India replaces France as world’s 6th biggest economy

India’s GDP amounted to $2.597 trillion at the end of last year, against $2.582 trillion for France

India has become the world’s sixth-biggest economy, pushing France into seventh place, according to updated World Bank figures for 2017. India’s gross domestic product (GDP) amounted to $2.597 trillion at the end of last year, against $2.582 trillion for France. India’s economy rebounded strongly from July 2017, after several quarters of slowdown blamed on economic policies pursued by Prime Minister Narendra Modi’s government.

India, with around 1.34 billion inhabitants, is poised to become the world’s most populous nation, whereas the French population stands at 67 million. This means that India’s per capita GDP continues to amount to just a fraction of that of France which is still roughly 20 times higher, according to World Bank figures.

Manufacturing and consumer spending were the main drivers of the Indian economy last year, after a slowdown blamed on the demonetisation of large banknotes that Modi imposed at the end of 2016, as well as a chaotic implementation of a new harmonised goods and service tax regime.

India has doubled its GDP within a decade and is expected to power ahead as a key economic engine in Asia, even as China slows down.

According to the International Monetary Fund, India is projected to generate growth of 7.4% this year and 7.8% in 2019, boosted by household spending and a tax reform. This compares to the world’s expected average growth of 3.9%.

The London-based Centre for Economics and Business Research, a consultancy, said at the end of last year that India would overtake both Britain and France this year in terms of GDP, and had a good chance to become the world’s third-biggest economy by 2032.

At the end of 2017, Britain was still the world’s fifth-biggest economy with a GDP of $2.622 trillion. The US is the world’s top economy, followed by China, Japan and Germany.


Sensex crosses 30,000 mark, Nifty ends at record 9,351.85

The bull run was driven by hopes of earnings growth and continued buying by domestic investors. Rising global optimism on French elections results and likely announcement of tax reforms by Donald Trump in the US also pushed the markets higher.

With mixed positive sentiments among investors and unabated funds inflows in both global and domestic rallies, markets created yet another milestone in the stock trading history on Wednesday. The benchmark Sensex ended with new and all-time high of 30,133.35 for the first time, while the broader Nifty scaled a new peak at 9,351.85 points.

Similarly, energised by positive global cues in line with a spectacular rally in equities, the rupee also surged by another 15 paise to close near a fresh 21-month high of 64.11, the third straight session of gains. This is the highest closing for the rupee since August 10, 2015, when it had ended at 63.87.

The market momentum also got an additional push on growing expectations for robust foreign inflows to India sparked by a renewed optimism about the US economy and waning anxiety over the European political landscape. Besides, stocks also saw frenzied buying, in line with global shares, which have been on a high after the first round victory of centrist Emmanuel Macron in French presidential elections. Investors are also keeping an eye on US President Donald Trump’s much-awaited tax reforms.

However, traders and market insiders have a different view on this unusual rally, saying that the impressive show by the ruling BJP in Delhi civic polls added to the positivity in the share market.

Keeping the upward trend of the markets, the BSE, however, cautioned the investors not to be carried away by the ‘euphoria’ and refrain from investing in penny stocks. BSE Chief Executive Ashish Chauhan appealed to investors to invest only in good companies or opt for the mutual funds’ route to invest in the markets. “As an exchange, we advice investors not to be carried by the 30,000 mark euphoria and they should not invest in penny stocks nor do they fall prey to fly-by- night operators,” Chauhan said after celebrating the milestone at the Dalal Street towards the end of the trading hours in Mumbai.

As far as Sensex is concerned, the BSE 30-share index opened on a strong footing and surged to a lifetime high of 30,167.09 points in intra-day trade, before settling at 30,133.35, up 190.11 points, or 0.63 per cent. This surpassed its previous record close of 29,974.24, reached on April 5. The gauge had hit its previous intra-day high of 30,024.74 on March 4, 2015. The Sensex has gained 768.05 points or 2.62 per cent in three days.

Similarly, the broader 50-issue NSE Nifty scaled a new high of 9,367 before finally settling 45.25 points, or 0.49 per cent higher at 9,351.85, a new record closing.

Its previous closing high of 9,306.60 was hit in Tuesday’s trade. It also broke the previous intra-day record of 9,309.20. “Market has made a higher high on account of rising global optimism due to ease in political risk in Eurozone and expectation of tax reform in the US. “Volatility emerged during the late hours due to profit booking but short covering ahead the expiry navigated the direction back to north. Optimism on earnings and continued buying by local investors is directing the recent rally in the market,” said Vinod Nair, Head of Research, Geojit Financial Services.

Overseas, Asian indices also ended higher following overnight rally in US stocks on strong earnings announcements and expectations surrounding US President Donald Trump’s impending tax reforms. Tokyo’s Nikkei ended up 1.1 per cent, while Hong Kong’s Hang Seng rose 0.5 per cent, its fifth straight day of gains. Shanghai Composite Index edged up 0.2 per cent.

Key indices in Europe, however, were mixed in their morning deals, with Paris CAC 40 rising 0.1 per cent, London’s FTSE slipping 0.06 per cent and Frankfurt’s DAX 30 declining 0.03 per cent. Back home, of the 30-share Sensex pack, 18 scrips ended higher while 12 closed lower.

Major gainers were ITC 3.36 per cent, M&M 3.29 per cent, HDFC 2.36 per cent, HUL 1.78 per cent, ICICI Bank 1.61 per cent, Tata Motors 1.17 per cent, Bharti Airtel 1.14 per cent, Maruti 0.88 per cent, HDFC Bank 0.73 per cent and Asian Paints 0.73 per cent.

The total turnover on BSE amounted to Rs 5,021.73 crore, higher than Rs 4,006.89 crore registered during the previous trading session.


Brexit offers lifeline on $800 billion emerging company debt

Britain’s vote to exit the European Union (EU) has thrown a lifeline to emerging-market companies facing an $800 billion wall of maturing debt.

By hindering the Federal Reserve’s plan to raise interest rates, the referendum result has led to speculation borrowing costs will remain lower for longer as policy makers attempt to prevent Europe’s turmoil turning into a recession. This means developing-nation companies that borrowed when it was cheaper to do so won’t have to pay more to service those bonds, at least for now.

The prospect of fewer defaults shows how the so-called Brexit vote is proving a blessing for developing-nation companies that need to pay back about $200 billion per year from 2017 to 2020. Economists from the International Monetary Fund (IMF) to the Bank for International Settlements have been warning Fed monetary tightening may set off an increase in corporate failures in emerging markets. Defaults have been climbing since 2013 and reached a seven-year high in the second quarter.

“We might even see a decline in default rates again in the third and fourth quarters of this year,” said Apostolos Bantis, a Dubai-based credit analyst at Commerzbank AG, who recommends investing in Latin American company bonds. “The overall outlook now is more positive for emerging-markets corporates because the Fed is very unlikely to move any time soon following the Brexit.”

Uncertain outcomes

The policy uncertainty engulfing the developed world has boosted the appeal of emerging countries, usually viewed by investors as more vulnerable to political risk. Yields on a Bloomberg index tracking developing-nation corporate bonds have fallen 27 basis points to 5.19% since the UK vote, adding to a recovery that started when oil prices began rebounding from a 20 January low.

The sentiment shift means that defaults are probably past their peak, according to Kathy Collins, an analyst at Aberdeen Asset Management in London. By 28 June, S&P Global Ratings had recorded 10 emerging-market corporate defaults in the second quarter, the worst quarterly tally since mid-2009. The rating company’s 12-month junk-bond default rate climbed to 3.2% at the end of May from 2.9% at the end of April.

“Given where commodity prices are at the moment, we’re not expecting too many more defaults,” Collins said. “In the first six months of this year, we’ve seen a lot of companies be very proactive in terms of tenders and buybacks in the market.”

Buying back

Russia’s Novolipetsk Steel PJSC and shipping operator Sovcomflot OJSC have announced they intend to buy back debt totaling as much as $2 billion. Latin American bonds sales surged over the past week, which HSBC Holdings Plc partly attributed to an increased likelihood of “ultra-low global policy rates” for longer. Brazilian meat packer Marfrig Global Foods SA sold $250 million of securities to repurchase outstanding notes in a push it said would “lengthen its debt maturity profile and reduce the cost of its capital structure.”

The issuance boom may prove short lived if the prospect of Fed tightening re-emerges. The UK’s vote to end its 43-year association with the EU has also ushered in a period of uncertainty for global markets that may eventually turn investors off developing-world assets. In June, the BIS reiterated a warning that emerging market non-bank borrowers that have accumulated $3.3 trillion in dollar debt are coming under strain as their economies slow and currencies weaken.

“If we get some volatility in emerging markets, say from political noise coming from the EU, and there is no access to capital markets from some issuers, that could be really negative,” Badr El Moutawakil, an emerging-market credit strategist at Barclays Plc in London said.

Even after the Brexit dust settles, looming elections in the US, Germany, France and possibly the UK mean a lengthening list of potentially disruptive events, strengthening the hands of dovish central bankers. Emerging-market companies have raised $3.71 billion of international bonds since the UK’s referendum on 23 June.

“External factors are more supportive,” said Bantis from Commerzbank. “The default trend of the past quarter is unlikely to continue.” Bloomberg


US, Europe combined infra spending less than China’s

Despite a crying need for better infrastructure, investment in it has actually fallen in 10 major economies since the financial crisis, including the US, according to a new study by the McKinsey Global Institute. Meanwhile, China is still going gangbusters on roads, bridges, sewers, and everything else that makes a country run.

“China spends more on economic infrastructure annually than North America and Western Europe combined,” according to the report published Wednesday.

Economists around the world have been arguing that now is a great time to invest in infrastructure because interest rates are super-low and the global economy could use the spending jolt. “Is anyone proud of Kennedy airport?” Harvard University economist Lawrence Summers likes to ask.

The MGI report cites 10 countries where infrastructure spending fell as a share of gross domestic product from 2008 to 2013: the US, UK, Italy, Australia, South Korea, Brazil, India, Russia, Mexico, and Saudi Arabia. The study counts 11 economies, but that’s because it lists the European Union as a separate entity.

In contrast to the widespread declines, the institute says, infrastructure spending grew as a share of GDP in Japan, Germany, France, Canada, Turkey, South Africa and China. The chart from the MGI report shows China’s strength in infrastructure spending. Its bar is the highest. There’s such a thing as too much infrastructure spending, of course. At current rates of investment, China, Japan, and Australia are likely to exceed their needs between now and 2030, the McKinsey & Co-affiliated think tank says. To fund more public infrastructure, the report favours raising user charges such as highway tolls, among other measures.

To encourage more private investment in infrastructure, MGI argues for increasing “regulatory certainty” and giving investors “the ability to charge prices that produce an acceptable risk-adjusted return.”



Sumitomo likely to acquire 44% stake in Excel Crop Care

Japanese conglomerate Sumitomo is at an advanced stage of negotiations to acquire a substantial equity stake in Excel Crop CareBSE -0.87 % , a Mumbai-headquartered listed company. The proposed deal could pave the way for the Japanese group to own about 44% shares of the pesticides and agrochemicals company for a total consideration ofRs 1,200-1,300 crore.

Sumitomo plans to buy out stake of Excel promoters — the Shroff family — holding 24.7% equity as well as two financial investors together owning close to 19% of the shares. ET’s email to Dipesh Shroff, managing director of Excel Crop Care, and Sumitomo Chemical went unanswered.

There have been several rounds of talks between officials of Sumitomo Chemical and the Excel management, and indications are that the deal may be signed in June. Nufarm, the Australian crop protection and specialist seeds company, owns more than 14% and is likely to retain its strategic stake in Excel Crop Care.

According to a report by Avendus Capital, global players are looking at India to increase their market share, add to their product portfolio , and strengthen their supply base in specialty and agrochemicals. “The Indian agrochemicals market is expected to grow rapidly (about 12% CAGR over 2014-19) with increase in farmer awareness, improvement in rural income and increase in pressure for improving productivity,” said Preet Mohan Singh, executive director, Avendus Capital.

The Shroffs are also the promoters of Excel Industries, a specialty chemicals company, and co-promoters of Aimco Pesticides in which they control a little over 25%. Before entering into any agreement with Sumitomo, the Shroffs are expected to conclude the inter se transfer of their holding to the other promoter family of Aimco. Excel Crop Care has 1.13% equity interest in Excel Industries.

Besides Shroffs, the other two shareholders of Excel Crop Care who may sell their shares to Sumitomo are Ratnabali Capital Markets (holding 14.99%) and Ratnabali Investments (3.95%). Among the institutional shareholders of Excel Crop Care are Life Insurance Corporation (6.58%) and DSP Blackrock (1.92%).

Excel Crop Care’s consolidated net profit for the quarter ended March 31, 2016 was Rs 7.6 crore as against Rs 1.7 crore in the year ago period, on total income of Rs 188.6 crore (Rs 205.6 crore). The Excel Crop Care stock has been trading at around Rs 1,109, against 52-week high and low of Rs 1,247 and Rs 750, respectively.

M&A activities in sectors like agro and specialty chemicals is expected to pick up, said Avendus, adding that the stride towards food security will also increase the significance of agrochemicals. An estimated 85% of India’s crop loss (worth close to $20 billion) is caused by pest infestation, disease and weeds and is prevented by the use of agrochemicals.

India exports agrochemicals to countries like the us , France, the Netherlands, Belgium, Germany, Brazil, Colombia, China, Vietnam and Indonesia.


France will partner India to build three ‘smart’ cities

France partners with IndiaFrance will help India develop Chandigarh, Nagpur and Puducherry as smart cities. Agence Française de Developpement (French Development Agency) signed memoranda of understanding with the government of Union territory of Chandigarh, and government of Union territory of Puducherry and the Maharashtra government here on Sunday in the presence of French President Francois Hollande and Prime Minister Narendra Modi.

Chandigarh, designed by the French architect Le Corbusier half a century ago as a model city, is spread across 114 sq km and the urban infrastructure and green belt of the city provide it a distinguished status among India’s planned cities.

On January 26, Modi is set to announce the official list of 20 smart cities to be developed in the first phase.

A delegation of 26 CEOs from France travelled to Chandigarh with Hollande and had discussions on CEO forums to explore partnerships in renewable energy, defence, information technology and aerospace.

Modi said French companies can exploit India’s trained and affordable manpower to expand their manufacturing operations in the country. The French president committed annual investment to the tune of €1 billion to strengthen business relations with India.

An agreement between Airbus and Mahindra was also inked under Indo-French cooperation to manufacture helicopters within the Make in India initiative.

French companies will also collaborate with public sector firm Engineering Projects India to provide integrated railways solutions. The railway stations of Ambala and Ludhiana will also be redeveloped with French partnership.

The French delegation evinced interest in the areas of renewable energy, infrastructure, transport, defence, and water treatment.


France supports India’s global solar alliance

France has said that it supports India’s plans to set up an international solar alliance to promote access to low-carbon energy. Prime Minister Narendra Modi is slated to launch the initiative at the forthcoming climate meet (COP-21) in Paris.

“We totally support the solar alliance initiative. Ambitious economic partnerships can be forged between countries under this initiative,” French Foreign Minister Laurent Fabius said at a joint press conference with Environment Minister Prakash Javadekar here on Friday.

Fabius said India will be a key player at the COP-21, as a solution to dealing with climate change can’t be found without its consensus.

“India will play a pivotal part in the talks because of several factors including its size and population and the fact that it will also steer a lot of other countries outputs,” he added.

As many as 190 countries are working toward a legally binding and universal agreement on climate, which aims to keep a check on global warming by cutting down on carbon emissions and embracing green technology. Fabius is on a tour of countries which, according to France’s judgment, could contribute to a successful climate meet in Paris beginning November 30. He met Prime Minister Modi and Javadekar on Friday and discussed issues of importance to India. South Africa and Brazil are next on his itinerary.

New Delhi will focus on ensuring that provisions on industrial financing and technology transfer are part of the legal text that gets accepted in Paris, an Environment Ministry official told BusinessLine .

Focus areas

“India and several other developing countries are pursing the matter of finance and technology transfer at the on-going negotiations and we will try and see to it that provisions on it are legally binding,” the official said.

When asked what kind of progress had happened on the issue of industrial finance and technology sharing by developed countries to enable developing countries to switch over to green technology, Fabius said it was a difficult issue, but progress was being made.

However, he said issues of financing and differentiated responsibility (more responsibility to bring down emissions countries, mostly developed, that have contributed more to climate change), would be an important part of the Paris deal.

(This article was published in the Business Line print edition dated November 21, 2015)