India is All Set to be the Fastest Growing Large Economy

China was the fastest growing large economy in the world in the past few years. India has finally surpassed China in this regard.

In the 2nd quarter, India has surpassed China to become the fastest growing large economy in the world. There are several things that went in the favor of India during this period. Domestic demand witnessed a huge improvement. Manufacturing activity also saw a considerable improvement in this period. What does this mean for the central bank in the country? Well, the bank will keep the interest rates intact.

Interest Rates

Reserve Bank of India is expected to retain the interest rates as it is after its Tuesday meeting. If you remember, the last meeting saw a sharp 50 basis point cut. The Reserve Bank of India is looking for tighter inflation target in 2016 and therefore the interest rates are going to remain steady.

India is Asia’s 3rd largest economy as of now. During the second quarter of the 2015/16 financial year (April-June period), India witnessed 7% growth. But in the 2nd quarter, we have witnessed a 0.4% increase in growth, surpassing the numbers of China. This data was revealed by the Statistics, Ministry on Monday. Recently, India was on the List of Top 10 Most Valued Nation Brands as Well.

Chinese Economy

What about China in the 2nd quarter? Well, China was at a growth rate of 6.9% during this period. Reuters had predicted that India will see a GDP growth of 7.3% in the 2nd quarter. A stronger growth would be a good news for Narendra Modi who is planning to bring more reforms to increase the rate of growth.

3

Challenges Faced by India

The proposed GST (Good and Services Tax) bill is going to accelerate the GDP growth to 8%. When GST comes into the picture, there will be a unified tax system for all the 29 states in India. This can have an impact on the GDP growth of the country.

We can see that growth trajectory is showing the signs of a much needed recovery with the latest numbers. However, there are several challenges that India yet to address to sustain this growth. Those challenges include reduction in rural consumption and weak external demand. India has to focus on these challenges to stay on the path of good growth.

At the moment, the economy is not performing to its full potential. As for this growth, it was fuelled by consumption when it was supposed to be fuelled by investments. There are nearly 10 million government employees and pensioners in India. And the government is planning a 23% increase in their salaries in coming January and this is going to boost consumer spending. That means we will be able to sustain the growth in the next quarter as well.

Consumption Driven Growth

A couple of things affected the growth in the country in the 2nd quarter. A drought in some parts of the country was a big factor. Moreover, it happened 2 years in a row. As a result, rural wages and farm output suffered. This resulted in the demand for farm machinery. We can see that consumer goods were also in demand during this period. But you need to remember the fact that this growth is no indication that the economy is in good hands. This growth was fuelled by consumption alone. The real growth should be driven by investments and that is yet to happen in the country.

Global Finance Picks Citi Bank as the Best Bank in Asia

In its annual list, Global Finance Magazine picks Citi Bank as the best digital bank in Asia after evaluating the mobile and online banking applications of all the leading banks in Asia. They considered a number of parameters in finding the best bank including:

  • Web site design.
  • How functional the website was?
  • How much benefit the bank garnered from their online initiatives?
  • Products offered and their breadth.
  • How much growth each of these banks witnessed in the online customer base in last 12 months?
  • How successful these banks were in persuading their customers to switch to online platforms?
  • What strategy did these banks use to attract more customers to their bank?
  • The quality of the online service provided to their customers.

2

Citi Bank is delighted with the honor

Of course, Citi Bank is delighted with this honor. The Head of Consumer Banking in the Asia Pacific region was more than delighted with the honor. He said that the bank is focusing more on digitization and technology to serve their customers well in coming days. Be it the ATMs or credit cards, Citi Bank have always been the front runner in introducing the new technologies to their customers. He mentioned about the high tech branches, they opened across Asia to attract more customers. He will not hide ambition to be a global leader in digital banking in the near future. He expressed his heartfelt thanks to the customers who have made these awards possible. Despite the Financial Lull in Asian Countries Like China, Citi Bank continues to grow its used base in the region.

Head of Treasury in the Asia Pacific region, Amol Gupte, also commented on the win. He said that the company wants to bring innovation and digitization to all their customers all over the world. He noted that the ever changing market and world force them to come up with the latest innovation to satisfy their customers. He added that making their products more flexible, convenient and simpler is a big priority for them. He insisted on the significance of improved visibility over their treasury flows.

Asian market

For Citi Bank, the Asian market has been a top priority. The preferences of the clients are changing every day and the company is trying everything to meet the needs of the clients. For the same, the company launched mobile banking in all the 12 markets in this region.

Moreover, the company is always on the lookout for new solutions. The company aims to develop Fin Tech solutions for the next generation. They are trying to achieve this via Citi Mobile Challenge.

The company saw over 1,900 registrations in the challenge across Asia Pacific cities including Singapore, Bengaluru, Hong Kong and Sydney. They also witnessed participation from 80 Fin Tech teams as well. You will be expected to see the full list of winners by December 15th. The company hopes that this competition will pave way for the technological innovation in mobile banking they have been seeking for. They believe that the emerging solutions can be revolutionary in the banking sector. The company focuses its energies on Smart Banking Model as of now. They are planning to bring many of these facilities to iPads and iPhones.

Most of the Adults are Financially Illiterate Worldwide!

A latest study suggests that two third of the adults all over the world are financially illiterate. Also, there is a five point gap between the financial literacy of men and women.

Yes, the latest study has some rather shocking revelations about financial literacy all over the world. It’s proven once again that people don’t understand or care about Mathematics. Two thirds of the adults worldwide are financially illiterate, according to the study. Where do US stand on the list? Well, US is at the 14th place in the literacy list. Important information is the gap between men and women as far as financial literacy is concerned.

Who is behind this data? Well, it comes from Standard & Poor’s Rating Services. They managed to collect this data via their Global Financial Literacy Survey. How many adults took part in the survey? From 148 countries, more than 150,000 adults took part in 2014. How did the survey work? The participants were asked to test their knowledge of financial concepts that are basic, including:

  • Inflation
  • Risk diversification
  • Compound interest
  • Numeracy

If the respondents managed to answer the questions correctly about at least 3 of the 4 concepts, then they were considered as financially literate.

Gallup world poll

As far as the data collection is concerned, they relied upon Gallup World Poll. There were other parties too, including Global Financial Literacy Excellence Centre & World Bank Development Research Group as they were in charge of analyzing the data. What is the significance of this survey? It is the world’s most comprehensive and largest global survey on this subject yet.

1

Who are leading?

Which countries are leading as far as the global financial literacy list is concerned? Well, a good look at it will tell you that Scandinavian countries are definitely leading. Sweden, Denmark and Norway are highly literate on the list. Other countries that made into the top 10 are Israel, Canada, the UK, Netherlands, and Germany etc.

Who is left behind?

Which countries are in the bottom 10 list? Well, you can say that Afghanistan, Albania and Yemen are those countries with less than 15% score. These are the countries with least financial literacy. Even as We Stare at a Global Financial Crisis, many continue to stay in the dark as far as financial literacy is concerned.

When we take a look at the largest economies in the world (or in other words, the G7 countries), Italy came last. Canada came first in the G7 group with 68% financial literacy.

The gender gap

As stated before, the gender gap of 5% is really alarming, but it’s not really surprising. 35% of the men are financially literate while only 30% women are financially literate. The gender gap was phenomenon in all the countries, irrespective of their financial status. It was same in developed as well as poor countries. If we take the case of the US, we can see that men were ahead with a 10% gap. Also, education and income are big factors in the case of US as far as financial literacy is concerned.

As far as US is concerned, it came up with a 57 % score. As stated before, US stands at 14th position. As far as compound interest is concerned, adults had weak knowledge. Compound interest questions were tough for many who had credit cards and home finance. This is something US needs to work on.

Eurozone Woes Continues to Bother Finance Chiefs

Corporate spending confidence is waning despite improvement in profits, says a poll conducted among chief financial officers. The same goes for the overall economy as well.

European financial bosses are not feeling confident about the current economic scenario. The ongoing economic woes in the Eurozone have drained the confidence of financial chiefs across Europe. Interestingly, they continue to perform well despite the uncertainty in the market.

According to the same survey, only one in four financial chiefs feel confident about the prospect of their business under the current scenario. Almost 1,300 financial bosses took part in the survey and it was conducted by Deloitte. In the past 6 months, we saw the figure shrinking from 33% to 25%.

It’s the case of almost all the European countries including the UK. Most of them are not optimistic about their future at all. As for financial chiefs in the UK, only 18% said they are optimistic about their business prospects. Speaking of Portugal, 47% said they are optimistic. We must remember the fact that Portugal is fresh from an uncertain election result. However, we must add that Asian countries like China is Also on the Verge of a Financial Crisis, you can read more about here.

1

The poll gave a true picture of the disappearing confidence in the minds of financial chiefs. One, two thirds of them said that they are confident about their company making profit in the coming year. Speaking of capital spending; only 4 in 10 intend to increase their spending. 15% of the respondents have the notion that they are going to cut down the expenditure. As for new recruits, 22% said that they expect a decline. Only 35% said they are going to hire more people next year.

One thing is clear that companies were hesitant to invest in risky investments. Instead, they chose to sit tight on their money in the previous year. According to Moody’s research that came out a few months ago, European companies are dealing with a cash pile at the moment as there is an increment of 6% in 201.

Things look really worse for the SNP. They are at the risk of losing defense jobs in thousands. As for currency union, things are not really looking in their favor. Moreover, you can’t hope to join EU just like that.

However, a senior person from Deloitte said that companies should be more upbeat about the current scenario, even though it looks bleak at the moment. He said that such scenarios were always there, but most of the European companies have a large pile of cash in reserve and they shouldn’t worry too much. Of course, the uncertainty is here to stay for a while, but things are not as bad as these companies like to project. He said that companies should take this as a business opportunity and try to expand their business. According to him, it holds true especially in the case of companies based in the UK as these companies can lead the rest of the companies in the Eurozone.

However, one has to be realistic about the losing enthusiasm of the chief financial officers across Europe. It has affected bank customers too as they find it hard to trust large banks as a result. Banks will have to change their policies to deal with the current scenario.

GE is All Set to Lease their Capital Finance in Japan

GE is all set to lease their Capital Financing Business to a local company in Japan. Shinsei Bank and Sumitomo Mitsui Financial Group are the front runners as their bids are worth almost $5 billion.

General Electric (GE) is all set to lease their commercial-lending business in Japan to a local company there. As of now, we are looking at a $5 billion race. There are two active bidders as of now including Shinsei Bank and Sumitomo Mitsui. It’s been revealed by someone close to the business.

As of now, talks are on with these two companies. These two companies submitted their bids this month. As per the source, the bids are worth $5 billion.

GE has ambitious plans for a global expansion of their Capital financing business. That’s exactly why they put up their Japanese firm for sale this year. Since then several financial biggies in Japan expressed interest in buying the company. However, it must be noted that GE Acquired Some Other Companies in the Interim, Including Grid Business and Alstom Power, and you can read more about it here.

What about the two current front runners? Well, they have a history with GE as far as cutting deals are concerned. GE is scaling back their operations in the global finance sector as of now.

Let’s have a look at a couple of recent deals that GE made with Japanese financial firms. SMFG is the second largest bank (in terms of revenue) in Japan and they bought private-equity financing business arm of GEs European division back in July. That deal was closed at $2.2 billion. So, GE has already done it and they know what they are doing. Since they already have a deal, it should be easy for these two companies come up with a reasonable deal for both.

1Now, speaking of Shinsei Bank, they also have done business with GE. They bought assets from GE already. Back in 2008, GE made a deal with $5.4 with the company. Back then GE sold its consumer-finance business to them. The company was forced to do this all thanks to the strict regulations from Japanese authorities.

As far as the auction process goes, GE has adopted a different style here. Usually when it comes to such deals, companies would select a preferred bidder and initiate talks with the bidder after evaluating their binding bid. But in the case of GE, they are conducting talks simultaneously with both the companies. The negotiations will continue with both the parties before GE chose to pick just one company. GE will be discussing specific terms of their agreement with both the parties. When can we expect the news? Well, we can expect to hear about the final deal within few weeks’ time as talks are happening in brisk pace.

An official statement came from GE saying that multiple bidders are part of the discussions. The official statement reiterated the competitive nature of the bids in question.

Did media spill some beans on the deal? Well, a couple of reports suggested that the company has made some progress when it comes to their talks with SMFG. But this can be merely speculative as of now. As of now, it would be smarter for us to stay away from speculation. As for the value of the company, both bids are close to $5 billion. We are talking about several divisions of the company here.

Finance Needs of Emerging Nations – Indian PM Modi

According to Indian Prime Minister Narendra Modi, the newly set up New Development Bank will address the financial needs of emerging economies.

If you don’t know already, BRICS nations have been setting up a $50 billion bank named New Development Bank to rival the World Bank. What was the main objective behind this movie? Mainly BRICS countries didn’t want to be too dependent on the World Bank. Besides that, BRICS countries wanted to protect the interest of the emerging economies in the volatile global scenario. This bank is meant to serve the needs of the emerging economies. Indian Prime Minister Narendra Modi declared that the bank will deal with the needs of the countries that are part of BRICS.

BRICS nations constitute Brazil, Russia, India, China and South Africa. Today they reviewed the progress of setting up the bank. They also reviewed the $100 billion liquidity reserve fund. BRICS countries have ambitious plans as they know that they can play a big role as emerging economies. They believe that their voice needs to be heard in the global scene. Especially since even BRICS countries are facing 3rd Global Financial Crisis – you can read more about here.

This meeting happened before the G20 meet, where 20 biggest world economies meet in Antalya.

Leaders of BRICS from left,  Brazilian President Dilma Rousseff, Indian Prime Minister Narendra Modi, Russian President Vladimir Putin, Chinese President Xi Jinping and South African President Jacob Zuma pose for a photo during their meeting prior to the G-20 Summit in Antalya, Turkey, Sunday, Nov. 15, 2015. (AP Photo/Alexander Zemlianichenko)

At the meet, representatives of these countries discussed about the progress made in setting up the New Development Bank. The bank will have an initial deposit of $50 billion. The main purpose of this bank is to serve the needs of emerging economies. This new bank will be headquartered in China. However, India will be in charge of the first presidency, which will be transferred to other BRICS countries on a rotation basis.

Mr. Modi said that India understands the significance of BRICS. He said that his country is honored to be the Chairman of BRICS starting from Feb 1st, 2016. He added that his country would like to continue the great work done its predecessors as the head of the union. PM Modi said this at the meeting held in Antalya.

According to Modi, India will take BRICS chairmanship with the seriousness it deserves and withhold the great values attached to it. During India’s reign, India will be seeking solutions that are inclusive, responsive and collective, he said. That’s exactly what BRICS stands for and India will honor it, said the PM.

Besides Mr. Modi, the Presidents of Russia, China, Brazil and South Africa attended this high profile meeting. They met ahead of G20 meet to review the progress they have made in setting up the bank, which has been a big priority for the BRICS nations since the start.

Mr. Modi talked about the skepticism BRICS faced in the initial days. Reminiscing those days, Modi added that BRICS stands tall today with greater purpose. He said that the relevance of BRICS has increased with the ever changing global scenario. BRICS countries managed to alleviate the doubts with solid action and this was extremely important in the wake of global challenges, Modi added in his speech at the meet. The proposed bank will increase its capital to $100 billion at a few years’ time. They want this bank to function as an alternative to the World Bank, which often bullies the emerging economies. The decision to start the bank was finalized in the Ulfa (Russia) meet in July.

Incentives have Failed to Boost the Struggling Global Factories

There has been a huge amount of monetary incentives offered by Chinese and European banks to increase the factory production, but, it has failed to spur the production.

Indications of Industry Surveys

The massive monetary incentives offered by the Chinese and the European banks to the production and manufacturing sector have not been able to boost the growth of this industry. This has resulted in many thinking of offering more financial sops to this sector to boost the falling economy. The industry surveys point out that October was also a passive month for the production sector. The Chinese factory sector has seen very low activity in October as the global demand for its products have reduced. The European zone factories had resorted to reducing the prices in order to improve its trade.

China to Ease Agenda 

The analysts are of the opinion that China will be looking to ease its norms, even further and this will be going on for some time in the next year as well. There is no doubt that China will be going through a long easing cycle for its production sector. China is going through a big lull as far as economy is concerned and is seriously worried about whether the U.S. interests will increase this year.

1

Euro Zone on the Same Wavelength

A similar approach will also be taken in the European Union. There is going to be a further announcement of easing on the agenda by the ECB in December. They are not concerned on the growth aspect, but their major concerns are about the inflation prospects. There is also a discussion about the Slowdown of the UK Economic Growth in a previous article that you can read by clicking on the link.

Central Bank Worries

The ECB has pumped in 60 billion Euros a month of solid finance through the quantitative easing program. But, even after half a year of this program, the downturn in the manufacturing survey has made it a really disappointing reading for all the policy makers. The central bank has not been able to raise the inflation to its proposed target of just below 2% and the prices have not seen a change last month. This will force the central bank to act soon and the pressure on it is also mounting.

There is no doubt that the central bank will ease its financial policy in December and it could increase or extend the stimulus package. There is also a chance for it to cut down the deposit rate further. The euro zone Purchasing Managers Index (PMI) read 52.3 last month, which was slightly better than what was seen in September. But, it is just lurking in the 50 mark that is showing a dent to the growth in the sector despite pumping up of funds and other stimulus programs.

The flat PMI suggests that the overall growth will also be very low or nil in the fourth quarter as well. This means that there will be more possibilities that will be looked into for growth stabilization. The stocks in Asia and Europe have fallen down at the beginning of this month and this indicates that there is an economic meltdown in China.

3 Straight Months Shrinkage Puts Chinese Economy Down

The factory production is seeing a slowdown and decline for the third month running in China. This has raised the fears about the global demand.  

Cause of Concern

There is a significant slowdown in the manufacturing sector in China during the end of the year. This has raised concerns globally and it is felt that this could have a severe impact on the prices of commodities globally. There is also a chance for the British industry to suffer heavy damages due to decline in the production of the Chinese manufacturing sector. The manufacturing sector has seen an unexpected decline for the third straight month in October this year and this is not a good sign at all. The service sector looks to have picked up pace, but in a slow manner after the 2008 financial crisis.

Growth Target Could Be Missed

The latest figures indicate that China is all set to miss its 7% growth target that has been set up by the Government. The growth, in all likelihood, will not rise above the 6.9% annual growth rate seen at the end of the third quarter of this year. The growth rate can only be increased if there is a substantial rebound and this looks quite far as of now. As discussed in a previous article, China is Not Game for a Federal Rate Hike, because of its struggling economy, it looks like there is no hope at the end of the tunnel for China to increase its manufacturing sector output by the end of this year.

1

Forecast of Volatile Currencies

The UK business chiefs are predicting that there is every chance for currencies getting volatile and also changes in the commodity pricing. This is going to affect their businesses very badly. About 28% of the businesses are feeling that the slowdown is a sure possibility of the emerging markets and this will be a very big threat to businesses.

The commodity prices are at its lowest since 2001 and it could further take a hit if you take a look at the present Chinese data as an investor. The economic melancholy that the country is facing at the moment has caused a severe dent in the prospects of many of the leading metal and oil producers of the world.

What Latest Chinese PMI Suggests?

If you take a look at the latest Chinese PMI figures put up by the National Bureau of Statistics, you will find that there is no end to this economic crisis in the near future. The manufacturing sector is one of the main reasons for this as it has recorded a reading of lesser than 49.8 that is below the 50 mark. There were expectations of the markets that there would be a rebound set at 50.

The services sector has covered up some of the disappointment of the factory production sector and has seen its slowest growth for seven years. China has been cutting down the lending requirements in order to boost its failing economy and to cut off the deflation. The new figures indicate that China will need to take few more measures to stop this crisis from getting over the head.

GE Acquired Alstom Power and Grid Business

GE has made an announcement that it has fully completed acquiring the power and grid businesses of Alstom. This is the largest industrial acquisition made by GE.

Largest Digital Industrial Business

GE is a very popular business organization that has been doing remarkably well in all the sectors that it has set its foot in. Now, GE Power has taken a big step to become the powerhouse of power and grid business by acquiring Alstom’s power and grid businesses in over 20 countries. This acquisition by GE Power also includes popular developed regions like the United States and the European Union as well as other developing countries like Japan, China, India and Brazil. This is the biggest ever industrial acquisition that General Electric Company has made in its illustrious business operations. GE Power will soon be a force to reckon with all over the world.

Agreement with Alstom

GE had reached an agreement about the buying of the power and the grid businesses of Alstom in 2014. This purchase is touted to be around €12.35 billion. This is a huge investment that General Electric is making in the power sector and is also the biggest industrial buying by GE so far. With this acquisition, GE will be entering into joint ventures for grid, renewable and nuclear energy. There are as many as 20 countries that will be benefited by this acquirement of Alstom by GE and the use of renewable energy for power generation are very high on the GE cards. Soon, you will see very good grid solutions and power generation in all the popular countries of the world that is associated with GE and Alstom power and grid businesses.

1

Significant for GE’s Transformation

The completion of the acquirement of Alstom power and grid businesses is considered to be a major achievement in the history of GE, according to its CEO, Jeff Immelt. This will help the company to completely transform into a major power and grid solutions provider. With the use of modern day technologies, installed bases, global power generating capacities and also the talent that Alstom has, the CEO is confident that GE will see huge industrial growth in the coming months. Jeff has also said that GE Power is ready to offer the best and most comprehensive technologies in the energy field for its dear customers. All this is happening despite news that GE Capital is all set to unwind its financial arm. You can read more about this in the earlier article on Why GE Finance is Wounded.

Immediate Benefits

The customers who are going to reap the benefits of this new merger of Alstom and GE are those that would be part of the current projects like:

  • New Jersey combined cycle power plant.
  • Punjab, Pakistan Bhikki cycle power plant.
  • Chempark heat and power project in Leverkusen, Germany.
  • Exelon power project in Texas State.

The GE and Alstom combine has also successfully completed its 800 KV HVDC power transformation project in India for the Champa-Kurukshetra power project. It is also looking to come out with a combined cycle power project in Asia as well as for a clean coal project in the Middle East.