India Business and Finance, January 23rd
An intelligible take on India
Temple construction
The significance of Ayodhya expressed in a single metric
Millions of words will be spent writing about the new temple and its broader significance. To all of this, a business and finance email will add two numbers capturing…something. The Indian Administrative Services officer in charge of tourism told me there are currently only two hotels in Ayodhya (along with all the unofficial guest houses). Within the very near future, there will be another 115 and more are on the way. Beyond everything else (and there is a lot of everything in this case), it does demonstrate that when India wants to get things done, it can.
Economic factoids
Company creation
The Ministry of Corporate Affairs reported that in the first nine months of the current fiscal year (ends March 31st) 142,000 new companies and 44,000 limited liability partnerships were registered. That is a 3% increase in the rate of creation for companies and a 54% increase in the rate of creation for partnerships over the same period last year. The base number is trickier to obtain than one might imagine but it appears that as of March 2023, there were 1.5m registered companies and, using slightly earlier data, 252,000 limited partnerships.
Employment creation
Of the 12m new jobs that emerged in the fiscal year concluding at the end of March 2023, 48% were in IT, finance and banking, according to a survey by the Bank of Baroda. By far, the largest growth was in IT with 2.1m. Hiring by IT firms has plateaued with the slowdown in the global economy so if India’s numbers continue at an even remotely similar rate the engine will have to come from elsewhere. The obvious answer is assembly work. Samsung has announced that its newest model, the Galaxy 24, will come out of its factory in Noida and Maruti Suzuki intends to export an upcoming electric car before selling it in India–both China-like events. But the broader manufacturing numbers, as is often observed, don’t reflect, at least yet, a China-like vitality.
Non-poverty creation
A paper by the government’s Niti Aayog, a public policy think tank, and the UNDP says 248m people exited “multidimensional poverty” over the past decade. The measure includes data on education and health. Given the vast number, the complexity of the calculation, and the heated politics of India, the estimate is the subject of debate but even if exaggerated, it is staggeringly large.
Companies
Only so much money
Indian bank shares dipped after quarterly results showed that deposits, though at record levels, were growing at a far lower rate than loans. There is no definitive reason but the sharp rise in stock prices and the dramatic increase in brokerage accounts suggests people who would ordinarily be putting their money into savings are now taking a punt. For banks, this means the interest rate paid must go up, causing their margins to decline. The shift also has policy implications. India wants stockmarket (meaning equity) investment in companies, so to that extent the shift is healthy and its tax policy (low on capital gains, high on interest income) encourages this sort of approach. But having people with very limited resources heavily exposed to stockmarket movements comes with big risks.
A booming but profitless business
Indians are on their mobile phones 4.8 hours a day, among the highest useage in the world and far larger than any other big markets. But in terms of paying for content, India doesn’t rank in the top 20, according to a survey by data.ai. But paid usage is increasing, albeit from negligible amounts.
Can Elon Musk change India, too?
Starlink, his satellite communication service, is reported to be on the verge of gaining permission to provide broadband service by satellite. If approved, Starlink will join OneWeb, a European company with heavy Indian investment, and the Jio subsidiary of Mukesh Ambani’s Reliance. That a foreigner could squeeze into this sensitive area is mind boggling and suggests the Indian government believes Musk is providing a service, and perhaps competition, that is vital to the country.
The important international role of government-run companies for India’s broader economic development.
A consortium of Indian state-controlled mining companies signed a lithium mining agreement in Argentina, adding to potential domestic projects that have been discussed but still in their earliest (and most uncertain) days. This is the first deal Indian companies have made to go overseas for lithium and the reason is both obvious and ambitious. India has huge plans for electric vehicles and related projects for which lithium is a key input. Beyond being a simple industrial agreement, the deal may reflect how comprehensively the government and its directly controlled companies have begun to look at long-term projects.
Idiosyncratic Indian risks
Pecking peacocks. Auto insurer Go Digit disclosed that, to no one’s surprise, rampaging elephants, stray dogs and falling coconuts do a lot of damage to cars. Reporters at The Times of India dug deeper and spoke to a state-run insurer and discovered that vain peacocks stare at their reflection on cars and, perhaps dismayed, peck at what they see.
Butter chicken battles. The front page of the Hindustan Times noted that two restaurants in New Delhi are suing each other over the right to claim they invented butter chicken. As is often the case with Indian novels that involve themes with high emotional content and bitter contention, the roots of this story date back to pre-partition Pakistan. Faced by the ubiquitous challenge of extending the useful sales period of tandoori chicken, a chef created a recipe and took it with him across the border where it became both a phenomenal success and (as is so often the case in India) a cause for litigation.