India Business and Finance, March 6th
What happened in the world's fastest growing large economy over the past week
Confab for James Bond villains?
The pre-wedding party for Anant Ambani’s nuptials drew Mark Zuckerberg, Larry Fink, Jared Kushner (with Ivanka Trump) and numerous other global tycoons who share a reputation for immense economic power that spills over into political control. The party is unfolding in Jamnagar, northern Gujarat, where the Ambani-controlled Reliance Industries has a vast refinery that is a source of vast profits and, occasionally, controversy, most recently stemming from the origin of the oil being refined (notably Russia).
To accommodate 2,000 guests flying in from all over the world, Mr Ambani’s magic resulted in a special immigration facility at the local Jamnagar airport, giving it international status for the duration of the event. For travelers stuck in the often interminable lines at Mumbai airport, this seemingly small detail will elicit the most envy. Unconfirmed buzz included the construction of three hotels in recent months to accommodate the crowd. Photographs showed guests drenched in glittering jewels. Rihanna played at one of the events (she was said to be paid either $6m or $9m depending on the account) and according to the New York Post, gave a lazy show. Not a word of that sort appeared in the Indian press, which has only provided the most obsequious coverage.
A common component of the early stories appeared to be orchestrated to transform the reputation of Anant from that of a child with no role in the family empire to a champion of endangered wildlife. Who doesn’t, after all, like someone who saves elephants? Post-party, the aspect of Anant that seemed to get the most attention appeared to be triggered by Mr Zuckerberg’s admiration of his watch which led to reports on his staggeringly expensive collection and the apparently diamond-encrusted watch worn by his fiancé.
The wedding itself will be this summer, which is unusual in India. Apparently, it was to have happened in Europe but the Modi administration, I am told, has instructed all tycoons to hold any lavish affairs (with all the connected spending) in India. It would be interesting to know how this is really being received in India. Big weddings are a national obsession and it is hard to imagine one that is bigger. But at the same time, many object to ostentatious displays of wealth in a place where poverty is rife.
Illicit trade
While the Reliance refining operations seem to have cleverly navigated global sanctions on imports from Russia, among other places, India’s diamond traders have not been able to do the same. They are now finding themselves caught in a bind because of G7 sanctions on the raw Russian diamonds that India polishes and resells to the world. Replacing the Russian diamonds will be hard bordering on impossible but even if it were feasible, India’s exported diamonds may now need to have exports go through a costly, onerous certification process in Antwerp. Perhaps the answer is to provide inducements for the Ambanis to play a role in the industry–beyond stimulating sales through the sale of watches and the weddings of their children.
Slapping down an American tech giant
Google removed a handful of apps from its Play Store for non-payment of fees. These included ones to find a spouse (Shaadi.com and Matrimony.com), a date (Truly Madly, Quack Quack) and a home (99acres). The government pushed back after complaints that this reflected too much power in the hands of a tech giant and Google folded, restoring access and underscoring that in India, tech platforms are, ultimately, controlled by the government.
Suprising GDP number
Growth in the final quarter of 2023 was 8.4%, according to the National Statistical Office, a figure which raised not a few eyebrows. Putting aside whether it is valid, the main drivers of the high growth number were manufacturing, construction and defense, all important facets of the Indian economy and all areas where strong growth would be a harbinger of better times to come. But they are also all areas where the benefits to many people would be indirect and thus not immediately apparent to many Indians who, based on relatively slow growth in consumption, do not feel they are in the midst of a boom. In a related sign suggesting caution is in order, tractor sales, which had been booming, have fallen 5% over the past year, hinting that incomes in farming, an area in which almost half the country continues to work, might be falling.
More skepticism
The economic numbers were echoed by new records in the Indian stockmarket and domestic participation in the same. But foreigners are not swayed. Although foreign portfolio investment has risen along with the overall market, the percentage of the market owned by foreigners has declined over the past decade from a high of 19% to a new low of 16.3% in February. The country’s primary market regulator, the Securities and Exchange Board of India, is concerned about the flood of money going into small and medium cap mutual funds and has written fund companies asking them to take steps to impede purchases.
Perhaps the single biggest beneficiary of the Indian stockmarket boom has been the old Bombay Stock Exchange. Its share price has risen over 400% in the past year.
Sometimes price doesn’t matter.
Numbers from February show that the one area in which foreigners continue to invest is debt securities, and it happens to be one where those investing likely feel they have no choice. A record $2.7bn was invested last month, with the money likely coming from large investors needing to match global indices that have recently added India. This underscores how powerful passive investments have become and, indirectly, the power of the very active builders of the passive indices.
Big investments
Ambani-Reliance may be getting all the attention because of the wedding but the most interesting deals are being announced by the other business behemoths. Tata recently announced the creation of a vast semiconductor fabrication plant as part of a government plan to invest $15bn in the industry. At least one other major deal has apparently come close to fruition but won’t be announced until after the election (set for April-May). The Adani Group announced it will build the country’s largest complex for ammunition and missiles. It will be located in Uttar Pradesh which has begun a serious effort to build a “defense corridor” packed with similar sorts of companies.
Business crime in India
Bombs. The bombing of a café in Bangalore’s tech corridor was a rare show of overt violence in an area that has been peaceful. It comes as the area is suffering through a slump based on the failure of many tech startups, vanishing finance and, possibly, the end of the Indian ambitions of many prominent global investors whose once promising bets have soured.
Smuggling. Business smugglers have long played a key role in Indian trade, though mostly through their involvement in gems and gold. Now they have gone organic courtesy of the government’s effort to contain inflation through a ban on onion exports. According to a story in Businessline, onions are now hidden in boxes labelled grapes or tomatoes. India, the newspaper said, “is renowned for its pungent variety” beloved by South Asia, if not the world, and it added that insiders report that smuggling into Bangladesh, Nepal and Bhutan “is rampant.”