Category: Economy

Sterling has fallen by 1% after the dollar wavered and British Prime Minister Liz Truss defended her government’s economic plans that led to the drop in the pound. Defending the new plans laid by the British government, Truss said that the big tax cuts were the right path for the nation and refused to give a second thought to making any changes to the “mini-budget”.

The pound was last down 0.3% to $1.0854 after hitting a low of $1.0764. However, the euro was 0.12% lower against sterling at 89.27 pence. Not only on other currencies, the new budget has affected the UK government bond market as wekk, forcing the Bank of England to intervene to protect pension funds, which are big holders of long-dated gilts. The BoE said it would buy 65 billion pounds of government bonds to restore market functioning.

“We are facing difficult economic times,” Truss said on local BBC radio. “I don’t deny this. This is a global problem. But what is absolutely right is the UK government has stepped in and acted at this difficult time.”

Jonas Goltermann, senior markets economist at consultancy Capital Economics, said that he does not think the Bank of England’s intervention would help boost the Sterling in the long run.

“I don’t think (the BoE’s intervention) is going to be a long-term boost for sterling, although it might prevent an extreme downturn,” he said.

The September 2022 United Kingdom mini-budget was announced by the Chancellor of the Exchequer Kwasi Kwarteng on 23 September 2022. Some of the new policies have attracted wide criticism. On 27 September, the International Monetary Fund (IMF) issued a statement in which it criticised the plans, saying “the nature of the UK measures will likely increase inequality”. 

A new report released by the World Intellectual Property Organisation (WIPO) on 29 September shows India has made significant progress in the global innovation index ranking, reaching the top 40 for the first time.

In the report, the most innovative economies in the world are Switzerland, the United States, Sweden, the United Kingdom and the Netherlands. Furthermore, India jumps to 40th place, while Turkey moves up to 37th place, with emerging economies showing consistently strong performance.

It has made its way into the top 40 this year after entering the top 50 earlier in 2020. In spite of the COVID-19 pandemic, research and development (R&D) and other investments that drive worldwide innovation continued to boom in 2021, but challenges arise in translating these investments into impact.

As part of its 15th edition, the GII 2022 report is published by WIPO in collaboration with Portulans Institute and with the support of corporate partners such as the Confederation of Indian Industry (CII), Ecopetrol (Colombia), the Brazilian National Confederation of Industry (CNI), and the Turkish Exporters Assembly (TIM).

The WIPO report said, “India is the innovation leader in the lower middle-income group. It continues to lead the world in ICT services exports and holds the top ranking in other indicators, including venture capital receipt value, finance for startups and scaleups, graduated in science and engineering, labour productivity growth and domestic industry diversification.”

The Asian Development Bank (ADB) on Tuesday announced plans to provide at least $14 billion in financial support for the Asia-Pacific region’s worsening food crisis, which is a direct impact of the Russia-Ukraine war and global climatic conditions. The funding will be done over 2022-2025.

The funding was announced by Asian Development Bank (ADB) President Masatsugu Asakawa during the 55th ADB annual meeting, conducted via a virtual press conference.

$3.3 billion will be spent in 2022, while $10.7 billion is to be utilized between 2023-25.

Mr. Asakawa highlighted global climate changes and food security as two prime target areas.

“This is a timely and urgently needed response to a crisis that is leaving too many poor families in Asia hungry and deeper poverty,” said ADB President Masatsugu Asakawa, in remarks at ADB’s 55th Annual Meeting. “We need to act now before the impacts of climate change worsen and further erode the region’s hard-won development gains. Our support will be targeted, integrated, and impactful to help vulnerable people, particularly vulnerable women, in the near-term, while bolstering food systems to reduce the impact of emerging and future food security risks.”

The organization, whose headquarter is in Manila, takes charge to support the member nations. ADB is owned by 68 members, of which 49 belong to the Asia-Pacific region.

On Tuesday, Defence Minister Rajnath Singh urged the domestic industry to identify cost-effective products and technologies for making weapons for the world, noting that global military spending is on the rise.

He said the recent rally in defence stocks indicates a growing interest in the sector, as he addressed a gathering of domestic defence manufacturers.

He spoke at the Society of Indian Defence Manufacturers (SIDM). Singh said, “The whole world is coming forward to invest in India. India is an attractive investment destination. This shows that now is the time to move ahead much faster than all of you have covered so far.”

He added that the companies need to cater not just for the requirements of the Indian armed forces but also for international buyers. Considering the substantial Indian capital procurement budget and the increase in global defence spending, he believes that the nation can meet the needs of quality and efficiency.

Aside from earmarking 68% of the capital procurement budget for domestic purchases, the defence minister also listed several policy initiatives taken by the government to promote the defence industry. He said the aim is to reach Rs. 1.75 lakh crore in defence production by 2025 and targets to increase the export by Rs. 35,000.

In August, the Japanese Finance Ministry released trade statistics showing a significant increase in LNG purchases from Russia. The data shows that Russian LNG supplies to Japan increased by 211.2% over August 2021. The value of Russian LNG imports increased by more than 380%.

The quantity and value of Russian oil purchases dropped by 20.3% and 54.1%, respectively, in August. Additionally, Japan bought less Russian coal this year (a 32.6% drop), but at a higher price. The number of Japan’s exports to Russia also increased last month, with shipments of computers increasing 107.1% and computer parts increasing 161.6%.

However, semiconductor shipments to Russia ceased earlier this year due to sanctions. The export of buses and trucks to Russia decreased, while the export of cars increased by 5.8%.

In response to Russia’s military operation in Ukraine, Japan supported the US and EU by imposing sanctions on Russian individuals, companies, banks, and over 300 exports and imports. Its companies, however, have been urged to keep their shares in Russian oil and gas projects to ensure continued access to energy supplies, and Tokyo is unwilling to jeopardize its energy supply.

In August, Saudi Arabia surpassed Russia to become the second-biggest supplier of oil to India, while Iraq retained the top spot, according to industry and trade sources.

Saudi Arabia shipped 8,63,950 barrels of crude to India last month, up 4.8% from last month, while Russia shipped 8,55,950 barrels, down 2.4% from December 2011.

In spite of Saudi Arabia’s gain, India cut African imports in order to cut its share of oil from the Organization of Petroleum Exporting Countries to 59.8%.

Following Moscow’s invasion of Ukraine in late February, India became Russia’s second biggest oil buyer after China. It is thought that the two countries, eager to secure raw materials at discounted prices, are cushioning the impact of western sanctions on Moscow as a result of their agreement to secure raw materials at discounted prices.

However, Moscow’s ‘special military action’ in Ukraine has not been publicly condemned by New Delhi. A Shanghai Cooperation Organisation summit, a regional security organization, will be held alongside a meeting between Modi and Putin on Friday.

In June, India imported a record amount of oil from Russia, but its imports have been declining since Moscow narrowed oil discounts and refiners lifted shorter-term supplies.

Foreign banks and rating agencies are increasingly becoming optimistic about India’s potential to grow and as a key investment destination, while the global economy keeps fretting about intense pains caused by the biggest economies be it as front-loading of Federal Reserve rate hikes or China’s deteriorating construction bubble.

Moody’s yesterday proclaimed a stable outlook on India, saying its credit profile shows key strengths, including its huge and diversified economy with high growth potential, a comparatively robust external position, and a firm domestic financing base for government debt.

McKinsey & Co’s chief executive asserted it’s not India’s decade but it’s India’s century. “India is the future talent factory for the world. By 2047, India would have 20% of the world’s working population. And with supply chains being reimagined, it has massive potential for India across all aspects of manufacturing. The third is digitization. India has leapfrogged on the digital scale. All those are the raw materials to do something special for not only the Indian economy but potentially for the world,” McKinsey’s Bob Sternfels told ET.

India’s finance minister said that advancing economies like that of India are showing a high possibility to lead the global economy for the next 5-6 decades.

India and Japan come together to combat the ever-increasing expansionist behavior of China in the Indo-Pacific region. Both countries plan to soon carry out their first-ever air combat exercise with fighter jets, improve their reciprocal military logistics pact and augment the range of defense-industrial collaboration to make the most advanced weapon systems.

Defence Minister Rajnath Singh and his counterpart Yasukazu Hamada met and discussed the importance of the India-Japan defense partnership and the vital role it will play in clinching a free, open, and rules-based Indo-Pacific region. “We also held extensive discussions on ways to enhance maritime cooperation, including MDA (maritime domain awareness),” Singh said.

While India is struggling with the unceasing military clashes in eastern Ladakh with China, though in some areas, troops have been withdrawn, Japan is strengthening its military potentialities to prepare for any eventuality stemming from the Taiwan Strait crisis.

The India-Japan joint statement considered Tokyo’s decision to scrutinize all options, such as its “counter-strike” capabilities, for its national defense. “The Japanese side expressed its determination to fundamentally reinforce its defense capabilities within the next five years and secure substantial increase of defense budget needed to effect it,” the statement said.

“Acknowledging Japan’s determination to reinforce its defense capabilities, the Indian side expressed its support to work towards enhanced security and defense cooperation,” it added

Saudi Arabia’s real gross domestic product increased by 12.2% in the second quarter compared with last year’s second quarter, according to data published on Wednesday. The kingdom, which is the world’s largest oil exporter, gains an advantage due to escalating crude prices and a post-pandemic recuperation.

The government had expected a growth of 11.8% at the end of July, but the growth figure in the second quarter exceeded the estimate. The economy improved by 2.2% from the first quarter.

“The growth is mainly due to the high increase in oil activities by 22.9% y-o-y,” the General Authority for Statistics said. The oil economy grew 4.4% from the first quarter to the second quarter.

Non-oil activities saw an increase of 8.2% on a yearly basis and 4.5% from the first quarter. Government activities grew by 2.4% in the first six months of 2022, a 0.4% rise compared to the first quarter.

The American services sector grew at a somewhat quick pace in August amid indications of easing supply issues and decelerating price gains, according to an industry survey released on Tuesday.

The Institute for Supply Management’s services index went up to 56.9 percent, a little above the July level, flouting expectations of a decline. The new orders index rose 1.9 percentage points, and employment jumped 1.1 points, ISM said, while prices went down 0.8.

“The services sector had a slight uptick in growth for the month of August due to increases in business activity, new orders, and employment,” ISM survey chair Anthony Nieves said in a statement.

Companies replying to the survey noted “some supply chain, logistics and cost improvements; however, material shortages remain a challenge,” he said. A hopeful prospect was that “employment improved slightly despite a restricted labor market.”

Two-thirds of the US economy depends on the service sector, which comprises a large variety of services, from education to IT to medicine.

Even in the middle of very high US inflation, the sector has expanded steadily for 151 months, except for a two-month decline as the United States battled with the coronavirus pandemic in April and May 2020.