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

Foreign Direct Investment (FDI) Increases to c.US$27bn during April-August

FDI in India increased by 16% year-on-year to US$27.1bn during April-August 2020, the highest ever for the first five months of a financial year, further affirming India’s status as a preferred investment destination amongst global investors.

Indian Government Provisions US$7bn to Vaccinate Population Against Covid-19

The Indian Government has provisioned c.US$7bn for vaccinations, estimating an all-in cost of about $6-$7 per person for a population of over 1.3 billion people.

Indian Government Imposes New Regulations for Chinese FDI Approval

In a move to reduce investment flows from China amid border tensions and the growing influence of Chinese companies in the Indian start-up ecosystem, the Indian Government has announced that all FDI proposals with Chinese holding will require government approval.

Qualcomm and Jio Set to Fast Track 5G Infrastructure in India

Reliance Industries’ Jio Platforms is working with Qualcomm Inc. to fast track the development and roll out of 5G network infrastructure and services across India, which is expected to have several digital applications, from AR/VR products to vertical IOT solutions, for various industries.

US Telecom Operators to Source Low Cost Mobile Phones from India

Top US telecom operators are focusing on sourcing low-cost mobile phones from India as the US ratchets up national-security scrutiny of Chinese companies, providing Indian handset makers an opportunity to procure large multi-million-dollar contract-manufacturing orders.

India CPI Inflation at 7.3% in September

India’s retail inflation witnessed a 7.34% rise in September, higher than the upper band of the central bank’s 2%-6% target range for the sixth consecutive month, preventing the Reserve Bank of India from making any additional rate cuts.

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

Media coverage in India this month covered the third 2+2 Ministerial dialogue between US and India leading to military agreements, the fresh US$6.4bn economic stimulus package announced by the Indian Government and the Trump Administrations’ new restrictions on H-1B Visa Programme.

 

US-India Hold Third 2+2 Ministerial Dialogue, Sign Basic Exchange and Cooperation Agreement

US Secretary of State Mike Pompeo and Secretary of Defence Mark Esper visited India for the third India-US “2+2" Ministerial dialogue. During the visit, both countries signed the Basic Exchange and Cooperation Agreement (BECA), which gives India access to classified geo-spatial data as well as critical information having significant military applications from the US. Media publications focused on the evolution of the US-India bilateral relations over the previous few years and covered why a strong partnership between the two countries was important for dealing with various global and regional challenges.  An article in NDTV detailed the importance of the two countries signing the Basic Exchange and Cooperation Agreement at a time when India and China are locked in a serious military conflict along the Line of Actual Control (LAC) in Eastern Ladakh.  “BECA which is the fourth and final "foundational" understanding the US has with India, will allow India to gain access to precision data and topographical images - on a real time basis - from United States military satellites. The signing of the long-negotiated defence pact comes in the backdrop of India's tense border standoff with China in eastern Ladakh…. US Secretary of Defence Mark Esper, who is attending the high-level meeting along with US Secretary of State Michael Pompeo, is reported to have said that the growing defence and security partnership between India and the US will keep a check on the situation in the Indo-Pacific at a time when China is attempting to expand its economic and military clout in the region… In the 2+2 dialogue, the two sides discussed on a number of critical issues including ways to further expand the already close relationship between the militaries of the two countries as well as broader issues of mutual interest in the Indo-Pacific region.”

An op-ed in The Indian Express focused on how the incentives for the US and India to sustain and advance relations are stronger than ever amidst a profound structural shift in great power politics as well as turbulence in the international economic order intensified by the coronavirus pandemic. “The 2+2 dialogue comes just three weeks after the foreign ministers of the Quad — or the Quadrilateral Security Framework — met in Tokyo. The dialogue follows India’s first-ever participation, earlier this month, in a meeting of the exclusive Five Eyes grouping that facilitates intelligence-sharing among the US, Canada, UK, Australia and New Zealand… Although Delhi and Washington continue to have many differences over bilateral trade, they both see the need for rethinking the current global economic institutions that China has bent to its own advantage… Both Delhi and Washington have benefited much from the recent political investments in the relationship. As the regional and global order faces multiple transitions, the incentives for Delhi and Washington to sustain and advance India-US partnership and will continue into the next administration.”.

Another op-ed in The Hindustan Times summarised why the 2+2 dialogue marks an important moment in bilateral relations between India and the US and how the partnership between the countries is set to enter a new, more constructive phase under the next administration, whether headed by Donald Trump or Joe Biden. “For the US, the India partnership has progressed at a time when almost every other major relationship — with both adversaries and allies — has experienced immense tumult. Despite some continuing areas of difference, India is the rare country over which Republicans and Democrats compete to project themselves as the better party to partner.... the basic building blocks of an India-US defence partnership have now been put in place... Further economic relations will likely be based less on goods trade, and more on other aspects of economic cooperation… In some sense, India and the US have moved beyond the basic conceptual arguments about the value of their relationship to each other. Barring some exceptions, a fundamental understanding has permeated the bureaucracies and policy communities in both countries about the value of the partnership.”

 

Indian Government Announces Fresh US$6.4bn Economic Stimulus Package 

Finance Minister Nirmala Sitharaman unveiled the government’s second economic stimulus package of US$6.4bn, which is c.0.2 per cent of the gross domestic product (GDP) for year ending March 2021. The new stimulus package, which includes cash payments to government employees and interest-free loans to states, aims to stimulate consumer spending during India’s festive season and to increase capital expenditures. Various media publications have weighed in on how the new stimulus package would help drive consumer demand and economic growth over the coming months.  Times Now outlined how the government’s focus on shoring up capital expenditure through the economic package is expected to have a high multiplier effect that will enhance the future productive capacity of the economy and result in a higher rate of economic growth. “In order to boost infrastructure in the country, the Centre announced Rs 12,000 crore (US$1.6bn) interest-free loans to states for spending on capital projects payable over a 50-year period. The entire amount under the scheme is to be spent by March 31.... The fund will be released by the Department of Expenditure based on proposals submitted by states. These funds can be also used for settling pending bills in such projects, however, priority will be given to new projects under the scheme. Within this incentive, US$219m will be divided equally between eight North-Eastern states. Additionally, US$123m will be divided equally between the hill states of Himachal Pradesh and Uttarakhand.... The third portion of the Rs 12,000 crore (US$1.6bn)  incentive to states will be a package of US$273m, which will be available to those states that have met 3 of 4 of the conditions related to specific reforms announced in the Aatmanirbhar Bharat Package.”

An op-ed in Livemint emphasised why the latest stimulus package would stimulate demand in a “fiscally prudent way” and reduce the risk of inflation growth despite the rise in fiscal deficit following the shrunken economic output during the year. ““Measures by the government to stimulate demand must not burden the common citizen with future inflation," she said, “and must not put government debt on an unsustainable path." This captured the spirit of what turned out to be a modest exercise in spurring private expenditure... The finance minister duly highlighted the multiplier effect on jobs and incomes of state spending, especially for infrastructure and other projects. The grand sums announced, however, had fiscal conservatism written all over them... Her latest stimulus package, as she made clear, will not alter the Centre’s current borrowing target of ₹12 trillion (US$164bn) for this fiscal year, already up from ₹7.8 trillion (US$106bn) planned back in February… This would relieve some of the inflation worries that have arisen on the back of a fiscal deficit seen by analysts at 7-8% of this year’s shrunken output. Bond investors would be particularly pleased.”

An article in Business Today that summarised the opinions of various economists across the country was critical of the second round of stimulus package, covering why the package will provide limited support to growth and why the additional expenditure in the infrastructure sector is insufficient. “Finance Minister Nirmala Sitharaman projected that the various measures would boost demand to the extent of Rs 73,000 crore (US$10bn) during the remaining financial year FY21… "The total amount of both capital and consumption expenditure is Rs 73,000 crore... It's a small boost but it is entirely fiscal, which is good. All of the spending is, however, dependent on a lot of compliance conditions which have been imposed on government employees and state governments," says DK Srivastava, EY India Chief Policy Advisor....  Asked if the size of the stimulus was enough given the massive shock economy has got due to the pandemic, Suvodeep Rakshit, Vice President & Senior Economist at Kotak Institutional Equities says: "not really.".... The government has kept its focus on infrastructure to boost demand and jobs. While it has encouraged various ministries to continue spending on asset building, resource crunch is being seen as a major concern. Given that private sector investment in the sector has been subdued, the government has to spend more to bridge funding gap.”

 

Trump Administration Announces New Restrictions on H-1B Visa Programme

The US Government announced new restrictions on H-1B non-immigrant visa programme that are expected to curb US companies' use of skilled foreign workers, particularly in the technology industry. The joint rule from the US Department of Labor and Department of Homeland Security will significantly increase the minimum wages companies must pay to workers enrolled in the H-1B visa program and will narrow the definition of "specialty occupations" eligible for H-1B visas. Media publications focused on the implications of these new restrictions on the functioning of Indian IT companies in the US and also small and medium-sized contractual companies in the IT sector, which are mostly owned by Indian Americans.  An article in Livemint covered how these new restrictions are likely to have an adverse impact on thousands of Indian IT professionals, given more than two thirds of H-1B visa holders come from India. “The Trump administration has announced new restrictions on H-1B non immigrant visa programme which it said is aimed at protecting American workers, restoring integrity and to better guarantee that H-1B petitions are approved only for qualified beneficiaries and petitioners, a move which is likely to affect thousands of Indian IT professionals… It will also require companies to make “real" offers to “real employees," by closing loopholes and preventing the displacement of the American workers. And finally, the new rules would enhance the department’s ability to enforce compliance through worksite inspections and monitor compliance before, during and after an H1-B petition is approved.… The technology companies depend on it to hire tens of thousands of employees each year from countries like India and China… Already a large number of Indians on the H-1B visas have lost their jobs and are headed back home during the coronavirus pandemic that has severely hit the US economy… According to the Department of Homeland Security, the interim final rule to be published in Federal Register will be effective in 60 days.”

Economic Times focused on how the changes in the H-1B visa program would further widen the skill gap in STEM (science, technology, engineering and mathematics) skills critical across key sectors in the US economy and result in Indian IT companies looking for alternate nearshore locations like Canada and Mexico. “Sweeping changes announced in the H-1B and green card programme by the US Department of Labour (DoL) and Department of Homeland Security (DHS) have shaken India’s information technology (IT) and IT-enabled services (ITeS) sector… As per DoL’s own estimate, this change would impact around 65,000 entities and over one million H-1B visa-holders… This translates to an annual impact of about $17.5 billion increase in operating costs, and almost 50% of this cost would affect Indian IT-ITeS companies.… While in the short term, Indian nationals hired as H-1B professionals would benefit from these changes, in the long run, such a drastic wage hike would make the deputation of Indian nationals to the US economically unviable…  Many IT companies in India have already started looking for alternate nearshore locations like Canada and Mexico, for moving their crucial on-site resources who need to service their US clients in the same time zone. Further, this change will also encourage more US organisations to offshore jobs to India, despite several tax and other regulatory disadvantages in offshoring jobs that were introduced in the past by the Trump administration.” 

Finally, Hindu Business Line detailed the impact of the amendments to the H1-B visa rules in its largest market for the US$180bn Indian IT industry, projecting a reduction in Indian IT companies’ profit margins by up to 5.8 per cent during this fiscal year. “The over $180 billion Indian IT industry counts on the US as its largest market and sends engineers from India to work at onshore client locations, resulting in the dependency on the H1-B visas… “The margin impact on full implementation...will be in the range of 2.60-5.80 per cent, depending upon the level of onshore H-1B visas,” rating agency ICRA said, adding generally companies have 20-30 per cent employees onshore with 40-50 per cent employed using the H-1B visas… Changes effected include revising definition of occupations and positions qualifying for H-1B visas, increasing minimum wage level and reducing tenure for onsite third-party employee H-1B visa categories from three years to one year,,,, Larger companies will be better placed to bear the impact because of the cushion as they have higher operating margins and stronger balance sheet sizes, but a few mid-size companies may face deterioration in their credit profiles.”

Key insights and forecasts that show us what is to come

Dual Circulation Strategy to Feature Prominently in China’s Next Five-year Plan

The forthcoming 14th five-year plan is expected to crystallize the dual circulation policy to strengthen links between the domestic and foreign markets and rely more on domestic drivers of growth in order to get China’s economic growth back on track.

Covid-19 and Asia’s Infrastructure Imperative

As emerging Asia seeks to avoid excessive dependence on China and looks to find alternative financing sources for infrastructure projects following the Covid-19 pandemic, this is an opportunity for Western governments to significantly expand private investment in emerging market infrastructure.

Shanghai Cooperation Organization Enters Period of Stagnation

The growing dysfunction and stalemate within the Shanghai Cooperation Organization (SCO) have resulted in documents signed during the SCO’s annual summits becoming declarative in nature, with little follow-through and wholly dependent on the goodwill of the member states.

India Can be the World’s Great Back-up Factory

India’s production-linked incentive (PLI) scheme, designed to facilitate its emergence as a global manufacturing hub has received a strong response, but the government should now focus on reforms across labour, land and taxation to push large transnational corporations to set up base in the country.

Future of Taiwan-India Relations

India’s current big moves to publicly counter China demonstrate its long-standing dissatisfaction and frustration makes this is the best time for India and Taiwan to work together on shared economic and strategic interests, laying the foundation for the future development of both sides.

The Future of Sino-Indian Rivalry

The coronavirus pandemic, the border clashes, and India’s curbs on Chinese investment have deepened the Sino-Indian rift, with territorial dispute threatening to outweigh the benefits of economic collaboration between the two countries.

India’s Cities Need Green Infrastructure Financing

Following the outbreak of the Covid-19 pandemic, green infrastructure has been viewed as a development priority for Indian cities with different city governments exploring various sources of financing for this infrastructure including private investors, municipal bonds and PPPs.

Renaissance in India-United Kingdom Relations

As the U.K. firmly separates itself from the European Union, it increasingly seeks to position itself as a major power outside Europe and deeper ties with India is a crucial component of this endeavour.

Future of US-India Economic Relations

The current uncertainty and turbulence in the global economic order can compel leaders of the world’s two most populous democracies to expand their economic cooperation, guiding the way for progress in the future.

India Should Use Current Economic Slowdown to Implement Reforms 3.0

The current economic slowdown following the Covid-19 pandemic, provides India with a good opportunity to push ahead with tough reforms in labour reform, education, agricultural practises and public sector banking system that could revive the economy.

The Key Events Driving Global Instability & Opportunity

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

India’s economy showed signs of recovery with factory activity expanding at its fastest pace in over eight years in September as a relaxation in coronavirus lockdown restrictions drove a surge in demand and output. The PMI rose to 56.8 in September from 52.0 in August signalling a turnaround in industrial activity following the easing of lockdown curbs. The revival of global demand as major global economies gradually restart their economic activities led to exports growing at 5.8% (while imports decreased by 19.4%) over the same period last year. No further rate cut was announced during the RBI meeting earlier this month.

 

The official China manufacturing PMI for the month increased to 51.5 in September, higher than analyst expectations of 51.2 due to the simultaneous recovery of both global supply and demand. Additionally, trade metrics have continued to improve as major global economies have gradually restarted their economic activities with China’s exports and imports increasing by 9.8% and by 13.2% respectively over the same period last year.