India Business and Finance, April 2nd

What's working and who no longer is (an iconic gangster-politician-businessman)

India business and finance over the past year

With the conclusion of the 2024 fiscal year on March 31^st India’s newspapers have been publishing tables of sectors and companies that have thrived and those that have faltered. Stockmarkets reflect innumerable kinds of information and inevitably lean toward hope but over the past year, share prices have done an excellent job of quantifiably capturing changes. The best performing industries were real estate, a reflection of a huge demand for housing being addressed by builders working under a revised, if still flawed, regulatory regime; power companies; and capital goods. India, in short, is in building mode. Ordinary consumption faltered, with the share price of Hindustan Unilever, which has an unmatched distribution network of 9m outlets, dropping 12%.

The outlier in the slow consumption story has been vehicles. Scooter and motorcycle sales rose 13% and cars 8.2% respectively. This is a twist on recent trends which had car sales rising (so the relatively wealthy must be doing well) and scooter/motorcycle sales shrinking (thus the relatively poor are doing worse). There are different ways to look at these numbers and many stories are slanted to capture what the author wants to say about India’s economy and, by inference, the Modi Administration. Cars are expected to hit a record 4.2m in sale (so the relatively wealthy are doing well). Scooter and motorcycle sales, with 18.5m units sold, reflect a recovery from 2020 but will still trail the 20m sold in 2018 and 21m in 2019. That could mean the relatively poor are doing worse than they had been but it could also suggest that the trend for all is up.

India business and finance over the next year

Global capability centres, where multinationals do their technology development, now number around 1,600 and are getting into semiconductors. A new report by Nasscom, the industry group, says that nine of the 30 established during the second half of 2023 were involved in semiconductor design, bringing the total of such operations to 95, with 50,000 people employed. The expansion in this area suggests a big step forward in India’s technological capability and will be welcomed by the government, which sees all aspects of semiconductor production as critical pieces needed for India to become an economically advanced nation.

Remittances from Indians working overseas, the most highly paid believed to be in technology, hit a record $29.4bn in the final quarter of calendar year 2023, topping the $28.6bn from the same quarter in 2022, according to preliminary data from the Reserve Bank of India analyzed by The Economic Times.  It is impossible to understate the importance of remittances to India’s economy. It is the world’s largest recipient and the inflow tempers the consequences of India’s large merchandise trade deficit.

 The process of having Indians work overseas and send money home is, however, beginning to face new obstacles. In a story widely picked up in India, The Wall Street Journal reported that at least 22 complaints have been filed with America’s Equal Employment Opportunity Commission against Tata Consulting Services, the most important, and the most global, of the Indian software technology firms. The litigation, according to the Journal, accused TCS of favouring lower paid Indian employees working under H1-B visas because of race and age. TCS has made a statement to the Indian press denying the allegations.

The case touches many political nerves in the US at a moment when immigration issues are particularly fraught, and an election looming. An ancillary consequence, not mentioned in the Journal story, is the possibility of the lawsuits being extended to TCS customers. It provides services to many of the most important American companies. If it is held to have discriminated, surely enterprising lawyers will seek damages from the companies that have indirectly benefited from these practices. Indian firms could lose assignments – or do more of the work in India. Under pressure, the H1-B visa program could change in multiple ways. The litigation may, in short, be a prelude to a bigger debate and significant change.

Non-self-effacing central banker

The Reserve Bank of India’ (RBI), the central bank, had its 90^th birthday on April 1^st, making it one of the world’s oldest. Its recent record is mixed, meaning inflation remains significant but not crippling. Perhaps because the RBI has the right to veto all senior bank appointments, the usual deluge of birthday commentary has been missing. Anyone in the higher realms of Indian finance with career ambitions would, as a matter of personal risk control, refrain from even a hint of criticism. The RBI’s governor, Shaktikanta Das, took up the slack with a column in The Times of India in which he summarized his institution’s approach as “agile and decisive without being tied down by existing dogma or stereotypes.”

India’s improving stockmarkets

It takes less than a second to trade a share in a company, transfer money between bank accounts or, in India, to use its robust digital network and a QR code to pay 6 rupees to a chaiwala for a cup of tea. However, clearing a stock transaction in India and much of the world, has taken days. There is no good reason for this other than brokers get to hold and invest the residual money while it is "in transit", in effect skimming a bit off every trade. Little tricks like this go some way in explaining why people distrust finance. Firms work in their own interests and sometimes do so under regulators who are captured.  In India, change has come. Same-day clearing on 25 large stocks has begun. For this, India deserves applause..

The outer edge of India business and the law.

On March 28^th, Mukhtar Ansari, 63, died of a heart attack at the Banda Medical College Hospital in Uttar Pradesh. That is one of the rare aspects of his life for which there is universal agreement. His biography is beyond cinematic. The child of a prominent political family, he grew up to be a hero of eastern Uttar Pradesh textile workers and a feared gangster who was, in a phrase used by The Business Standard, among other publications, “a well-known face in the contract mafia circle”. He was also, beginning in 1996, an elected politician. He was charged with 65 different crimes, was convicted of eight (including murder and extortion) and was scheduled to be tried in 21 more distinct cases. Though he has resided in various jails since 2005, he was elected to the Uttar Pradesh Assembly multiple times representing five different political parties and only stepped down in 2022 in favour of a chosen successor, his son. Mr Ansari’s death, claims his brother, was a consequence of slow poisoning. For Uttar Pradesh, Mr Ansari was often seen as a reflection of a business world that had been infected by fear and corruption. The state’s business reputation has grown immeasurably in recent years, in part because this aspect is seen to have declined, with any residual appeal doubtless left for the inevitable movie to come.

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