1. Food inflation illustrated through BLT sandwich.
War in Ukraine and the resetting of supply chains following pandemic lockdowns mean prices for the ingredients in one of the UK’s most popular sandwiches — the BLT (bacon, lettuce and tomato) — are up by 56 per cent on average since 1 January 2019, according to data compiled by commodity research group Mintec and the Financial Times. That rise is led by a huge spike in the price of sunflower oil, of which Ukraine is the world’s largest exporter. But prices for other ingredients are also surging: wheat and tomatoes have each increased by 63 per cent since the start of 2019, while the cost of lettuce has increased by nearly a quarter. Pork is the only ingredient to have remained level. Food manufacturers and retailers say they have never had to contend with such a rapid surge in all of their input costs. The sandwich, whose assembly and distribution requires fresh ingredients, large factories, labour and prompt, chilled transport, is emblematic of the struggle they face.
So if we really want to continue with global inequality reduction, leaving Covid aside for the moment, we need to count on India growing fast and Africa growing very fast. When you translate that into growth rates that are needed for Africa to achieve this, these per capita growth rates are 4 or 5 per cent, which means 6 to 7 per cent overall for the GDP, or even 8 per cent. These are not growth rates that African countries have historically been able to sustain over a ten-year period, much less over a 20-year period. So I became relatively pessimistic about the ability to maintain the trend of declining global inequality.
3. Good explainer by Vivek Kaul in Livemint of US dollar as a reserve currency.
4. Interesting data on autocracies and economic growth from Ruchir Sharma
Looking back in 150 countries to 1950, autocracies account for 35 of the 43 cases in which a nation sustained gross domestic product growth of more than 7 per cent for a decade. However, autocracies also account for 100 of the 138 cases in which a country grew a full decade at slower than 3 per cent — a rate that feels like a recession in a developing country. In extreme cases, 36 countries have been whipsawed for decades by swings between years of rapid growth and years of negative growth: 75 per cent of those were autocracies, many in petro states such as Nigeria, Iran, Syria and Iraq.
5. After all the reforms, the power sector is no better off today. The Business Standard reports that the amount owed by discoms to power producers touched a new high of Rs 1.05 trillion in April 2022 a 20.4% rise over the last two years. Further, 21 out of 34 states and UTs recorded a rise in overdues in that time.
It's also reported that the overdues position worsened for private producers, whose share of over dues rose from 46% to 55.7%.
The number of disputes raised by discoms also doubled from Rs 13,576 crore to Rs 25,129 crore. Independent power producers accounted for 80 per cent of the disputed amount owed by discoms.
Thinking aloud here. Why should there not be a merit order for payment of producers dues where private producers are given preferential treatment? After all, those are sovereign contracts of the government.
6. Importance of gold in the savings basket of middle-class Indians
And this is important,
The consumption, IGPC said, was not affected by demonetisation or goods and service tax (GST) implementation. In the last five years, at least 74 per cent of the households confirmed buying gold with 90 per cent of such households preferring to make the payment in cash while buying the yellow metal, IGPC said.
7. In a welcome step, the Telecom Regulatory Authority of India (TRAI) has recommended a 36% cut in the 5G spectrum auction base prices. However, the industry associations are demanding even further cuts. It's reported that 5G spectrum prices in India are 2.6, 3.8, and 4.4 times higher than that in Germany, UK, and South Korea respectively.
This raises the classic auctions challenge. How do we reconcile the classic auctions dilemma of reconciling the conflicting risks of leaving money on the table with that of winner's curse? One way would be to have something of a two-tier spectrum pricing - a low base-price, and an increasing block spectrum fee levied on some easily observed and difficult to manipulate commercial parameter (say, like ARPU). This would ensure that the operator is not burdened with the high upfront costs and the government retains its claim on higher profits.
8. As the French Presidential election hots up FT has a graphic which captures the respective bases of Macron and Le Pen.
According to recent government figures, the single biggest cohort of business owners in Japan are 69-year-olds. Demographics have long posed huge challenges to the country’s rapidly shrinking and ageing population. But the national shortage of heirs was largely overlooked. Two years of pandemic restrictions have deepened the sense of urgency. Many owners in their mid-seventies have chosen to accelerate plans to either hand over control or watch their cherished firms disappear. As a consequence, Japan faces what some fear could be the most extensive evaporation of knowhow and institutional memory in modern history. The effect on the country will, Ohashi fears, be huge since so much of Japan’s culture is embedded in its businesses and the skills they have amassed between them. The idea that the country could somehow allow all this to disappear, and that the process may even alienate parents from children, is a source of national sorrow...Decades of stellar postwar economic growth helped create a large, university-educated workforce. These younger generations have been a source of enormous pride to their parents, but in a culture that has long emphasised filial piety and family cohesion, their determination to turn their backs on the family business has brought disappointment too. Many children of baby boomers have moved into cities and have no interest in taking over the small factories or repair shops started by their parents in their now-depopulating hometowns. More than 40,000 small firms a year are in need of a successor, government data shows.
10. As public support for it rises, Finland and Sweden are contemplating joining NATO. This is another example of how the invasion has rebounded on Russia.
11. AK Bhattacharya has an assessment of the tax revenues trends of government of India.
12. Good presentation by Eileen Applebaum on the impact of Private Equity investments in businesses. This on PE practices in the US health care sector.
13. Harish Damodaran writes about the rising fertiliser prices and how the subsidy regime hinders its availability in the Indian market. In case of urea, India produces 24-24 mt out of annual consumption of 34-35 mt and while it's sold at an administered MRP of Rs 5360 per tonne, companies are fully compensated for any import or manufacturing cost differential. However, in case of DAP, MOP, and NPKS, while the MRPs are decontrolled in theory and the subsidy is limited to a fixed per-tonne subsidy based on nutrient content, in practice companies are not allowed to freely set MRPs.
DAP, MOP and the popular ’20:20:0:13′ NPKS fertiliser are currently being retailed at Rs 27,000, Rs 34,000 and Rs 28,000 per tonne, respectively. Companies are further getting per-tonne concessions of Rs 33,000, Rs 6,070 and Rs 15,131, respectively, on these fertilisers — translating into a gross realisation of Rs 60,000, Rs 40,070 and Rs 43,131, respectively. According to the industry, these realisations are too low to manufacture or import at today’s international prices. The quoted price (cost plus freight) of DAP imported to India is about $1,250 (Rs 95,000) per tonne — it is $700-750 (Rs 53,200-57,000) per tonne for MOP and $780 (Rs 59,280) per tonne for ‘20:20:0:13’. The gross realisations, thus, don’t cover even the landed cost of imports.
14. Robots policing Covid lockdown in Shanghai,
Preserved Egg roams Shanghai’s empty streets with a megaphone strapped to its back. The robot dog is about the size of a terrier and barks orders to residents: stay inside, wash your hands, check your temperature.
15. Finally, Scott Galloway has a great post where he highlights how today's business winners tries to keep out competitors once they are on the pole position.
Nothing threatens today’s competition more than yesterday’s winners... Today’s largest companies offer a masterclass in anticompetitive behavior. Amazon bars sellers on its platform from offering lower prices elsewhere, then uses the information it gleans from them to design and market its own, lower-priced products. It gives favorable search results placement to vendors that use Amazon fulfillment services (for which it’s been fined $1.3 billion by the Italian government). Defenders of the company say this is all business as usual … yet Amazon lied to Congress, repeatedly, about all of it.Apple takes a 30% cut of app revenue, which it says it needs to run the app store, but it books billions in profit instead of cleaning up obvious frauds or copycats, while giving preference to its own products over competitors. (Can you get your iPhone to stop trying to play music through Apple Music instead of Spotify?) Microsoft charges more for its applications when users run them on a competing cloud provider. Google doesn’t merely sit on both sides of the digital advertising negotiation, it owns the negotiating table. And Facebook has stated that it acquired Instagram to eliminate a competitor.
This is a great snippet which exposes the reality of Big Tech collusion,
In the 2000s tech titans conspired to suppress competition for employees. For example, when Steve Jobs learned that Google was recruiting an Apple engineer in 2007, he emailed CEO Eric Schmidt: “I would be very pleased if your recruiting department would stop doing this.” Schmidt forwarded the email to an underling: “Can you get this stopped and let me know why this is happening?” He was told the recruiter would be “terminated within the hour” and to “please extend my apologies as appropriate to Steve Jobs.” Then a Google SVP chimed in: “Please make a public example of this termination with the group.” (We only know about Jobs and Schmidt channeling their inner Rockefellers thanks to a class action lawsuit former employees brought against the companies, which led to a $415 million settlement.)
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