Jan 20

Jan 20 Why I Am Puzzled By Indian Financial News

January 20, 2024

By Romar Correa*

Finance is supposed to be the conveyor belt of the production of and investment in goods and services which lead to employment and consumption. Here I have scanned recent news that is inconsistent or selective or that clearly militates against this definition, especially as it relates to the welfare of the Indian people. Also, in some cases, while the reported financial and economic data remains the same, a reader gets one perspective from one newspaper and an exactly opposite view from another newspaper.

Company shares buybacks have no investment impact?

Tata Consultancy Services, India’s largest software exporter, announced a Rs 17,000-crore ($204 million) share buyback programme, which opened and closed last month. A statement in the company’s regulatory filing, according to The Economic Times, explains, “The company believes that that the buyback is not likely to cause any material impact on the profitability or earnings of the company except to the extent of reduction in the amount available for investment, which the company could have otherwise deployed towards generating investment income” (emphasis mine).

Economic growth leads to fewer jobs for fresh engineers?

One morning, early last month, I was bewildered by a couple of headlines:

“GDP blitz at 7.6% lays ground for FY24 show”.

This news, on the first page of The Mint, referred to India’s strong economic growth during a quarter of the current fiscal year ending March 2024.

Then I came across this headline, on the same first page. It referred to weak job prospects for graduates of the world-renowned Indian Institutes of Technology:

“Fewer hirings, stagnant pay, as IITs brace for grim season”.

As I continued reading the paper, I wondered if a story on page 12 was an explanation:

“Jobs bear a weak link with economic growth and women’s workforce participation remains dismal”

A couple of weeks later, while reading The Economic Times, I came across similar confusing news:

Headline: “Hiring Activity Set to Pick Up Pace in 2024”

“India Inc will see an overall increase of 19% in hiring numbers in calendar year 2024, compared to the previous year, with manufacturing, automotive and the BFSI (Banking, Financial Services, and Insurance sector) leading the hiring.”

Headline: Engineering Grads Face Tough Placement Season

“Hiring of fresh engineering graduates is likely to fall by over 30% this fiscal amid a freeze on fresher intake at major IT and technology companies …”

Raising more debt helps manage debt price volatility?

Also last month, this was a headline in The Economic Times:

“Adani Group Plans to Raise $350m Bond to Refinance ’24 Maturing Paper”

The report stated that “Adani Green Energy’s $750-million, 4.375% bond maturing in September 2024 has seen the most volatility. In response, the management had put in place a financial plan by July this year, assuring investors that funds would be placed in escrow one year ahead of maturity.”

Government-run banks are financially strong, or, are they?

The first story says that government-run banks are healthy. Then, there was news that these banks took a massive loss on loans made to businesses.

“Almost the entire Rs 15,186 ($180 million) seized by the ED (Enforcement Directorate) has been restituted to public sector banks, FM (Finance Minister) Nirmala Sitharaman told Rajya Sabha (parliament) while stressing that Indian banks are healthy and resilient despite global turmoil. Indian banks have not only witnessed bad debts reducing but also profit margins going up even as banks in the US, Germany and Switzerland have collapsed, Sitharaman said.”

“Banks have written off Rs 10.57 lakh crore ($13 billion) during the last financial years, of which Rs 5.52 lakh crores ($6.6 billion) was in respect of loans pertaining to large industries, the government informed Parliament on Tuesday.”

Are foreign investors bullish or bearish on India?

One story says foreign investors are pumping funds into the Indian stock market. Another story, the same day, states a sharp decline in such investments worries officials.

“FPIs (Foreign Portfolio Investors) Flood Indian Equity Mkts, Infuse RS 1.5 Lakhs Crore ($1.8 Billion) In 2023”

Headlline: ‘Decline in FDI (Foreign Direct Investment) temporary, long-term growth story is strong,” says an Indian official.

“FDI into India registered a sharp slip by 24 percent to $20.48 billion ($250 million) in April-September 2023-24 largely led by decline in the inflows in sectors such as computer hardware and software, telecom, auto and pharma. Concerned by the decline, the government had invited fund managers and start-up founders among other stakeholders for a crucial meeting to find out ways to weed out operational challenges impeding investments” (emphasis mine).

Funding new investments can reduce debt?

Green investments are subject to gargantuan and unquantifiable risks. The private sector is, naturally, loth to sally forth. Governments have begun to absorb and underwrite the risks to induce the private sector to enter. The process is called de-risking. Firms are guaranteed a profit more assured than the so-called return on riskless government paper.

First headline: “Adanis to invest Rs 9,350 in green unit to pare debt” (emphasis mine).

Second headline: “Adani Green inks Pact with SECI to Supply 1,799 MW of Power”

“Adani Green Energy Ltd has executed a power purchase agreement with Solar Energy Corporation of India (a government- run business) to supply 1,700 MW of solar power” The Economic Times reported. “With over 200,000 acres of land already tied up in resource-rich areas of India, the portfolio is fully de-risked for execution of 45 GW capacity by 2030” (emphasis mine).

Did goods and services tax collection fall or rise?

Some headlines, the same day early this month, stated that the GST tax collection fell. Others said the collection rose.

“GST revenue growth dips to a 3-month low in Dec”

“Gross GST collections drop to three-month low of Rs1.64cr in December”

“GST revenue in December slips to Rs1.65tn, may pick up again”

“GST Collections up 10% YoY at Rs1.64Lcr in Dec”

“GST kitty grows 10% in Dec on strong domestic sources”

Did India’s exports rise or fall?

I came across this headline of growth in exports. But the story includes a statement of a decline in exports.

Headline: “Will maintain export nos. of last yr: Goyal”

“Commerce and industry minister Piyush Goyal on Wednesday exuded confidence that during this fiscal, the country will maintain the last year’s export figures despite slowdown in global trade”. …

“Globally growth has been negative, international trade is in the negative territory, estimates are that this year’s international trade may fall, … and I expect that in the current year, we will maintain our figures of last year …”

“Cumulatively, the country’s merchandise exports in April-November 2023-24 contracted by 6.5% to $278.8 billion.”

More confusion

And here are another set of confusing headlines. First on bank loan growth and the next on coal output.

“Loan growth of pvt banks moderates in Oct-Dec on high interest rates”

“Banks Pass Through of Rate Hikes Fastest of Past Three Cycles: RBI”

“India’s coal output rises 10.75% in Dec to 92.87 MT”

“Coal output growth slid to a six-month low in December”