This week, we talk about India’s latest quarterly GDP numbers and how they could augur well for the country as it gets ready to host the G20 summit. We also talk about a shortfall in rain and about the multi-million-dollar deal between Viacom18 and the BCCI. And finally, we talk about the latest allegations to hit Adani Group and Vedanta.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
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“GDP measures everything,” former US Senator Robert Kennedy once said, “except that which makes life worthwhile.”
Now, Bobby Kennedy may have had his reasons for being so cynical, but India’s economic growth numbers released this week should make Indian policy mandarins as well as economists and analysts quite happy.
India’s gross domestic product grew by 7.8% in the April-June quarter of the current fiscal year (2023-24), compared with 6.1% in the January-March quarter of 2022-23, according to data released by the National Statistical Office.
This is significant as it means that India remains one of the fastest-growing major economies, especially as China’s post-pandemic recovery has slowed.
To be sure, assessing the economic health of a country as diverse and large as India, just from its GDP numbers, is a risky affair. Little wonder, then, that economists are treading cautiously and not jumping up with joy, at least not yet.
Economists, both in India and outside, have been revising growth estimates in the recent past. The Reserve Bank of India’s first quarter estimates have varied from 6.7% (Aug 2022) to 7.2% (Sept 2022) to 7.1% (Dec 2022) to 7.8% (Feb and April 2023), and finally 8% (June and Aug 2023), as The Economic Times noted in an analytical piece.
But what is not in doubt is the fact that the growth number is driven by the services sector and greater capital expenditure. And the government is certain the economy will continue to power ahead.
India’s Chief Economic Advisor V. Anantha Nageswaran said during the week the economy is expected to grow at 6.5% this fiscal year notwithstanding deficient monsoon rains. He also said inflation won’t spike out of control as both the government and the RBI were taking adequate steps to maintain supply and keep prices under check.
These GDP numbers may also give Prime Minister Narendra Modi some bragging rights as he gets ready to host the leaders of the 20 wealthiest nations, including US President Joe Biden, for the G20 summit in New Delhi next week. While Vladimir Putin of Russia and Xi Jinping of China may not be in attendance, India will leave nothing to chance to show itself off as an attractive investment destination to leaders from the world’s most powerful economies.
Cloud Over Monsoon
The government can hope for a speedy economic growth that it can go to town with, but the rain gods have a mind of their own.
Monsoon rainfall during 2023 is expected to be “below normal” or on the lower side of “normal” after August ended with deficiency of 36%, the worst in 122 years, according to the India Meteorological Department (IMD).
This August was the driest and warmest for the entire country since weather records began being kept in 1901, the IMD said this week. In September, however, the rains are likely to be “normal” although the month will be hotter than usual, the weather department said.
Why is this important? India, you see, is still hugely dependent on its agricultural sector that employs a vast majority of the rural population. A significant shortfall in rains will not only impact farm output, but also prices of both food and non-food commodities. Shortages could lead to inflation and this could, in turn, impact lending rates, which may not come down anytime soon, making the cost of borrowing higher for businesses and individuals alike.
In fact, retail inflation in July was at a 15-month high of 7.44%, not merely on account of a seasonal spike in prices of important vegetables such as tomatoes and onions, but also due to more obstinate inflation in cereals.
So, what can we do about this? Precious little, except praying to the rain gods, we say, and keeping a tight watch on our monthly spending.
UPI, Up & Away
Talking of spending, India’s homegrown payments platform, the Unified Payments Interface (UPI), achieved an incredible milestone as its transactions crossed the 10-billion mark for the first time in a month, in August.
“Drumroll please! UPI has just shattered records with an astonishing 10 billion-plus transactions,” the National Payments Corp of India (NPCI), which runs the payment platform, said on X, formerly known as Twitter.
UPI transactions as on August 30 stood at 10.24 billion, up from July’s 9.96 billion and 9.33 billion in June. In value terms, the transactions totalled Rs 15,18,456 .4 crore, according to data shared by the NPCI on X.
The Game of Sports
The NPCI was not the only one celebrating this week. The Board of Control for Cricket in India (BCCI), which manages India’s most popular sport, won a jackpot of sorts, with the Mukesh Ambani-controlled media outlet Viacom18 winning media rights for 2023-2028 for both TV and digital category in an auction this week.
The exercise will make the Indian board richer by Rs 5,963 crore for 88 matches. This translates to a collective per match value of roughly Rs 67.8 crore, 13% higher than the Rs 60.18 crore paid by Disney Star in the last cycle.
To be sure though, the current value falls well short of the Rs 78.9 crore per match that Disney Star paid for bilateral cricket in 2023. This could mean that, overall, the business of cricket broadcasting may actually be stagnating a bit.
It also means that Ambani-led Reliance’s streaming app Jio Cinema could well become the next big thing in the Indian OTT space. In fact, digital may be the way to go, with more and more people cutting the TV cord. The winning bid for digital was worth Rs 3,101 crore while for TV it was Rs 2,862 crore.
Incidentally, this was also the week when Ambani announced at his group’s annual general meeting that the next generation of the family—his kids Isha, Akash and Anant—will join the board of Reliance Industries, while his wife Nita steps aside to focus more on her foundation.
With the gen-next taking charge, their priorities are clear, and they show!
The Insiders
While Ambani has been on a high, Gautam Adani, who competes with him for the top spot as the wealthiest Indian, may once again be in a spot of bother.
The Organised Crime and Corruption Reporting Project (OCCRP), an international network of investigative journalists, released a report this week with details suggesting that individuals ‘closely associated’ with the Adani family indulged in stock price manipulation amounting to violation of India’s rules on stock holdings by promoters of a company.
The Adani Group has, however, said that it “reject(s) these reports in their entirety” and termed them “recycled allegations” — a reference to the report released by New York short seller Hindenburg Research in February, in which it accused the conglomerate of “brazen stock manipulation and accounting fraud”.
The Adani group was not the only conglomerate under scrutiny this week. The OCCRP also alleged that billionaire Anil Agarwal’s Vedanta Group ran a ‘covert’ lobbying campaign to weaken key environmental regulations during the Covid-19 pandemic.
The OCCRP said Agarwal in January 2021 told then environment minister Prakash Javadekar that the government could add “impetus” to India’s economic recovery by allowing mining companies to boost production by up to 50% without having to secure new environmental clearances. It also alleged that Vedanta’s oil and gas business, Cairn India, lobbied to have public hearings scrapped for exploratory drilling in oil blocks it won in government auctions.
Vedanta reportedly told the OCCRP that it operated “with an objective of import substitution by enhancing domestic production in a sustainable manner”.
Market Wrap
On July 20, the Sensex touched a lifetime closing high of 67,571 and the Nifty peaked at 19,979. Market pundits predicted at the time that both the indices will soon breach 70,000 and 21,000 levels, respectively.
Just over 40 days on, the two benchmark indices have scaled back somewhat, as both the global and Indian markets turned choppy. The Sensex and the Nifty have been sluggish over the past couple of weeks but this week was a tad different. The Sensex ended the week 0.8% higher and the Nifty climbed about 0.9%, thanks to gains on Friday.
The Nifty stocks that were up the most were led by Tata Steel and JSW Steel, followed by Coal India, Hindalco and ONGC. Others that ended in the green were Maruti and Mahindra & Mahindra, Ultratech Cement, UPL and Cipla.
Nifty stocks that left their investors poorer were Dr. Reddy’s, Adani Ports, Indian Oil, Hindustan Unilever, Bharat Petroleum and Bharti Airtel. Reliance Industries, Britannia Industries and almost all the major lenders—ICICI Bank, Kotak Mahindra Bank, IndusInd Bank, State Bank of India and Axis Bank—were among the losers.
This was also a difficult week for the Adani Group companies as it came under fire over allegations of financial fraud and round tripping.
Other headlines
- India’s manufacturing PMI rises in August to a three-month high of 58.6
- Government’s fiscal deficit at Rs 6.06 trillion in April-July, hits 34% of FY24 target
- Growth in eight key infrastructure industries eases to 8.0% in July from 8.2% in June
- Government removes import duty, infra cess on LPG
- Department of Telecom tightens norms in crackdown on SIM frauds
- Govt appoints Jaya Verma Sinha as Railway Board’s first woman chief
- Government calls special session of Parliament; may table bills for One Nation-One Election, women reservation
- JC Flowers Yes Bank ARC settles with Subhash Chandra of Zee with a 75% haircut
- Akasa Air accuses Air India Express of poaching pilots, sends legal notice
- Ford in talks with two-three companies to sell its Chennai factory
- Jio Financial to be removed from key stock market indices
- Gokaldas Exports to acquire Dubai-based apparel maker Atraco for $55 million
- Maruti Suzuki says aiming to double production capacity by 2031
- FirstCry founder under investigation for alleged $50 million tax evasion
- Aeroflex Industries shares end with 51% gains on trading debut
That’s all for this week. Until next week, happy investing!
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