Weekly News 06 - 10 November 2023
Monday, 6 November 2023 “Germany for deeper ties on 3rd countries” (Mattoo 2023:2).
Germany aims to strengthen its development partnership with India by expanding collaboration in strategic third countries. Initially focused on climate and sustainability initiatives in Peru, Malawi, Ghana, and Cameroon, the partnership now seeks to include healthcare projects and support health-related research and development in Africa. Launched in 2022, the existing projects aim to advance sustainable development goals (SDGs) in Asia, Africa, and the Indo-Pacific, ranging from promoting women-led agribusiness in Malawi to enhancing potato production in Cameroon through Agri-Tech.
Jochen Flasbarth, the state secretary in Germany's Federal Ministry for Economic Cooperation and Development, expressed Germany's interest in leveraging individual strengths and experiences to offer inclusive projects addressing development challenges and achieving SDGs. Both nations emphasize capacity-building initiatives in jointly identified priority sectors and explore co-financing and innovative partnership models to support joint projects in third countries, aligning with their commitment outlined in a joint declaration of intent released in May 2022.
Tuesday, 7 November 2023 “Fertilizer subsidy bill may spike to ₹2 trillion” (Das 2023:1).
India's fertilizer subsidy bill is anticipated to reach ₹2 trillion this fiscal year, surpassing the initial estimate of ₹1.75 trillion, driven by increased consumption and higher natural gas prices. Fertilizer subsidies have already surpassed 63% of the full-year allocation in the first six months of FY24, with urea and P&K fertilizers accounting for substantial portions of the expenditure. The ongoing conflict in West Asia is expected to keep natural gas prices elevated, contributing to higher fertilizer prices.
The fertilizer subsidy for FY24 is projected to be 13-14% higher than the budgeted estimates, with an increase in consumption expected during the rabi season. Urea, comprising 53-55% of total fertilizer consumption during rabi, is a key factor. The war in West Asia is likely to impact natural gas prices, leading to an expected rise in urea subsidy for the 2024-25 rabi marketing season. However, revised nutrient-based subsidy rates for non-urea fertilizers in rabi 2024-25 are anticipated to mitigate the increase in the subsidy bill for these fertilizers. Despite uncertainties in global prices and imports, urea imports are expected to decline, and domestic production is on the rise. Acreage increases for key crops support the demand for fertilizers during rabi as well.
Wednesday, 8 November 2023 “China to Grow 5.4% in '23 and 4.6% in '24: IMF” (The Economic Times 2023:17).
The International Monetary Fund (IMF) raised China’s economic growth forecast for 2023 to 5.4%, up from the initial estimate of 5%, citing a robust post-Covid-19 recovery. However, the IMF anticipates a slowdown in growth next year to 4.6%, attributing this deceleration to ongoing weaknesses in the property sector and subdued external demand. Despite the moderation, this projection is more optimistic than the 4.2% forecasted in the IMF’s World Economic Outlook (WEO) from October.
China’s decision to approve a 1 trillion yuan ($137 billion) sovereign bond issue and allow local governments to advance part of their 2024 bond quotas contributed to the upward revision. This move aims to provide economic support. Gita Gopinath, the IMF’s first deputy managing director, explained that the adjustment reflects stronger-than-expected growth in the third quarter and the recent policy measures. Economists, however, caution that a combination of property sector challenges and local government debt concerns may pose a threat to China’s long-term growth potential.
Thursday, 9 November 2023 “US invests $553 mm in Adani’s Sri Lanka port to check China” (Mint 2023:1).
The US will provide $553 million in financing for Sri Lanka's West Container Terminal in Colombo, a project led by billionaire Gautam Adani. This move is seen as part of efforts by the US and India to counter China's influence in South Asia, particularly in the wake of Sri Lanka's substantial indebtedness to Beijing due to previous Chinese port and highway projects. The financing from the International Development Finance Corp. (DFC) is the agency's largest infrastructure investment in Asia, reflecting a broader push for US engagement in development projects across the Indo-Pacific.
The funding aims to bolster Sri Lanka's economic growth and enhance its regional economic integration, aligning with India's interests. It is also a strategic move to counter China's influence, as the US seeks to be more actively involved in development initiatives. The port project is crucial for Colombo, given its status as one of the busiest ports in the Indian Ocean, and the funding is expected to provide support without adding to Sri Lanka's sovereign debt. The endorsement from the US is significant for the Adani group, which has faced corporate fraud allegations, as well as for the controversial port project.
Friday, 10 November 2023 “Moody's Retains Growth Forecast at 6.7% for 2023” (The Economic Times 2023:9).
Moody's Investor Service has reaffirmed its 6.7% growth forecast for the Indian economy in 2023, emphasizing that strong domestic demand will counterbalance weak exports amid a challenging global economic environment. The research firm predicts a growth of 6.1% in 2024 and 6.3% in the following year. India's economy showed resilience with a 7.8% expansion in the April-June quarter, and Moody's expects this momentum to persist, citing robust tax collections, surging auto sales, and positive consumer sentiment.
While there are positive indicators, Moody's highlights the vulnerability of rural demand to unpredictable monsoons, which could impact crop yields and farm income. Additionally, a report expresses concerns about India's long-term prospects, citing low trade openness as a potential hindrance to growth and job creation, despite ranking the country higher than its South Asian peers in terms of global value chain integration.
References:
- Das, Puja. 2023. “Fertilizer subsidy bill may spike to ₹2 trillion”. Mint, 7 November 2023: 1.
- Mattoo, Shashank. 2023. “Germany for deeper ties on 3rd countries”. Mint, 6 November 2023: 2.
- Mint. 2023. “US invests $553 mm in Adani’s Sri Lanka port to check China”. 9 November 2023: 1.
- The Economic Times. 2023. “China to Grow 5.4% in '23 and 4.6% in '24: IMF”. 8 November 2023: 17.
- The Economic Times. 2023. “Moody's Retains Growth Forecast at 6.7% for 2023”. 10 November 2023: 19.
