Hello everyone! Good day!
Let us dive into some news from past week
Highlights from RBI’s Monetary Policy Meeting
RBI’s first Monetary Policy Meeting of the year was held on February 8 and the committee decided to keep the repo rate unchanged at 6.5%. The decision to keep the high rates is primarily to reduce the inflation rate and the retail inflation projection for the fourth quarter is 5%
A rise in food prices in the country is the main reason for stubborn inflation despite higher interest rates. The RBI projects the inflation to ease to 4.5% in FY25 and forecasts the economy to grow at 7% in the same fiscal year. The growth will be aided by a strong urban demand, improvement in rural demand and continued government capital expenditure.
Further, the RBI mandated all lenders to provide a Key Fact Statement (KFS) to retail and MSME borrowers. Currently, KFS is a must for lending by scheduled commercial banks to individual borrowers; digital lending by REs (Regulated Entities); and microfinance loans. As per the latest mandate, all entities regulated by RBI should provide KFS in a simple and easy-to-understand format for users. All loan agreements and charges including processing charges and penalties will bring more transparency. It would help customers to compare loan products from different lenders and help reduce the issue of hidden charges.
On the Paytm debacle, RBI clarified the actions were taken due to ‘lack of compliance’ by the company. The bank will be issuing an FAQ next week clarifying the concerns of the public.
ADIA Launches $4-5 Billion Indian Investment Fund via GIFT City
One of the largest sovereign wealth fund in the UAE, The Abu Dhabi Investment Authority, plans to establish a $4-5 billion fund aimed at investing in India through a tax-neutral finance centre located in the state of Gujarat. ADIA will be the first sovereign wealth fund to commence investments in India via GIFT City. This decision comes shortly before Modi's scheduled visit to Abu Dhabi.
Trade between India and the UAE reached $85 billion for the fiscal year ending March 2023, as per Indian government data. The substantial Indian dispersion in the UAE, constituting nearly 35% of the total population plays a key role in fostering the strong ties between the two countries. Fund management activities through the GIFT City hub have gained momentum following a sluggish start, with 95 local and global funds and commitments amounting to $30 billion and investments surpassing $2.93 billion as of December 2023.
Evergrande Group Nears Liquidation as Bond Valuations Plummet
China Evergrande Group now confronts liquidation after failed negotiations and a Hong Kong court ruling. The company's offshore bonds, amounting to a staggering $19 billion, have plummeted to just 1 cent on the dollar in secondary markets, marking a substantial collapse in value. Initially attracting interest from US and European hedge funds seeking high returns, Evergrande's fortunes dwindled as discussions with creditors stalled amidst opaque processes and prolonged communication gaps, leaving investors grappling with uncertainty over government involvement and conflicting interests.
Despite attempts to salvage the situation amid China's property market challenges and regulatory obstacles, including weaker-than-expected sales and the detention of Evergrande's chairman, Hui Ka Yan, negotiations ultimately unravelled, leaving stakeholders disheartened. The fallout underscores the intricate risks inherent in conducting business in China's corporate landscape, particularly in sectors like real estate where government influence looms large. As Evergrande faces the grim prospect of liquidation, the episode serves as a stark reminder of the complexities and uncertainties facing investors navigating the Chinese market.
Want to know more about the Budget announcements? Check out the reel below:
More news from the week ...
IMF warns Maldives about its debt position and advises a ‘policy adjustment’ After reviewing the economy of Maldives, IMF warned the country of its increasing reliance of external debt. The country which relies immensely on tourism is recovering from the pandemic. However, the country’s increased reliance on China for funds is a growing concern.
Uttarakhand becomes the first state to pass the Uniform Civil Code The Bharatiya Janata Party (BJP) has long pushed for a Uniform Civil Code (UCC), which would replace personal laws based on religion with a single set of rules for all Indians. This means things like marriage, divorce, and inheritance would follow the same laws instead of varying depending on someone's faith.
Temperature surge makes January 2024 the hottest on record Global temperatures reported a 1.7 degree Celsius rise in January 2024 when compared to pre-industrial levels. Global temperatures soared 1.52 degrees Celsius above the 1850-1900 average in the past year, which is the highest ever recorded.
Rise in crude oil price with ongoing peace talks - Israel declined a ceasefire proposal from Hamas, causing oil prices to rise amid ongoing efforts to resolve the Gaza conflict and broader tensions in the Middle East. Additionally, indications of strong fuel demand in the United States further supported the market's upward trajectory this week.
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Visual of the Week
India is gearing up for its first driverless metro train. This China-made train arrived at Chennai port. This development brings hope for the long-awaited Bengaluru’s Yellow Line, which will connect RV Road with Bommasandra in Bangalore. Manufactured by China's CRRC Nanjing Puzhen Co Ltd, the contract was worth Rs 1,578 crore in 2019 to supply 216 coaches to the Bangalore Metro Rail Corporation Limited (BMRCL). Capable of running without a driver at intervals of 90 seconds, the coach measures 21 meters in length and weighs between 32 to 37 tonnes.
Test you knowledge !
This country outpaced China to become the top exporter to the USA. Can u guess the country?
For the first time in 20 years, China was outpaced by Mexico to become the biggest supplier to the USA. Mexico sent 5% more goods to USA in 2023 from the previous year, whereas China supplied 20% less goods compared to the prior year. The other top suppliers to the US are Canada, China, Japan and UK.
There are a couple of reasons for this major shift:
The pandemic had completely destroyed global supply chains. The cost of shipping a container from China to USA grew almost 20 times and this led to US looking for geographically closer and cheaper alternatives like Mexico.
During the Trump-era, the import tariff’s on certain goods were raised significantly. Moreover, the Biden administration passed climate rules that would reduce the dependence on China for clean technology, which made import of such goods costlier.
The tensions between China and US further forced manufacturers to set up shops in Mexico and as a result foreign investment grew 21% in the country.
Biden administration is asking companies to reduce the ‘offshoring’ risks in China. It has asked for ‘nearshoring’ and move manufacturing base to closer geographies.
Chinese companies itself are investing heavily in Mexico to bypass the higher tariffs imposed on goods from China.
That’s all from us
Until next week 👋
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