which reported Thursday that profit fell for a seventh straight quarter, may be sustainable. After starting a price war that forced some smaller providers out of the industry, Jio is acquiring spectrum, tower and fiber assets from debt-laden Reliance Communications Ltd., controlled by billionaire sibling, Anil Ambani.

    That deal puts Mukesh Ambani back in control of assets he handed to Anil Ambani in 2005 as part of an agreement to settle a family dispute.

    Jio, now the country’s fourth-largest carrier, is also getting a tailwind from declines in its costs for interconnection fees. The Telecom Regulatory Authority of India reduced interconnect charges by 57 percent to 0.06 rupees a minute from October last year and plans to cut them to zero starting Jan. 1, 2020.

    Jio spent 10.8 billion rupees on access charges in the third quarter, compared with 21.4 billion rupees it had spent in the three months through September, the company said.

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    Email of the day on India and governance

    I'm not sure whether you include 'The Economist' in your regular reading material. If so, you will have noticed that they have recently published several articles critical of India and in particular, critical of the BJP and of Modi. In last week's edition, a lead article plus a 'Briefing' suggested that wealth in India was confined to very few people and to get into the top 1% of earners you only needed an income US$20,000 a year. The articles were critical of infrastructure, of education, of the bureaucracy and of both the pace and direction of reform. They concluded that the Indian economy may be running out of puff and wondered from where it might get its second wind. As a consequence of an Asian-centric background, I have reasonably large weightings in China, India and Japan. I have no intention of reducing exposure to India (nor to China or Japan) but I would be interested in your views on The Economist's assertions particularly given your high regard for Modi and his government. All best.

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    Billionaire Ambani Bails Out Brother by Buying Wireless Assets

    This article by Santanu Chakraborty for Bloomberg may be of interest to subscribers. Here is a section:

    Billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd. agreed to acquire spectrum, mobile-phone towers and fiber assets of his brother Anil Ambani’s Reliance Communications Ltd. helping the younger sibling cut debt at the embattled wireless carrier, the two companies said in separate exchange filings.

    Reliance Jio emerged the highest bidder for assets and the sale is expected to be closed in a phased manner between January and March 2018, according to a statement from RCom on Thursday.

    The companies didn’t disclose a value for the transaction. The deal will include a cash payment and transfer of deferred spectrum installment payable to India’s Department of Telecommunication.

    Mumbai-based RCom is seeking to cut total borrowings by $6 billion by March. RCom posted its first annual loss last March after Jio stormed into the market by offering free calls and data. That escalated a price war that has forced consolidation in the sector. RCom this week said it expects to get about 250 billion rupees ($3.9 billion) from the sale of its spectrum across four frequencies, its optical fiber network, and its more than 40,000 telecom towers. Entire proceeds will be used for repayment of RCom’s debt.

    Reliance Jio is only paying for good quality assets that will enhance its depth of network, especially in rural areas, and raise data usage capacity, Shobhit Khare, a co-founder at Inertia Wealth Creators LLP, said via phone.

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    Modi May Face a Photo Finish in Crucial State Election

    This article by Iain Marlow for Bloomberg may be of interest to subscribers. Here is a section:

    Most observers expect Modi to win the Gujarat election when votes are counted on Dec. 18. But the narrowed lead is surprising for a bastion of BJP support such as Gujarat, as well as for Modi, whose party has swept to power in most state elections since he took national office in 2014. 

    Capping days of relentless campaigning, Modi said in a rally in Surat that people of Gujarat would vote for the BJP. “My single aim is to ensure development and improve the lives of the poor,” he said on Thursday.

    Anything other than a comfortable victory for Modi would surprise investors betting on a clear win in Gujarat, as well as five more years of Modi’s government on the other side of 2019. "Market assumptions so far have been of a comfortable BJP victory in Gujarat, and that the momentum continues till 2019," wrote Mumbai-based Credit Suisse analysts Neelkanth Mishra and Prateek Singh in a Dec. 5 note.

     

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