Tag: Global Economy

Global economy faces weakest half-decade performance in 30 years: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Global economy may have dodged recession in 2023 but experts forecast slowdown in 2024

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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JPMorgan’s Global Head of EM Economics, Jahangir Aziz predicts a slowdown in the global economy for the year 2024. Despite the unexpected growth experienced by several major economies in 2023, including the US and India, Aziz said there are signs of a forthcoming soft landing and the need for a disinflation process to prompt central banks, particularly the US Federal Reserve, to initiate rate cuts.

Aziz highlighted the actions of Latin American and European central banks, which have already begun cutting rates. However, he noted that Asian economies face limitations in following suit due to minimal margins over the US Federal Reserve’s decisions. According to Aziz, unless the Fed initiates rate cuts, Asian economies will be constrained in their response to the impending economic slowdown.

Also Read | Stock market set to surge even as slowdown looms over the economy

Robert Sockin, Global Economist at Citi, echoed concerns about a potential economic slowdown despite the current resilience. Sockin suggested that policymakers may adopt a dovish stance to support the economy and prevent a recession. He hinted at the possibility of a faster reduction of the balance sheet and more rapid Federal Reserve cuts than initially anticipated.

In his earlier interview with CNBC-TV18, Robert Sockin, Global Economist at Citi said that he does not anticipate any rate cuts in the US until July next year.

Sockin says although there is uncertainty around when the rate cuts start, he expects the cuts to be deeper than the Fed is guiding.

Sockin expressed a more pessimistic view, stating, “We are still in the recession camp, with the economy projected to enter a recession in Q2 of this year, resulting in two quarters of negative growth in Q2 and Q3. However, he reassured that this anticipated recession would be relatively mild compared to historical standards.”

Also Read | Why Standard Chartered Wealth is overweight on these three sectors

Ed Yardeni, President of Yardeni Research had earlier told CNBC-TV18 that the US Federal Reserve may be cautious in rate cuts and it wouldn’t be surprising if it starts speaking more firmly about not lowering rates too quickly or too much, to prevent people from expecting too many rate cuts.

“Now, there could be some correction (in the market), if and when the market starts to conclude that the Fed isn’t going to be quite as easy, as is, has been discounted recently. I will not be surprised if the Fed officials come out talking quite hawkish, trying to convince people not to overreact here and anticipate too much of an easy move,” he said in an interview with CNBC-TV18.

As the global economy navigates uncertainties and varying opinions from experts, the financial community is closely monitoring key indicators and policy decisions to gauge the trajectory of economic growth in 2024.

For more, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IMF says global economy on track but not out of the woods, raises India’s FY24 growth estimates

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The International Monetary Fund’s (IMF) latest World Economic Outlook (WEO) report finds that global growth is projected to fall from an estimated 3.5 percent in 2022 to 3 percent in both 2023 and 2024. While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook, it remains weak by historical standards.

“The global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine. In the near term, the signs of progress are undeniable…Yet many challenges still cloud the horizon, and it is too early to celebrate,” said Pierre-Olivier Gourinchas, the Economic Counsellor and the Director of Research of the IMF.

The report finds that the rise in central bank policy rates to fight inflation continues to weigh on economic activity. Advanced economies continue to drive the decline in growth from 2022 to 2023, with weaker manufacturing, as well as idiosyncratic factors, offsetting stronger services activity, the IMF said.

In the emerging markets and developing economies, the growth outlook is broadly stable for 2023 and 2024, albeit with notable shifts across regions. On a year-over-year basis, global growth bottomed out in the fourth quarter of 2022. However, in some major economies, it is not expected to bottom out before the second half of 2023, said the IMF.

As a result, it expects world trade growth to decline from 5.2 percent in 2022 to 2 percent in 2023, before rising to 3.7 percent in 2024, well below the 2000-19 average of 4.9 percent.

“The decline in 2023 reflects not only the path of global demand but also shifts in its composition toward domestic services, lagged effects of US dollar appreciation — which slows trade owing to the widespread invoicing of products in US dollars — and rising trade barriers,” the report said.

For advanced economies, the growth slowdown projected for 2023 remains significant, from 2.7 percent in 2022 to 1.5 percent in 2023, with a 0.2 percentage point upward revision from the April 2023 WEO. About 93 percent of advanced economies are projected to have lower growth in 2023, and growth in 2024 among this group of economies is projected to remain at 1.4 percent. In the United States, growth is projected to slow from 2.1 percent in 2022 to 1.8 percent in 2023, then slow further to 1 percent in 2024.

For emerging markets and developing economies, growth is projected to be broadly stable at 4 percent in 2023 and 4.1 percent in 2024, with modest revisions of 0.1 percentage point for both 2023 and 2024, as per the report.

However, this stable average masks divergence, IMF said, with about 61 percent of the economies in this group growing faster in 2023 and the rest –– including low-income countries and three of the five geographic regions –– growing more slowly.

“Hopefully, with inflation starting to recede, we have entered the final stage of the inflationary cycle that started in 2021. But hope is not a policy, and the touchdown may prove quite tricky to execute… It is critical to avoid easing rates prematurely, that is until underlying inflation shows clear and sustained signs of cooling. We are not there yet. All the while, central banks should continue to monitor the financial system and stand ready to use their other tools to maintain financial stability,” Pierre-Olivier Gourinchas said.

IMF on India

The latest WEO shows that the IMF estimates India’s real GDP growth at 6.1 percent in FY24, a 0.2 percentage point upward revision compared with its April projection. This, said the IMF, reflects momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment. India’s growth is seen slowing from an estimated 7.2 percent in FY23 to 6.1 percent in FY24 and then recovering gradually to 6.3 percent by FY25, as per IMF.

On a calendar year basis, India’s growth is seen at 6.6 percent in 2023 and 5.8 percent in 2024.

Global inflation

Global headline inflation is expected to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024, as per the report estimates, but remain above pre-pandemic (2017-19) levels of about 3.5 percent. About three-quarters of the world’s economies are expected to see lower annual average headline inflation in 2023, the report found.

Monetary policy tightening is expected to gradually dampen inflation, but a central driver of the disinflation projected for 2023 is declining international commodity prices, said the IMF.

Core inflation is generally declining more gradually. IMF estimates that globally, core inflation is set to decline from an annual average of 6.5 percent in 2022 to 6 percent in 2023 and 4.7 percent in 2024.

Risks to outlook

The balance of risks to global growth remains tilted downward, but adverse risks have receded since the publication of the April 2023 WEO, the IMF said. Inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering a more restrictive monetary policy.

Financial sector turbulence could resume as markets adjust to further policy tightening by central banks. China’s recovery could slow down, in part as a result of unresolved real estate problems, with negative cross-border spillovers. Sovereign debt distress could spread to a wider group of economies. On the upside, inflation could fall faster than expected, reducing the need for tight monetary policy, and domestic demand could again prove more resilient.

Also Read:IMF says global growth prospects over medium term now seem dimmer than in decades

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IMF observes ‘pockets of resilience,’ slowing momentum in global economy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The International Monetary Fund said on Thursday that first quarter global growth slightly outpaced projections in its April forecasts, but data since then has shown a mixed picture, with “pockets of resilience” alongside signs of slowing momentum.

The IMF said in a briefing note for a G20 finance leaders meeting in India next week that manufacturing is showing weakness across G20 economies and global trade remains weak, but the demand for services is strong, particularly where tourism is recovering.

The IMF did not indicate any changes to its April 2023 global GDP growth forecast of 2.8 percent- down from 3.4 percent in 2022 – but said that risks were “mostly” tilted to the downside. These include the potential for Russia’s war in Ukraine to intensify, stubborn inflation and more financial sector stress that could disrupt markets.

But the Fund said that inflation “seems to have peaked” in 2022, and core inflation, while also easing, remains above targets in most G20 countries.

Reduced supply chain disruptions and lower goods demand means likely disinflationary pressures from goods, the IMF said.

“However, services inflation – which is now the major driver of core inflation – is expected to take longer to decline,” the IMF said.

Strong consumer demand for services, buoyed by demand, buoyed by strong labour markets and the post-pandemic shift in spending from goods to services, is likely to sustain these price pressures, the IMF said.

“On the upside, a softer-than-projected landing for output and labour markets is possible, with activity remaining resilient, inflation falling faster than anticipated and labour markets cooling through fewer vacancies rather than more unemployment,” the Fund added.

INFLATION FIGHT

G20 policymakers should continue their fight against inflation, tightening monetary policy in many economies and maintaining real rates above neutral until “tangible signs of inflation returning to target emerge.”

But the IMF said policymakers will need to be vigilant for signs of financial sector stress, especially those brought about by interest rate risk and property sector stresses, and may need to deploy financial policy tools to contain them. It called for “granular stress tests” for financial firms.

G20 countries also need to tighten fiscal policy to ensure debt sustainability, create fiscal space and to help support disinflation by reducing aggregate demand, the Fund said.

IMF Managing Director Kristalina Georgieva said in an accompanying blog post that her “overriding priority” was to complete a review of the IMF’s quota resources that would increase their overall size, “with mindfulness of how the global economy has evolved”, a signal that major emerging markets like China should see increased shareholding.

The Fund last adjusted its shareholding in 2010, and is working to complete a review by Dec. 15.

SUBSIDY ADVICE

The IMF also warned G20 countries about the dangers that industrial policy can have in creating distortions in trade and investment, citing China’s industrial subsidies and those for green energy investment in the United States and the European Union.

“Such policies create the risk of fragmentation of production and of triggering retaliatory responses by trading partners,” the IMF said. “These could also hamper technological diffusion, both between major technological hubs and to developing economies.

Instead, it called for G20 countries to “develop common perspectives on the appropriate use of subsidies,” adding that this can help improve outdated World Trade Organization rules and help avoid a fragmented global economy.

ALSO READ: Pakistan secures final IMF approval for $3 billion rescue package

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

‘Precarious position,’ World Bank on state of global economy amid high interest rates

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The World Bank on Tuesday, June 6, said the global economy is in a “precarious position” and the risk of financial stress in emerging market and developing economies (EMDEs) is intensifying amid elevated global interest rates.

According to the World Bank’s latest Global Economic Prospects report, global growth has slowed sharply and is projected to decelerate from 3.1 percent in 2022 to 2.1 percent in 2023.

The World Bank expressed concern about the impact of increasingly restrictive global credit conditions on EMDEs. One in four EMDEs has lost access to international bond markets, particularly those with underlying vulnerabilities such as low creditworthiness. These economies are highly vulnerable to additional shocks, and their growth projections for 2023 are less than half of what they were a year ago.

“In EMDEs other than China, growth is set to slow to 2.9 percent this year from 4.1 percent last year. These forecasts reflect broad-based downgrades: growth projections for 70 percent of EMDEs and nearly all advanced economies have been downgraded,” the report said. 

By the end of 2024, economic activity in these economies is expected to be approximately 5 percent lower than projected before the pandemic. In low-income countries, per capita incomes in 2024 will still be below 2019 levels in more than one-third of the countries, perpetuating extreme poverty.

“Many developing economies are struggling to cope with weak growth, persistently high inflation, and record debt levels. Yet new hazards — such as the possibility of more widespread spillovers from renewed financial stress in advanced economies — could make matters even worse for them,” said Ayhan Kose, Deputy Chief Economist of the World Bank Group.

“Policy makers in these economies should act promptly to prevent financial contagion and reduce near-term domestic vulnerabilities,” Kose added.

The report also addresses the growth prospects of advanced economies, which are expected to decelerate. The US economy is forecast to grow at 1.1 percent in 2023 but slow down to 0.8 percent in 2024 due to the lingering impact of rising interest rates. In the euro area, growth is projected to slow to 0.4 percent in 2023 compared to 3.5 percent in 2022, primarily due to monetary policy tightening and energy-price increases.

“The surest way to reduce poverty and spread prosperity is through employment — and slower growth makes job creation a lot harder,” said World Bank Group President Ajay Banga, adding, “It’s important to keep in mind that growth forecasts are not destiny. We have an opportunity to turn the tide but it will take us all working together.”

Chief Economist and Senior Vice President of the World Bank Group Indermit Gill described the world economy as being far from the dynamism required to address poverty, climate change, and human capital replenishment.

“In 2023, trade will grow at less than a third of its pace in the years before the pandemic. In emerging markets and developing economies, debt pressures are growing due to higher interest rates. Fiscal weaknesses have already tipped many low-income countries into debt distress. Meanwhile, the financing needs to achieve the sustainable development goals are far greater than even the most optimistic projections of private investment,” Gill said.

The World Bank upgraded its 2023 outlook for China after Beijing late last year relaxed its draconian zero-COVID policies, which had restricted travel and hammered its economy. The world’s second-biggest economy is now expected to grow 5.6 percent in 2023, up from 3 percent last year. The World Bank envisions Japan’s growth decelerating to 0.8 percent this year from 1 percent in 2022. It foresees India’s growth slowing to a still-strong 6.3 percent from 7.2 percent last year.

The bank predicts that global trade will slow markedly this year. It foresees a sharp drop in the price of energy and other commodities this year and next.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Global recession blues on a rise and these economies are the most vulnerable

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The world economy has been grappling with numerous challenges, including trade tensions, geopolitical uncertainties, and the lingering effects of the COVID-19 pandemic. The risk of a global recession has increased in recent times, and investors need to be cautious.

In an interview with CNBC-TV18, Rupal Agarwal, Senior Research Analyst-Asia Quantitative Strategy, Bernstein said that the risk of a global recession has increased.

She said, “We do think that the risk of a global recession has increased since the beginning of the year and hence we are still taking more of a balanced approach across the region, including even for a market like China, where we do think that we are very close to a market bottom.”

Also Read | ‘Modest’ recession in US expected from June: Fitch Ratings

Amidst the concerns surrounding the global economy, Agarwal believes that China’s market is nearing a bottom. This assessment implies that the Chinese market may be reaching a point where it is less likely to experience significant downward movement.

Agarwal expressed her worries regarding Asian markets, excluding China, over the next 12 months. While China’s market may be approaching a bottom, other Asian markets face their own set of challenges. Factors such as slowing growth, geopolitical tensions, and policy uncertainties contribute to the concerns. Agarwal’s cautionary stance reminds investors to diversify their portfolios and adopt a cautious approach when considering investments in Asian markets.

Also Read | The fear around China is melting metals and Indian metal stocks like Hindalco and Vedanta

Talking about India, she said that Indian market valuations have come down. This observation suggests that the Indian market has experienced a decline in the prices of listed securities relative to their underlying fundamentals. While lower valuations could present attractive opportunities for investors.

Also Read | Explained | How a US debt crisis standoff could cause a recession

“When we started the year, we were much more positive on China and much bearish on India. Our bearish view on India has likely come down because of valuations coming back to 10-year average levels and the disconnect that we were seeing between market valuations and the 10-year bond yields in India, that has completely normalized,” Agarwal added.

For more details, watch the accompanying video

Also, catch all the live updates on markets with CNBC-TV18.com’s blog

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

World economy to grow less than 3% for five years, India, China to account for half of global growth in 2023: IMF

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The IMF chief on Thursday said that the world economy is expected to grow at less than 3 percent this year, with India and China expected to account for half of global growth in 2023.

International Monetary Fund (IMF) managing director Kristalina Georgieva warned that a sharp slowdown in the world economy last year following the raging pandemic and Russia’s military invasion of Ukraine would continue this year.

The period of slower economic activity will be prolonged, with the next five years witnessing less than 3 percent growth, “our lowest medium-term growth forecast since 1990, and well below the average of 3.8 per cent from the past two decades,” she said.

“Some momentum comes from emerging economies — Asia especially is a bright spot. India and China are expected to account for half of global growth in 2023. But others face a steeper climb,” she explained.

“After a strong recovery in 2021 came the severe shock of Russia’s war in Ukraine and its wide-ranging consequences — global growth in 2022 dropped by almost half, from 6.1 to 3.4 per cent,” Georgieva said.

Georgieva said slower growth would be a “severe blow,” making it even harder for low-income nations to catch up.

“Poverty and hunger could further increase, a dangerous trend that was started by the COVID crisis,” she explained.

Also Read: More Americans file for jobless claims; layoffs remain low

Her comments come ahead of next week’s spring meetings of the IMF and the World Bank, where policy-makers will convene to discuss the global economy’s most pressing issues.

The annual gathering will take place as central banks around the world continue to raise interest rates to tame galloping inflation rates.

About 90 percent of advanced economies are projected to see a decline in their growth rates this year, she said.

For low-income countries, higher borrowing costs come at a time of weakening demand for their exports, she said.

Georgieva added that while the global banking system had “come a long way” since the 2008 financial crisis, “concerns remain about vulnerabilities that may be hidden, not just at banks but also non-banks.

“Now is not the time for complacency.”

Also Read | Consumer confidence on recovery track from historic low in mid -2021: RBI report

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

World Bank warns of steep global slowdown, but there may be hope yet

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A new report from the World Bank warns that the global economy’s “speed limit” — the maximum rate of long-term growth without causing inflation — is set to decline to its lowest point in three decades by 2030.

An ambitious policy push is needed to boost productivity and the labour supply, ramp up investment and trade, and harness the potential of the services sector, it said.

The report, titled ‘Falling Long-Term Growth Prospects: Trends, Expectations, and Policies,’ provides an extensive evaluation of potential output growth rates in the aftermath of two significant global events — the COVID-19 pandemic and the Russian invasion of Ukraine.

Also read: NSSO Survey: More men migrate for jobs and women for marriage

It presents a troubling observation — nearly all of the economic forces that have driven progress and prosperity in the past three decades are diminishing.

This decline is expected to result in a significant reduction in average global potential GDP growth between 2022 and 2030. Specifically, the expected decline is roughly one-third of the rate that prevailed during the first decade of this century, with an annual growth rate of 2.2 percent.

This trend is not limited to developed economies, as developing economies are also projected to experience a decline of equal magnitude, with an annual growth rate of 4 percent over the remainder of this decade compared to 6 percent between 2000 and 2010.

If a global financial crisis or a recession occurs, these declines could be even more severe.

This decline could lead to a lost decade for the global economy, impacting the world’s ability to tackle poverty, climate change, and diverging incomes.

“A lost decade could be in the making for the global economy,” said Indermit Gill, the World Bank’s Chief Economist and Senior Vice President for Development Economics.

Also read: Former RBI governor YV Reddy praises Shaktikanta Das – here’s why

“The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times — stubborn poverty, diverging incomes, and climate change. But this decline is reversible. The global economy’s speed limit can be raised — through policies that incentivise work, increase productivity, and accelerate investment.”

Additionally, the study identifies policy options that could raise the global potential GDP growth rate from an expected 2.2 percent to 2.9 percent per annum, including sustainable growth policies, boosting investment in climate-smart infrastructure and reducing trade costs.

The report highlights specific policy actions at the national level that can make an important difference in promoting long-term growth prospects:

• Align monetary, fiscal, and financial frameworks.
• Ramp up investment.
• Cut trade costs.
• Capitalise on services.
• Increase labour force participation.

Also read: Pakistan economic crisis | Videos show hundreds in frenzy over free flour, looting trucks

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Indian economy remains resilient in hostile global environment, says RBI governor

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Even as the global economy is projected to contract significantly in 2023 following the COVID-19 lockdown, Russia-Ukraine war and global financial markets crisis, the Indian economy remains resilient in this hostile and uncertain international environment, RBI Governor Shaktikanta Das said on Friday.

“The global economy is still marred by shocks and uncertainty. Financial markets remain volatile and the geopolitical situation continues to be tense. International food, energy and commodity prices have eased but uncertainties do remain. Inflation remains high and broad-based across countries. The IMF has projected contractions in over one-third of the global economy,” Das said.

On the growth front, projections are now veering around to a softer recession as against a severe and more widespread recession projected a few months back,” he said at 22nd FIMMDA-PDAI Annual Conference in Dubai on Friday.

However, he said, “In this hostile and uncertain international environment, the Indian economy remains resilient, drawing strength from its macroeconomic fundamentals. Our financial system remains robust and stable.”

Das said that India’s Current Account Deficit (CAD) is eminently manageable and within parameters of viability even as he stressed on the need for larger and deeper financial markets to drive India’s growth and aspirations amid a global gloom.

Also Read: RBI orders SBM Bank to stop all transactions under Liberalised Remittance Scheme

He said that the banks and corporates are healthier than before the crisis. Bank credit is growing in double digits. India’s strong services exports and remittances will help in softening the impact on slowing of merchandise demand globally.

“India is widely seen as a bright spot in an otherwise gloomy world. Our inflation remains elevated, but there has been a welcome softening during November and December 2022. Core inflation, however, remains sticky and elevated.”

He further said that the journey of Indian financial markets has been driven by two key objectives – stability and development. “Crisis management has been a key component of this journey. And the pursuit of developmental reforms, with the key objective of widening and deepening of financial markets was continued even amidst the worst storms,” he added.

Protectionism, de-globalisation growing

“On the external front, de-globalisation and protectionism are gaining ground as witnessed during the recent global supply-chain shock. It is thus necessary to build and strengthen bilateral trade relations to deal with such challenges. India has recently signed bilateral trade agreements with the UAE and Australia and more such agreements are works in progress,” the Governor said in the speech.

Das said that we still see challenges when we look ahead but can prepare for them with optimism and confidence. Indian financial markets have developed appreciably over the years and liquidity in the government securities and the overnight money markets have grown as well. In India, we have come a long way in the development of financial markets, but this remains work in progress, he added.

“The Reserve Bank and stakeholders like FIMMDA and PDAI need to work together and focus on certain specific areas. Secondary market liquidity in g-secs is concentrated in a few securities and tenors. The MIBOR-based OIS remains the only major liquid product in the interest rate derivative market.”

“A term money market remains absent, notwithstanding a host of facilitative policy measures. Access of the retail segment to markets, especially derivative markets, needs to improve further.”

“In the forex markets, while corporates benefit from the tight bid-ask spreads,
smaller users continue to face pricing disadvantages notwithstanding regulatory requirements for fair and transparent pricing. Likewise, there remains a need for improvement in ensuring liquidity for retail investors in the government securities markets,” Das said.

Further he said that greater challenges will emerge as the footprints of Indian banks increase in the offshore markets, the range of products expand, non-resident participation in domestic markets grows and as capital account
convertibility increases.

“Market participants will have to prepare themselves to manage the changes and the risks associated with globally integrated markets. The achievement of desired outcomes is contingent on financial institutions and market participants taking forward the reform agenda so that we have more vibrant and resilient financial markets,” he said.

Also Read: RBI releases discussion paper on Securitisation of Stressed Assets Framework

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Digital Competition Act — It’s all about a fresh change in Competition Law to regulate digital markets

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a globally competitive economy, technological innovation and the narratives they construct are critical to how enterprises cater to their customers or consumers while at the same time complying with regulatory requirements. This presupposes a delicate balance between adopting healthy market practices and taking care of critical stakeholders such as consumers and regulators. Since competition law prohibits anti-competitive practices which negatively impact both incumbent competitors and consumers, the Competition Act, 2002 is often referred to as the ‘de facto consumer protection law’.

This philosophy is now deeply rooted into the digital ecosystem, where with the advent of newer forms of business models, interface of such companies with consumers is on the rise, which inevitably has consequences from a competition law standpoint.

As a case in point, consumers engage with such service providers on a frequent basis ranging from ordering food from online delivery applications through Zomato or Swiggy, executing financial transactions through PayTM, PhonePe or Google Pay, utilising digital cab aggregators like Uber and Ola and engaging in Business to Consumer (B2C) transactions through electronic commerce platforms such as Amazon and Flipkart, among others.

While on the one hand, the aforesaid innovative business models are a testament to ‘dynamic competition’ tracing its roots to the renowned economist, Joseph A. Schumpeter, on the other hand, there is an emerging trend of digital platforms preferring their own services (self-preferencing), engaging in deep discounting practices, among others and becoming repositories of consumer and business data thereby providing them an opportunity to exploit the data in an anti-competitive manner.

In this evolving techno-legal paradigm, Report of the Parliamentary Standing Committee (PSC) on Finance on ‘Anti-Competitive Practices by Big Tech Companies’ holds promise to bring a paradigm shift in regulating digital markets.

The PSC Report emphasises upon ten anti-competitive practices which have gained traction in the digital ecosystem. However, such practices ought to be understood in light of key attributes of the digital ecosystem such as network effects (more users on the platform based upon the utility of the same) and ability to scale quickly complemented by diminishing marginal costs proportionately with the growth of the business, which contributes to tipping the market in the favor of selected companies in the digital ecosystem. This, in turn, has the potential to generate entry barriers and eliminate innovative start-ups from the market, acquiring potential smaller competitors, or using advantage in one market to enter another. Accordingly, the PSC Report aptly refers to such markets as ‘winner-takes-all-markets’.

More specifically, the PSC Report emphasises upon various anti-competitive practices. It The PSC Report articulates about ‘anti-steering provisions’ wherein app stores prevent their users from opting out of the platform and using alternative payment applications, thereby reducing competition in the digital payment markets.

Similarly, the PSC Report denounces the practice of self-preferencing, wherein digital platforms not merely serve as platforms for outside businesses but also for their parent companies to list different applications and such applications get more preference. Hence, the principle of platform neutrality is advocated. Thirdly, the practice of ‘bundling and tying’ has been highlighted upon. As an illustration, the PSC Report mentions how online food delivery apps impose mandatory conditions on restaurants to utilise their delivery services thereby limiting choices for consumers.

Fourthly, the PSC Report makes explicit reference how companies in the digital ecosystem can obtain monopolistic control over consumer and business data by virtue of them being digital repositories of the same and through the usage of algorithms such data is utilised by firms to leverage and skew market predominance in their favour.

The PSC Report also highlights how possession of data by enterprises in the digital markets leads such platforms to engage in search preferences to select products or services, restricting third party applications on digital platforms, and usage of artificial intelligence or machine learning to influence advertising policies. Moreover, it has been observed that electronic commerce platforms have often engaged in deep discounts and not giving sellers the chance to set prices.

Further, companies in the digital space often engage in dynamic pricing by monitoring consumer demand and preference and increasing prices when demand is increasing. The PSC Report also mentions how companies in the digital environment can engage in acquiring smaller companies without being subject to merger control rules.

After taking industry representations from diverse stakeholders such as big technology companies like Google, Amazon, Apple, Meta, Uber and Microsoft along with Ministry of Corporate Affairs, the PSC Report largely argued in favour of established rules of conduct to cater to the peculiarities of the quick scaling of digital markets. One of the other key recommendations has been to classify as Systematically Important Digital Intermediaries (SIDI) those digital market players in whose favour the market has tipped and having potential to engage in anti-competitive behaviour.

Such classification ought to be on the basis of market capitalisation, revenues and active business and end users. In the spirit of transparency, the PSC Report has recommended for adoption of a legislative definition of SIDI and after such designation, the SIDI must submit to CCI a detailed report on how necessary compliances have been made aside from publishing a non-confidential version on their website. With regard to anti-steering  provisions and bundling, the PSC Report recommends prohibition of such practices in favour of healthy market competition.

Further, with regards to data monopolisation, the PSC Report explicitly recommends that a SIDI must not process, combine, cross-use, or sign in end user data without consent, wherein there is separation from core and non-core services in the interest of an equitable competitive scenario for all market players concerned.

Similarly, for business data, the PSC Report advocates for non-use of data not available in public domain. With regards to mergers and acquisitions, it has been emphasised that regardless of the notifiability of the transaction, the parties must intimate to CCI any transaction where there could be intended concentration. Further, practices such as deep discounting and exclusive tie-ups are recommended to be completely discouraged in the interest of free and fair competition. The PSC report also recommends removal of restrictions with regards to installation of third party applications on digital platforms with the exception of data being transferred to a foreign government.

Based on the aforesaid analysis, the PSC Report has therefore recommended ex-ante regulation (enforcement of laws by laying down prior code of conduct) as opposed to the existing regime of ex-post enforcement (enforcement of laws after the occurrence of the conduct).

Presently, the Indian competition law regime works upon the principle of ex-post regulation for anti-competitive agreements and abuse of dominance and ex-ante regulation is applicable for mergers and acquisitions. The recommendations of the House Panel will go a long way in heralding a paradigm shift in regulating competition in digital markets.

— The author, K D Singh, is Director, Competition Commission of India & Amrit Subhadarsi, and Assistant Professor (Law) at School of Law, KIIT. The views expressed are personal.  

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow