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Business Standard
3 days ago
- Automotive
- Business Standard
India Inc resilient to tariffs, to invest $50 bn despite global headwinds
Indian enterprises are well positioned to handle the impact of tariffs and geopolitical tensions, Moody's Investors Service and its local arm Icra Ratings said on Wednesday. India Inc, however, will be "measured" in making investment decisions in the new fiscal because of the external headwinds, they said. "Indian non-financial companies are not directly affected by US import tariffs due to their focus on domestic consumption and low dependence on exports," a statement from Moody's said. It further noted that government initiatives to boost private consumption, expand manufacturing capacity and increase infrastructure spending will help offset the weakening outlook for global demand. "Private capex to remain measured amid external headwinds," it said. Indian corporates will continue investing in new capacity to cater to the sustained growth in domestic consumption, and Moody's estimated that non-financial companies rated by it will spend around USD 50 billion annually in capital spending over the next two years. It said most companies will spend from internal accruals, and the average portfolio leverage will continue to remain at 3 times the operating profit. Moody's Ratings managing director Vikash Halan said India's manufacturing growth will be constrained by challenges such as inadequacy of skilled labor, evolving logistics infrastructure and complex land and labor laws. Select auto parts categories, cut and polished diamonds, and seafood exports have notable exposure to the US market and may face headwinds from demand moderation or rising competition, it said, adding that the textiles sector is expected to benefit from its comparative advantage over China. Geopolitical tensions, particularly the India-Pakistan conflict, may weigh on near-term demand for travel and hospitality services. Nonetheless, India's overall exposure to these risks remains moderate, it said. Icra's chief rating officer K Ravichandran said after being muted in FY25, urban consumption is expected to recover in FY26 supported by income tax relief, further rate cuts, and easing food inflation, and the same will benefit automobiles, consumer goods, and services sectors. Meanwhile, on the infrastructure creation front, Icra forecasted a slowdown in road construction activity in the near-term, whereas other segments like ports and data centers will continue to witness significant investments, benefiting from solid government support, healthy capital outlays and a large pipeline of projects. The rating agencies said the country needs massive investments to meet its 2070 net-zero pledge, explaining that the country is grappling with the trilemma of energy security, affordability and transition. Over the next decade, these investments are projected to constitute 2 per cent of real GDP for the electricity value chain, encompassing power generation, storage, transmission and distribution, it said. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Arabian Post
3 days ago
- Business
- Arabian Post
African Nations Urged to Boost Local Debt Markets Amid Global Funding Shift
African countries face growing challenges in accessing international finance as global economic uncertainty and tightening monetary policies restrict foreign capital flows. Moody's Investors Service has highlighted the urgent need for these nations to develop robust local debt markets denominated in their own currencies to mitigate risks associated with reliance on external funding. As global financial conditions tighten, foreign investors have become more cautious about exposure to emerging markets, including many African economies. This shift has led to a decline in capital inflows, leaving governments increasingly vulnerable to sudden stops or reversals in funding. Moody's global head of sovereign risk emphasised that liquid and deep domestic debt markets can provide a crucial buffer, enabling governments to raise funds without depending heavily on foreign creditors. Currently, many African countries issue debt primarily in foreign currencies such as the US dollar or euro, exposing them to exchange rate risk. Currency depreciation against these hard currencies can dramatically increase debt servicing costs, placing pressure on public finances. Developing local currency bond markets would allow governments to borrow in their own currency, reducing this vulnerability and helping to stabilise fiscal positions. ADVERTISEMENT Several African countries have already taken steps to expand their local debt markets. Nigeria, Kenya, and South Africa stand out with relatively more developed government bond markets, which have helped these economies absorb shocks from external capital volatility. However, the scale and liquidity of these markets remain limited compared to advanced economies, making them less effective as shock absorbers. Moody's report stresses that broadening the investor base is critical. This includes attracting domestic institutional investors such as pension funds, insurance companies, and mutual funds, which have longer-term investment horizons and are less likely to withdraw capital abruptly. Expanding participation by local investors can deepen the market and enhance price discovery, increasing market efficiency. Policy reforms to improve the regulatory environment, market infrastructure, and transparency are essential to build investor confidence in local markets. Strengthening legal frameworks for debt issuance and enforcement, improving settlement systems, and enhancing credit rating capabilities will facilitate greater market participation. Governments must also maintain prudent fiscal management to ensure debt sustainability and investor trust. The trend toward tightening global financial conditions reflects actions by major central banks to raise interest rates and normalise monetary policy after years of ultra-loose settings. This environment reduces appetite for higher-risk emerging market debt, especially those with significant external borrowing and weaker fiscal fundamentals. African nations with large current account deficits and high foreign currency debt are most at risk of capital flight and currency pressures. At the same time, China's retrenchment from aggressive lending in Africa is altering traditional funding patterns. The decline in Chinese infrastructure loans and project financing has created financing gaps that are not easily replaced by private capital. Local debt markets can offer a more sustainable alternative, giving governments greater control over funding costs and maturities. ADVERTISEMENT International financial institutions have also been encouraging African governments to tap domestic markets and enhance fiscal resilience. The International Monetary Fund and World Bank support capacity-building initiatives to develop sovereign bond markets and encourage the issuance of domestic debt instruments. These efforts align with the broader agenda of promoting sustainable debt practices and reducing vulnerability to external shocks. Despite the push for local currency debt markets, several challenges remain. Many African economies are characterised by low levels of financial inclusion, limited investor sophistication, and constrained savings pools. These factors restrict demand for government bonds and complicate efforts to build deep, liquid markets. Inflation volatility in some countries adds further complexity. Investors may demand higher yields to compensate for inflation risk, raising borrowing costs. Maintaining price stability is therefore a key complementary objective to developing local debt markets, ensuring that bonds remain attractive and sustainable. The broader economic context also matters. African economies face structural hurdles including reliance on commodity exports, limited industrial diversification, and infrastructural deficits. Strengthening economic fundamentals through reforms aimed at boosting growth and reducing fiscal deficits will enhance creditworthiness and market access. The rise of regional capital markets integration presents another avenue to bolster liquidity and investor interest. Initiatives such as the African Continental Free Trade Area and the establishment of pan-African bond indices could foster cross-border investment, broadening the market beyond national boundaries. As sovereign risk dynamics evolve, credit rating agencies are recalibrating their assessments to account for greater exposure to domestic debt and currency risks. Moody's and others acknowledge that while local debt markets reduce foreign exchange exposure, they introduce new vulnerabilities related to domestic economic conditions and market depth. Continuous monitoring and adaptive policy responses will be necessary to balance these risks.
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Business Standard
22-05-2025
- Business
- Business Standard
Stay in US funds if horizon exceeds seven years, exposure less than 20%
If you are worried about a US-only exposure following the downgrade of US government debt, go for a globally diversified fund Sanjay Kumar Singh Karthik Jerome New Delhi Listen to This Article Moody's Investors Service downgraded the United States (US) government's credit rating from AAA to AA1 on May 16, 2025. This has sparked concern among Indian retail investors who have diversified globally, with many questioning whether to maintain, reduce, or exit their US fund holdings. Why the downgrade happened The downgrade stems from the US's widening fiscal deficit and elevated debt-to-GDP ratio. 'The high level of debt-to-GDP ratio could make it difficult for the US to service its debt,' says Pratik Oswal, chief of passive business, Motilal Oswal Asset Management Company (AMC).
Time of India
22-05-2025
- Business
- Time of India
India's oil demand to grow 3-5% annually till 2030, import reliance to rise: Moody's
New Delhi: India's oil demand is expected to grow at a compound annual rate of 3 to 5 per cent through 2030, outpacing China's, although the country's energy import dependence is projected to rise further, according to a report by Moody's Investors Service. The report titled 'Oil and Gas – China and India: Investment and demand trends diverge, but Chinese companies will retain credit edge' said China's oil demand will likely peak by 2030, driven by slower economic growth and increasing adoption of electric vehicles. India's crude oil consumption, in contrast, will continue to rise, supported by strong economic expansion and growing industrialisation. Moody's projected India's real GDP growth at 6.3 per cent in 2025 and 6.5 per cent in 2026, making it the fastest among G20 economies. The report said India imports close to 90 per cent of its crude oil and about 50 per cent of its natural gas requirements. If domestic production does not increase significantly, import dependence will rise further. In contrast, China's crude oil and gas production has been growing steadily in recent years, supported by government directives for national oil companies (NOCs) to boost exploration and development. Moody's said this trend would help reduce China's import reliance. India's refining capacity is projected to increase from 256.8 million metric tonnes per annum (mmtpa) in April 2024 to 309.5 mmtpa by 2030. China, meanwhile, is approaching its state-mandated refining cap of 1 billion tonnes. India's natural gas demand is expected to grow 4 to 7 per cent annually until 2030, with the government targeting to raise gas' share in the energy mix to 15 per cent from the current 6 per cent. Chinese NOCs including CNPC, Sinopec and CNOOC accounted for over 90 per cent of the country's oil and gas output and hold significant integrated operations across the upstream, refining, and marketing segments. In India, ONGC and Oil India contributed about 70 per cent of the country's oil and gas production in FY24-25, while BPCL, IOCL, and HPCL along with joint ventures handled around 70 per cent of the refining throughput. Moody's observed that Indian NOCs face higher taxation, lower operational scale, and weaker credit metrics relative to Chinese peers. Indian firms also allocate more capital to downstream expansion, unlike Chinese companies that focus significantly on upstream. Capital expenditure by Indian NOCs was around USD 15 billion in FY24, compared to about USD 100 billion by Chinese NOCs. The report said China's fuel pricing regime is more market-oriented, enabling faster cost pass-through. In India, static retail prices during oil price spikes in 2022 led to financial stress for oil marketing companies, including under-recoveries of approximately ₹40,000 crore on LPG in FY25. Moody's also said the petroleum sector accounted for 16 per cent of the Centre's and 8 per cent of state governments' total revenue in FY24, mainly through taxes and dividends. On the energy transition front, CNPC plans to produce one-third of its energy from renewables by 2035, while Sinopec aims for carbon neutrality by 2050. India has set a net zero target for 2070.
Globe and Mail
21-05-2025
- Business
- Globe and Mail
Elliott Waves: Dollar Index Can Be Targeting New Lows
Markets started the week in a bit of a risk-off tone—stocks slowed down a bit on Monday , after Moody's downgraded the US credit outlook over the weekend. But nothing significant so far. Interestingly, the dollar also sold off, opening with gaps across the board, which— as we know—can eventually be filled. From an Elliott Wave perspective, we've been eyeing for potential bearish reversal on the Dollar Index last week, and so far the price action supports that view. We've seen three waves up from the April lows, and now also some sell-off that signals for continuation lower—especially as the channel support is broken. But the most important to watch is the US treasuries; a completion of five waves down in C, and a turn up/lower US yields can make dollar much weaker, down to 98.
