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India’s Quest for High and Stable Growth

In honor of our new “Look Forward” report on India, this week’s Daily Updates will cover different aspects of the Indian economy.

India came out of the pandemic with GDP growth of 7.2% in the fiscal year ended March 2023. Growth is nothing new to the Indian economy, but consistent and stable growth has remained an elusive goal. S&P Global economists believe that such growth is possible, predicting an annual growth rate of 6.7% between fiscal years 2024 and 2031, catapulting GDP to $6.7 trillion from the current level of $3.4 trillion. The question is: Given the employment needs of the fast-growing and relatively youthful Indian population, will 6.7% be enough?

V. Anantha Nageswaran, chief economic adviser to the government of India, believes that growth will need to be higher. “The Indian economy, in real terms, needs to grow annually at 7% to 7.5% until 2030,” Nageswaran said.

Growth in India will require a balance of manufacturing and service sector opportunities. The service sector has long been an area of strength for India, especially in information technology and IT-enabled services, along with domestic sectors such as retail, food services, trading, finance and healthcare. Other Asian countries that have experienced rapid growth, such as China, have done so with manufacturing jobs. Whether India can generate similar employment and productivity growth from services will be crucial.

“The composition of services should change in favor of high-value-added services, as this will improve earnings by attracting foreign demand,” Nageswaran said in a recent interview with S&P Global. “Hospitality is one area where high-value-added services need to be developed. Another is healthcare and elderly care, including traditional and modern medicines.”

S&P Global believes that the ingredients for macroeconomic success in India are increased labor force participation — particularly for women — more private investment in manufacturing and growth in foreign direct investment. Manufacturing is a particular area of concern for India. The sector has historically underperformed due to stringent labor laws, subpar logistics and poor infrastructure. The national and state governments in India have focused on addressing these problems through infrastructure investment and strategic reductions in often-onerous regulations.

“Achieving rapid growth in high-end manufacturing and high-value-added services requires an overarching and supportive ecosystem,” said Nageswaran. “This means there is a sustained pace of expansion in digital infrastructure, along with a significant upscaling of research and development in both the public and the private sector.”

Today is Monday, August 7, 2023, and here is today’s essential intelligence.

Written by Nathan Hunt.

Economy


US Hotel Occupancy Down in Q2 2023; Boston Properties Enters JV for NYC project

US hotel industry growth softened in the second quarter, with occupancy declining 1.5% on an annual basis, according to a report from CBRE. The average daily rate rose 2.6% year over year, its slowest growth pace since the first quarter of 2021. Revenue per available room was up 1.1%, compared with the 15.9% increase recorded in the previous quarter.

—Read the full article from S&P Global Market Intelligence

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Capital Markets


Bankruptcies Among Private Equity Portfolio Companies on Track for 13-Year High

Private equity portfolio companies in the US are on course in 2023 to post the highest number of annual bankruptcy filings since 2010, as credit tightening and interest rate hikes push highly leveraged companies toward nonperforming status.

—Read the full article from S&P Global Market Intelligence

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Global Trade


Watch: Market Movers Europe, Aug 7-11: Saudi Arabia-Russia Oil Output Cuts, Black Sea Tensions Buoy Crude Prices

This week, oil prices are being buoyed by Russia’s and Saudi Arabia’s announcement that they will extend their output cuts. Additionally, tensions are mounting in the Black Sea, where a drone attack on the Russian port of Novorossiisk on Friday has raised concerns of disruption to a vital Kazakh-Russian export route.

—Watch the video from S&P Global Commodity Insights

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Sustainability


Canada’s Raging Wildfires Lead to a Surge in Carbon Emissions

The wildfires in Canada have caused a massive surge in global greenhouse gas emissions in the first seven months of this year, the EU’s Copernicus Atmosphere Monitoring Service said Aug. 3. Accumulated carbon emissions from wildfires across Canada from Jan. 1 to July 31 totaled 290 million mt, data from EU’s climate monitor showed. “This is already more than double the previous record for the year as a whole and represents over 25% of the global total for 2023 to date,” the statement said.

—Read the full article from S&P Global Commodity Insights

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Energy & Commodities


Listen: Guyanese Dream: Oil boom in Guyana could transform global crude market

The small South American country of Guyana has experienced a quick transformation within the past decade, going from zero oil production in 2019 to nearly 400,000 b/d in 2023, and that is expected to reach around 600,000 by the end of 2024. That will position Guyana as one of the world’s top oil producing countries in the world and a rare exception in the market where exploration and production is expanding.

—Listen and subscribe to Oil Markets, a podcast from S&P Global Commodity Insights

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Technology & Media


Cyber Risk Insights: New Regulations Will Increase Resilience, At A Cost

Regulators are shining a spotlight on organizations’ cyber exposure by demanding greater disclosure of cyber-related events, their impact, and information on organizations’ cyber preparedness and resilience. The main aim is to enforce minimum standards and ensure company’s assume responsibility for their own cyber security. Yet greater insight is also opening the door to differentiation based on cyber risks, which could have implications for company credit worthiness.

—Read the full report from S&P Global Ratings

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