Ideas

Peace

In a world set to reach nearly 10 billion inter-connected people, power will come from creating peace, prosperity and freedom so that we can make breakthroughs in how we live together, and this requires a transformation in the very definition of power, and the purpose and principles by which it is exercised

GPC’s Macro Thought Leadership

GPC’s research focuses on the geostrategic changes in the world and the implications of for peace, prosperity and freedom. Our analysis seeks to find the patterns and identify the new forces that are the signs of our times and will determine the future of the world


The world is in a historic transition of great power hegemony, world order, population and resources which will change the very nature of civilisation. These transformations create discontinuities and a dynamic canvas on which the world’s future will be written

The 21st Century has been widely predicted to be the Asian Century, in which the continent, home to 60% of the world’s population, will become the world’s dominant economic, political and even cultural force. Within this continent of 49 countries, two will disproportionately impact the trajectory of the 21st Century on account of their scale and growth potential: China and India. The relationship between these two countries as well as the trialogue with the world’s current hegemon, the United States, will will be critical to shaping global economic and political trends for generations to come.

 

A modern India lifting a billion people out of poverty will need a large, modern and diversified economy to not only realize the aspirations of people but also to clothe, feed, employ and educate what will become the world’s largest population within the next five years and this will require an India that is open to the world and dedicated to unlocking the potential of its people and its assets

 

We bring our network of business leaders, entrepreneurs, influencers and thinkers who are at the frontline of change across to provide insights into the global issues that are rapidly changing the world and how they see an impact being made for good

 

We recognise the complex and rapidly changing nature of India’s markets and economy as it grows and expands internationally and have focused the firm’s thought leadership on detailed research to generate insights into the macro-environment, market strategy, investment opportunities and challenges to generate attractive risk adjusted returns

We live in revolutionary times. Increasingly political, economic and social volatility is driving change on a global level, creating both risks and opportunities for international investors. Greater Pacific Capital’s thought leadership and investing strategy placed it at the forefront of global change

Selected news that makes the difference

Prime Minister Modi Announces US$2.1bn Package to Strengthen Healthcare System

The central government allocated US$2.1bn to strengthen the healthcare infrastructure in India, including an increase in the number of beds, testing kits, and even training of professionals to combat the spread of the coronavirus disease.

ITR, GST filing, Aadhaar-PAN Linking Deadlines Have Been Extended

Amid a complete shutdown in India, the Indian government announced various statutory and regulatory relief measures for companies including extending the last date for filing belated income tax and GST returns and for linking PAN card with Aadhaar to June 30, 2020.

India May Top Up Strategic Tanks with Saudi, UAE Oil

As the world’s third biggest oil importer and consumer, India plans to take advantage of low oil prices from Saudi Arabia and UAE to top up its strategic petroleum reserves in order to protect against supply disruption over the coming months.

RBI to Infuse Additional Liquidity c.US$4.3bm via Bonds

The Reserve Bank of India (RBI), in addition to purchasing government securities worth c.US$1,400m, will purchase bonds worth c.US$4.3bn to infuse additional liquidity and improve monetary transmission in the Indian market amid the Covid-19 pandemic. 

India Plans a Common Electricity Market

The Union government plans to create a common electricity market through a regional grid that will be leveraged by Myanmar, Sri Lanka, Nepal, Bhutan and Bangladesh, to aid regional peace as well as to improve utilization of generation assets including the stranded assets and to ensure efficient price discovery.

RBI Cut Interest Rates by 75 bps

In order to mitigate the impact of Covid-19 and the 21-day coronavirus lockdown on the Indian economy, the RBI cut interest rates by 75 basis points to 4.40%, the sharpest in over a decade and allowed almost all borrowers to defer loan repayments by three months.

Spotlight on the key monthly news events shaping media coverage in India

Media coverage in India this month focused on the 21-day lockdown and US$22.5bn economic package announced by the government to fight the Covid-19 pandemic, the oil price war between Saudi Arabia and Russia and SBI’s acquisition of Yes Bank as part of the government’s bailout plan for the bank.

 

Government Announces 21 Day Lockdown, Economic Stimulus Package Worth US$22.5bn to Fight Coronavirus

 

India’s Prime Minister Narendra Modi imposed a nationwide a 21-day lockdown in an attempt to slow the spread of the coronavirus. Following this, the government announced an economic stimulus package worth US$22.5bn, designed to support daily wage earners, small business owners, and low-income households during the period of the lockdown. Various media publications weighed in on how the lockdown and economic package would help India’s fight against the Covid-19 pandemic.

 

The Economic Times lauded the announcement of the economic package by the government, stating that it would benefit the most venerable sections of society including landless workers, small and marginal farmers in rural areas, the aged, poor women and construction workers to mitigate the hardship and loss of livelihoods caused by the Covid-19 lockdown. “it can be recalibrated for better effect. For instance, five crore families of MGNREGA workers with proper identification are unquestionably poor, as are the families of 3.5 crore construction workers. To boost their demand and income, these families should be paid a part of their entitlement without requiring them to work… It is paramount to protect people from becoming unemployed, or from suffering an income shock that could lead to unemployment. Due to multiple reports of administrative inefficiencies and manipulations by hoarders, supplies of food and other essentials are in short supply, and their prices too high. For the poor to benefit from PMGKY transfers, it is crucial to address these issues… Finally, GoI should be willing to relax the fiscal deficit targets to 6%. RBI can buy government bonds to keep the yields low and market orderly, just like it has managed the forex markets. With crude at $25 a barrel and good rabi crops, inflation is not an immediate concern. In fact, excise duty on petroleum products should be used to generate funds.”

 

An article in Livemint covered why the success of this shutdown will depend upon the various states’ capacity to monitor it and their ability to provide essential services to the large sections of the population that may not survive without them. “Long-term lock-downs are difficult to implement anywhere, but in an India where so many need to work every day just to survive, they pose very special problems. You can’t lock down for too long — three weeks is already pushing the limit of what people will likely accept — and you can’t do it too often... In a country where migrant laborers might live a dozen to a room, a shutdown of this sort in fact asks unprecedented questions of the state. Will you shift these millions of people back home, risking the further spread of the virus? Will you hope that these crowded conditions don’t become hotbeds of transmission.... Modi may have felt he was left no choice, and his instincts are always to go as big as possible. Shutting down 1.3 billion people for 21 days is as big as it gets. Whether the gamble succeeds or doesn’t, the India that emerges at the other end of these three weeks will be irrevocably changed.”

 

The Hindu focused on why if the prolonged lockdown is to be executed without too much trauma for the general public there should be reliable access to food, water, medicines and emergency assistance, without which people will be forced into a situation where breaking the curfew might seem the safer alternative to deprivation and suffering in isolation. “Regrettably, the lack of planning on the lockdown resulted in another bout of crowding, with people rushing out to buy essential supplies and medicines. There were instances of mindless police violence against workers performing routine jobs… The challenge is to ensure effective implementation. Again, if movement is to be restricted, essentials must be delivered virtually at the doorstep. This is enabled explicitly by the Home Ministry’s order. Allowing delivery of medicines by pharmacies is important and essential personnel must be given passes that protect them from police harassment and ensure movement of goods. There is also a deplorable trend of social discrimination against health workers handling COVID-19 cases, which must be sternly dealt with... The efficacy of a protracted three-week-long countrywide lockdown in the fight against the pandemic aside, what is very clear is that the shutdown is set to bring the approximately ₹200-lakh crore national economy close to a shuddering standstill. The ramifications are already so wide-ranging that measuring the fallout merely in terms of lost economic output would be grossly inadequate.”

 

Finally, an article in The Hindustan Times focused on why India needs an aggressive, well-funded relief and stimulus package to help businesses cope with this unprecedented crisis. “While it is only understandable that the government look to the most vulnerable first, some reassurance of forthcoming relief for businesses wouldn’t have hurt. So far, the government has announced relaxation in statutory requirements, which is important but not as critical as a relief and stimulus package. And some of the relaxations stop half-way… The government is entirely justified in asking employers to protect jobs, but it needs to follow up with measures that provide relief to companies. The Indian economy was expected to grow at 5% in 2019-20, the lowest in 11 years. The crisis may take that number even lower. The economy was looking like it was coming out of a structural and cyclical slowdown, and that it could grow faster in 2020-21... Prime Minister Narendra Modi moved quickly to contain the spread of the pandemic by announcing a lockdown that will hopefully flatten the curve of infections. Now, the finance minister must move equally quickly (and aggressively) to contain the economic fallout of the crisis. Just like in the case of the highly-virulent infection, a delay could be fatal for the economy.”

 

Saudi Arabia and Russia Launch Oil Price War After Following Disintegration of OPEC+ Alliance

 

The Organization of the Petroleum Exporting Countries (OPEC) and Russia failed to reach an agreement on oil production cuts, possibly signalling the end of a nearly five decade-long intervention by oil producers in the international market. Following this, Saudi Arabia and Russia launched an aggressive oil price war driving crude to below US$35 a barrel, its lowest level in four years, which is expected to result in a huge windfall for India, the world’s third largest oil importer and consumer. Various media publications have weighed in on the implications of the oil price war for the Indian economy.

 

An op-ed in Livemint detailed out why the fall in oil prices provides the Indian government with an opportunity to pass the benefit of lower global prices to consumers as well as shore up its tax revenues, similar to steps taken during the period of the previous fall in oil prices from 2014 to 2016. “Since the start of the year, oil prices have fallen by about a third. Prices may drop further under the weight of the twin assault of higher supply and lower demand… This has positive implications for India’s economy and policymaking, as it comes at a time when it has embarked on an uncertain and hesitant recovery… The Union government did something similar between 2014 and 2016. It used low oil prices to improve its fiscal health, as the budget deficit it inherited from the previous government was higher than what the official figures suggested. Second, the additional tax revenue thus generated through higher excise duty should be used to clear all dues of the central government, whether to private companies, state governments, or others awaiting tax refunds... Much policy innovation and courage, combined with integrity, will be needed for India to emerge stronger from 2020. For the country’s leadership, there isn’t much to lose from breaking free of old policy and behavioural shackles.”

 

The Hindustan Times outlined why the present instability in the global oil market further underlines the need for India to increase its efforts to move away from traditional energy sources and focus on its renewable energy sector in the long run to ensure a more secure future. “The expectation of an oil price war between Russia and Saudi Arabia has already driven oil prices below $ 35 a barrel… A $20 drop in oil prices reduces India’s balance of payments deficit by $30 billion. Most of these savings will accrue to the government, providing more than 20% top off to its expected receipts this year… Moscow decided to unilaterally adopt an alternative strategy of increasing production and driving down prices, with the idea of driving high-cost oil producers and US shale out of business. But this would also wreck the Saudi-led Organisation of Petroleum Exporting Countries… If this game of hydrocarbon chicken plays through the year, India will count its blessings. But it must recognise that eventually prices will stabilise at a higher level. New Delhi must safeguard its renewable energy sector and redouble its efforts to gassify its economy.”

 

The Hindu focused on why the fall in oil prices will impact the Centre’s disinvestment programme such as the sale of Bharat Petroleum Corporation Limited (BPCL), since it may force many big global oil companies who were expected to bid, to either not bid or place bids at lower than expected valuations. “The possibility of the market being flooded with excess production from Saudi Arabia and Russia leading to a supply shock, therefore, comes at a most inopportune time. There is still a large downside to prices from current levels especially if Russia joins the battle with Saudi Arabia and decides to hike its own output… While a fall in prices is good news for major consumers such as India and China which depend on imports for a major part of their oil needs, it may be bad news for the big oil companies and the smaller shale oil players who are highly leveraged. A collapse of these shale oil producers may set off defaults in the bond markets, setting off its own non-virtuous spiral starting with the U.S. markets... Big oil companies, which are widely expected to bid for BPCL, may either shy away from it or their bids may be much lower than expected as the company’s valuation may drop.”

 

State Bank of India (SBI) to Invest US$350m to Acquire 49% Stake in Yes Bank

 

Following the Reserve Bank of India (RBI) clamping a moratorium on Yes Bank, the Union Cabinet approved a reconstruction plan for the bank under which the SBI could invest up to US$1.4bn, including an immediate infusion of US$350m, for a 49% stake in Yes Bank. Media publications focused on how this bailout plan, which is being piloted by India’s major state-owned bank and private sector lenders under guidance of the RBI, is aimed at visibly restoring depositors’ trust in the banking and financial system of the country.

 

An article in The Hindustan Times  outlined the short term challenges including protecting Yes Bank’s depositors, and maintaining trust in the private banking system following the bailout while highlighting why there was a need for reforms in the banking sector for the resolution of failed financial firms. “To protect the depositors, the bank must be quickly reconstructed, but without distorting incentives for investors. So, losses and the cost of resolution must be fairly imposed on the investors... If Yes Bank is resolved effectively, it will help restore some faith in the system. However, this episode can still lead to a change in perception about risks in private banks. Bank runs are often self-fulfilling prophecies — people withdraw deposits under the false impression that a bank is unsafe, and by withdrawing in hordes they precipitate the failure of a healthy bank. The key is to not let false impressions form… Most G-20 countries have built specialised capabilities to resolve failed financial firms. Such a mechanism can keep a check on the regulator’s tendency to delay recognition of failure, thereby ensuring quick and orderly resolution. In India, this reform was thwarted by the political economy in 2018, when the Financial Resolution and Deposit Insurance (FRDI) Bill was withdrawn. The Centre should bring a revised version of the law and put some political capital into it.”

 

The Indian Express was critical of the Reserve Bank of India’s failure in identifying governance failures at Yes Bank and its ability to act quickly and decisively even after the identification of structural weaknesses at the bank. “For the RBI, it was imperative to act to save Yes Bank from collapsing, to preserve people’s trust in the Indian banking system. It has bailed out banks in the past, but its action this time around is egregious on two counts: The unjustifiable delay, and eroding depositor faith by limiting withdrawals at Rs 50,000… Capping withdrawals for depositors for Punjab and Maharashtra Cooperative Bank was bad enough. Using the same principle for Yes Bank will only serve to erode the faith of depositors in private banks in general, and the banking regulator, RBI itself, in particular… This action of capping withdrawals apart, what is more disconcerting is the inaction. After being slothful in identifying governance faultlines among a string of players in the financial sector — IL&FS, DHFL, and now Yes Bank, it was slow to act…. The RBI put its nominee on the Yes Bank board last May, and in November it found a Rs 3,277 crore divergence in bad loan reporting for the year-ended March 2019... But the RBI is also failing to uphold the people’s trust and faith.”

 

An op-ed in The Hindu commended the alacrity with which the bailout had been proposed, but stated that the decision to suspend normal business operations raised several worrying questions, both about the health of the banking sector, and the adequacy of the oversight role that regulators play. “Yes Bank’s troubles are not exactly new or unique and its problems with mounting bad and dodgy loans reflect the underlying woes in the borrower industries, ranging from real estate to power and non-banking financial companies… The fact that the lender ended up at the resolution stage, without ever being placed under the central bank’s Prompt Corrective Action (PCA) framework, also raises a question mark over how and why Yes Bank eluded the specifically tailor-made solution to address weakness at banks… With several other public sector banks currently engaged in merging with weaker peers as part of the Centre’s plan, it has fallen on the country’s largest bank to play the role of a white knight to a private rival. While Yes Bank’s depositors are sure to heave a huge sigh of relief, India’s banking sector is still far from out of the woods. Clearly, the RBI and Centre have their task cut out in ensuring that the need for such bailouts is obviated.”

Key insights and forecasts that show us what is to come

What the Covid-19 Pandemic May Mean for China's Belt and Road Initiative

In becoming the epicenter of a global public health crisis with far-reaching economic consequences, China has also revealed the inherent vulnerabilities of an international initiative that is governed through its reliance on Beijing.

U.S.-China Relations and Covid-19: What Can Be Done Now

The COVID-19 pandemic both highlights the need for Sino-American cooperation to find remedies, vaccines, and protocols through their collective talent and energy and, at the same time, reveals the two countries’ inability to do so.

The India-Japan Partnership Is a Crucial Pillar for the Free and Open Indo-Pacific Vision

The international system is undergoing transition with a weakening U.S.-led liberal order challenged by contesting regional visions, providing an opportunity for a stronger and more comprehensive partnership between Japan and India.

The Covid-19 Crisis Could Bring India Up to Digital Speed

The Covid-19 disruption provides an opportunity for India to hasten technology adoption across various spheres including the judicial system and the healthcare sector, both which were traditionally slow to adapt to new technology.

Russia’s Chinese Dream in the Era of Covid-19

While political relations between Russia and China are likely to weather the COVID-19 storm, the horizon could be greyer for people-to-people relations with the virus potentially resulting in a long-term negative impact on the Russian population’s perception of Chinese people.

India’s Timely Initiative to Convene SAARC During the Covid-19 Pandemic

India’s move to convene a video conference of the South Asian Association for Regional Cooperation (SAARC) states amidst the threat of COVID-19 reasserts India’s leadership as a response to China’s growing influence in the region.

India Leans Into Its Fight Against the Coronavirus

While the United States and China engage in schoolyard one-upmanship, India has an opportunity to act as a “bridging power,” one that helps itself and other nations look beyond their own borders to develop collaborative solutions in a time of international emergency. 

Flattening the Covid-19 Curve in Developing Countries

To contain the spread of coronavirus in the developing countries, more fiscal space is required to mitigate the deeper recession that it will result in, making it critical to recirculate the money that is fleeing the developing countries back to them.

Coronavirus Threatens Catastrophe in India

Following the rise in Covid-19 cases, India now finds itself preparing for an uphill battle against a virus that has already overwhelmed some of the most developed health-care systems in the world.

Coronavirus Pandemic Will Further Strain Relations Between US and China

President Trump’s criticism of China for having kept the virus secret after it was first discovered in Hubei province has ushered in a new low-point for the already strained relationship between the U.S. and China and it could get worse in the months ahead.

China’s Policy Banks Need to Hedge Against Climate Risks

Given the inordinate exposure of Chinese policy banks to fossil fuels, it is essential that they re-evaluate the bankability of their fossil fuel projects, not just for their own survival but also that of the planet.

China New Relationship with Iran

Although some of the grand strategic interests of China and Iran overlap, there is no evidence that China privileges its relations with Iran over those with the Gulf Arab states, given the GCC countries are arguably more attractive trading partners for China than a revisionist Iran.

The Key Events Driving Global instability & Opportunity

Big Picture TEST Metrics for the US, India and China, April 2020

In order to mitigate the impact of Covid-19 and the 21-day coronavirus lockdown on the Indian economy, the RBI cut interest rates by 75 basis points from 5.15% to 4.40%, the sharpest in over a decade. The Nikkei India Manufacturing PMI fell to 54.5 in February from 55.3 in January and is set for a severe slowdown in demand and output through March amid the lockdown and the rapid global spread of coronavirus across the US and Europe. On the trade front, exports and imports increased by 3.6% and 3.0% respectively over the same period last year.

 

The Official China Manufacturing PMI fell to a record low 35.7 in February, highlighting the damage from the coronavirus outbreak on the world’s second-largest economy. On the trade front, exports and imports decreased by 33% and 17% respectively over the same period last year, due to the impact of a government-imposed factory shutdown across the country.