India Business and Finance, May 21

What happened in the Indian business world during the past week

India Business and Finance over the past week.

Corporate results

Sceptics on the Indian economy will note that profit growth, though strong, is slowing. Optimists will note that revenue growth is accelerating. For 1,084 listed companies tracked by Businessline, profits for the first quarter of the calendar year were up 16.5% from the prior year. That reflects a steady decline over each of the prior three quarters. Growth was 29.4% in the final quarter of 2023, 51% in the third quarter and 63.4% in the second quarter. Much of this can be explained by the distortions that came with the emergence from the protracted lockdown. The trajectory of revenues are another story, up 10.6% in the most recent quarter, 10.1% in the prior quarter and 7.9% the one before. during the one before. One area where profits were particularly strong was banking – up 39% for the 2024 fiscal year concluding at the end of March. That suggests a financial system in robust shape. The world may be stalling. India is not.

India’s most important new product

On May 20^th, the Serum Institute announced it had begun shipping malaria vaccines to Africa, with an initial 43,000 doses.  A preventative treatment for malaria had been a goal of the Pune-based company for years and ultimately could have an impact on hundreds of millions of people annually who under current circumstances would become infected. Development involved the University of Oxford and Novavax, an American company.

Business/government collaboration with friends/enemies

India Ports Global, a company controlled by the Indian government, struck a 10-year deal with the Iranian government to operate parts of the Chabahar Port which sits at the intersection of the Gulf of Oman and the Arabian Sea. The deal will require a major investment by India and reflects a long-term commitment that surely is intended to extend beyond the terms of the lease. The deal is the latest move in discussions that began, haltingly, as far back as 2003. In theory, the port could create a key link to Afghanistan, thus unlocking its huge deposits of sought-after minerals, as well as creating conduits for India trade into central Asia and even Russia.

While the business may have a business logic for India, the appeal may be lost on America and non-Iranian aligned Arab countries. In response to direct questions about this, India’s External Affairs Minister Subrhamanyam Jaishankar downplayed the concerns (particularly America’s), saying it will be for “everybody’s benefit”. The statement was unequivocally diplomatic. It may not be true.

When strengthening ties between America and India are discussed, it is often because there is a shared sensibility about a China that both find militarily and economically threatening. This confluence of interests falls apart when it comes to Russia and Iran and underscore how difficult a broader alliance between India and much of the west will be. India is a huge importer of oil for its own needs and a major exporter of refined oil for the world’s. Iran is a particularly convenient potential source; Russia recently a particularly important one. Their role as a source collides with American policy though the possibility of a strong American reaction isn’t taken seriously at the moment. That could change. Sentiments around Chabahar are particularly complex since America saw potential benefits from the port when it was attempting to develop Afghanistan’s economy but since its chaotic withdrawal has no evident interest.

Difficult legal landscape

Here  is a link to a map created by an entity called Land Conflict Watch, which tracks property disputes in India. It reckons there are 781 major disputes affecting 9.4m people and $1.2bn worth of investment. While there are disputes stemming from industry, power, mining and even conservation, a look at the map suggests the largest source of friction is infrastructure. This may be an inevitable consequence of the government’s recent efforts to provide the roads, railways and power systems needed as a foundation for economic growth. It is hard to build in India without colliding with people and things that have existed since before memory. 

India’s enhanced export competitiveness

While steep duties block car imports into India, there is a move to dispense with these in exchange for other concessions in trade negotiations. The new willingness to accommodate is a consequence of how cost-efficient small car production has become in India, as reflected in financial reports for the newly concluded fiscal year and statistics collected by the Society of Indian Automobile Manufacturers. Maruti Suzuki’s exports have grown by 42% to 280,000 vehicles, Hyundai’s have grown 24% to 160,000 vehicles and another hundred thousand units have been exported by Kia, VW and Nissan (reflecting growth of about 7%).

More broadly, the increasing vitality of India’s auto industry is reflected in the profits of Tata, the giant conglomerate. Though TCS, the group’s fantastically profitable IT consultancy, completed the recent fiscal year with a higher net income than the group’s once troubled car operations ($5.5bn as compared to $3.8bn) The Business Standard reckons that after deducting exceptional items the car division produced better numbers, a conclusion that even the most creative accounting boosts could not have produced four years ago.

Overseas barriers for Indians

Foreign reporters in India frequently complain about the challenges of getting a visa. A group that feels similarly aggrieved is the 92m Indians who travel overseas. India has visa-free access to only 61 destinations compared to 187 for the UAE according to the Henley Global Passport Index. “Destinations” is not synonymous with countries (since some countries may have regional requirements) but the divergent numbers do management to capture the strikingly different conditions under which Indians must operate.  Travelling for Indians can require coping with the odd hours and moods of consulates, filing out innumerable extensive forms in paper and online, providing extensive documents including ones covering bank accounts proving financial resources and queuing under a broiling sun. A result is the remarkable popularity of consular officials stationed in India. In a country where “knowing the guy” who can get things done is seen as a component of a successful life, diplomats are often viewed as much like bureaucrats who can cut through red tape – they are crucial to befriend. There are many potential unintended potential consequences from this sort of power and this sort of relationship, most bad.

Quirky standards

* India’s Supreme Court has ruled that lawyers do not come under consumer protection laws and apparently doctors are the next up to seek an exemption.

* Norway’s central bank (and presumably its vast sovereign wealth fund - the world’s largest) dumped its holdings in Adani Ports because of a recommendation by the Council On Ethics, which has an advisory role. At issue was Adani’s association with a port in Myanmar that it says it has divested. After news of the move, shares in Adani port appeared to fall and bounce back. The bigger issue raised by the move is the standards that Norway, and its sovereign wealth fund, will apply in the future and to whom and whether, taken in full, the decisions reflect the financial and ethical values of Norwegians whose capital has a growing say on the actions of non-Norwegian businesses.

The Indian company America needs now

Mysore Paints and Varnish Ltd, was established by the Maharaja of Mysore in 1937 and is wholly owned by the state of Karnataka. For a brief moment every five years, it is the most important company in India because of an indelible ink it produces that is used to mark the fingers of voters during elections, which are now under way across the country. Its ink began being used in 1962 after allegations of voter fraud and, according to a long story in Mint, the company’s products have subsequently been used in Malaysia, Cambodia, South Africa, Nepal, Ghana, Denmark, Pakistan and Afghanistan. The ink lasts from three days to three months. In Mumbai, just waiving one a purple smudged finger in a cafe or hotel on election day can result in a discount as a result of a campaign to encourage suffrage. If there are readers of this substack in Arizona, Georgia, Michigan, Nevada, New Mexico, Pennsylvania, Wisconsin and any other state where voting for the 2024 presidential election is likely to result in a debilitating controversy, note that the world’s largest democracy may have an answer.

For distribution in America