Category: Economy

India and the UAE signed four major energy deals on Monday, bolstering strategic relations. Prime Minister Narendra Modi and Abu Dhabi Crown Prince Sheikh Khaled bin Mohamed bin Zayed Al Nahyan discussed nuclear energy, vital minerals, and green hydrogen.

One significant agreement is for Abu Dhabi National Oil Company (ADNOC) to supply Indian Oil Corporation Ltd. with one million metric tonnes of liquefied natural gas (LNG) every year.

ADNOC also agreed with India Strategic Petroleum Reserve Ltd (ISPRL) to investigate additional opportunities for crude oil storage in India.

Another agreement between Emirates Nuclear Energy Company (ENEC) and Nuclear Power Corporation of India Ltd (NPCIL) intends to improve collaboration in nuclear plant operations and the sourcing of nuclear materials from India. The agreement will also consider investment potential in the civil nuclear energy sector.

The fourth agreement concerns Urja Bharat’s production concession for Abu Dhabi’s Onshore Block One, which is the first time an Indian company will operate in the UAE. The Gujarat government and the Abu Dhabi Developmental Holding Company made a separate agreement to construct food parks in India.

According to a survey by HSBC and S&P Global, India’s services sector expanded at a five-month high in August. The Services Purchasing Managers’ Index (PMI) increased to 60.9 from 60.3, the largest increase since March and far beyond the 50-point barrier that indicates growth.

HSBC’s Chief India Economist, Pranjul Bhandari, attributed the improvement mostly to higher domestic orders. The new business subindex rose to a four-month high, highlighting the importance of domestic demand in driving development. Although overseas demand remained strong, growth has fallen to a six-month low.

Despite this, service providers remained cautiously hopeful about future demand, but confidence fell to its lowest level in over a year. Hiring in the sector continued but at a slightly slower rate.

Cost pressures, including food, labour, and transportation, increased moderately. However, cost increases for service providers were the slowest in four years. Input costs in the industrial and service sectors also increased at their slowest rate in six months.

With inflation dropping, businesses passed on less costs to customers, adding to India’s inflation figures, which fell to a near five-year low in July.

The World Bank has boosted its India growth forecast to 7% for the current fiscal year, up from 6.6% previously. This modification reflects a robust agricultural rebound and rising rural demand, according to the most recent India Development Update, which was released on September 3, 2024.

Ran Li, a senior economist at the World Bank, said that favourable monsoon conditions and increased private spending had led to the upward adjustment of India’s GDP prediction. Despite a challenging global climate, India’s growth is resilient, and the services sector is anticipated to maintain its robust performance. While there is a modest slowdown in the industrial sector, the recovery in agriculture is predicted to counterbalance this loss.

Furthermore, as agriculture recovers, rural private consumption is projected to increase.

The World Bank anticipates India’s medium-term growth rate to average 6.7% over the following two fiscal years, helped along by a slight increase in private investment that will aid in consumer recovery. However, obstacles continue, particularly in job creation, as the urban unemployment rate remains stubbornly high at 17%.

Thailand’s Prime Minister Paetongtarn Shinawatra has revealed a big change to the government’s 450 billion baht (US$13.1 billion) “digital wallet” handout, indicating that some of the funds will now be distributed in cash. This is a deviation from the original idea, which was to send 10,000 baht in digital credits to 50 million residents for use in their communities.

The plan, a cornerstone of the ruling Pheu Thai Party’s election campaign, is now being finalised, with further information expected in a future parliamentary policy declaration.

The specific amount of the budget to be converted to cash is unknown, and attempts to gain more information from a deputy finance minister were fruitless. This development comes just two weeks after Paetongtarn, 38, took office as Thailand’s youngest prime minister, succeeding Srettha Thavisin, who was important in developing the digital wallet strategy.

The digital giveaway initiative is intended to improve Thailand’s economy, which expanded by only 2.3% in the second quarter of this year, underperforming other countries in the region. Despite criticism from academics and previous central bank governors for fiscal recklessness, the government insists on preserving fiscal discipline as the program is due to begin in the fourth quarter of the year.

Egypt’s non-oil private sector has finally resumed growth after three difficult years of decline. The S&P Global Purchasing Managers’ Index (PMI) for Egypt rose to 50.4 in August from 49.7 in July, indicating growth. This favourable shift is linked to higher demand, stronger economic conditions, and a major boost from increasing export activity.

Egypt’s recent $8 billion financial assistance agreement with the International Monetary Fund (IMF) has played a critical role in its recovery.

The IMF accord included major economic reforms like market-determined currency exchange rates and significant interest rate hikes, which have helped to restore investor confidence and stabilise the economy. While the new orders subindex remains slightly below the growth criterion at 49.4, the overall gain in the PMI suggests a more general economic stabilisation that is progressively taking root.

The PMI’s rise above 50.0 points to a positive shift in market dynamics, with gains in both employment and purchasing activity.

These elements point to a larger economic recovery, making Egypt a more appealing destination for investment. As businesses restore confidence, they increase capacity, adding to the positive cycle. The future output subindex, which rose to 57.1 from 54.6 in July, reflects greater optimism about ongoing economic growth, pointing to a larger positive trend in Egypt’s recovery.

In August, India collected 1.75 trillion rupees ($20.87 billion) in goods and services tax (GST), up 10% over the same month the previous year when the collection was 1.59 trillion rupees. Since being implemented on July 1, 2017, GST has altered India’s tax environment, replacing a variety of indirect taxes such as excise duty, VAT, and service tax.

GST has decreased the overall tax burden, simplified compliance, and increased transparency and economic growth, all of which accord with India’s vision of ‘Ek Bharat Sreshtha Bharat.’

As of August 23, India’s foreign exchange reserves were at a record $681.69 billion, up $7 billion from the previous week. The Reserve Bank of India, which manages these reserves, intervenes in the foreign exchange market to control rupee volatility. Reserves change as a result of RBI operations and foreign asset appreciation or depreciation. During the week, the rupee fluctuated between 83.7550 and 83.9650 before closing at 83.8625 on Friday, indicating its second straight monthly fall.

GST collections have grown significantly, with the fiscal year 2023-24 collections reaching 20.18 lakh crores, up from 18.08 lakh crores in 2022-23, indicating increasing compliance and economic stability.

The United Kingdom reported that it had received the requisite sixth and final ratification to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) by December 15. This economic bloc covers five continents: Canada, Mexico, Japan, and Australia. With the UK’s participation, the CPTPP will now include approximately 600 million people.

Peru’s ratification represented the final step in the UK’s participation in the deal, which was launched under the Conservative Party and is now due to take effect under the new Labour government. Douglas Alexander, Minister of State for Trade Policy, urged businesses to investigate the potential benefits of the CPTPP and welcomed the countries that had already confirmed the UK’s membership.

The Department for Business and Trade (DBT) stated that once the agreement is implemented, over 99% of UK goods exports to CPTPP members will be tariff-free, hence enhancing trade and economic growth. The accord is expected to boost the UK economy by GBP 2 billion per year by 2040.

DBT is working with the remaining members to complete the process. The UK, as the first member to join after its inception, seeks to shape the bloc’s future and prospective expansion. Meanwhile, the UK is engaged in separate trade negotiations with India to improve its bilateral economic ties.

Christopher Waller, a member of the Federal Reserve Board of Governors, indicated that the United States may connect some private banks to India’s Unified Payments Interface (UPI) to create a speedier payment network. Speaking at the Global Fintech Fest in Mumbai, Waller stated that the United States now lacks a complete quick payment system due to risk management and regulatory concerns. Connecting with UPI could be a viable alternative, but it requires a solid value offer.

Waller noted that contemporary global payment systems are purposefully created with some frictions for compliance and risk management, which aid in the prevention of fraud and money laundering. The integration of UPI with US banks would pose more legal and regulatory hurdles than technological ones.

Waller praised the National Payments Corporation of India’s (NPCI) UPI technology, which processes over 10 billion transactions each month and was a driving force behind India’s digital payments revolution.

Furthermore, he emphasised the potential for public-private partnerships to improve cross-border payments, which is outlined in the G20’s roadmap for global payment system improvements. He acknowledged the importance of addressing legal, compliance, and operational issues in such endeavours.

The UK government has committed £10.5 million ($13.9 million) to help ports prepare for the European Union’s enhanced border security checks for UK citizens entering the EU. The funding is intended to reduce queues and delays when the EU implements its computerised Entry and Exit System (EES) this September.

This technology will remove manual passport scanning by requiring travellers from non-EU nations, including the United Kingdom, to register digitally at the border. The method entails scanning faces and collecting fingerprints to create a biometric record that is connected to travel documents.

The newly elected Labour government expressed alarm in July about the UK’s lack of preparation for the additional inspections, forecasting potential disruptions. The cash will be used to install essential equipment, develop kiosks, and hire and train personnel to handle the additional requirements.

The UK’s Minister for Migration and Citizenship, Seema Malhotra, stated, “We are working closely with the European Commission, member states, and ports to minimise any disruptions for Brits travelling into Europe.” The Port of Dover, Eurotunnel at Folkestone, and Eurostar at St Pancras station will each receive £3.5 million to help with these preparations.

QatarEnergy and Kuwait Petroleum Corporation (KPC) signed a new 15-year LNG supply agreement on August 26, reflecting Kuwait’s growing demand for low-carbon fuel for power generation. Under the terms of the arrangement, Qatar’s Q-Flex and Q-Max ships will transport liquefied natural gas (LNG) to Kuwait’s Al Zour refinery LNG import facility.

This is the second arrangement between the two corporations, following a 3 million metric tonnes per year deal in 2022. According to a KPC source, this increased supply is necessary due to Kuwait’s growing domestic demand for cleaner energy. Unlike prior contracts, Qatar’s Energy Minister Saad al-Kaabi travelled to Kuwait to sign this one, emphasising the importance of the pact.

KPC CEO Sheikh Nawaf al-Sabah emphasised the importance of the relationship with Qatar, noting that it will help Kuwait shift to cleaner energy and achieve net-zero emissions by 2050. To fulfil rising power demand and reduce emissions, Kuwait is transitioning from fuel oil to gas for power generation.

The government began importing LNG in 2009 and signed a 15-year contract with Shell in 2017 for LNG supply beginning in 2020. Kuwait has also built the Al Zour refinery, the Middle East’s largest power generation facility, with a capacity of 615,000 barrels per day.