Arvind's Newsletter-weekend edition

1.India to offer $4-$5 bn incentives to boost electronics, cut China reliance

India is set to roll out incentives worth up to $5 billion to local electronics firms to manufacture components for devices ranging from smartphones to laptops, according to government officials (via Reuters).

Reportedly, the initiative aims to reduce reliance on Chinese imports and strengthen domestic supply chains within the fast-growing sector.

The country's electronics production has surged to $115 billion in 2024, more than double its output six years ago, driven by global manufacturers like Apple and Samsung. India has now emerged as the fourth-largest smartphone supplier globally.

However, the industry remains heavily dependent on imported components, particularly from China and Hong Kong, which account for over half of India's $89.8 billion electronics imports in the fiscal year 2024, according to the Global Trade Research Initiative (GTRI).

The forthcoming scheme, spearheaded by India’s Ministry of Electronics, will provide incentives for manufacturing critical components such as printed circuit boards. These measures aim to enhance domestic value addition and foster deeper local supply chains, officials stated, requesting anonymity as details remain confidential. The programme is expected to be unveiled within the next two to three months, pending approval by the Ministry of Finance

2.How Adani's Indictment Rocked His Empire and What Comes Next; Long read; Bloomberg

“Gautam Adani, one of the world’s richest people, was in good spirits Wednesday evening. Earlier in the day, the Indian billionaire’s green energy business had raised $600 million through a bond sale. Before heading to bed in the city of Ahmedabad, he relaxed by playing a card game with his wife, according to a person close to him.

But around 3 a.m., a colleague delivered some shocking news: The US had charged Adani and several associates with fraud in a sprawling criminal investigation.

Within minutes, senior executives from the Adani Group assembled on conference calls and in the conglomerate’s headquarters in western India. Federal prosecutors in New York had accused Adani and his colleagues of lying to US investors about their anti-bribery practices while promising more than $250 million of bribes to Indian officials. To cover their tracks, collaborators used code names for Adani, referring to him as “the big man” and “numero uno,” the indictment said.

As the rest of India woke up on Thursday, Adani was apparently still unsure whether releasing a statement would even be a good idea. When stock markets opened in Mumbai, Adani Group companies’ shares plunged. The conglomerate scrapped the planned $600 million bond sale. By midday, the group had denied all accusations of misconduct by its executives and threatened legal action.

What happens next for Adani, 62, and his empire is unclear.

India’s capital markets regulator is looking into whether the Adani Group violated rules mandating the disclosure of market-moving information, Bloomberg reported Friday, citing people familiar with the matter. The fact-finding will likely take two weeks, after which the India regulator will assess whether to open a formal probe.

And political controversy is likely in the months ahead, with a tussle over possible extradition. US President-elect Donald Trump will soon be in a position to cut a deal with India to make the matter go away, if he chooses. Key figures in Trump’s orbit see India, and the Adani Group more specifically, as important partners to push against Chinese hegemony. Unrelated to Wednesday’s charges, Trump’s family members have visited Adani’s home in Ahmedabad, according to people with knowledge of the matter who asked not to be named discussing sensitive information.

In any case, prosecution would take months, if not years, meaning that it will fall to Trump’s Justice Department to determine how to proceed.” Read on.

3.HSBC Flash India PMI Strengthens To Three-Month High In November

The HSBC Flash India Composite Output Index—a seasonally adjusted index to measure combined manufacturing and services output—rose to 59.5 in November, from a final reading of 59.1 in October.

The moderate expansion was sharpest in three months as services output picked up and manufacturing performance exceeded expectations. Manufacturing firms saw orders expand faster than services firms for the third month in a row. Job creation was more pronounced in the latter though, fastest since the survey began in December 2005.

After a slump in August, India's industrial output rebounded in September led by a surge in manufacturing and a modest pick up in mining and electricity generation. The Index of Industrial Production grew by 3.1% as compared to a contraction of 0.1% in August, according to data published by the Ministry of Statistics and Programme Implementation on Tuesday.

4.India may land in top 5 with 12.7% growth in airline seat capacity

India is projected to see a 12.7 per cent growth in overall airline seat capacity in 2024 compared to pre-pandemic levels in 2019, ranking fifth among the top 20 countries with the highest seat capacity globally.

A study by global travel data provider OAG highlights that the four countries that have recovered faster than India include Saudi Arabia (growth of 17.1 per cent), the United Arab Emirates (UAE) (15 per cent), Mexico (14.4 per cent), and Türkiye (12.3 per cent). However, even in 2024, nearly half of the top 20 countries still have not fully recovered to 2019 levels. These include France, Australia, Russia, Canada, Thailand, and South Korea. 

In 2024, India’s overall seat capacity is expected to increase by 8 per cent year-on-year, placing it in seventh place. However, countries like Saudi Arabia (11.7 per cent) and the UAE (10.5 per cent), which are ahead, have done well.

5.The cost of water desalination has fallen by more than half since 2000, from $1.10 a cubic meter (220 gallons) to 50¢. 

Looking back 50 years the cost has fallen 90%, and the volume of water treated has nearly quadrupled from 2003, with 20,000 desalination plants now in operation worldwide. The falling costs are driven by improved technology — modern reverse-osmosis plants obviate the need to boil and distill seawater, reducing energy consumption.

In the Middle East, where fresh water is often hard to find, “the mega-projects will only multiply,” Sherwood reported: A $900 million plant opened in Abu Dhabi this year, and a $1.5 billion, 1-million-square-foot plant will begin operations in Israel soon.

The global market for desalination is expected to more than double by 2032.

6.Germany reported slower-than-expected economic growth, the latest challenge facing a country whose coalition government has collapsed. 

Germany — Europe’s biggest economy — barely avoided recession this year, battered by declining industrial production, the lingering effects of the COVID-19 pandemic, and Russia’s invasion of Ukraine.

In the long run, its famed manufacturing sector faces challenges from Chinese rivals: “Germany’s old macro business model of cheap energy and easily accessible large export markets is no longer working,” an ING economist wrote. But with an election not expected until February, analysts are skeptical of any short-term policy changes to address the malaise. Germany’s chancellor staved off an internal party bid to unseat him, but is polling in the mid-teens.

7.Meanwhile, China overtakes Germany in industrial use of robots, says report

China has overtaken Germany in the use of robots in industry, an annual report published by the International Federation of Robotics (IFR) showed on Wednesday, underscoring the challenges facing Europe's biggest economy from Beijing.

In terms of robot density, an important indicator for international comparisons of the automation of the manufacturing industry, South Korea is the world leader with 1,012 robots per 10,000 employees, up 5% since 2018, said the IFR.

Singapore comes next, followed by China with 470 robots per 10,000 workers - more than double the density it had in 2019.That compares with 429 per 10,000 employees in Germany, which has had an annual growth rate of 5% since 2018, said IFR.

8.China market sell-off accelerates

Chinese stocks are in precarious territory. Already trending lower because of concerns over what Donald Trump’s return to the White House will mean for the economy, the sell -off accelerated after the latest batch of earnings.

PDD and Baidu, both seen as bellwethers for consumer demand, reported disappointing revenue late yesterday. AI pioneer Baidu posted its biggest drop in sales in more two years, while online shopping platform PDD warned of worsening profits. 

Investors “found nothing has improved from property and equity to consumption,” said Steven Leung, an executive director at UOB Kay Hian Hong Kong. The CSI 300 slumped the most since Oct. 9, extending its slide from the peak it reached in the exuberant aftermath of the announcement of monetary stimulus measures.

Foreign investors have dumped Chinese government bonds over the past two months, unwinding a popular and lucrative trade that had been enabled by Beijing’s efforts to support its currency.

9.Tom Standage’s ten trends to watch in 2025; The Economist’s The World Ahead

IT SEEMS APPROPRIATE that 2025 has been designated the year of quantum science and technology by the United Nations. Because like Schrödinger’s cat, which (in a quantum thought-experiment) was both alive and dead at the same time inside a closed box, 2025 has hovered in a superposition of two very different states, defined by the outcome of America’s election. Now the ballot boxes have been opened, the world knows which 2025 to expect: the one where Donald Trump returns to the White House. With that uncertainty resolved, here are ten themes to watch in the coming year.

1. America’s choice.
The repercussions of Mr Trump’s sweeping victory will affect everything from immigration and defence to economics and trade. His “America First” policy will have friends and foes alike questioning the solidity of America’s alliances. This could lead to geopolitical realignments, heightened tensions and even nuclear proliferation..

2. Voters expect change.
More generally, incumbent parties did badly in 2024’s unprecedented wave of elections. Some were chucked out (as in America and Britain); others were forced into coalition (as in India and South Africa); others were pushed into cohabitation (as in Taiwan and France). So 2025 will be a year of expectations. Can new leaders deliver what they promised? Will humbled leaders change? If not, unrest may follow.

3. Broader disorder.
Mr Trump may push Ukraine to do a deal with Russia and give Israel a free hand in its conflicts in Gaza and Lebanon. America’s more transactional stance and scepticism of foreign entanglements will encourage troublemaking by China, Russia, Iran and North Korea (the “quartet of chaos”) and more meddling by regional powers, like that seen in crisis-hit Sudan. But it is unclear whether America would stand up to China in a conflict over Taiwan or in the South China Sea.

4. Tariffying prospects.
For now, America’s rivalry with China will manifest itself as a trade war, as Mr Trump imposes restrictions and ramps up tariffs—including on America’s allies. As protectionism intensifies, Chinese firms are expanding abroad, both to get around trade barriers and to tap new markets in the global south. So much for decoupling; Chinese firms, building factories from Mexico to Hungary, have other plans.

5. Clean-tech boom.
China’s government has encouraged booming exports of solar panels, batteries and electric vehicles to offset a weak domestic economy. The result is a Chinese-led clean-tech boom, with adoption of solar panels and grid storage outstripping forecasts. And the world will soon learn whether global emissions have peaked.

6. After inflation.
The rich world’s central bankers have celebrated the defeat of inflation. Now Western economies face a new challenge: reducing deficits, by increasing taxes, cutting spending or boosting growth. Many may also have to increase defence budgets. Painful economic choices loom. In America, Mr Trump’s policies will make things worse: hefty import tariffs could hamper growth and reignite inflation.

7. Age-old questions.
America has just picked its oldest-ever president-elect. World leaders are greying, along with their populations. Expect more discussion of age limits for political leaders. China, meanwhile, is looking for economic opportunities in an ageing world. In parts of the Middle East, by contrast, a booming youth population, coupled with a shortage of jobs, risks instability.

8. Crunch time for AI  
Its the biggest gamble in business history: more than $1 trn is being spent on data centres for artificial intelligence (AI), even though companies are still not sure how to use it and adoption rates are low (though many workers may simply be using it in secret). Will investors lose their nerve, or will AI prove its worth, as “agentic” systems become more capable and AI-developed drugs emerge?

9. Travel troubles.
The global movement of people, not just goods, faces increasing friction. Conflict is disrupting global aviation. Europe is adding new border checks, and its borderless Schengen system is fraying. The backlash against “over-tourism” will diminish in 2025, but restrictions introduced by many cities, from Amsterdam to Venice, will remain.

10. Life of surprises
With assassination attempts, exploding walkie-talkies and giant rockets being captured by chopsticks, one lesson of 2024 was to expect the unbelievable. What implausible-sounding things could happen in 2025? Our “Wild cards” section offers a selection to watch out for, including a devastating solar storm, the discovery of lost ancient texts—and even another global pandemic.