1. A nice story on the South Indian breakfast dish idlis.
2. Citing the lack of superstar technology companies, Nicolas Petit writes that Europe lacks economic dynamism. Never mind, the problem with categorising a single Europe which contains both Germany and Ireland; that Europe does indeed lack economic dynamism in relative terms; and that superstar tech companies are imprimaturs of economic dynamism.
It is an article without any compelling empirical or other evidence, but full of prescriptions couched in jargon. Petit is a great example of an ideologue for the technology companies reinforcing entrenched narratives.
3. Apple's quarterly results and the 21% overall drop in iPhone sales has raised alarms across Wall Street. It's hard not to feel that iPhone as growth driver is well past its peak. And moving into services is far more challenging than can be imagined. Even the 22.5% share of profits from digital services conceals the big deal to keep Google Search as the default device on Apple devices. As FT wrote,
...is estimated to be worth up to $12bn per year, equal to about a quarter of Apple’s services revenue. That is a lot of money for not much work. Apple may be working on its own search function but it has no hope of replacing pure profit of this size.
4. The stunning increases in debt to GDP ratios in developed world, estimated to reach 141% next year, a rise of 26 percentage points from 2019. This from Gavyn Davies,
A few days after Özil went public, the Premier League’s two broadcast partners in China, CCTV and PP Sports, refused to air an Arsenal match. When the latter did deign to show Arsenal again, its commentators refused to say Özil’s name. His avatar was removed from video games. Searching the internet for his name in China brought up error messages. (It was reported his Weibo account was disabled, though that was not true.) Very deliberately, though, and seemingly at the behest of an authoritarian government, Mesut Özil was being erased... Arsenal’s reaction to Özil’s decision to speak out was — at least — inconsistent. Publicly, the club moved quickly to distance itself from his comments. Privately, it considered punishing him. His tweet, and a simultaneous Instagram post to his more than 20 million followers on that service, had caused considerable problems — not just at Arsenal, but also for the Premier League. China, after all, was its largest foreign broadcast partner, and its biggest foreign market, and the league could not afford — even in a pre-Covid-19 world — to have its games blacked out, to have its sponsors and its fans close their wallets... When the club sent out its merchandising celebrating Chinese New Year, it made sure to remove Özil from any of the materials.
In an example of astonishing hypocrisy and moral bankruptcy, the same Arsenal which went out of its way to erase Ozil, tweeted from its official handle virtually denouncing the Nigerian government and supporting street protesters against the government. In other words, it did to Nigeria what it found deeply problematic when Ozil did to China.
Whatever happened to the indignation and fury of the millennials and GenZs among Arsenal supporters who lose no time to pounce on such issues anywhere.
7. Andy Mukherjee on the Reliance-Amazon tussle over Future Group's retail assets.
8. FT on the impressive strides made by North Korea's weapons development program.
Kim Jong Un beamed from his palatial rostrum as the world’s largest mobile intercontinental ballistic missile rolled across Pyongyang’s Kim Il Sung Square shortly after midnight on October 10. Here was indisputable evidence of North Korea’s rapid progress in the country’s nuclear technology... North Korea’s Kim Chaek University of Technology ranked eighth in the world at the International Collegiate Programming Contest last year, beating top institutions such as Oxford and Harvard, noted Martyn Williams, an analyst with 38 North, a Washington think-tank.
9. Coal India Limited (CIL) is a classic example of asset stripping by government, which squeezes out its ownership by making the company pay out large dividends each year.
In the past three years, the company’s average dividend yield is at 10.9 per cent — compare this with a minus 60.47 per cent return on its stock price. In other words, the stock is in value more for the dividend it pays than for its performance in the market.
Despite being in a sheltered environment, in a simple enough activity, with assured customers, CIL remains uncompetitive,
BSE data shows CIL’s operating profit margin (operating profit to sales ratio) for the June quarter at 16.51 per cent, the lowest in five quarters. It was 26.51 per cent in June 2019. A third of its income from operations disappears in its staff cost. No surprise, CIL has the costliest output per man shift among major mining companies globally. CIL’s efficiency is slipping despite operating in a protected market (so far) with a straightforward line of business. CIL has to just dig for coal and dump those besides the rail lines running past the mines. India, faced with a perennial shortage of coal, has enough buyers ready to arrange the transportation and pay for the entire cost... the company routinely supplies coal of inferior quality than the buyers have contracted for, which raises the cost for companies because they often have to import better quality coal... a tonne of coal from Mahanadi Coalfields, the most efficient of CIL’s seven subidiaries, costs Rs 4,365 per when it reaches a power station in Tamil Nadu against the imported coal price of Rs 3,779. Ironically, despite having the world’s fifth largest coal reserves, India’s coal imports have risen by a CAGR of nearly 10 per cent in the five years up to 2019-20, the third largest by value among imports. In response, major coal customers such as public sector NTPC have created a backward linkage to develop their own coal mines. In the recent auctions, key power, aluminium and steel producers, such as Adani, Hindalco, Vedanta and JSW, have bid for mines that will substantially end their dependence on CIL.
10. Christophe Jaffrelot points to Bihar as an example of social mobility without economic mobility.
The post-Mandal rise of the Yadavs was confined to the electoral domain; it did not have much impact on their socio-economic status. Second, the uneven mobility among OBCs has offered space for upper-caste manoeuvres to co-opt emerging castes within the caste dynamic, preserving the hierarchical caste structure.
Remarkable similarities with post-Apartheid South Africa. Is this the general trend with social mobilisation efforts - it leads to social mobility and lags on economic mobility? For how long? Would economic mobility, like in the US with blacks, remain elusive for very long?
11. AK Bhattacharya points to the growing fiscal squeeze being applied at the level of state governments.
The combined fiscal deficit of all states and Union Territories with their own legislature was in 2019-20 contained within their budget target of 2.6 per cent of gross domestic product (GDP), even though their revised estimates had shown a significant slippage at 3.2 per cent. And they achieved this fiscal correction not by increasing revenue collections, but by sharply cutting back on both revenue and capital expenditure. Even as their revenues according to the provisional accounts fell by 6 per cent, compared to the revised estimates, the spending squeeze was by a margin of 11 per cent for revenue expenditure and by 14 per cent for capital expenditure...In 2018-19, the states’ actual revenue receipts were lower by 8.4 per cent compared to the revised estimates. The slippage in non-debt capital receipts was higher at 19 per cent. But a squeeze on expenditure saved the day for the states. Their revenue expenditure was down by over 6 per cent and capital expenditure was lower by a higher margin of 18 per cent. The result: The combined fiscal deficit of the states was down to 2.4 per cent, compared to 2.9 per cent shown in the revised estimates. The actuals for the states’ combined revenue receipts in 2019-20 were also lower by 6 per cent, compared to the revised estimates. Even their non-debt capital receipts were lower by 25 per cent. But the states pressed the pause button on their expenditure, as a result of which their revenue spend was down by 11 per cent, and worse, their capital spend was lower by 14 per cent. The result: The actual fiscal deficit for states in 2019-20 was cut to 2.6 per cent, from the revised estimates figure of 3.2 per cent of GDP.
Two points. One, state (and central) governments have been consistently keeping their revenue and expenditure projections unrealistically high, leading to revisions which basically make a mockery of the original budgetary exercise. This is one more reason for government statistics losing their credibility. Two, the scramble to stay within the redlines makes governments invariably squeeze their expenditures, with knock-on effects on the economy.
The article also points to a slower pace of growth of state budgets compared to central budget, and slower growth of state government revenues compared to central government revenues.
The combined size of the state budgets at Rs 12.85 trillion in 2011-12 was smaller than the Union budget size of Rs 13 trillion that year. However, from the following year, the state budgets began growing at a rapid pace showing double-digit annual growth ranging between 11 and 19 per cent till 2016-17. In contrast, the Union budget size grew at a smaller rate in this period with annual increases ranging between 6 per cent and 10 per cent... In 2019-20, the size of the state budgets was only 24 per cent more than the size of the Union budget. This was a significant change from 2016-17, when the state budgets were more than 33 per cent of the Union budget. This trend is likely to continue, given the way states have been curtailing their expenditure in the last two years. Between 2011-12 and 2018-19, the states’ own tax revenues grew at less than 7 per cent in each of these years. But the Centre’s gross tax revenue recorded double-digit growth in most of the years during the same period. Similarly, while the Centre’s tax revenues fell by over 3 per cent in 2019-20, the states are likely to have suffered a steeper decline.
This points to a trend of increasing centralisation of spending by government.
12. The Chinese government's decision to postpone the IPO listing of Ant Financial in Shanghai raises several questions. The IPO is now off by at least six months and investors are being returned back the money raised.
One important question is on what it tells us about finch regulation. Ant has been at the forefront of the fintech trend in China, a push which has recently been receiving intense regulatory scrutiny,
The head of consumer protection at China’s banking regulator, Guo Wuping... in a sharply critical article in 21st Century Business Herald, a government-owned newspaper... argued that online finance products were not fundamentally different from traditional ones, and that financial technology companies should therefore be regulated in the same way as established institutions. Huabei, a credit function in Alipay, is no different from a credit card issued by a bank, Mr. Guo wrote. And Jiebei, an Alipay loan feature, is no different from a bank loan. Ant has called Huabei and Jiebei the most widely used consumer credit products in China. Loose regulation has allowed financial technology companies to charge higher fees than banks, Mr. Guo wrote. This, he said, “has caused some low-income people and young people to fall into debt traps, ultimately harming consumers’ rights and interests and even endangering families and society.”
This scrutiny has even made Ant pivot away from being seen as a financial company to a service provider to financial institutions,
Instead of using its own money to extend loans, the company now primarily acts as an agent for banks, introducing them to individual borrowers and small enterprises that they might not otherwise reach. It describes itself as a technology partner to banks, not a competitor or a disrupter.
The new regulatory rules tighten things for fintech lenders,
Oliver Rui, finance professor at China Europe International Business School, says that Ant could previously leverage Rmb3bn ($449m) in capital into Rmb300bn in loans. But under the new guidelines, online lenders would need to make at least 30 per cent of the loans themselves rather than outsourcing them — up from about 2 per cent currently. “What this means for Ant is that it might have to find an extra $20bn or so in capital reserves to back its current loan portfolio,” says one Chinese finance professional, who asked to remain anonymous. “If you think that the IPO was supposed to raise about $37bn, that is a really big amount of money. No wonder Ma was so agitated.”
13. WSJ has a graphical feature on the changing face of the global semiconductor chip making industry. While US continues to have the dominant share of semiconductor sales, 47% in 2019, its share of manufacturing capacity has been continuously declining - US and Europe's share of manufacturing declined from more than 75% in 1990 to less than a quarter now.
In recent years, US semiconductor companies have preferred to focus on higher value upstream activities, and outsource their production.
No comments:
Post a Comment