Arvind's Newsletter

1.While Indian IT stocks have been recently firing up based on strong Q3 earnings, Tech workers continue to hurt, reports Rest of World

Indian tech workers who were laid off from companies like Twitter, Amazon, and Microsoft in the U.S. last year are struggling to find jobs back home. They have been forced to take huge salary cuts and often undersell themselves to find employment in India. Experts say Indian employers are skeptical as they fear these workers will go back to the U.S. at the first opportunity.

“More than 200,000 tech workers have been laid off in the U.S. between November 2022 and January 2023, according to Bloomberg, of whom 30%–40% were Indian IT professionals.

 Around 80,000 Indian IT professionals on H-1B and L-1 visas have faced job losses in the U.S. since late 2022, with the tech industry experiencing a significant impact,” Krishna Vij, business head of IT staffing company Teamlease Digital, told Rest of World. “After the pandemic, the overall startup ecosystem hired aggressively,’ Vij said. ‘Now, what we’re also seeing is that because of overall macroeconomic conditions, the startups are not hiring.”

Meanwhile, India’s tech industry has had over 30,000 workers laid off since 2022. Prominent startups including Paytm, Byju’s, Unacademy, Meesho, and Sharechat have cut jobs in the last year, and the bigger tech companies have announced hiring freezes in India.

2.Niti Aayog delivers the good news on poverty front

Close to 250 million Indians escaped multidimensional poverty in the nine years ending 2022-23, federal policy think tank Niti Aayog said on Monday, referring to an index it uses to track the various ways that economic poverty affects life. Multidimensional poverty uses measures of health, education and standard of living, and the development could help reduce the share of Indians deprived on this metric to single digits in 2024, the think tank said.

More than half of India’s population was multidimensionally poor in 2005-06, going by National Family Health Survey (NFHS) data for that period. This fell to about a quarter of the population by 2015-16, and to 14.96% by 2019-21, Niti Aayog said, quoting a discussion paper written by member Ramesh Chand with inputs from the United Nations Development Programme (UNDP).

The think tank has projected an 11.28% figure for multidimensionally poor in 2022-23 based on past trends, and expects that to fall below 10% in 2023-24.

3.Scientists find bottled water filled with hundreds of thousands of Microplastics. But Bottle water industry says please disregard this discovery.

Researchers from Columbia and Rutgers came out with a new study in the science journal Proceedings of the National Academy of Sciences that detailed how they developed a new optical technique to detect plastics in water "with unprecedented sensitivity and specificity."

By using this new technique, they examined and analysed store-bought water in plastic bottles, leading to the upsetting discovery that one litre of bottled water had an average number of 240,000 teeny tiny plastic bits swimming in it. That's a lot more plastic than what a previous 2018 study had suggested, which had found an average of 10.4 plastic particles in a litre of water.

The new study found that 10 percent of the plastic particles in water were microplastics — measuring from five millimeters to one micrometer — but most insidiously, 90 percent were nanoplastics. That means they're even smaller, so tiny that they require high powered, advanced microscopes to even observe.

Microplastics are pretty bad in of themselves — they've become quite prevalent in our environment and inside our bodies — but nanoplastics pose a special danger because they're so much smaller, the research team says.

Now the bottled water industry has cried foul, claiming it's totally fine we're all ingesting these nanoplastics and that the Columbia team's research is nothing more than fearmongering.

"Media reports about these particles in drinking water do nothing more than unnecessarily scare consumers," the International Bottled Water Association (IBWA) wrote in a statement.

The association is trying to get consumers to disregard the findings."There currently is both a lack of standardized methods and no scientific consensus on the potential health impacts of nano- and microplastic particles," the statement reads.

4.Emmy Awards 2023: ‘Succession’ and ‘The Bear’ Tie With Six Wins, ‘Beef’ Follows With Five (See Winners List below)

Three TV shows dominated the 2023 Emmy Awards on Monday night: “Succession,” “The Bear” and “Beef.” Each show nearly swept its respective category in the drama, comedy and limited series races. “Succession” and “The Bear” tied with a leading six wins each, and “Beef” followed closely with five trophies.

Some notable first-time winners included Jeremy Allen White and Ayo Edebiri (“The Bear”) and Steven Yeun and Ali Wong (“Beef”). And Elton John joined the EGOT club — he now has an Emmy, a Grammy, an Oscar and a Tony — when he won the Emmy outstanding variety special for “Elton John Live: Farewell From Dodger Stadium.”

5.China’s premier sought to win back foreign investment in a speech at Davos, as Beijing sent its largest delegation to the global conclave since 2017. 

China’s grim economic data has spurred it to court investment, which has fled the country, “rattled by raids on private businesses” and posturing by leader Xi Jinping. In the third quarter of 2023, foreign investors withdrew $12 billion from the country, the first net outflows in a generation.

The speech by Premier Li Qiang was part of a wider push by Beijing at the World Economic Forum: U.S. diplomats think that the presence of Li and 10 state ministers amount to a “pseudo state visit,” according to Politico, and are pushing for Secretary of State Antony Blinken to meet with the Swiss president to achieve parity.

6.Former U.S. President Donald Trump won the Iowa caucuses by a record margin, cementing his status as the frontrunner in the race for the 2024 Republican presidential nomination.

Former President Donald Trump won the Republican caucus in the Hawkeye State yesterday, garnering 51% of the votes after caucus-goers faced icy temperatures and cast their ballots for the first test of the 2024 presidential primary season. Florida Gov. Ron DeSantis came in second place (21.2%), ahead of former South Carolina Gov. Nikki Haley (19.1%). Entrepreneur Vivek Ramaswamy (7.7%) ended his campaign and endorsed Trump.

The Iowa caucus is typically recognised as having a pivotal role in shaping the outcome of presidential campaigns, either building or breaking a candidate's momentum. However, winners of the caucuses aren't always the eventual nominees of their party, as was the case in the GOP races in 2008, 2012, and 2016, and the Democratic race in 2020.

This year's fight to win the Iowa Republican caucus was the most expensive on record, with candidates' campaigns and affiliated political action committees pouring in more than $120M on ads in the state; Haley spent the most at $37M. Yesterday also marked the coldest caucus day on record, as an arctic blast swept across the US.

7.How strong is India’s economy under Narendra Modi? The Economist opines.

In the second week of 2024 business leaders descended on Gujarat, the home state of Narendra Modi, India’s prime minister. The occasion was the Vibrant Gujarat Global Summit, one of many gabfests at which India has courted global investors. 

“At a time when the world is surrounded by many uncertainties, India has emerged as a new ray of hope,” boasted Mr Modi at the event. He is right. Although global growth is expected to slow from 2.6% last year to 2.4% in 2024, India appears to be booming. Its economy grew by 7.6% in the 12 months to the third quarter of 2023, beating nearly every forecast. Most economists expect an annual growth rate of 6% or more for the rest of this decade. Investors are seized by optimism.

The timing is good for Mr Modi. In April some 900m Indians will be eligible to vote in the largest election in world history. A big reason Mr Modi, who has been in office since 2014, is likely to win a third term is that many Indians think him a more competent manager of the world’s fifth-largest economy than they do any other candidate. Are they right?

To assess Mr Modi’s record The Economist has analysed India’s economic performance and the success of his biggest reforms. 

In many respects the picture is muddy—and not helped by sparse and poorly kept official data. Growth has outpaced that of most emerging economies, but India’s labour market remains weak and private-sector investment has disappointed. But that may be changing. Aided by Mr Modi’s reforms, India may be on the cusp of an investment boom that would pay off for years.

The headline growth figures reveal surprisingly little. India’s GDP per person, after adjusting for purchasing power, has grown at an average pace of 4.3% per year during Mr Modi’s decade in power. That is lower than the 6.2% achieved under Manmohan Singh, his predecessor, who also served for ten years.

But this slowdown was not Mr Modi’s doing: much of it is down to the bad hand he inherited. In the 2010s an infrastructure boom started to go sour. India faced what Arvind Subramanian, later a government adviser, has called a twin balance-sheet crisis, one that struck both banks and infrastructure firms. They were left loaded with bad debt, crimping investment for years afterwards.

 Mr Modi also took office at a time when global growth had slowed, scarred by the financial crisis of 2007-09. Then came the covid-19 pandemic. The difficult conditions meant average growth among 20 other large lower- and middle-income economies fell from 3.2% during Mr Singh’s time in office to 1.6% during Mr Modi’s. Compared with this group, India has continued to outperform (see chart 1).

Against such a turbulent backdrop, it is better to assess Mr Modi’s record by considering his stated economic objectives: to formalise the economy, improve the ease of doing business and boost manufacturing. On the first two, he has made progress. On the third, his results have so far been poor. India’s economy has certainly become more formal under Mr Modi, albeit at a high cost. The idea has been to draw activity out of the shadow economy, which is dominated by small and inefficient firms that do not pay tax, and into the formal sphere of large, productive companies.

Mr Modi’s most controversial policy on this front has been demonetisation. In 2016 he banned the use of two large-value banknotes, accounting for 86% of rupees in circulation—surprising many even within his government. The stated aim was to render worthless the ill-gotten gains of the corrupt. But almost all the cash made its way into the banking system, suggesting that crooks had already gone cashless or laundered their money. Instead, the informal economy was crushed. 

Household investment and credit plunged, and growth was probably hurt. In private, even Mr Modi’s supporters in business do not mince words. “It was a disaster,” says one boss.

Demonetisation may have accelerated India’s digitisation nonetheless. The country’s digital public infrastructure now includes a universal identity scheme, a national payments system and a personal-data management system for things like tax documents. It was conceived by Mr Singh’s government, but much of it has been built under Mr Modi, who has shown the capacity of the Indian state to get big projects done. Most retail payments in cities are now digital, and most welfare transfers seamless, because Mr Modi gave almost all households bank accounts.

Those reforms made it easier for Mr Modi to ameliorate the poverty resulting from India’s disappointing job-creation record. Fearing that stubbornly low employment would stop living standards for the poorest from improving, the government now doles out welfare payments worth some 3% of GDP per year. Hundreds of government programmes send money directly to the bank accounts of the poor.It is a big improvement on the old system, in which most welfare was distributed physically and, owing to corruption, often failed to reach its intended recipients. The poverty rate (the proportion of people living on less than $2.15 a day), has fallen from 19% in 2015 to 12% in 2021, according to the World Bank.

Digitisation has probably also drawn more economic activity into the formal sector. So has Mr Modi’s other signature economic policy: a national goods and services tax (GST), passed in 2017, which knitted together a patchwork of state levies across the country. The combination of homogenous payments and tax systems has brought India closer to a national single market than ever.

That has made doing business easier—Mr Modi’s second objective. GST has been a “game-changer”, says B. Santhanam, the regional boss of Saint-Gobain, a large French manufacturer with big investments in the southern state of Tamil Nadu. “The prime minister gets it,” adds another seasoned manufacturing executive, referring to the need to cut red tape. The government has also put serious money into physical infrastructure, such as roads and bridges. Public investment surged from around 3.5% of GDP in 2019 to nearly 4.5% in 2022 and 2023.

The results are now materialising. Mr Subramanian recently wrote that, as a share of GDP, in 2023 net revenues from the new tax regime exceeded those of the old system. This happened even as tax rates on many items fell. That more money is coming in despite lower rates suggests that the economy really is formalising.

Yet Mr Modi is not satisfied with merely formalising the economy. His third objective has been to industrialise it. In 2020 the government launched a subsidy scheme worth $26bn (1% of GDP) for products made in India. In 2021 it pledged $10bn for semiconductor companies to build plants domestically. One boss notes that Mr Modi personally takes the trouble to convince executives to invest, often in industries where they face little competition and so otherwise might not.

Some incentives could help new industries find their feet and show foreign bosses that India is open for business. In September Foxconn, Apple’s main supplier, said it would double its investments in India over the coming year. It currently makes some 10% of its iPhones there. Also in 2023 Micron, a chipmaker, began work on a $2.75bn plant in Gujarat that is expected to create some 5,000 jobs directly and 15,000 indirectly.

So far, however, these projects are too small to be economically significant. The value of manufactured exports as a share of GDP has stagnated at 5% over the past decade, and manufacturing’s share of the economy has fallen from about 18% under the previous government to 16%. And industrial policy is expensive. The government will bear 70% of the cost of the Micron plant—meaning it will pay nearly $100,000 per job. Tariffs are ticking up, on average, raising the cost of foreign inputs.

So what matters more: Mr Modi’s failures or his successes? As well as economic growth, it is worth looking at private-sector investment. It has been sluggish during Mr Modi’s time in office. But a boom may be coming. A recent report by Axis Bank, one of India’s largest lenders, argues that the private-investment cycle is likely to turn, thanks to healthy bank and corporate balance-sheets.

Announcements of new investment projects by private corporations soared past $200bn in 2023, according to the Centre for Monitoring Indian Economy, a think-tank. That is the highest in a decade, and up 150% in nominal terms since 2019.

Although higher interest rates have sapped foreign direct investment in the past year, firms’ reported intentions to invest in India remain strong, as they seek to “de-risk” their exposure to China. There is some chance, then, that Mr Modi’s reforms will kick growth up a gear. If so, he will have earned his reputation as a successful economic manager.

The consequences of Mr Modi’s policies will take years to be felt in full. Just as an investment boom could vindicate his approach, his strategy of using welfare payments as a substitute for job creation could prove unsustainable. A failure to build local governments’ capacity to provide basic public services, such as education, may hinder growth. Subhash Chandra Garg, a former finance secretary under Mr Modi, worries that the government is too keen on “subsidies” and “freebies”, and that its “commitment to real reforms is no longer that strong.”

And yet for all that, many Indians will go to the polls feeling cautiously optimistic about the economic changes that their prime minister has wrought.