Category: Economy

On October 4, the Reserve Bank of India (RBI) took action in the foreign exchange market by selling dollars to prevent the Indian rupee from plummeting to an all-time low.

The rupee, facing challenges from increased US Treasury yields and a strengthened US dollar, concluded the day at 83.24 against the dollar, slightly weaker compared to the previous closing rate of 83.21. During the day, the domestic unit depreciated to 83.27 per dollar, just shy of the record intraday low of 83.29.

Dealers estimate that state-run banks, acting on behalf of the RBI, sold approximately $500 million to stabilise the situation.

Despite these challenges, a resilient domestic economic outlook has helped keep the Indian bond market afloat. On October 4, the yield on the benchmark 10-year government bond remained steady at 7.24%, matching the rate from the previous day. Nevertheless, India’s benchmark stock indices, Sensex and Nifty50, dropped to their lowest point in over a month due to widespread selling.

In comparison to other Asian currencies on October 4, the Indian rupee outperformed peers like the Indonesian rupiah, Malaysian ringgit, and Thai baht but lagged behind the Japanese yen, Taiwanese dollar, the Chinese offshore yuan, and a few others. Market participants anticipate that the rupee will continue to trade within the range of 83.05 to 83.30 against the US dollar for the time being.

The people in one of the wealthiest nations in the world, Luxembourg are crossing borders to live in neighbouring countries such as Germany, Belgium or France to seek affordable rent.

Luxembourg faces a dire housing crisis. With sky-high prices for homes and rentals, even people with good incomes find it difficult to secure affordable housing. Residents are moving to neighbouring countries due to more reasonable property costs. Despite Luxembourg’s strong economy, the housing market has created significant challenges.

There are people who have waited five years for social housing, underlining the shortage of affordable options, especially for young people and single-parent families. The issue has led many Luxembourgers to move abroad, despite the nation’s thriving financial services sector.

The housing problem is striking in a country with the EU’s highest average earnings, estimated at €47,000 annually in 2022. In Luxembourg City, new apartments can cost around €13,000 per square meter, while older ones go for €10,700. The average house price is €1.5 million. Rents have surged by 6.7% between June 2022 and June 2023 outpacing inflation.

A lack of inheritance tax and nominal duties has encouraged landowners to hold onto property without development. Around 0.5% of residents, or 3,000 individuals, own half of the buildable land. High demand from foreign workers and the unequal housing market further inflate costs.

Singapore’s digital economy contributed 17.3% to its gross domestic product (GDP) in 2022, marking a significant increase from the 13% contribution in 2017, according to a report released on October 6. This represents nearly a doubling of its value added or economic contribution, rising from S$58 billion to S$106 billion over the five-year period, as reported by the Infocomm Media Development Authority (IMDA).

Between 2017 and 2022, the digital economy’s contribution rose by $48 billion. Among sectors, Information and Communications (I&C) played the most substantial role in Singapore’s economy, contributing $33 billion, which accounted for 5.4% of the GDP in 2022. In 2017, I&C contributed $19 billion, equivalent to 4.3% of GDP. IMDA identified I&C as the fastest-growing sector between 2017 and 2022.

IMDA’s inaugural Singapore Digital Economy report was developed in collaboration with the Lee Kuan Yew School of Public Policy. The report also revealed that technology adoption rates among Small and Medium Enterprises (SMEs) increased significantly, rising from 74% in 2018 to 94% in 2022. Additionally, the average technology adoption intensity by SMEs increased from 1.7 to 2.1 over the same period.

The expansion of the digital economy has led to the growth of the tech workforce in Singapore. The number of tech professionals increased from approximately 155,500 in 2017 to 201,100 in 2022, driven by demand across all sectors.

A wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA) will invest Rs 4,966.80 crore in Reliance Retail Ventures Limited (RRVL), announced the Reliance Industries Limited on October 6. ADIA’s investment will translate into a 0.59% equity stake in RRVL on a fully-diluted basis.

In a statement, Hamad Shahwan Aldhaheri, Executive Director of the Private Equities Department at ADIA, said that the investment aligns with the company’s strategy of supporting its portfolio companies that are transforming their respective end-markets. 

The investment places RRVL’s pre-money equity value at Rs 8.381 lakh crore. The Indian company has an integrated omnichannel network, with over 18,500 stores and digital commerce platforms, across businesses of grocery, consumer electronics, fashion and lifestyle and pharmaceuticals.

The transaction is subject to customary approvals. Morgan Stanley served as the financial advisor to RRVL, while Cyril Amarchand Mangaldas and Davis Polk and Wardwell were its legal counsels for the deal.

RRVL aims to reform the Indian retail sector with its inclusive strategy by serving millions of customers, empowering MSMEs, and building collaborations with global and domestic companies, the company said in a press release. Its New Commerce business so far works with over 3 million small and unorganised merchants.

Northeastern states of India have benefitted from the implementation of Goods and Services Tax (GST) by way of a big jump in their revenue collections after the tax reform in 2017, said Union Finance Minister Nirmala Sitharaman at an event in New Delhi on September 23.

The states in the region have benefitted from the emphasis given by the government on infrastructure creation and connectivity improvement. The region has also benefited from the higher tax transfers to the states and by way of funds given to them for asset creation, the union finance minister added.

GST is a destination-based tax on consumption. The importing states get the tax on inter-state trade, unlike seen in the pre-GST regime. This is a big advantage under GST for states with little manufacturing base as they receive proceeds of Integrated GST (IGST) receipts on imports.

Although areas like the northeast have lesser manufacturing activities, both the collection of GST and the devolution of tax from the central government result in good revenue generation. The states recorded a compound annual GST revenue growth rate of 27.5% since the implementation of the GST (2017-18 to 2022-23) as against 14.8% for all states.

The Government of India is looking to auction its lithium reserves in the Union Territory of Jammu & Kashmir in the coming few weeks, says a media report quoting government sources. The auction will happen soon and some overseas miners have shown interest, the report adds.

India has been exploring ways to secure lithium supplies with the first lithium deposits of 5.9 million tonnes found in Jammu and Kashmir’s Reasi district in February 2023 during exploration by the Geological Survey of India (GSI).

The report also noted that Khanij Bidesh India Ltd (KABIL), a state-owned joint venture formed to look for minerals overseas, is in the final sages to secure a few lithium blocks in Argentina. Additionally, discussions are also underway with the Chilean government in order to secure lithium blocks.

Lithium is critical for making batteries of electric vehicles. A lithium battery has a high power-to-weight ratio and can deliver a lot of power while keeping the curb weight of the car low. It also works better in a variety of temperatures and is more energy-efficient. As a result, it is a safer and more dependable procedure than other ones.

Lithium reserves are a key component in India’s ambition to expand EV penetration by 30% by 2030. Currently, less than 1% of all new cars sold in the nation are electric vehicles.

The Government of India is reportedly taking significant steps to promote the local sourcing of components for laptops and servers to around $20 billion over the next four years – a considerable increase compared to the current $1 billion procurement – to reduce reliance on imports and boost domestic manufacturing in the technology sector.

The move to promote local component sourcing aligns with broader efforts to boost India’s manufacturing sector and make a self-reliant and resilient domestic manufacturing ecosystem, say media reports.

The Centre has taken several initiatives to establish a strong ecosystem for device and server manufacturing within the country. These initiatives include the implementation of the Rs 17,000 crore production-linked incentive (PLI) scheme for IT hardware and the introduction of an “import management system,” which is set to begin on November 1.

The “import management system” is expected to play a role in regulating and managing imports, especially from ‘non-trusted sources,’ to support the “Make in India” initiative and strengthen the local manufacturing ecosystem.

Indian medical graduates will now be able to practice medicine in foreign countries, as the National Medical Commission (NMC) has received the World Federation for Medical Education (WFME) recognition status for a period of 10 years.

According to a Union Health Ministry press release on September 20, the recognition will enable medical graduates with degrees from Indian institutions to pursue post-graduation or practice medicine in countries such as the United States, Canada, Australia and New Zealand, where WFME recognition is required.

All 706 existing medical colleges in India have received WFME accreditation. Any new medical colleges established in the next 10 years will also automatically gain this status.

The WFME is a global organisation dedicated to improving the quality of medical education worldwide. Its recognition will enable the commission to enhance the quality and standards of medical education in the country by aligning it with global best practices and benchmarks. It will also augment the international recognition and reputation of Indian medical institutions and professionals, foster academic collaborations and exchanges, and promote ongoing improvements and innovation in medical education.

WFME recognition process entails a fee of Rs 4,98,5142 ($60,000) per medical college, which covers expenses related to site visits, travel, and accommodation for assessment teams. This implies an approximate total cost of Rs 351.9 crore ($4,23,60,000) for all 706 medical colleges in India to seek WFME recognition.

Singapore has seized the title of the world’s freest economy, toppling Hong Kong after a 53-year reign, according to a report unveiled by the Canadian think tank Fraser Institute. This marks the first time since the inception of the Economic Freedom of the World Index in 1970 that Hong Kong has been displaced from the number one position. Switzerland, New Zealand, and the United States have secured the third, fourth, and fifth spots, respectively.

The index assesses economic freedom through various criteria, including ease of international trade, the liberty to enter and compete in markets, and business regulations, among other benchmarks. Hong Kong’s decline in ranking can be attributed to new regulatory barriers to market entry, rising business costs, and restrictions on foreign labor, as noted in the report.

The data in the 2023 report is derived from 2021, representing the most recent year with comparable statistics across 165 jurisdictions. It evaluates the economic freedom of individuals, reflecting their ability to make autonomous economic decisions.

Other notable mentions in the report include the United Kingdom, which claimed the ninth spot, while Japan and Germany secured the 20th and 23rd positions, respectively.

Around 22 countries are currently engaged in negotiations and exploring the possibility of conducting bilateral trade with India using the rupee, said Union Finance Minister Nirmala Sitharaman in an interview on September 15.

Sitharaman stated, “Approximately 22 countries are actively negotiating with us and considering the feasibility of conducting bilateral trade in rupees. This interest is driven, in part, by the fact that many of these countries are facing a shortage of dollars,” as she spoke to a news channel.

The minister also emphasised that India possesses a better understanding of the needs of the developing world and is committed to aligning their goals with the global developmental agenda.

India has recently introduced several initiatives aimed at promoting the use of the Indian rupee for international transactions. Through collaborations with banks from 22 different nations, India has established special rupee vostro accounts within local banks, facilitating the exchange of national currencies.

In July 2023, India signed an agreement with the United Arab Emirates that enables trade settlement in rupees rather than dollars, further advancing the country’s efforts to reduce transaction costs by eliminating the need for dollar conversions.