From Yuan Dominance in Oil Trade to India’s Economic Rise: IT Workforce Growth Unfolds India’s Economic Landscape
Even as India’s economic rise continues to capture global attention, the country has been somewhat hesitant to use the Yuan as the currency of choice in the Russia oil trade. A lot of the Indo-Russia oil trade through Dubai and Singapore is being settled in Yuan. Currently, nearly 95% of the trade between Russia and China is being settled through Yuan or Rouble. Many Russian trades channeling oil into India from Dubai and Singapore prefer the Yuan due to its global acceptability. Last year, India’s trade deficit with Russia swelled to $40 billion; a 7-fold growth. Rupee Rouble trade still seems far away.
Credit card transactions in September 2023 fell by 4.2% to Rs1.42 trillion. This can be explained by the fact that most consumers were prioritizing savings ahead of the festival season. All the major credit card issuers saw fall in credit card usage, except for IndusInd Bank, which is on a much smaller base. Within the credit spend, POS (point of sale) transactions fell by 7% while the ecommerce transactions fell by 3% in the month. However, with the online festival sales on, only credit card usage may sell later in this year.
According to a note by S&P Global, India will surpass Japan to become the second largest economy in Asia by the year 2030. That will only leave the US and China larger than India in terms of GDP. In last 2 years, India has already been the fastest growing large economy in the world (economies with GDP of more than $1 trillion). India’s GDP is expected to touch $7.3 trillion by 2030, which supposes nominal growth of over 10% in the next 7 years. India’s currently nominal GDP is $3.5 trillion, so we are talking of GDP doubling.
Honasa Consumer, the parent of Mamaearth, will open its IPO on 31st October 2023. The IPO will be a mix of fresh issue and an offer for sale. While the fresh issue would be worth Rs365 crore, the OFS will entail the sale of 4.12 crore shares by promoters and early investors. It is first big digital IPO in the market since Delivery in May 2022. Honasa Consumer was promoted by Varun Alagh and Ghazala Alagh (of Shark Tank fame). While the final IPO size is yet to be firmed, it is estimated to be in the range of Rs1,700 crore.
L&T Finance is making a big retail shift with retail loans likely to account for 90% of its book by end of FY24 and will also look to hive off some of its wholesale loans. Its current loan book stands at Rs78,734 crore with retail loans accounting for 88% already. L&T Finance has seen its retail loans portfolio grow by 25% CAGR over the last 4 years. L&T Finance has kept its ticket sizes lower so as to reduce the chances of any delinquencies. It is currently awaiting regulatory approval for the merger of 3 of its subsidiaries into itself.
US 10-year bond yields breached the 5% mark, sending warning signals that even Indian bond yields may spike above 7.4% in this week. Tuesday was a trading holiday in India on account of Dussehra. This is on the back of fears that while rates may not go up from here, the Fed was likely to be on pause mode for much longer. The sharply higher bond yields in the US are likely to make these debt instruments in the US very attractive. This would obviously put pressure on other economies and even Indian yields would rally.
India’s H1 crude import bill was down 23% on the back of a sharp fall in crude prices. In early 2022, the oil prices had spiked sharply on the back of the Russia Ukraine war. However, the fear is that the second half of FY24 could once again see the oil bill spiking as crude prices are up nearly 35% in the last 3 months. The first half also saw huge discounts offered by Russia, which may not be possible in the second half with the US and other Western economies tightening the screws on shipping companies moving the Russian oil.
There is weird trend playing out in the IT space. Even as large IT stocks are cutting manpower, the mid-cap plays are actually adding people. Most of the large IT company have seen about 6% reduction in workforce in the last 3 to 4 quarters. However, in this same period, Tata Elxsi increased headcount by 10% while Happiest Minds increased headcount by 15%. Even Coforge has seen headcount expand by 7.1% in this period while LTTS headcount was up 7.2%. The base may be low, but mid-cap IT has the right story.