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

Securities and Exchange Board of India (SEBI) Imposes New Environmental, Social and Governance (ESG) Reporting Requirements

The SEBI announced new ESG requirements for the top 1,000 listed entities by market capitalisation, which is expected to bring in greater transparency and enable market participants to identify and assess sustainability-related risks and opportunities.

India 5th Largest Recipient of FDI Inflows in the World in 2020

India received US$64bn in foreign direct investments (FDI) in 2020, the fifth largest recipient of inflows in the world, indicating that its strong fundamentals provide “optimism” for the medium-term performance of the economy.

World Bank Approves US$500m Loan to Support India's Informal Working Class Amid Pandemic

World Bank has approved a US$500m loan for Indian states to cope with the ongoing pandemic, future climate and disaster shocks including strengthening India's social protection programmes to help the poor and vulnerable households.

S&P Reduces India's FY22 Growth Forecast from 11.0% to 9.5%

Following a severe second Covid-19 outbreak in April and May, which led to lockdowns imposed by states and sharp contraction in economic activity, S&P reduced India's growth forecast for the current fiscal to 9.5%.

India Signs Trade Deal with Mauritius

India signed a Free Trade Agreement with Mauritius, its first such agreement with any African country, which is expected to enable Indian investors to use Mauritius as a launch-pad for business expansion into continental Africa, potentially allowing Mauritius to emerge as a ‘hub of Africa’.

SEBI to Come Out with Framework for Special Purpose Acquisition Companies (SPACs)

With several large Indian private companies looking to raise billions of dollars through SPACs in the US, the SEBIis expected to come out with framework on SPACs that will enable listing of start-ups on domestic stock exchanges.

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

Media coverage in India this month covered the US$85billion relief package by the Indian Government to support the economy following the impact of the second wave, Prime Minister Narendra Modi’s announcement of centralised procurement of Covid-19 vaccines and India’s decision to join the G20-OECD tax framework deal.

 

Government Unveils US$85bn Relief Package to Support Economy Following Second Wave of Covid-19 impact

 

Finance minister Nirmala Sitharaman announced a c.US$85bn economic stimulus and relief package focusing on enhancing healthcare facilities, particularly those for children, providing inexpensive credit to small firms, including those in the tourism, agriculture, and exports sectors, and incentivising foreign tourists by temporarily waiving visa fees. This is the fourth such package being announced by the government since last year to provide relief to individuals and enterprises and boost the economy in the wake of the Covid-19 pandemic.Various media publications focused on the how the relief package would help support the economy following the second wave.

 

An article in Hindustan Times outlined why the relief package will be crucial for the near and medium growth of the tourism and healthcare sectors, both of which have been significantly impacted by the second wave.“ The stimulus measures have been announced as the second wave of the Covid-19 pandemic ebbs and states are easing restrictions on movement and activities… the second wave is expected to have a lingering effect on the economy, necessitating relief and stimulus measures… She launched a new ₹1.1 lakh crore (US$11bn) loan guarantee scheme for Covid affected sectors with ₹50,000 crore (c.US$7bn) dedicated to improving health infrastructure in non-metropolitan cities at a maximum interest rate of 7.95% compared to prevailing interest rates of 10-11%. The balance 60,000 crore is fund is meant for other sectors, with the interest rate capped at 8.25% per annum, she said… Loans would also be provided from the corpus to both tourism companies and recognised tourist guides, she said. In order to boost tourism, on request of the industry, the government has allowed free tourist visa to 5 lakh tourists up to March 31, 2022. Tourism, an important economic activity, has been devastated by Covid-19 pandemic since March 2020. In 2019, 10.93 million foreign tourists visited India and spent $30.1 billion on leisure and business… DK Srivastava, Chief Policy Advisor at EY India termed it as the government’s first fiscal stimulus package for 2021-22 as part of its first response to “ the deleterious impact of Covid’s second wave” on the economy… “ Although this is a limited magnitude of direct stimulus, it would be desirable to follow it up with another dose of stimulus later in the year. In addition, government would do well to ensure that the budgeted capital expenditure for 2021-22 is spent in the earlier part of the financial year so as to generate benefits of frontloading of expenditures,” Srivastava said.”

 

An op-ed in Livemint was critical of the package covering that while the government’s credit backstops as its chief response to the covid crisis gels with a tight-fisted policy approach that has its merits, the package will not create a sharp revival in overall demand required to catalyse a quick economic revival. “This fiscal conservatism has been a consistent feature of the Narendra Modi government’s set of economic policies. Last year’s Atmanirbhar rescue plan, for instance, was pegged at a staggering 10% of GDP, but involved state expenditure of just a bit above 1% of GDP… While much of the once fiscally-hawkish world flirts with modern monetary theory, which imposes no restraint other than inflation on fiscal easing and cash creation to revive growth, India has opted to be watchful of excessive public debt, already about 90% of GDP. This has its merits…. The use of a classic stimulus, however, would probably not conform with the government’s broad outlook. In a conservative paradigm, money for doing nothing is a moral hazard, while a loan encourages hard work. The worry today is that the Centre’s credit-default coverage will have too little effect too late. Lending involves lender discretion and debtor obligations, after all, and even if borrowers intending to pay back foresee bright business prospects, the scheme would take rather long to multiply people’s incomes.”

 

Finally, an article in News18 covered the opinion of various economists on the package with several of them stressing the need for direct stimulus such as cash transfers to poorer households that have suffered during the pandemic to revive consumer confidence and solve the demand crisis. “ Industry leaders and economists are not fully convinced that the fresh economic relief measures announced by the finance minister would help in significantly boosting the Covid-battered economy. They say the new loan guarantees and higher cap for the Emergency Credit Line Guarantee Scheme (ECLGS) will provide temporary relief but will fall short of booting economic growth over a longer period… The latest economic relief package announced yesterday — like all the earlier relief packages — lacks direct measures. India’s relief packages have differed significantly from the ones announced by other major economies, which offered huge financial aid to households, businesses and people who lost jobs.India, on the other hand, has relied on pumping funds into infrastructure and state-guaranteed loans since the last year. The only direct relief has come in form of free food grain distribution, while all other measures have been heavily focused on low-cost lending.Such lending is likely to help businesses recover temporarily, but it will not guarantee recovery in the long run… Another point that experts highlight is that a scheme allowing small businesses to borrow money would be of no use if consumer sentiment and demand remain subdued over a longer period.”

 

Indian GovernmentAnnounces Free Vaccines for All Adults

 

Prime Minister Narendra Modi announced that the government would revert to a system of centralised procurement of Covid-19 vaccines wherein it will provide free shots to states for inoculation of all above the age of 18. Going forward, the Centre will buy 75% of all vaccines made by domestic vaccination manufacturers for free distribution to the various Indian state governments, that would no longer need to scout for their own supplies. Media publications focused on how the new policy on centralized procurement would impact India’s current vaccination drive.

 

Anarticle in Livemint lauded the decision and detailed why the centralization of vaccines is a welcome reversal of the approach taken in April amid a ferocious second wave of covid and how it is the currently the best option available to accelerate the vaccination drive across the country. “With vaccines scarce, April’s decentralization achieved little other than frustration in state capitals. While a private market can still play a supplementary role once supplies ease, asking states to make purchases was akin to handing them boarding passes for an overbooked plane after its take-off. They were not just hard pressed to arrange funds, especially since they had to shell out twice or more per dose than the Centre, a difference that had no justification, they were also rebuffed by most suppliers… It is obvious that the government was caught off-guard by the second wave, with its lack of preparation evident on all fronts. The most baffling aspect of it was how poorly vaccine supplies had been planned, given that covid jabs had to be administered irrespective of the infection curve… No matter how imperfectly vaccines protect people, they are our best hope and their administration needs to accelerate. For this, centralized bulk-buying is the way forth, even as the Centre widens its roster of suppliers. The aim should be to maximize jab availability.”

 

An op-ed in Hindustan Times covered that while the Government of India’s decision to provide free vaccines to the states for all citizens above the age of 18 years has lent a powerful impetus to the ongoing vaccination rollout, the drive has to be backed up by the other four proven elements in the strategy to stem the spread of the virus: Testing, Tracing, Treatment and educating the population on Covid-19 appropriate behaviour.“ As experts have pointed out, vaccination is the only protective shield when it comes to curbing the spread of the pandemic. Community awareness and involvement, summed up by Prime Minister Narendra Modi as “ Jan Bhagidari” and “ Jan Andolan” lie at the heart of effective pandemic management on the ground… Working in close coordination, both the Central and state government are leaving no stone unturned to educate people on the importance of vaccination, as also the need to conform to appropriate behaviour...Community support is critical to controlling the transmission of the virus, as well as quickening the pace of the vaccination campaign. Rising above party lines, people’s representatives at all levels and civil society groups should collaborate actively and act as social influencers on the ground to dispel vaccine hesitancy in some sections of the population, especially in our rural areas.”

 

Business Standard covered the opinion of various Indian industry bodies outlining how the increased role of the central government in the vaccination procurement process would help make vaccination drives further effective and accelerate the revival of the Indian economy. “ Prime Minister Narendra Modi's announcement that the central government will provide free coronavirus vaccine to states will help ensuring quick rollout of vaccine, uniformity of procurement prices and resuming normal economic activities at the earliest, India Inc said… Assocham too said that the decision to streamline vaccine procurement with the Centre bearing 75 per cent of the cost of doses would provide speed to India's vaccination programme and leave states with more resources to fight the coronavirus.… The CII said that the announcements by the Prime Minister are welcome moves in the critical task of ensuring quick rollout of vaccines.Centralisation of procurement will ensure uniformity of procurement prices and create bandwidth among states to manage inoculation of their adult populations, it said."This would also ensure an equitable allocation of vaccines in states ... Making the vaccines available for all the eligible population free of cost will go a long way in protecting the citizens and resuming normal economic activities at the earliest," it added.”

 

India Joins G20-OECD Tax Framework Deal

 

India joined the G20-OECD inclusive framework deal that seeks to reform international tax rules and ensure that multinational enterprises pay their fair share wherever they operate. The principles underlying the solution vindicates India’s stand for a greater share of profits for the markets and consideration of demand side factors in profit allocation.The new framework also seeks to address concerns over cross-border profit shifting and bring in subject-to-tax rule to stop treaty shopping. Media publications focused on what the tax framework means for India and its implications for bilateral ties with other nations.

 

An op-ed in the Financial Express outlined how the global minimum corporate tax rate of 15% would benefit India, allowing it to gain up to US$10bn of tax revenues annually since it will deter companies from setting up structures in low/no tax jurisdictions such as the UAE and Cayman Islands.“ MNCs, the G7 proposes, must pay taxes on at least 20% of the profit exceeding 10% margin in the country where they have sales. In other words, an MNC must pay taxes to a jurisdiction, based on generation of revenue/sales, irrespective of physical presence. While this would impact all MNCs, those benefiting from the digital economy will be impacted the most. Countries like India that have a large consumer base are likely to benefit from this… This will help eliminate the tax benefits from branches/subsidiaries in low/zero tax jurisdictions. The proposal has adopted a practical approach, of having a global minimum tax rate of 15% and not forcing tax-havens to increase their corporate tax...Going forward, investment structures would be devised based on commercial and economic conditions, and tax may not be the driving factor. As per the State of Justice report, India loses $10 billion every year to global tax abuse. These reforms would help in plugging such tax abuse.”

 

An article in the New Indian Express covered how the success of global tax treaty could potentially pave the way for the India-US trade agreement, given the digital tax imposed on large US multinationals like Google, Facebook, Amazon has been one of the stumbling blocks during the trade negotiations between the two countries.“ The success of global tax treaty will pave the way for the India-US trade negotiations which were stuck over digital tax… India imposed a 2% equalisation levy starting in April last year on earnings in the country by foreign technology and e-commerce companies like Amazon, Facebook and Google. It was opposed by the administration of former President Donald Trump, and he flagged the concerns many times, stopping trade negotiations… In June 2020, USTR initiated investigations into the digital services tax adopted or under consideration in ten jurisdictions: Austria, Brazil, the Czech Republic, European Union, India, Indonesia, Italy, Spain, Turkey, and the UK. The US Trade Representative had found India’s 2% equalisation levy unreasonably contravening international tax principles and specifically discriminating against US digital companies… Now that India has agreed to join the treaty, it has to let go the equalisation tax and instead it will be able to tax big multinationals doing business in the country, without a physical presence or permanent establishment, at 20 per cent of their profits.”

 

Finally, an op-ed in Hindustan Times was critical of the tax framework stating that the global minimum tax proposal of 15% unfairly targets smaller countries that have no option other than low corporate tax rates to attract investments and retain their competitiveness.“Countries, including India, lose billions of dollars every year to corporate tax avoidance. Large multinational corporations use sophisticated and creative means to avoid paying corporate tax in countries in which they undertake business activities. This is mainly done by way of transfer-pricing, debt-financing and restructuring of intellectual property rights… The question that we must ask ourselves is who will the proposal benefit the most? A short answer to that would be the US itself. This is because any “top-up” tax collected from businesses which have paid less than the minimum tax rate in overseas jurisdictions will be go back to the US since most large businesses who benefit from preferential tax rate structures are tax residents in the US. … In the past decade, the average corporate tax rate has gone down significantly. One explanation for this is that countries have now come to realise that optimal corporate tax rates attract foreign investment, which will contribute to a nation’s overall growth… India must strongly oppose a US- and G7-centric proposal disguised as international tax reform. This is particularly important when India is reeling under economic distress due to the Covid-19 pandemic. The tax system should be certain and fair, but also flexible.”

Key insights and forecasts that show us what is to come

President Biden Needs to Make Significant Progress on India-U.S. Bilateral Relations

The Biden administration should focus on further strengthening India-US bilateral relations given India is one of the few countries that has the potential to be an important contributor to Asian security and prosperity, making the relationship too valuable to lose.

The Challenge of Decarbonizing Heavy Industry

Given steel, cement, and chemicals are responsible for c.40% of global CO₂ emissions, policies with different levers will be crucial to achieving industrial decarbonization, since it will require large capital investments in low-margin industries, something most companies will be able to do on their own.

Chinese Financial Intervention in Africa

The volume of Chinese loans to the public sector in Africa is large and recent insights into the terms around this massive lending portfolio raise questions around transparency, access, and concerns on Africa-China relations.

China Overseas Coal Decline Opens Door for Clean Energy

The slowdown in new coal is an opportunity for both recipient countries and financiers, including China, to pivot fully to zero carbon technologies in order to meet energy security goals as well as sustainable economic development.

Rethinking Climate Finance to Improve Infrastructure Resilience

The recent executive order by President Biden outlines the financial markets’ importance in driving public and private action on climate resilience, but it omits details on types of financial institutions and flows of capital involved and overlooks investment opportunities in more resilient infrastructure.

Envisioning Central Asia’s Green Recovery

By continuing to balance short- and medium-term priorities and taking advantage of new technologies, innovation, and green financing, Central Asia can both recover more quickly from the pandemic as well as come off the list of the world’s most carbon-intensive economies.

G-7 New Global Financing Aims to Counter China

The new ‘Build Back Better World’ partnership that will mobilize billions of dollars toward infrastructure and other development projects aims to be an alternative to the Chinese global infrastructure push, through the Belt and Road initiative and loans from the Asian Infrastructure Investment Bank.

The Role of Multilateral Lenders in Minimising Climate Change

Multilateral lenders increasing focus on climate financing will be key to the Asian countries’ fight against climate change, including meeting the emission-reduction goals under the Paris Agreement—all while promoting economic growth and putting the region’s development on a green path.

India Should Help Smaller Powers Lead Regional Cooperation in South Asia

India should facilitate and institutionalize cooperation on key issues for the various smaller countries across South Asia in order to counter China’s growing influence in the region.

India's Cold War on Cryptocurrencies

India has been using an approach of trying to reduce domestic cryptocurrency sphere to a state-backed central bank digital currency under Reserve Bank of India, but global experience suggests that a blanket ban would be ineffective and it may be wiser to regulate them to mitigate systemic risks.

The Key Events Driving Global Instability & Opportunity

Big Picture TEST Metrics for the US, India and China, July 2021

The Indian economy PMI decreased to 50.8 in May from 55.5 in April as companies observed the slowest rises in new work and output in ten months amid intensification of the Covid-19 crisis. Both exports and imports grew by 69% and 73% respectively over the same period last year when the national lockdown was imposed. No further rate cut was announced by the RBI during this month.

 

China's factory activity growth slowed slightly in May as raw materials costs grew at their fastest pace in over a decade. The official PMI inched lower to 51.0 in May, against analyst expectations that it would remain unchanged from April at 51.1. Trade metrics have continued to improve amid improving global demand, with China’s exports and imports increasing by 28% and 51% respectively over the same period last year.