Latest news with #LicensingRights
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
17-04-2025
- Business
- Reuters
Fed winning with its 'cruel-to-be-kind' strategy: Mike Dolan
The Federal Reserve building is seen in Washington, U.S., January 26, 2022. REUTERS/Joshua Roberts/File Photo Purchase Licensing Rights, opens new tab LONDON, April 17 (Reuters) - The Federal Reserve's job is complicated and simple at the same time: hold the line on interest rates, even in the face of pressure, in order to keep long-term inflation expectations under control. If the recently restive bond markets are to be believed, the Fed appears to be doing a pretty good job, especially at a time when unprecedented policy uncertainty is sending near-term inflation expectations spiking. The Reuters Tariff Watch newsletter is your daily guide to the latest global trade and tariff news. Sign up here. With average U.S. import tariffs set to surge to their highest level in decades and those on Chinese-made goods due to skyrocket, U.S. households' outlook for the cost of living in the year ahead has, unsurprisingly, climbed sharply. The New York Fed's consumer survey for March showed the one-year inflation outlook jumping to 3.6% for the first time in 18 months. The University of Michigan's more recent equivalent poll for April saw the one-year inflation view soar to 6.7%, the highest such reading since 1981. The medium-term outlook was messier, with three- and five-year takes from the New York Fed poll barely budging and Michigan survey respondents expecting five-year inflation to climb to 4.4%. Wide discrepancies in inflation views based on political affiliation further complicate things and inject ever more caution into all interpretations of public inflation perceptions. But despite any household anxieties about tariff-induced price rises, long-term market-based measures of inflation expectations are actually falling back quite significantly. The so-called breakeven inflation rate built into 10-year inflation-protected Treasury securities has fallen almost half a percentage point over the past two months to about 2.1%, so essentially back near the Fed's 2% target. The five-year 'breakeven' is a touch higher at 2.2% but has also fallen back by around 50 basis points since February. And both rates are lower than they were at the start of year. Meanwhile, the five-year, five-year forward inflation-linked swaps rate has followed suit to sit between the two. There seem to be three basic explanations for these moves. One is the assumption that tariffs will simply generate one-off price hikes, not persistent inflation. The second is that the Fed's steely resolve is being heeded. And the third is the much darker view that the economy will suffer in the long-term from the trade war and that muted demand will rein in prices. It may ultimately be a combination of all three. THE DARKER THEORY What's certain is that the global economic outlook has weakened substantially in recent weeks. On Wednesday, the World Trade Organization slashed its goods trade outlook, predicting a 0.2% contraction this year from the 3% expansion forecast six months ago. Worse still, it said full decoupling of the U.S. and China - or an 81% drop in trade between the world's two biggest economies - could shrink global GDP by 7% on a longer-term basis. The U.N. Trade and Development agency said global growth would slow to 2.3% in 2025, placing the world economy "on a recessionary path". Credit rating agency Fitch cut its 2025 global growth forecast to less than 2%, projecting the weakest expansion since 2009, outside of the COVID-19 pandemic shock. What's the Fed to think? U.S. central bank chief Jerome Powell seems in no mood to change his relatively hawkish tack. On Wednesday, Powell claimed the economy was still "solid" and the Fed could wait for more clarity. "Tariffs are highly likely to generate at least a temporary rise in inflation. The inflationary effects could also be more persistent," he told the Economic Club of Chicago. Fed Governor Christopher Waller broke ranks somewhat this week, offering a dovish take that contrasted with Powell and other Fed colleagues recently. Waller evoked memories of the post-pandemic "transitory" inflation debate by saying weak growth would ultimately trump one-off price rises. But his other colleagues remain much more circumspect. Atlanta Fed President Raphael Bostic spoke of standing pat because it remained highly uncertain where tariffs would land, let alone what impact they would have. "The fog has just gotten really, really thick," he said. And others dwelt on the risk that the jump in short-term inflation expectations won't simply fade. St. Louis Fed President Alberto Musalem said: "I would be wary of assuming the impact of high tariffs on inflation would be only brief or limited." Minneapolis Fed President Neel Kashkari put the conundrum in the context of recent history. If the U.S. hadn't just lived though four years of high inflation, Kashkari said, he would be more comfortable seeing through a tariff-related jump. "We should be very cautious about taking moves that could demonstrate a weakening, which I don't think is there, to the Fed's commitment to getting inflation down," Kashkari told CNBC. So barring any serious financial market malfunctioning, the Fed's "cruel-to-be-kind" strategy looks set to stay, especially if long-term market expectations keep supporting it. The nearly four Fed interest rate cuts that money markets have priced in for this year may yet prove overzealous. The opinions expressed here are those of the author, a columnist for Reuters By Mike Dolan; Editing by Paul Simao Our Standards: The Thomson Reuters Trust Principles., opens new tab Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Mike Dolan Thomson Reuters Mike Dolan is Reuters Editor-at-Large for Finance & Markets and a regular columnist. He has worked as a correspondent, editor and columnist at Reuters for the past 30 years - specializing in global economics and policy and financial markets across G7 and emerging economies. Mike is based in London but has also worked in Washington DC and in Sarajevo and has covered news events from dozens of cities across the world. A graduate in economics and politics from Trinity College Dublin, Mike previously worked with Bloomberg and Euromoney and received Reuters awards for his work during the financial crisis in 2007/2008 and on Frontier Markets in 2010.
