Latest news with #IndiaFile
Reuters
07-05-2025
- Business
- Reuters
India File: Picking the right fights in manufacturing
Car panels are welded using robotic machines at the manufacturing plant of Maruti Suzuki in Manesar, in the northern state of Haryana, India, September 26, 2023. REUTERS/Anushree Fadnavis/File Photo Purchase Licensing Rights , opens new tab (This was originally published in the India File newsletter, which is issued every Tuesday. Sign up here to get the latest news from India and how it matters to the world.) As global supply chains start to break apart and reassemble under new tariff realities, could India set itself up to be among the winners? Which sectors could draw global manufacturers? That's the focus of our analysis this week. The Reuters Tariff Watch newsletter is your daily guide to the latest global trade and tariff news. Sign up here. Advertisement · Scroll to continue And in the aftermath of the Kashmir attack, India begins to raise the capacity of hydroelectric projects in the Himalayan region after suspending a 1960 water-sharing treaty with Pakistan. THIS WEEK IN ASIA SEMICONDUCTORS VS SMARTPHONES India's age-old but as yet unfulfilled hopes of building up its manufacturing sector have another window of opportunity, as long-established global supply chains snap under the strain of U.S. President Donald Trump's tariff wars. Advertisement · Scroll to continue India is working to close an early trade deal with the U.S., offering rare concessions but also seeking favourable tariff treatment for labour-intensive sectors, Shivangi Acharya and Manoj Kumar reported. Read here for the details. Against this backdrop, two unrelated developments drive home that India will have to choose its manufacturing battles carefully to lock in gains from a once-in-a-lifetime trade and supply chain reshuffle. The first is a setback to India's attempt to become a semiconductor manufacturing hub. Billionaire Gautam Adani's group has paused talks with Israeli partner Tower Semiconductor for a $10 billion chip project after concluding it did not make commercial sense . Indian software firm Zoho's plans to expand into chip manufacturing have also fallen through. Despite the government's attempts, including 760 billion rupees ($9.00 billion) in state subsidies to set up new factories, India has yet to get any real traction in semiconductor manufacturing. But in smartphones, it's a different story. Apple Inc. is considering moving to India all its iPhone production for the U.S. market. Indeed, it has already been accelerating India's output and exports in the lead-up to the tariffs' implementation. ROOM FOR OPPORTUNITY India has not been spared from U.S. tariffs but the rates are far below those imposed on China, and the shift of output to India may already be showing up in macroeconomic data. In April, India's export orders grew at the second-fastest pace in 14 years. Whether this reflects a " tariff front-run " during the 90-day pause in Trump's hefty "reciprocal tariffs" or the beginning of a full-on shift in production will be judged as more detailed export data flows in, Capital Economics said in a note on Friday. But India is well-positioned to become an alternative to China as a supplier of goods to the U.S, said Shilan Shah, deputy chief emerging market economist at Capital Economics. "More than 40% of India's exports to the U.S. are similar to those exported by China," he said. According to Nomura, there is growing anecdotal evidence of trade diversion and supply chains shifting to India due to higher tariffs on China and other competitor nations. For now, this is visible in low- and mid-tech sectors such as consumer electronics, textiles and toys, economists Sonal Varma and Aurodeep Nandi wrote in a note on April 30. But there are spoilers that could trip up this opportunity. One is the need for reforms that would make doing business in India easier, such as simplifying customs processes and speeding up the clearance of shipments through Indian ports. Another, which would be tougher to overcome, is India's dependence on imported components from China in major sectors such as electronics and solar equipment. Are you seeing signs that India is moving fast enough to capture the opportunity created by the global trade shuffle? Write to me at , opens new tab MARKET MATTERS India's weighted average call rate easing towards RBI's SDF rate The Indian central bank's plan to buy 1.25 trillion rupees in government bonds in May, following similarly large purchases in April, has pulled down overnight interbank lending rates below the policy rate. This, analysts say, is acting as a de facto interest rate cut over and above the 50 basis points in cuts announced by India's Monetary Policy Committee so far this year. There is room for further rate cuts , but with caution, an external member of the committee told Reuters. The liquidity infusions have brought down borrowing costs, leading to a rush of bond issuance THE WEEK'S MUST-READ India has begun work to boost holding capacity of reservoirs at two hydroelectric projects in the Himalayan region of Kashmir. Last month, New Delhi suspended the 1960 Indus Waters Treaty with Pakistan after an attack on tourists in Kashmir. Read more in this Reuters exclusive Pakistan has denied India's accusation that it was behind the attacks and is preparing to challenge the suspension of the treaty, which ensures water for 80% of Pakistani farms. ($1 = 84.4190 Indian rupees) By Ira Dugal; Editing by Edmund Klamann Our Standards: The Thomson Reuters Trust Principles. , opens new tab Share X Facebook Linkedin Email Link Purchase Licensing Rights
Reuters
23-04-2025
- Business
- Reuters
India File: Monsoon windfall vs tariff headwinds
(This was originally published in the India File newsletter, which is issued every Tuesday. Sign up here to get the latest news from India and how it matters to the world.) Indian markets got a double-dose of good news last week from the country's government agencies, which forecast more plentiful-than-average monsoon rains while reporting easier-than-expected consumer inflation. Both bode well for economic growth, but will they be of much help in the face of global economic turmoil stirred up by U.S. tariffs? That's our focus this week. And, India's government has drafted a proposal to ease its nuclear liability laws, which have long hindered cooperation with foreign firms to develop the nuclear power sector. Scroll down for details. THIS WEEK IN ASIA ** China warns countries against striking trade deals with US at its expense ** South Korea finds 'Made in Korea' breaches intended to bypass US tariffs ** Nintendo faces trade war test with Switch 2 launch ** Early voting in Australia election begins, PM Albanese's party holds slender lead BLESSINGS OF THE MONSOON In India, people don't just talk about the weather, they rely on it - especially the annual monsoon rains - as a pillar of the economy, ensuring stable supplies of food, water and electric power. Nearly 45% of India's workforce and 15% of its GDP are tied to agriculture, so it was no small blessing last week when the India Meteorological Department forecast this year's monsoon would bring plentiful rains - about 5% above an average year. This is a rare bit of good news for the world's fifth-largest economy as it grapples with slowing growth and the fallout from U.S. President Donald Trump's erratic tariff policies, which threaten to stall the global economy. Climate change also looms as a threat to India, where droughts have routinely knocked growth by anywhere from 50-200 basis points a year since the start of the millennium, according to government estimates. Heatwaves and flooding have also become more frequent and are taking a heavy human toll. For now, the fortuitous monsoon forecast has helped to put a damper on prices of rice and cotton, where bumper harvests are more likely this year, while shares of fertiliser and seed companies rose in anticipation of strong demand. Analysts said it also lent support to India's stock markets, which were already on a recovery path with the best weekly gain last week in more than four years. "(The forecast) adds to the happy tidings on the food inflation front," said Dharmakirti Joshi, chief economist at Crisil. The government last week announced that India's retail inflation slipped to a more than five-year low as food prices continued to moderate, in part a lingering effect of last year's good monsoon. India's monsoons, typically lasting from June to September, deliver nearly 70% of the rain needed to water crops and recharge reservoirs and aquifers. Nearly half of the country's farmland lacks any irrigation, relying on the monsoon to grow a wide array of crops including rice, corn, pulses, cotton and soybeans. Analysts estimate that a bad monsoon can cut India's growth by 20-30 basis points. That's at a time when India, the world's fastest-growing major economy, has a lot at stake in the rural sector as stagnant wages and legacy inflation weigh on urban consumer spending. The central bank estimated growth for the financial year to next March at 6.5%, down from its earlier estimate of 6.7%. And while the government maintains that Trump's tariffs will not affect growth, private economists cite them as a major reason for cuts to growth forecasts of 20-40 basis points. If good rains help to further lower food prices, they could keep inflation within the central bank's comfort level and allow more rate cuts to stimulate growth. Crisil's Joshi warns, however, that the weather doesn't always bring good news. "Watch out for weather disruptions such as heatwaves," he said. Weather experts and agriculture scientists worry that above-average temperatures in March, following a warmer February, could damage winter-sown crops such as wheat, chickpeas and rapeseed. Some experts believe climate change is to blame in recent years for the heat waves during April-June, typically India's hottest months, followed by excessive monsoon rains that trigger floods. India recorded more than 40,000 suspected heatstroke cases last year as a prolonged heatwave killed more than 100 people. Temperatures in north India soared to nearly 50 degrees Celsius (122 degrees Fahrenheit). Torrential rain, floods and landslides kill scores of people every year and damage property and infrastructure. Last year, more than 200 people were killed after heavy rains triggered landslides in the southern state of Kerala, while heavy rains hit major cities such as New Delhi and Bengaluru as well. Can this year's monsoon help India weather the tariff-driven turbulence ahead? How should India respond to climate change and its influence on weather patterns? Write to me with your views at opens new tab. THE WEEK'S MUST-READ India is planning to ease its nuclear liability laws in hopes of attracting U.S. equipment suppliers, who have kept their distance for fear they'd risk unlimited exposure in the case of an accident. Prime Minister Narendra Modi's government aims to expand nuclear power capacity to 100 gigawatts over the next two decades, or 12 times the current capacity. Prospective imports of nuclear power equipment could also serve as a bargaining chip in trade negotiations with Washington. Don't miss this exclusive report about a draft law to remove the legal hurdle that has thwarted nuclear power development despite a landmark 2008 India-U.S. civil nuclear deal. MARKET MATTERS Indian stocks, bonds and the rupee have turned positive for 2025 on expectations of an improving domestic economy. Benchmark stock indexes on Monday logged their biggest five-day gain in four years, boosted by shares of financial services firms after large private-sector banks posted strong earnings.
Reuters
08-04-2025
- Business
- Reuters
India File: RBI's moment to fly with the doves
India File is published every Tuesday. Think your friend or colleague should know about us? Forward this newsletter to them. They can also subscribe here. U.S. President Donald Trump's tariff announcement last week has cast a shadow over central bank policy decisions, including the Reserve Bank of India which will announce its latest decision on Wednesday. Should the Indian central bank turn dovish to counter global headwinds, or hold off given the threat of inflation? That's the focus of our analysis this week. Catch up on all tariff related news with Reuters' tariff watch. You can sign up here. THIS WEEK IN ASIA ** China censures Trump tariff 'blackmail' as market turmoil eases ** China state firms vow to boost share purchases to calm markets ** South Korea to hold snap presidential election on June 3 ** Trump orders fresh review of Nippon Steel's bid for US Steel AN EARLY TEST OF TRADE WAR RESPONSES With less than a week past since markets globally fell into a tariff-driven tailspin, the Reserve Bank of India finds itself among the first high-profile central banks, along with New Zealand, to issue a formal policy response, due on Wednesday. While Fed Chair Jerome Powell has demurred on whether to respond quickly with rate cuts to bolster growth, wary that a trade war could also trigger inflation, analysts say this is the RBI's moment to step up as a first-mover among the doves. India's long-running worries about inflation and currency weakness have eased in recent months, while flagging GDP growth has made the central bank more amenable to policy easing that could shore up the world's fifth-largest economy. Read here to catch up on expectations for the RBI's policy decision. Weakness in the dollar - and potentially in China's yuan - as well as lower global crude oil prices, which have fallen 13% since last week's tariff announcements, can further help to keep inflation reined in. The RBI has forecast a comfortable inflation rate of 4.2% for 2025/26 - close to its 4% target. Things are different on the growth front. At first blush, India appears to have been spared the worst of the new U.S. tariffs, with a "reciprocal" rate of 26% compared with 34% for China and 46% for Vietnam, two of Asia's most heavily export-dependent economies. You can see a graphic on the global spread of tariffs here. The tariffs' hit to Indian GDP growth is estimated by economists at a modest 20-50 basis points for this financial year, while the government believes its projected 6.3-6.8% growth rate will hold. But India's policy makers are nervous all the same. The RBI has forecast GDP growth this year at 6.7%, a slight improvement from a four-year low of 6.5% expected for the financial year just ended in March but still well short of what had become the norm for the world's fastest growing major economy in the post-pandemic years. The tariffs could also deliver a heavy blow to consumer demand in sectors such as gems and jewellery, although others like textiles may have an opportunity to benefit from higher U.S. tariffs on competing nations. PRIORITY ON GROWTH AND LIQUIDITY What's more, the indirect impact of the U.S. tariffs, through global and local financial market turbulence and delayed investment decisions by both domestic and foreign firms, could amplify the hit to growth, warns Citigroup's India economist Samiran Chakraborty. Vivek Kumar, economist at QuantEco Research, said that reviving domestic consumption and demand should be a priority for the RBI at this stage. The central bank had already begun to prioritise supporting growth when it cut interest rates in February for the first time in five years. Since December, it has also infused more than 6 trillion rupees of liquidity into the banking sector, pushing the financial system into a cash surplus. Bankers are now seeking an assurance of adequate and predictable liquidity, which the central bank may consider at this policy review. "That significant easing of monetary conditions will be immensely supportive of ease of financing by domestic industries amid the turbulent operating conditions," rating agency India Ratings and Research said in a note over the weekend. In the slightly longer term, Indian policymakers will closely watch whether the trend of a falling dollar and lower oil prices persists. The recently weaker dollar and strength in the rupee - up 2.3% from February's record low - give the central bank particular comfort, both by keeping a lid on imported inflation and easing concerns that rate cuts would weigh on the currency. That said, if the global market turmoil persists and reverses a nascent recovery in India's equity markets, the negative wealth effect could be severe, especially for young investors. How badly will the Indian economy be hit by the global trade war? Write to me at opens new tab QUOTE OF THE WEEK "The legislation will improve lessors' confidence in the Indian market and may also make it easier for upcoming airlines to lease aircraft." Lovejeet Singh, a partner at law firm Chandhiok & Mahajan who specialises in aviation law, said the Indian parliament's passage of the "Protection of Interests in Aircraft Objects" bill will fully implement the Cape Town Convention and Protocol, an international agreement on asset-based financing. This would help make it easier for global aircraft leasing companies to repossess jets and engines when a carrier defaults on its payments, Singh said. MARKET MATTERS Crude oil prices have fallen sharply in the wake of last week's U.S. tariff announcement, a modest rebound on Tuesday notwithstanding, as worries mount over a potentially severe slowdown in the global economy. Goldman Sachs has raised the odds of a U.S. recession to 45%, a second revision to its forecast in a week. The slowdown could add to already weak demand in Asia. India, meanwhile, raised some tax levies on petrol and diesel, taking advantage of the lower prices to boost its tax revenues while preventing oil companies from reaping a windfall on the market's moves.
Reuters
02-04-2025
- Business
- Reuters
India File: Musk, big tech, and the Trump-Modi two-step
(This was originally published in the India File newsletter, which is issued every Tuesday. Sign up here, opens new tab to get latest news from India and how it matters to the world.) With less than 48 hours until the U.S. announces retaliatory tariffs against countries with higher tariffs than its own, India's list of pre-emptive concessions is still growing. Who is benefiting most so far? That's the focus of our analysis this week. Keep up to date on all things tariff-related by signing up to the Reuters daily Tariff Watch here. India's swap markets are signalling another interest rate cut and looser cash conditions when the central bank announces the results of its next monetary policy review on April 9. Scroll down for more on that. THIS WEEK IN ASIA ** China launches military drills around Taiwan, calls Taiwan President a "parasite" ** Myanmar quake death toll hits 1,700 as aid scramble intensifies ** South Korea, China, Japan agree to promote regional trade as Trump tariffs loom ** Bangladesh's main opposition warns of instability if elections delayed beyond December ADVANTAGE MUSK, AND THE TECH TITANS As U.S. trade partners await word on reciprocal tariffs, due Wednesday, India has seemed eager to make pre-emptive concessions on trade - more so than, say, China or Canada, even though economists estimate tariffs would trim Indian GDP growth by just 0.1-0.6%. And while the U.S. tariff drama is still playing out, some early winners are already emerging from the Indian government's conciliatory efforts, including the companies of Elon Musk, a close adviser to President Donald Trump, and other big players in the U.S. technology sector. Musk's Starlink last month signed surprise deals with a couple of its biggest Indian telecoms rivals, just weeks after his EV maker Tesla started to move on long-delayed plans to enter the Indian market. India has hinted at a broad range of concessions to the U.S. that could cut tariffs on more than half of U.S. imports into India, Reuters journalists Sarita Chaganti Singh, Aftab Ahmed and Manoj Kumar reported. LNG imports and selected farm goods such as almonds and lentils may be among them. India has also cut import tariffs on raw materials needed to manufacture mobile phones and EV batteries. In a revision to its annual budget announced on Feb. 1, India agreed to scrap a 6% tax on digital advertising that raised costs for U.S. tech giants such as Google, Meta and Amazon. The tax was introduced in 2016 but applied only to foreign firms, drawing criticism at the time from the U.S. Read here the full list of concessions made by India in trade negotiations with the U.S. AFTER TARIFFS, NON-TARIFF BARRIERS Since Trump's inauguration a little more than two months ago, Prime Minister Narendra Modi has taken a number of steps to appease the new U.S. administration and build on what analysts considered an amicable relationship during Trump's first term. As the India File wrote in a previous edition, Tesla's entry into India gathered momentum after Modi spoke with Musk on the sidelines of meetings in February with U.S. officials in Washington. More surprising were announcements over the past two weeks of Starlink partnerships with India's two largest telecoms service providers: billionaire Mukesh Ambani's Reliance Jio and Sunil Mittal's Bharti Airtel. Starlink had been widely seen as heading towards a conflict with Ambani, who has made clear his ambitions of dominating India's telecoms sector. If Musk succeeds in India, that could help to unlock opportunities for Starlink in other emerging markets, Reuters' Nivedita Bhattacharjee writes. Read that analysis here. But whatever Modi hopes for from his relationship with Trump or from increasingly unpredictable U.S. policies, the dance between the two could still involve some complicated footwork with unforeseen spins. Analysts are now starting to worry about the U.S. also targeting non-tariff barriers, which Nomura economists said would make the already-chaotic approach to retaliatory tariffs "more complex and less transparent". China and India stand out among Asian nations not just for higher tariffs, Nomura said, but for non-tariff barriers. One potential area of friction: Data localisation. India has pushed Amazon, MasterCard and Visa, among other big U.S. companies, to store data related to Indian transactions locally. This has become the latest sticking point in India-U.S. trade negotiations, the Business Standard newspaper reported last week. Who are the emerging winners and losers in the trade negotiations between India and the U.S.? Write to me with your views at opens new tab. QUOTE OF THE WEEK "I don't fear this mob and I will not be hiding under my bed, waiting for this to die down." Indian stand-up comedian Kunal Kamra faced a social media backlash and police scrutiny over a performance that provoked anger among supporters of a party allied with Prime Minister Modi. The incident fanned concerns about the limits of free speech in the world's largest democracy. MARKET MATTERS India's swap markets are now pricing in at least two more 25-basis-point rate cuts over the current monetary easing cycle after the central bank's cut in February, the first in five years. Banks are also pushing for more predictable cash infusions into the banking system by the central bank as liquidity conditions remain volatile. Overseas investors are lapping up Indian government bonds ahead of the anticipated easing, with foreign holdings of Indian bonds now exceeding 3 trillion rupees.
Reuters
19-03-2025
- Business
- Reuters
India File: Digital cash is everywhere, and so are scammers
(India File is published every Tuesday. Think your friend or colleague should know about us? Forward this newsletter to them. They can also subscribe here.) March 18 - By YP Rajesh, South Asia Breaking News Editor & Lead Writer, with global Reuters staff. India's consumers and businesses engage in more digital transactions - to pay for parking or cigarettes or even peanuts in pushcarts - than those of any other country, giving a boost to its fast-growing economy. But scams and fraud schemes are also on the rise as security infrastructure and regulations lag, potentially tripping up India's digital economy. That's our focus this week. And, India's stock market slump has persisted for five months and now threatens to weigh on consumer spending, just as the economy tries to regain its footing on growth. Scroll down for more. THIS WEEK IN ASIA ** China retail sales pick up as Beijing turns to consumers to ease US trade pressure ** Major Japan firms agree to big wage hikes, impact on BOJ policy in focus ** Amid tariff risks, Vietnam signs energy deals with US, reviews duties to boost US imports ** As Tesla tanks, Musk's hand-picked board chair is doing just fine STREET VENDORS GO DIGITAL Indian street vendors, parking lot attendants and - according to media reports - even beggars with QR codes are taking digital payments, sometimes for as little as 10 or 20 rupees, making India number one globally in the sheer number of digital transactions. The finance ministry has praised the rise of digital payments for enhancing economic opportunities and financial inclusion, while the central bank has labelled it the "growth engine of tomorrow". But headlines last week cast the spotlight on an uglier side of this transformation: runaway digital financial crime. Digital scams are on the rise, including the case of an Indian textile baron who lost $830,000 last year after fraudsters summoned him to an online hearing at a fake Supreme Court that threatened him with jail. The finance ministry told parliament last week that the number of high-value cyber fraud cases in the latest full fiscal year was more than four times the number the year before, while a central bank report said total digital payment fraud amounted to $175 million in the same period. Also among the news headlines last week: India brought home nearly 550 people who had been lured with fake job offers to "scam centres" in Myanmar and other Southeast Asian countries, where they were made to engage in financial cybercrime. Hundreds more are still waiting to return. This, ironically, coincided with the central bank's fifth annual "Digital Payment Awareness" week, held to promote safer online payments in the world's fastest-growing major economy. FAKE CODES, FAKE COURTS It is a rare day in India these days when there is no media report or social media post about people duped by a digital scam. In the early days of scamming, smartphone users were deceived by fraudulent payment codes that they were told would pay into their bank accounts, but that took money out instead. Now, with the use of AI and spoofing software, scammers have been creating fake police stations and even the fake court hearing that defrauded the textile tycoon, or using the voice of relatives to dupe victims. Financial and tech analysts blame poor cyber literacy, digital security loopholes, sophisticated AI-driven phishing attacks and deepfake scams for the rise in digital financial fraud. "The golden age of cybercrime is here — where AI, the dark web, and rampant data exposure fuel financial fraud at an unprecedented scale," cyberlaw expert Pavan Duggal was quoted as saying in a November 2024 report by the Indian Cyber Crime Coordination Center. Regulators have taken notice. The telecoms regulator has ordered the blacklisting of spam callers, while the central bank has proposed allowing banks to freeze accounts suspected of use for fraud. Public and private agencies have launched awareness campaigns where Bollywood stars urge consumers to remain alert. But financial and tech analysts say more needs to be done, including awareness campaigns, cybersecurity investments by banks and fintech firms, tech training for law enforcement officers, and strong data privacy and protection rules. "Enhancing the safety and security of the payments ecosystem is a work in progress," central bank Governor Sanjay Malhotra said last week. What should India be doing to fight digital financial crime? Write to me with your views at opens new tab. QUOTE OF THE WEEK "Our aim is to free up two to three hours of time daily for doctors and nurses with AI interventions." Sangita Reddy, joint managing director of India's Apollo Hospitals, spoke with Reuters in an interview published on Thursday. Apollo has more than 10,000 beds across its hospital network, making it one of the largest in the country. Reddy said the company would increase its digital spending on AI this year. Apollo's AI tools, some of which are experimental or still in the initial stages, would be able to analyse patients' electronic medical records to suggest diagnoses, tests and treatment. They would also help to transcribe doctors' observations, generate faster discharge summaries and create daily schedules from nurses' notes. MARKET MATTERS India's five-month-long equity slump, the worst in nearly three decades, has wiped out about $1 trillion in market capitalisation and delivered a major blow to retail investors. This has dented consumer spending and threatens to further slow growth in the world's fifth-largest economy, write Reuters reporters Bharath Rajeswaran, Siddhi Nayak and Vivek Kumar M. Investors trying to catch their breath may have to wait a bit longer for the selloff to run its course, analysts say, as uncertainty about the impact on global growth from U.S. President Donald Trump's policy moves adds to worries over weak domestic earnings and persistent foreign outflows.
