Macroeconomic Notes

Sources international and domestic led with the news that India’s GDP data showed a world-topping 7.6% estimate for FY16 growth. But nearly all observers have raised questions on the meaning of the number, noting sector-wise expected contractions in key growth-driving areas such as agriculture, and the incorporation of indirect taxation into the calculation of output. (The Hindu BusinessLine)

Services and manufacturing PMI data, which measure how fast business is growing in those sectors, show promising upticks. Services growth hit a 19-month high, while manufacturing growth bounced back from a contraction at the end of 2015. (The Hindu BusinessLine)

The Sensex has been in a steady decline for quite a while, but observers regularly shrug this off and look at other indicators for economic and business performance. Geoskope expert Ajay Shah asserts that, “The stock market seems to do relatively well in "micro-forecasting": differentiating one company from another. The stock market does not seem to do well at "macro-forecasting": in understanding the overall trajectory of Indian earnings growth.” (Business Standard)

As old a tale as can be told in the current India story, jobs are growing too slowly.  But as some Indian observers have pointed out, much of the economy in its current state is unorganized. Indeed, 94% of workers in India do not have an employment contract. Certainly organizing employment or planning for the circumstances that unorganized workers endure ought to be in the minds of the Prime Minister’s Office and every company’s India director. (BusinessToday)

Governance, Politics and the Modi Effect

Business Standard: February 10
Led by indirect tax surpluses, the Ministry of Finance reported that it expected to meet its FY16 tax collection target, the equivalent of over $200 billion. Buoyed by particular expansions in business activity, this suggests a pragmatic ministry shying away from making concrete promises that it cannot keep, exciting those looking ahead to the FY17 budget at the end of the month.

The Hindu: January 28
Giving shape to a plan driven by Prime Minister Modi since his election, 20 cities, led by Bhubaneshwar in Orissa, were named under the first tranche that will be given funding to transform into networked, IT-forward, infrastructure-rich entities. Cities submitted action plans that were evaluated by an office under the Prime Minister, and funding is ordered according to the evaluations. The plan will eventually have 100 cities transformed, but many will look at the winds blowing from these initial efforts to gauge the actual form of this initiative.

Business and Consumption

Sunil Sood, the CEO and managing director of Vodafone, reveals in an interview with Business Standard his outlook on the future of telecom — 4G is making waves, but may not expand as quickly as, say, mobiles themselves. There is friction from the telecom regulator and an uncertain competitive picture. Vodafone is looking to get more spectrum allocations, an area where it feels unnecessarily limited.

Facebook, Whatsapp, reality shows, and skills training – all from mobiles on fuzzy 3G connections. This is the story of rural India throughout the country, according to a BusinessToday investigative team. While rural consumption is a grim story at the moment, people are indulging in the world of their smartphones, running up massive data bills and centralizing their activity around it.

Livemint: February 3
Despite murmurs of heat in the high-stakes top-tier urban real estate market, investors have consistently gotten reasonable to high returns on exit. To date, the majority of these investments have been domestic, but this month, KKR has announced a tie-up with local Sunteck Realty focusing on Mumbai’s highest end.

Livemint: January 16
Regulation held firm, and Uber adapted when it could not roll out its direct in-app payment system for the Indian market. Seeing the market potential and the pace of change in the minds of regulators, it designed a new payment system and left it at that.

The Hindu BusinessLine: February 4
Companies across the retail landscape are finding that they need to think of their brands as fluid and market in a more granular way than that which they are used to. Marketers at Future Group and more are “micro-segmenting” at a street-by-street level, with impacts being felt even at an early stage.

Business Standard: February 11
British retailer Tesco’s development center in Bangalore is a crucial part of its business, says its CEO, as it looks to the start-up ecosystem in India to inspire or even develop outright new products that will improve its consumer-facing dynamic and business efficiency.

Business Standard: February 3
Betting on the experience-oriented, digitally-oriented youth, Starbucks, whose CEO called India a “game changer,” is moving forward with a number of marketing programs aimed at “creating special moment,” including tie-ups with dating apps. Additionally, mobile and online ordering are about to be deployed to what is expected to be Starbucks’ 100 stores in country.

Business Standard: February 1
What does ‘Making in India’ look like? The story of Dynamatic, a 30-year manufacturer that began by producing hydraulic pumps and has progressed to aerospace components, is a necessary illustration. “[The CEO] explains that Dynamatic’s growing success rests on its global production model. Instead of providing foreign vendors with a sweatshop for reducing costs through low-wage labour, Dynamatic has fashioned a multi-national capability based on comparative advantage."

Business Standard: February 3
Andhra brings substance: Colgate’s MoU with the southern state has come to fruition as it inaugurated a toothbrush plant in the industrial park of Sri City that will produce 220 million toothbrushes per year, with more investment to follow.

Livemint: February 3
The central bank will now allow foreign investors to sell stakes in Indian startups to domestic companies. Domestic VC activity demonstrates a clear enthusiasm for the ideas that are emerging from Indian startups, but this was a significant hang-up for the foreign counterparts. As a bubble looms, major foreign investors like SoftBank and Tiger Global may be looking to unload.