India News with Eyes Wide Open
November 25, 2023
By Romar Correa*
I reproduce items in Indian newspapers, with minimal commentary in italics, to illustrate the incoherence in thought and deed of India’s ruling elite. That these articles appear at all strengthens our faith, given the belief that the Indian press is straitjacketed, in the power of truth. This is the first of a continuing series.
November 23, 2023
The Adani group is in talks to sell its entire stake of $2- 2.2 billion in the Joint Venture with Wilmar, according to The Hindustan Times. The following quote appears in other newspapers of the day as well: “The Adani group is keen to shift focus from non-core ventures such as commodities and retail consumer goods to core infrastructure, energy, ports, logistics and cement businesses”.
Adani Wilmar is one of the large food companies in India, offering “most of the essential kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses and sugar. “
Then, are duty-free stores not “commodities and retail consumer goods ventures”? Are they the same as airports? ‘No’ and ‘Yes’ are the answers, in turn, to the two questions as attested below.
The Adani Group has set up a company in Macau that will bid for selling duty-free tobacco and liquor at Macau International Airport, according to The Times of India.
The Adani Group has been vociferous in its promises to go/grow green. Here is a news flash from the Business Standard: Leading exchanges imposed fines for non-compliance with some listing regulations on Adani Green.
To reduce risk, banks are expected to meet certain capital adequacy requirements, according to the Basel norms. The weight of different risks is summarised in models. The Reserve Bank of India (RBI) recently hiked the risk weights for unsecured lending by banks in India.
Financial technology firms and other financial platforms, evolving to evade such oversight, pose a challenge as they follow the market dictum, ‘innovate or perish’. They also portend the demise of classical banking for which the RBI is not likely to shed a tear.
The following subtitle of a story in The Hindu, therefore, is striking in its incomprehensibility. “RBI chief cautions lenders against being over-reliant on algorithms and model-based credit appraisal and lending, especially at a time when greater collaboration with fintechs is illustrating the introduction of innovative products and services.” The story carried the title: “RBI flags model-based lending, warns banks, NBFCs of undue risk build-up.”
November 8, 2023
The accumulation of capital is the heart of the capitalist dynamic. Investment is undertaken by a combination of debt and equity/bonds. Shares are also issued to retire existing debt. In that case, there is no growth in future output and employment. It should not be possible to vacillate between the two end uses as the next item suggests.
Reliance Industries Limited (RIL) has boldly stepped in where no Indian company has tread before, beyond the confines of banking and financial services. If successful, the amount would be the largest ever raised through bond issues by a business in India. “RIL to raise Rs 20,000 crores ($2.6 billion) via bonds in its largest domestic bond sale,” was the headline of a story in The Economic Times.
RIL announced, the story continued, that “up to 50% of the proceeds could be used for ongoing capital expenditure (capex) or lending to domestic subsidiaries where the shareholding of the parent company is greater than 51%; up to 25% of the funds raised could be used for any other purpose in the ordinary course of business, and 100% of the funds could be used for refinancing existing borrowings.” (All emphasis mine.)
Is ‘Make in India’ equivalent to ‘Conceive in Korea, Assemble in India’?
India’s Production-Linked Incentive (PLI) Scheme is enthusiastically touted by members of the government. Rajesh Kumar Singh, Secretary, Department for Promotion of Industry and Internal Trade, is less exhilarated and confesses that “about 80% of the funds for semiconductor PLI remain unused,” according to a report in The Hindu. Singh appealed to Korean investors to fill the breach especially for battery storage devices.
November 1, 2023
The following item makes sense with the definition, Total Profits equals Total Revenue (Income) minus Total Costs. Adani Total Gas Company Limited (ATGL) has kept costs down in unspecified ways. Reading a news report though makes me wonder how the math works.
According to a report in The Economic Times. ATGL’s Total Income dropped by around 1% year-on-year to Rs 1,188 crores during the recent July-September quarter, against Rs 1,200 crores in the same period last year. The volume of Piped Natural Gas (PNG) sold fell by 5% year-on-year due to lower offtake by industrial consumers, due to, in turn, lower fuel prices available elsewhere. Yet, the report stated, ATGL’s consolidated Net Profits rose by 7.5% on higher volumes for the quarter.
October 28, 2023
Received wisdom is that, in general, competition is the best of all milieux in delivering goods and services of high quality in adequate quantities and at reasonable prices. Other things being equal, monopoly is the worst of all possible worlds in delivering no more than monopoly profits. The following item, from a report in The Indian Express, is about the impact of monopoly and pricing: “On average an Adani port every 500 km of coastline; these handle 24% of all cargo, government share dips.”
It is common knowledge that working regulators, including Competition Commission of India (CCI) Chairmen, have regularly voiced concerns about the dominant position of Adani enterprises over parts of the Indian economy. In particular, two regulators have protested six acquisitions in the past 10 years in the shipping industry, concluding that the obliteration of potential competition in certain regions is now complete.
Minor ports are governed by state governments and state maritime boards. Their tariffs are not calculated by the Tariff Authority for Major Ports (TAMP). Therefore, Adani Ports and Special Economic Zone Ltd (APSEZ) can set monopoly tariffs in the minor ports.
Port tariffs account for a small share of gross shipping costs. However, ship leasing charges are much higher. As a result, shippers would prefer ports with faster turnaround times even if the tariffs are exorbitant. Moving to other sectors, with ownership of eight airports, Adani is the largest private sector operator in the business. The group dominates cement manufacturing and private sector coal power production.
There should be no need to spell out that accumulation of capital is undertaken by capitalists and not by the State. The next two items dwell on the theme.
October 26, 2023
Private companies have announced more new business projects than the government-run companies in the first half of the financial year 2024. However, a report in The Indian Express notes, private companies trail the government ones in the number of completed projects and projects under implementation.
The value of projects abandoned by private companies increased from Rs 300,000 crores ($39 billion) in the fourth quarter of financial year 2023 to Rs 420,000 crores ($55 billion) in the first quarter of financial year 2024. This rise in abandoned projects and fewer announcements of new projects means the total value of net new projects by the private sector declined in the first half of financial year 2024, for the first time since 2021.
October 1, 2023
The central government announced that, for the current fiscal year ended March 2024, a state would get a share of Rs 1 trillion in capital expenditure loans only if it spent 45% of their previous annual capex, between April to September 2023.
This raised expectations that the states would furiously pursue capital projects, which are funded by loans from the central government. Yet, during April-August 2023, the states had met only a quarter of their annual capex spending, according to a report in The Financial Express.
Nor surprising then, that during August and September 2023, the capital expenditure of state governments increased at a faster rate – 45% - than over the comparable period in 2022. However, excluding the interest-free capex loans of Rs 40,000 crores ($5.2 billion), released by the centre to the 17 largest states, the states capex increased only by 10%.
*Romar Correa retired as the Reserve Bank of India Professor of Monetary Economics, Bombay University.
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