India Wants To Be A Developed Nation By 2047. Here Are 4 Critical Areas Modi Can’t Ignore

Economic

Summary:

Prime Minister Narendra Modi has an ambitious goal for India to be a developed economy by 2047, but analysts believe this is only possible if the country’s infrastructure development, manufacturing capabilities, and employment rates improve.

For the last two years, Prime Minister Narendra Modi has spoken confidently about his ambitious goal to make India a developed economy by 2047.

All eyes will now be on Modi and his Bharatiya Janata Party-led alliance to see if they can keep the economic momentum going and continue to improve the lives of millions in their third consecutive term in office.

Confidence in the BJP has plunged. Modi’s ruling party failed to win an outright majority in the lower house of Parliament for the first time since 2014, and is now forced to rely on its allies in the coalition.

“The government will have to find common ground and build consensus on multiple fronts, not just with alliance partners but also with other stakeholder groups, to push through key legislation in parliament and quell the rising anti-incumbency sentiment nationwide,” said Reema Bhattacharya, head of Asia research at risk intelligence firm Verisk Maplecroft.

“A failure to do so could also result in further political setbacks for the ruling party in the next round of state elections scheduled for later in the year,” she warned.

A Modi-led coalition won’t likely derail India’s economic and development, analysts say. However, they point out that the new government will now have to restore faith in the people and ensure India’s standing in the Global South remains.

The new government has yet to outline its key priorities. Analysts, however, are predicting that these four areas will feature high on the agenda.

1. Infrastructure push

India has undergone a massive infrastructure push and has made significant strides in connecting and modernizing its highways, railways and airports.

Last year, consultancy firm EY projected that India will become a $26 trillion economy by 2047, and highlighted that building up the country’s infrastructure capabilities will be pivotal in making this happen.

“Since Modi’s been in office, he’s done his utmost to build ports, railways, and all kinds of hardline infrastructure to make business fluid. He’s going to double down on that,” said Samir Kapadia, CEO of India Index and managing principal at Vogel Group.

India still lags China in this area, and more needs to be done if it is seeking high-growth trajectory to continue attracting foreign investors.

At the interim budget in February, Finance Minister Nirmala Sitharaman estimated capital expenditure will rise by 11.1% to 11.11 trillion Indian rupees ($133.9 billion) in the fiscal year 2025, largely focused on constructing railways and airports.

But improving connectivity between cities should not be the only area of focus, noted Santanu Sengupta, India economist at Goldman Sachs.

“Along with creating physical infrastructure, India needs to remain steadfast on the structural reforms ... It needs to look at land and unlock land to set up more infrastructure in terms of factories,” Sengupta told CNBC, adding that this will drive jobs growth in the sector.

However, analysts highlighted the government might face pushback on this as Modi’s weakened hand could make it more tedious to acquire land for projects.

“Such targets may be more difficult if state-level parties have a quasi-veto due to the coalition structure,” said Richard Rossow, senior advisor and chair in U.S.-India policy studies at the Center for Strategic and International Studies.

2. Enhance manufacturing

In the past decade, Modi has aggressively pushed for India to be self-reliant and overtake China to become Asia’s largest manufacturing powerhouse — particularly in chip manufacturing.

U.S. tech giants are increasingly bringing part of their supply chains to India. The Financial Times reported in December that Apple told component suppliers it will source batteries from Indian factories for its upcoming iPhone 16. Google is also reportedly set to begin Pixel phone production in India by this quarter.

Apple supplier Foxconn has announced it will ramp up investments in India, while Micron Technology is set to create the first India-made semiconductor chip by early 2025.

Projections from Counterpoint Research and the India Electronics and Semiconductor Association show that India’s semiconductor industry will be valued at $64 billion by 2026, a three-fold growth from $23 billion in 2019.

“This will probably be the biggest breadwinner for India over the next five to 10 years,” Kapadia said. “Modi firmly believes that if India is able to be in the semiconductor manufacturing business and if he gets it right, India can become an economy that will not be fussed with.”

3. Fight high unemployment

Unemployment is currently one of the biggest problem’s the world’s most populous country is facing, and a mismatch in skills is further exacerbating this issue, Sumedha Gupta, senior analyst at The Economist Intelligence Unit said.

“There is already a mismatch between the skill level of the country’s workers and the demand for high innovation from employers. This will persist definitely over this decade, possibly into the 2030s as well,” she told CNBC.

Unemployment rate in India rose to 8.1% in April from 7.4% in March, according to the Centre for Monitoring Indian Economy.

A survey conducted by the Centre for the Study of Developing Societies in April, ahead of the election, showed that unemployment was the top concern for 27% of the 10,000 surveyed. More than half (62%) of those surveyed said it had become more difficult to find a job in the last five years during Modi’s second term.

It is now up to the new coalition government to improve local education standards and skills-based training to ensure people are gainfully employed in the right sectors, analysts highlighted.

“While those with advanced education and practical experience are poised to secure jobs in this sector, creating widespread, equitable employment opportunities requires a more inclusive approach,” said Vivek Prasad, markets leader at PwC India.

New education policies and vocational training will “engage individuals at all levels of the manufacturing value chain, ensuring that the benefits of economic progress are shared across society,” Prasad told CNBC, adding that boosting the employment of women is paramount to driving India’s growth.

4. Increase foreign investments

From veteran emerging markets investor Mark Mobius to global strategist David Roche, market experts remain bullish on India.

The National Stock Exchange of India has a total market capitalization of $4.9 trillion — the third largest in Asia-Pacific, according to data from the World Federation of Exchanges. India’s market cap is projected to grow to $40 trillion in the next two decades.

Benchmark indexes Nifty 50 and the Sensex have been strong outperformers this year — respectively rising by 8% and 7% year-to-date, according to LSEG data.

Foreign direct investments into the country needs to however pick up pace to further drive economic growth and development, analysts told CNBC.

Foreign direct investments into India last year were relatively soft due to a difficult private equity funding environment as a result of high U.S. interest rates, said Goldman Sachs’ Sengupta said.

“India will likely attract more FDI inflows from the U.S. once interest rates soften and the funding environment becomes easier,” Sengupta told CNBC.

Ease of investing in India also “has some ways to go” in order to continue attracting foreign funds, noted Prabhat Ojha, partner and head of Asia client business at Cambridge Associates.

He recommended investors pay more attention to India’s banking sector — one that now has good quality growth and capital allocation practices.

“From 2017 to 2019, there was really a cleanup of Indian banks and they are in a very healthy state today,” Ojha told CNBC.

Source：CNBC

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Economic

Calmer week for the euro after French turmoil

European assets are having a better week following the market panic sparked by the rise of the far right across the continent in the European Parliament elections on June 9. But the biggest shockwave came from French President Emmanuelle Macron’s decision to call a snap legislative election the following day, raising fears that Marine Le Pen’s far-right National Rally party would repeat its success on a national level.

The threat of a far-right government in the Eurozone’s second largest economy raised fears of another debt crisis in the bloc, or at the very least, some kind of a market fallout on the scale seen in the UK from Liz Truss’ mini-budget. Investors’ biggest worries from a Le Pen government are the party’s protectionist policies and its calls for increased public spending.

French jitters ebb, for now

But after the panic-induced selloff in French stocks and bonds, as well as the euro, the National Rally appears to be backtracking on some of the party’s more controversial policies. Moreover, Le Pen has vowed to work with Macron rather than force his resignation. Euro on Firmer Footing Ahead Of Flash PMIs As French Risks Subside _1

Euro on Firmer Footing Ahead Of Flash PMIs As French Risks Subside _1

Subsequently, market jitters have calmed somewhat and the risk premium on French debt has also fallen slightly. The spread between French and German 10-year government bond yields spiked to the highest since 2012 as the French political drama unfolded, but for now, a major crisis appears to have been averted and the focus is once again on ECB rate cut expectations.

ECB rate cut expectations pared back

On its part, the European Central Bank steered clear of getting caught up in France’s domestic politics, but there were subtle warnings that neither would it stand idle should widening yield spreads become problematic.

Meanwhile, ECB policymakers have been out and about since the June 6 policy decision when rates were slashed, casting doubt on the prospect of back-to-back rate cuts. Most seem to be in favour of one cut per quarter, with the markets pricing in somewhere between one and two additional 25-bps cuts for the remainder of the year.

Eurozone economy on the mend

How the economy performs over the coming months will be crucial as to how rate-cut expectations shape out. The Eurozone economy picked up some momentum in the first quarter of 2024 and the composite PMI climbed to the highest in a year in May. Euro on Firmer Footing Ahead Of Flash PMIs As French Risks Subside _2

Euro on Firmer Footing Ahead Of Flash PMIs As French Risks Subside _2

Forecasts point to a further improvement in June’s flash estimates. The services PMI is expected at 53.5 versus 53.2 in May, and the manufacturing PMI is projected to come in at 47.9 from the prior 47.3. The composite PMI is expected to tick up to 52.5 in June.

Investors will also likely be scrutinizing the details of the PMI surveys, particularly on employment, amid still elevated wage growth, and on price pressures. With a follow-up rate cut in September only 60% priced in, a soft set of PMI numbers, or signs of a cooling off in inflation, would boost those odds, weighing on the euro.

Can the euro restore its uptrend?

The single currency recently slipped below its short-term ascending trendline against the US dollar, falling below its 50- and 200-day moving averages (MA) too. Further losses could lead to a re-test of the April low of $1.0599. Euro on Firmer Footing Ahead Of Flash PMIs As French Risks Subside _3

Euro on Firmer Footing Ahead Of Flash PMIs As French Risks Subside _3

However, if the PMIs show a strengthening recovery or an unfavourable trend in inflation, the euro could extend its latest rebound by climbing back above the 200-day MA, bringing into scope the June top of $1.0915.

In the event that the PMI data fails to shed some light on the ECB policy path, investors will turn their attention to the flash CPI readings due on July 2.

To stay updated on all economic events of today, please check out our Economic calendar

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Glendon

Economic

The recent cryptocurrency crash has sent shockwaves through the digital currency landscape. But its impact extends beyond just the value of Bitcoin and Ethereum. The ripple effects are being felt in the hardware market, particularly for companies like Nvidia, a leading manufacturer of graphics processing units (GPUs).

The Boom and Bust of Crypto Mining

GPUs are not just for gamers. Their ability to perform complex mathematical calculations makes them ideal for cryptocurrency mining, the process of creating new coins. During periods of high cryptocurrency prices, miners flock to purchase powerful GPUs, driving up demand and prices for these components. This phenomenon played out dramatically in 2017 and 2021, leading to significant shortages and inflated prices for Nvidia's GPUs.

However, the recent crypto crash has reversed this trend. As the value of cryptocurrencies plummeted, mining profitability significantly decreased. Miners, no longer able to justify the high cost of GPUs, are either holding off on purchases or looking to offload their existing hardware. This has led to a glut of used GPUs flooding the market, further dampening demand for new ones.

The Impact on Nvidia

For Nvidia, this translates to a potential decline in its gaming revenue. Here's a breakdown of the potential consequences:

Reduced Demand: With miners out of the picture, overall demand for high-end GPUs is likely to decrease. This could lead to lower sales figures for Nvidia's top-of-the-line graphics cards.

Inventory Adjustments: Nvidia may need to adjust its production volume and potentially face pressure to reduce prices on existing stock to remain competitive.

Uncertain Recovery: The timeframe for a full recovery in gaming-related GPU demand remains unclear. It depends heavily on the future trajectory of cryptocurrency prices and the profitability of mining.

A Look Back: Lessons from the Past

This situation isn't entirely new for Nvidia. A similar scenario unfolded in 2018, when a crypto crash led to a glut of used GPUs and a decline in Nvidia's gaming revenue. The company took several quarters to recover. This historical precedent suggests that Nvidia might face a similar period of adjustment in the aftermath of the recent crypto crash.

Beyond the Crash: A Diversified Future for Nvidia

However, Nvidia's story is not solely dependent on the whims of the cryptocurrency market. The company has taken steps to diversify its revenue streams:

Focus on Data Center Growth: Nvidia has seen significant growth in its data center business, where its GPUs are used for tasks like artificial intelligence and machine learning. This segment now surpasses gaming revenue, providing a buffer against fluctuations in the gaming market.

The Rise of Cloud Gaming: Cloud gaming services like Nvidia GeForce Now are gaining traction. These platforms rely on powerful remote servers equipped with Nvidia GPUs, potentially reducing the reliance on high-end personal gaming hardware.

Looking Ahead: A Cautious Optimism

While the crypto crash will undoubtedly impact Nvidia's gaming revenue in the short term, the company's diversified business model offers some protection. The long-term impact remains to be seen and depends on the overall health of the gaming industry and the future of cryptocurrency mining.

For investors, it's crucial to consider these factors and stay informed about developments in both the cryptocurrency and gaming markets to make informed decisions regarding Nvidia stock.

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Alex

Economic

Commodity

Australian LNG producers could be running into tough times as global demand for the energy source peaks and oversupply starts to hit world markets.

According to an IEEFA report, between 2024 and 2028 global LNG supply will increase by an unprecedented 40%.

This is due in part to increasing capacity additions from the US and Qatar, two nations that are able to produce gas at a much lower cost than Australia.

Concurrently, demand for LNG is starting to decline in mature markets. IEEFA predicts that European demand for LNG will peak in 2025, and then decline.

Japan’s LNG demand has decreased by 25% since 2014 and is expected to fall by a further 25% by 2030 as LNG is replaced with resurgent nuclear output and renewable energy. South Korea’s LNG imports fell by 5% last year and are expected to fall further by 2030.

Australian LNG producers could make up for this lost demand by exporting to emerging Asian markets. However, IEEFA points out that due to often high and volatile prices, and the associated fiscal challenges, the appetite of emerging Asian markets for Australian LNG is limited.

Many of the Australian producers currently sell their LNG through long-term contracts, but a large share of these will start expiring after 2030. They will therefore be increasingly exposed to low-cost competition.

As of July 2023, around 75% of Australian-produced LNG is exported, primarily to markets in Asia.

The energy industry also faces the additional problem of a possible large glut in global oil supplies. The International Energy Agency recently predicted that global oil capacity in 2030 will exceed demand by eight million barrels per day.

Most Australian LNG contracts have pricing directly linked to oil prices.

Amandine Denis-Ryan, CEO of the IEEFA’s Australia team and author of the report, said that the “double oil and LNG supply gluts are really a double whammy for the Australian LNG industry, which now faces an ever-gloomier future”.

Source：Offshore Technology

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Warren Takunda

Economic

The Pound to Franc exchange rate rallied half a per cent to hit 1.1380 after the SNB lowered the base rate to 1.25% from 1.50%, saying "underlying inflationary pressure had decreased again."

The Euro to Franc rose 0.40% to hit 0.9540, and the Dollar to Franc rose 0.76% to quote at 0.8906.

The currency reaction confirms that the majority of market participants were expecting the SNB to leave interest rates unchanged, given the recent improvement in domestic data.

"The SNB is doing the right thing," says Dr. Thomas Gitzel, Chief Economist at VP Bank. "If it had remained put, as the majority of economists expected, this could have given the impression that policymakers were unsure about the last interest rate move in March."

The SNB might have been pushed into this interest rate cut owing to the Franc's recent rally; after all, it is the best performer when screened over the past month, a development that penalises Switzerland's exporters.

Back in May, SNB President Thomas Jordan seemed to signal unease with the Franc's decline following the March interest rate cut. The currency has ultimately strengthened since then and Jordan's previously expressed fears will have faded as a result.

Swiss Franc Falls on Second SNB Interest Rate Cut, But Weakness Could be Short-lived_1

Above: GBP/CHF at 15-minute intervals.

A further 'dovish' development for the Franc came as the SNB lowered its inflation forecast profile, which means it is comfortable with the view that inflation will continue to decline, even as interest rates fall.

How far will the Franc fall? This will depend on how the market's expectation for further rate cuts evolves. If the market believes this is the final cut of the year, selling pressure might prove limited.

If upcoming developments suggest further cuts are warranted, selling pressures can extend.

"Looking ahead, we think that the SNB will not cut rates again this year as we are now no longer confident that underlying inflationary pressures are abating because labour compensation is growing at a strong rate and services inflation remains very sticky," says Adrian Prettejohn, Europe Economist at Capital Economics.

Kit Juckes, head of FX research at Société Générale, says Franc weakness might not be destinated to last and Jordan will likely "see EUR/CHF slip back down. There is too little growth and too much political uncertainty in Europe for the CHF to fall far."

Source: Poundsterlinglive

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FastBull Featured

Remarks of Officials

On June 18, local time, Alberto Musalem, President of the Federal Reserve Bank of St. Louis, spoke at the CFA Institute, sharing his views on monetary policy and the US economy. Key excerpts include:

Economic activity has continued to expand at a solid pace underpinned by robust demand, especially in services. However, April data, especially on real consumer spending and nominal retail sales, mostly underwhelmed, and the few May data reported to date have been mixed. May retail sales were weaker than expected, suggesting that aggregate demand is growing at a moderate pace thus far this quarter.

Overall, I expect aggregate consumption to moderate in coming quarters, without stalling, and then return to or slightly exceed trend by 2026.

The labor market has continued to rebalance. It no longer seems overheated but remains tight. I expect some further cooling in the coming months, as evidenced by the recent decline in job openings, the modest increase in new claims for unemployment insurance, and the uptick in the unemployment rate. However, the large and broad-based growth in payroll employment and the increase in average hourly earnings reported in the May establishment survey suggest demand for labor remains strong. Continued high employment and compensation growth, approximately in line with productivity growth, should moderate the impact of easing labor market conditions on aggregate demand.

There are potential early signs of continued progress on inflation. Favorable national reports on consumer and producer prices suggest the monthly reading for the personal consumption expenditures price index, or PCE price index, should show a welcome downshift of inflation in May. However, it takes more than one data point to establish a trend. Moreover, recent elevated readings on PCE inflation have been broad-based across expenditure categories of goods and services.

I also supported the Committee's statement that it "does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent." The current policy posture balances the risk of easing policy too early with the risk of easing policy too late. It allows the Committee to patiently observe economic developments going forward.

I will need to observe a period of favorable inflation, moderating demand and expanding supply before becoming confident that a reduction in the target range for the federal funds rate is appropriate. These conditions could take months, and more likely quarters to play out (implying that there may only be one rate cut this year).

I am also attentive to alternative scenarios where inflation becomes stuck meaningfully above 2 percent or moves higher. Should evidence of alternative inflation scenarios begin to materialize, I would support an additional firming of monetary policy.

To be clear, I do not view the inflation "getting stuck" or "rising" as the most likely scenario.

Musalem's Speech

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Samantha Luan

Economic

Stocks

European stocks strengthened after the Swiss National Bank delivered an interest rate cut in a busy day for monetary policy officials in the region.

The Stoxx 600 rose 0.4% Thursday, with the technology, insurance and real estate sectors leading gains. US future contracts also strengthened, signaling fresh record-highs for this year’s tech-fueled rally when Wall Street reopens after a public holiday.

The dollar edged higher against a basket of currencies, while 10-year Treasury yields advanced three basis points.

Policymakers in Switzerland cut borrowing costs for a second time, saying that inflation pressure has decreased again compared to the previous quarter. The Swiss currency fell in response, easing around 0.4% versus the euro, and tumbling 0.5% against the dollar.

“The fact we are having interest rates coming down implies they feel confident enough that the inflation dynamic is coming down,” said Guy Miller, chief market strategist at Zurich Insurance. The move “bodes reasonably well for other central banks,” he said.

Later on Thursday, Norges Bank and the Bank of England are expected to keep their respective rates unchanged.

In France, the Treasury is preparing to sell as much as €10.5 billion ($11.3 billion) in bonds for the first time since President Emmanuel Macron shocked markets by calling a snap election. The auction will offer clues as to whether the rout has taken yields to levels high enough to entice buyers. European Stocks Gain After Swiss Interest Rate Cut: Markets Wrap_1

European Stocks Gain After Swiss Interest Rate Cut: Markets Wrap_1

A two-day rally in Asia paused with a gauge of technology firms in Hong Kong sliding. The Japanese yen extended its weakness against the dollar to a sixth session.

The offshore yuan slipped to its weakest level this year on signs that policymakers are loosening their grip on the currency. The People’s Bank of China set the yuan’s daily reference rate at its lowest since November.

Chinese bonds were in focus after PBOC Governor Pan Gongsheng gave the clearest indication yet that the central bank would start trading government bonds on the secondary market. The country’s 10-year government bond futures rose to a record high.

Wall Street, meanwhile, has been lifted by the continued AI frenzy and resilient economic growth that should continue to support corporate earnings, especially in the technology sector.

Questions are rising on what could derail the stock rally given “all is not so rosy under the hood, where index market breadth has been poor, with participation underwhelming, suggesting the rally has been built on a shaky foundation,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “It has simply been a tough trade to bet against AI in its various guises - so until we lose these behemoths then pullbacks at an index level will likely be shallow and well-supported.”

In commodities, oil edged higher ahead of the release of weekly inventory data from the US. Gold rose after closing the previous session little changed.

Source：Bloomberg

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India Wants To Be A Developed Nation By 2047. Here Are 4 Critical Areas Modi Can’t Ignore

1. Infrastructure push

2. Enhance manufacturing

3. Fight high unemployment