Category: Economy

The World Bank has downgraded its growth forecast for developing economies in East Asia and Pacific, citing slow growth in China and weak global demand amid high interest rates and slow trade. It now expects these economies to grow by 5% this year, slightly less than the 5.1% it had forecasted in April. For 2024, the bank expects growth in the region to be 4.5%, down from the earlier forecast of 4.8%.

The Washington-based multilateral bank has left its 2023 economic growth forecast for China unchanged at 5.1%, but reduced its 2024 estimate to 4.4% from 4.8%. It pointed at longer-term structural factors, elevated debt levels in China and weakness in its property sector as reasons for the downgrade.

Even though East Asian economies have mostly recovered from the series of shocks since 2020, including the COVID-19 pandemic, and will continue to grow, the World Bank said the pace of growth will likely slow. It flagged the significant increase in general government debt, as well as the rapid jump in corporate debt levels, particularly in China, Thailand and Vietnam.

The bank warned that high government debt levels can limit both public and private investment. Elevated debt could lead to higher interest rates, which would increase the cost of borrowing for private businesses, it added.

The ongoing 2023 ICC Men’s Cricket World Cup may boost the host country India’s economy by as much as ₹22,000 crore ($2.6 billion), according to an estimate from the Bank of Baroda.

The quadrennial tournament, which began on October 5 and will continue until November 19, is expected to attract a large number of fans from India and abroad. With matches being played across 10 cities, the championship is likely to benefit other sectors such as tourism and hospitality, said the economists working with the bank on October 4.

The ICC Cricket World Cup, hosted in India for the first time since 2011, coincides with the three-month festive season that began in September. It will particularly benefit the retail sector, as many people are expected to make sentimental merchandise purchases, underlined the economists.

The total Indian viewership for the tournament, including both on television and streaming platforms, is expected to be significantly larger than the 552 million viewers recorded in 2019. It may generate ₹10,500 crore to ₹12,000 crore in TV rights and sponsorship revenue on a conservative basis, the Bank of Baroda team said.

However, the economists also warned that the World Cup may lead to inflation, with airline ticket and hotel rental prices surging during the period, along with service charges in the informal sector in the host cities. The researchers expect inflation to rise between 0.15% and 0.25% for October and November overall.

The United Arab Emirates (UAE) and India will cooperate more closely in sustainable industrial development following a memorandum of understanding (MoU) signed on October 5 in Abu Dhabi.

The MoU was signed by His Excellency Dr. Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and Piyush Goyal, India’s Minister of Commerce and Industry, in the presence of His Highness Sheikh Hamed bin Zayed Al Nahyan, Member of the Abu Dhabi Executive Council.

Focusing on facilitating industrial investments, technology transfer and enabling the deployment of key technologies in industries, the MoU will benefit both countries through joint industrial and technological developments. It focuses on seven key areas of supply chain resilience, renewable energy and energy efficiency, health and life sciences, space systems, AI, Industry 4.0 and advanced technologies, and standardisation and metrology.

Under the MoU, the UAE and India will also collaborate in the deployment of 4IR technologies in industry, real-time data processing, the development of machine-to-machine control systems, the development of autonomous robotics, equipment and vehicles, as well as the deployment of additive manufacturing in key industries.

Both the sides reviewed and strengthened existing collaborations, and explored new opportunities for their bilateral partnerships.

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.