Arvind's Newsletter

1.Not only exports, in a First for India: Tatas to Set Up Defence Factory Abroad

A Tata Group company is setting up a major defence manufacturing line abroad, in an overseas first for India. The Tata Advanced Systems Ltd (TASL) plant—which will come up in Casablanca—will initially make armoured vehicles for the Royal Moroccan Armed Forces. It plans to serve the larger African market in the long term.

The unit will produce the Wheeled Armoured Platform (WhAP)—an amphibious infantry combat vehicle capable of navigating all types of terrain.

The factory will be capable of producing 100 combat vehicles annually and will be functional within a year, with the first WhAPs projected to be rolled out within 18 months. These vehicles are already in service with the Indian Army in limited numbers and have been deployed in Ladakh.

2.Smartphones (mostly iPhones) overtake diamonds in India's exports to US; Surajeet Das Gupta in Business Standard

Smartphones, led by global technology major Apple Inc’s iPhones, have quietly surged to become India’s largest product export — based on HS (harmonised system) code classification — to the US by value over the past three quarters, overtaking non-industrial diamonds.

In the June quarter of 2024-25, smartphone exports hit $2 billion, well ahead of non-industrial diamond (cut or otherwise but not mounted) exports, which stood at $1.44 billion, according to the latest data from the Department of Commerce.

The growing dominance of smartphone exports, particularly iPhones, can be seen as a reflection of the success of India’s production-linked incentive (PLI) scheme for mobile devices. Before the PLI initiative, India’s smartphone exports were minimal, with just $1.6 billion in global shipments during FY19, of which only $5 million went to the US.

By FY23, Apple Inc alone exported over $5 billion worth of iPhones from India, making up a significant portion of the $11.1 billion in total smartphone exports from the country. Over $2.15 billion of those iPhone exports were destined for the US. In FY24, iPhone exports reached $10 billion, accounting for 66 per cent of India’s total smartphone exports of $15.6 billion globally.

3.Monsoon Watch-This time, rains may extend to early October

The 2024 monsoon is coming to an end. Rainfall this season is likely to surpass the IMD forecast of 6 percent above the long-period average (LPA).

India has recorded an 8 percent above-average rainfall this monsoon. However, the amount of rainfall varied across regions, leading to a mixed outcome for reservoir levels. As of September 26, 2024, the country-wide reservoir storage stood about 21 percent higher compared to last year and 13 percent above the average storage of the last 10 years.

While Maharashtra and Karnataka experienced above-average rainfall, parts of northern India, such as Punjab and Haryana, reported deficits. The Central Water Commission has indicated that major reservoirs are at satisfactory levels, primarily on the back of robust rainfall in key catchment areas. This replenishment is vital as it will support irrigation during the dry months ahead.

4.There one more semiconductor company to come in India (this one fabless):L&T Semiconductor Technologies

The company’s CEO Sandeep Kumar expects manufacturing of semiconductor products designed by it to start in the next two years. He said the company will set up its chip manufacturing plants after achieving a threshold revenue in the range of USD 50 million to USD 1 billion for different semiconductor technologies.

The company is building teams to handle around 15 different products in parallel,and it is already halfway on that journey, he added.

5.Israel targeted Tehran-backed proxies across the Middle East and reportedly sent Iran’s supreme leader into hiding, an offensive that analysts said presaged a widening of the Middle East conflict. 

The onslaught — including killing a Hamas leader in Lebanon and striking Houthi targets in Yemen — came after the weekend assassination of Hezbollah’s leader. The latter died because of two strategic mistakes, The Wall Street Journal’s chief foreign-affairs correspondent wrote: “Grossly underestimating Israel, his foe, and overestimating the abilities of his patron, Iran.”

Tehran has so far responded cautiously. “Faced with a choice between all-out war with Israel or lying low in the interest of self-preservation, [Iran’s leader] appears to be choosing the latter,” The New York Times noted.

The Financial Times, reported that, “Israeli spies had penetrated (deep) into Hizbollah.”Please use the sharing tools found via the share button at the top or side of articles.

“In its 2006 war with Hizbollah, Israel tried to kill Hassan Nasrallah three times. One air strike missed — the leader of Hizbollah had earlier left the spot. The others failed to penetrate the concrete reinforcements of his underground bunker, according to two people familiar with the attempted assassinations.

On Friday night, the Israeli military fixed those mistakes. It tracked Nasrallah to a bunker built deep below an apartment complex in south Beirut, and dropped as many as 80 bombs to make sure he was killed, according to Israeli media.”

6.The UK is done with coal: in a first for a G7 country, it is coal-free. How’s the rest of the world doing?

The UK is shutting down its final coal-fired power plant today, marking the end of an era for the country’s energy system. Once the backbone of the grid, coal has been steadily replaced with other, less polluting energy sources.

It’s a major milestone for the notoriously polluting fossil fuel. But coal is still booming in other parts of the world, especially in some larger countries where electricity demand is growing quickly. Read the full story.

7.Nike: An Epic Saga of Value Destruction

Earlier this year, we saw Nike losing $28 bn of market cap in a day ($70 bn in 9 months). It is a great example of self-inflicted damage, with the company losing its focus, losing its best talent, under a misplaced and misdirected leadership.

After a tumultuous few years marked by declining sales, lackluster innovation, and decimated retail relationships, John Donahoe has stepped down as CEO of Nike.

His departure comes on the heels of mounting criticism over Nike’s digital transformation strategy, which hit a critical juncture on June 28 when the company’s market capitalization plummeted by $28 billion following a dismal earnings report. The report projected that Nike’s revenues would drop by “mid-single digits” in fiscal 2025, triggering the worst day for Nike stock since its 1980 IPO.

It was a downturn that many industry insiders had long anticipated. Although Donahoe was brought in from Silicon Valley with a mandate to make Nike a digitally-driven company, the justification for this strategy quickly eroded in a post-pandemic landscape. The rapid shift toward e=commerce, once seen as the future of retail, began to lose momentum as consumer preferences swung back to in-person experiences. But Nike, having pivoted so heavily to a direct-to-consumer (DTC) model while neglecting the core pillars that originally made it a global sportswear leader—namely, cutting-edge product innovation and culturally resonant marketing—found itself in a precarious position.

8.The war is going badly. Ukraine and its allies must change course; The Economist

IF UKRAINE AND its Western backers are to win, they must first have the courage to admit that they are losing. In the past two years Russia and Ukraine have fought a costly war of attrition. That is unsustainable. When Volodymyr Zelensky travelled to America to see President Joe Biden this week, he brought a “plan for victory”, expected to contain a fresh call for arms and money. In fact, Ukraine needs something far more ambitious: an urgent change of course.

A measure of Ukraine’s declining fortunes is Russia’s advance in the east, particularly around the city of Pokrovsk. So far, it is slow and costly. Recent estimates of Russian losses run at about 1,200 killed and wounded a day, on top of the total of 500,000. But Ukraine, with a fifth as many people as Russia, is hurting too. Its lines could crumble before Russia’s war effort is exhausted.

Ukraine is also struggling off the battlefield. Russia has destroyed so much of the power grid that Ukrainians will face the freezing winter with daily blackouts of up to 16 hours. People are tired of war. The army is struggling to mobilise and train enough troops to hold the line, let alone retake territory. There is a growing gap between the total victory many Ukrainians say they want, and their willingness or ability to fight for it.

Abroad, fatigue is setting in. The hard right in Germany and France argue that supporting Ukraine is a waste of money. Donald Trump could well become president of the United States. He is capable of anything, but his words suggest that he wants to sell out Ukraine to Russia’s president, Vladimir Putin.

If Mr Zelensky continues to defy reality by insisting that Ukraine’s army can take back all the land Russia has stolen since 2014, he will drive away Ukraine’s backers and further divide Ukrainian society. Whether or not Mr Trump wins in November, the only hope of keeping American and European support and uniting Ukrainians is for a new approach that starts with leaders stating honestly what victory means.

As The Economist has long argued, Mr Putin attacked Ukraine not for its territory, but to stop it becoming a prosperous, Western-leaning democracy. Ukraine’s partners need to get Mr Zelensky to persuade his people that this remains the most important prize in this war. However much Mr Zelensky wants to drive Russia from all Ukraine, including Crimea, he does not have the men or arms to do it. Neither he nor the West should recognise Russia’s bogus claim to the occupied territories; rather, they should retain reunification as an aspiration.

In return for Mr Zelensky embracing this grim truth, Western leaders need to make his overriding war aim credible by ensuring that Ukraine has the military capacity and security guarantees it needs. If Ukraine can convincingly deny Russia any prospect of advancing further on the battlefield, it will be able to demonstrate the futility of further big offensives. Whether or not a formal peace deal is signed, that is the only way to wind down the fighting and ensure the security on which Ukraine’s prosperity and democracy will ultimately rest.

This will require greater supplies of the weaponry Mr Zelensky is asking for. Ukraine needs long-range missiles that can hit military targets deep in Russia and air defences to protect its infrastructure. Crucially, it also needs to make its own weapons. Today, the country’s arms industry has orders worth $7bn, only about a third of its potential capacity. Weapons firms from America and some European countries have been stepping in; others should, too. The supply of home-made weapons is more dependable and cheaper than Western-made ones. It can also be more innovative. Ukraine has around 250 drone companies, some of them world leaders—including makers of the long-range machines that may have been behind a recent hit on a huge arms dump in Russia’s Tver province.

The second way to make Ukraine’s defence credible is for Mr Biden to say Ukraine must be invited to join NATO now, even if it is divided and, possibly, without a formal armistice. Mr Biden is known to be cautious about this. Such a declaration from him, endorsed by leaders in Britain, France and Germany, would go far beyond today’s open-ended words about an “irrevocable path” to membership.

This would be controversial, because NATO’s members are expected to support each other if one of them is attacked. In opening a debate about this Article 5 guarantee, Mr Biden could make clear that it would not cover Ukrainian territory Russia occupies today, as with East Germany when West Germany joined NATO in 1955; and that Ukraine would not necessarily garrison foreign NATO troops in peacetime, as with Norway in 1949.

NATO membership entails risks. If Russia struck Ukraine again, America could face a terrible dilemma: to back Ukraine and risk war with a nuclear foe; or refuse and weaken its alliances around the world. However, abandoning Ukraine would also weaken all of America’s alliances—one reason China, Iran and North Korea are backing Russia. Mr Putin is clear that he sees the real enemy as the West. It is deluded to think that leaving Ukraine to be defeated will bring peace.

Indeed, a dysfunctional Ukraine could itself become a dangerous neighbour. Already, corruption and nationalism are on the rise. If Ukrainians feel betrayed, Mr Putin may radicalise battle-hardened militias against the West and NATO. He managed something similar in Donbas where, after 2014, he turned some Russian-speaking Ukrainians into partisans ready to go to war against their compatriots.

For too long, the West has hidden behind the pretence that if Ukraine set the goals, it would decide what arms to supply. Yet Mr Zelensky cannot define victory without knowing the level of Western support. By contrast, the plan outlined above is self-reinforcing. A firmer promise of NATO membership would help Mr Zelensky redefine victory; a credible war aim would deter Russia; NATO would benefit from Ukraine’s revamped arms industry. Forging a new victory plan asks a lot of Mr Zelensky and Western leaders. But if they demur, they will usher in Ukraine’s defeat. And that would be much worse.