Arvind's Newsletter

1.Chennai tops GCC headcount growth in FY24; Hyderabad, Bengaluru follow

Surpassing traditional hubs, Chennai has emerged as the top city in terms of headcount addition to Global Capability Centres (GCCs) in FY24, when compared over a five-year period. The capital city of Tamil Nadu added almost 95,000 employees in FY24 over FY19, taking the total headcount to over 2,13,000, according to data accessed by Moneycontrol from Zinnov.

Interestingly, even Hyderabad outperformed the GCC hub of India –Bengaluru- in terms of headcount addition.Nonetheless, Bengaluru beats all other top six cities when it comes to absolute numbers.

Another trend worth noting is that Maharashtra has emerged as the only state in India with two cities—Mumbai and Pune—each boasting a GCC headcount exceeding 2 lakh.

2.E-commerce orders may be harder to return this festive season

Reverse logistics, once a customer-friendly perk, could cost Indian e-commerce firms US $20-30 billion by 2025, according to Return Prime. 

According to The Mint, returns during this festive season for fashion, home decor and kidswear look difficult. Companies like Flipkart and Amazon are tightening return policies that jump around 30% during festivals, to protect profits by eliminating return logistics costs. Strategies include shorter return windows, fees for frequent returners and offering store credit. Myntra last year started charging Rs 199-299 for frequent returns. 

3.54 new space-tech startups in 2023 represent new opportunities for India

“India’s spacetech sector is experiencing rapid growth, with the Indian Space Association (ISPA) reporting 54 new space startups in 2023, bringing the total to over 200,” said Kritika Murugesan, senior director, deeptech and startups, Nasscom.

“This sector is set to significantly impact industries such as maritime, aviation, agriculture, energy, and telecommunications by providing satellite imagery, communication, and navigation services, enhancing profitability.” 

4.China’s Lenovo begins AI server production in India, opens R&D lab in Bengaluru

Not all Chinese firms are reducing their focus on Indian markets. Lenovo, a Chinese firm, announced this week that it would start building AI servers in India. The move is a boost to India’s efforts to attract investment in electronics manufacturing as it seeks to add well-paying jobs and become a link in global supply chains. 

The servers, 60% of which will be exported, will be made at a plant that already produces mobile phones and computers. The company is also opening an AI-focused research-and-development centre in Bangalore, India’s tech hub.

5.Israel’s operation to detonate pagers across Lebanon to target Hezbollah and undermine the group’s morale and communications was long in the making and astonishingly complex, The New York Times reported.

Well before Hezbollah’s leader urged members to switch to pagers in February, Israeli agents established a shell company to produce the devices with the ultimate aim of manufacturing booby-trapped ones for Hezbollah members: Pagers were shipped to Lebanon as early as 2022. The attack has further upended regional stability, and while some analysts told The Times the operation was a tactical success without a strategic goal, the Pentagon fears the blasts could mark a prelude to a wider Israeli ground operation, The Wall Street Journal reported.

6.Most CEOs expect workers to be back in the office 5 days a week in a few years

Almost eight in 10 CEOs expect all office workers on hybrid schedules will return to working in person five days a week by 2027. Wishful thinking ?

That statistic comes from KPMG’s 2024 CEO Outlook Survey, which asked 400 US CEOs about the key challenges and opportunities driving business growth today.

Seventy-nine percent of U.S. CEOs said they expect a return to working full-time in the office for “corporate employees whose roles were traditionally based in-office,” up from 34% who said the same in a CEO survey earlier this year.

At the same time, women have worked up the corporate ranks and increasingly broken into the C-suite over the last decade, according to a new report. But the study by McKinsey and the group Lean In also found that women continue to lag men in both the most senior executive positions and in lower-level managerial ranks.

7.The Federal Reserve Cuts Rates

The Federal Reserve announced a half-percentage-point cut in benchmark rates yesterday, at the higher end of market expectations. The decision marks the central bank's first rate cut since the early days of the COVID-19 pandemic in 2020.

The decision to lower rates to a range of 4.75% to 5% comes amid a recent hiring slowdown, though last month's 4.2% unemployment rate remains relatively low by historical standards. The Fed's decision also followed last week's consumer price index report, which showed inflation slowing to 2.5% year-over-year in August, approaching the Fed's 2% target. Most of the fed officials have pencilled in 1-2 more rate cuts before the end of the year.

S&P hits record high after jumbo Fed cut. Global stocks rally as investors bet half percentage point cut will support US economic growth.

8.People are splurging like never before on their pet; The Economist

There is little, it seems, that people won’t do for their pets. Americans spent $186bn on them last year, according to the Bureau of Economic Analysis, covering everything from food and vet visits to toys and grooming. That is more than they spent on childcare. Catering to pets has become big business. Mars, a company best known for its chocolate bars, made two-thirds of its revenue last year from pet-care. Besides owning the Royal Canin pet-food brand, the company also operates thousands of vet clinics. Nestlé and Colgate, two other consumer-products giants, also make around a fifth of their revenue from their pet divisions.

Spending on pets rocketed through the covid-19 pandemic, as lonely people adopted animals then splurged on them. Between 2019 and 2023 pet spending grew by a compound annual rate of 11%, in nominal terms, compared with 6% for consumer spending overall and 5% for pet spending over the preceding decade (see chart). Plenty more growth is yet to come.

Unlike virtual yoga classes or meal-kit subscriptions, animals weren’t easy to drop once lockdowns ended. Consumers, grappling lately with higher prices and a cooling job market, have been reluctant to inflict austerity on their pets. Morgan Stanley, a bank, reckons pet spending in America will grow by 2.5% this year, well ahead of estimates for, say, clothes. The pet business proved similarly resilient during the global financial crisis of 2007-09.

And analysts reckon the pet business will soon have the zoomies again. Morgan Stanley forecasts that annual spending will rise to around $260bn by 2030, consistent with its pre-pandemic growth trend. Behind that is a shift in the relationship between pets and humans. Owners increasingly see themselves as parents, not masters. “Pets have gone from the backyard to the living room to the bedroom,” says Loïc Moutault, head of the pet division at Mars.

That change is playing out across generations. Millennials, many of whom have put off having children, have more fur babies per household than any other generation in America. Gen Z is proving to be equally pet-loving. “Millennials and Gen Z see their pets differently,” says Kristin Peck, chief executive of Zoetis, a drugmaker for animals. “They really see them as part of their families.”

Dogs, cats and other animals lucky enough to be welcomed into such families are in for a treat. Younger owners might take their pets to the vet more often, to the animals’ dismay, but they make up for it by giving them more presents. Some 95% of Gen Z owners surveyed last year by the American Pet Products Association, an industry group, said they bought their dog a gift at least once a year, compared with 81% of boomers. The average cost of those gifts was a lavish $44 among Gen Z owners, compared with $17 among boomers.

Owners are also now giving their pets yummier food. At Freshpet, an American pet-food producer founded in 2006, sales are more than double what they were three years ago. It only uses natural ingredients. William Cyr, its boss, says the firm is gaining from the “humanisation” of pets. “Canned dog food was invented in 1922,” Mr Cyr says. “And it smells like it.”

All this is attracting plenty of newcomers to the pet industry. Private-equity firms have poured so much money into buying and consolidating vet clinics that they have caught the attention of antitrust regulators in America and Britain. Earlier this month Gilles Andrier, the boss of Givaudan, a Swiss company that is the world’s largest manufacturer of flavours and fragrances, said his firm is eyeing the pet-food market. “People spend more money on pets than kids nowadays,” he explained. Best, then, to have a dog in the fight. ■