Arvind's Newsletter

1.Budget 2024-25: The ultimate explainer
N. Mahadevan, Mint; Some excerpts:

“As finance minister Nirmala Sitharaman began preparing for her seventh consecutive budget, conditions on the ground were very different from what she had encountered in the past. The surprising electoral outcome in May this year reduced the government’s political capital—the compulsions of coalition politics reared its head again.

And while the economy is galloping, there are pain points that are beginning to hurt. India has emerged as the fastest growing large economy with an enviable gross domestic product (GDP) growth of over 8%. However, the economic expansion has been uneven. The rural economy, particularly, has been sluggish and there simply aren’t enough jobs that pay well or are aspirational. The private sector, unsure of demand growth, is hesitant to invest. In fact, after the electoral outcome, there were worries of the Centre’s economic approach embracing populism."

The Union budget, presented on Tuesday, has eased many concerns. The government has stressed on fiscal consolidation, spending efficiency and capital expenditure (capex)-led growth.”

“The budget has sent a clear message that the electoral outcome has not forced a change in its economic thinking. Let us take the case of fiscal consolidation which many feared would slow down. In reality, the government has accelerated it.

The fiscal deficit for 2024-25 is expected at 4.9% of GDP as against 5.1% that was fixed in the interim budget presented in February. The government has committed that the fiscal deficit for 2025-26 would be below 4.5% and for every year post that, it would be such that the government’s debt is lower than the previous year.

A lower fiscal deficit means less government borrowing from the market. This, in turn, would result in more funds being available for corporates and others to borrow at lower cost to fund their expansion.”

“The budget has maintained the focus on fiscal consolidation without compromising on the need to spend on areas that need support. The fiscal deficit in the budget proposal has been reduced even as revenue expenditure has risen. The overall quality of spending is not being compromised. The finance minister has also balanced the immediate needs of the economy while investing in the future—in areas such as agricultural research, human capital development and space.”

Read on.

2.India closes in on China as largest emerging market: FT

India is catching up on China’s spot as the largest country in a benchmark emerging-market index, underlining a quandary for global investors who are becoming increasingly exposed to its ebullient but expensive stock market.

Soaring share prices, stock sales and earnings growth by Indian companies have pushed India to just under a fifth of the MSCI emerging markets index while China has fallen to a quarter, from more than 40 per cent in 2020.

An MSCI index review scheduled for next month could elevate India to above 20 per cent, eclipsing Taiwan and putting India’s weighting directly behind China’s, investors say. The narrowing gap has become one of the biggest issues for investors in emerging markets this year, as they debate whether to put capital into an already red-hot Indian market, or into Chinese stocks that are relatively cheap, but are being hit by an economic slowdown.

Indian stocks are trading at 24 times their expected earnings next year, while China is at just 10 times. The shift has also underlined the power of indices in emerging markets, whether by directing billions of dollars in index-tracking passive flows or leading active managers to calibrate their exposure relative to established benchmarks.

Domestic inflows into equity funds have been a critical factor. Average annual net domestic flow into equities was $12bn between 2016 and 2020. Between 2021-2023 these annual flows had swelled to $29bn.

3.Shapiro, Kelly and Cooper frontrunners to be Harris’s running mate, say donors

Pennsylvania’s Josh Shapiro, Arizona senator Mark Kelly and Roy Cooper of North Carolina are the frontrunners to become Kamala Harris’s running mate, according to Democratic mega donors close to the vice-president.

The three men had won backing from leading Wall Street and Hollywood donors and were now being vetted by Barack Obama’s former attorney-general Eric Holder, said the people.

Wall Street supporters favour Pennsylvania governor Shapiro or North Carolina governor Cooper, while Hollywood Democratic donors are pushing for Kelly, said people familiar with the process.

Other names further down on the list include Kentucky governor Andy Beshear and Illinois governor JB Pritzker.

4.Cuba Libre!: More than 10% of Cuba’s population left the island nation between 2022 and 2023 amid a severe economic downturn and a hardening government crackdown. 

Despite allowing the creation of private businesses for the first time in decades, the state-run economy has collapsed as growth in Venezuela and Russia, on which Cuba relies, has slowed in recent years.

Cuban migrants are faced with host nations that are increasingly hostile to migration: Countries across Europe and North America have tightened their restrictions on foreign labor, even as they rely on workers, a move that could prove “immensely damaging to (their) economies,” The Economist argued.

Read more at: https://www.miamiherald.com/news/nation-world/world/americas/cuba/article290249799.html#storylink=cpy

5.Chandra Turns 25

NASA marked 25 years since it launched its X-ray observatory Chandra yesterday by publishing 25 previously unseen cosmic images the telescope has collected since its inception. See the photos in the link below. 

Named after Indian American Nobel laureate and astrophysicist Subrahmanyan Chandrasekhar, Chandra is the most powerful X-ray observatory in operation. X-rays originate when matter is heated to millions of degrees, commonly in high-energy regions with extreme magnetic or gravitational forces. The telescope has helped reveal the nature of supernovas and galaxy clusters, and has detected X-rays from within 55 miles of a black hole's event horizon, among other discoveries.

The 65-foot structure orbits Earth in an elliptical shape every 64 hours, swinging close to Earth before hurtling far beyond the Van Allen radiation belts—dense rings of magnetised solar particles around Earth. From there, it can capture X-ray data unobstructed for 55 hours every orbit.

6.Google’s parent company Alphabet will back its self-driving car unit with a further $5 billion. 

The robotaxi company recently expanded its waitlist-free service to San Francisco and raised another $2.25 billion in funding as investors upped their bets.

Other US autonomous vehicle companies had less good news: Tesla delayed the unveiling of its robotaxi prototype from August to October,  despite CEO Elon Musk’s focus on artificial intelligence and autonomy, and GM subsidiary Cruise said it would indefinitely delay production of its own autonomous vehicle (AV).

In China, though, AVs are racing ahead: Driverless cars are commonplace in several major cities and three firms have received the green light to go public on the Hong Kong stock market.

7.Meta has released an AI model to rival OpenAI and it is making it available free

Mark Zuckerberg is confident that future versions of Llama will lead the industry

Meta is releasing Llama 3.1, the largest-ever open-source AI model, which the company claims outperforms GPT-4o and Anthropic’s Claude 3.5 Sonnet on several benchmarks. It’s also making the Llama-based Meta AI assistant available in more countries and languages while adding a feature that can generate images based on someone’s specific likeness. CEO Mark Zuckerberg now predicts that Meta AI will be the most widely used assistant by the end of this year, surpassing ChatGPT.

MOST TECH MOGULS hope to sell artificial intelligence to the masses. But Mark Zuckerberg is giving away what Meta considers to be one of the world’s best AI models for free. Meta released the biggest, most capable version of a large language model called Llama on Monday, free of charge.

8.The AI job interviewer will see you now

Companies are adopting AI job interview systems to handle incoming applicants. LLMs allow the interviewer to incorporate follow-up questions based on the subject’s response. Critics say the opaque models raise serious concerns about bias, particularly where there is no documentation about how a decision is made.