Nov '2022

The Global Analyst

The Global ANALYST is one of India’s leading business & finance magazines. The Global ANALYST, a monthly magazine, contains intellectually stimulating articles on cutting-edge and contemporary topics. Besides, it also features interviews with as well as articles written by eminent national and international experts from industry, academia (including IIMs and IITs), as well as regulatory bodies (like RBI), etc., encompassing areas such as financial markets, economics, strategy, international trade, banking, technology, start-ups, e-commerce, industries, to name a few.

Contents : (Nov '22)

Business Briefs
Welcome to Twitter, an Elon Musk Company
Amit Singh Sisodiya

After months of drama and legal tussles, Elon Musk, the boss of X-Space and electric car pioneer Tesla, finally gets to own the popular microblogging platform Twitter, shelling out a staggering $44 bn. His detractors, however, call the deal too expensive. But if you thought the drama ended with what is easily one of the most expensive buyout deals in the social network space, then you may be mistaken. For, what is happening currently, post acquisition, it looks like the beginning of the next chapter in the Musk-Twitter saga. Meanwhile, Musk, announced his arrival at the social network giant's head office with a tweet that read, "Entering Twitter HQ - let that sink in!" His first major decision, as 'Chief Twit' (as he now calls himself), has been the award of 'golden parachutes', worth $122 mn, that he has handed over to the outgoing top executives-in a way, he has removed the entire top leadership. "Musk fired Parag Agrawal, who succeeded Jack Dorsey as Twitter CEO, and Chief Financial Officer Ned Segal, both of whom were in the building at the time and escorted out by security, The Verge commented, adding, "Vijaya Gadde, the company's policy chief whom Musk had publicly criticized, was also ousted. Sean Edgett, the general counsel, is gone, too (as per Bloomberg, security escorted him out, as well.) Chief customer officer Sarah Personette was also fired." The outgoing CEO has been offered $38.7 mn, Segal got $25.4 mn, Gadde was given $12.5 mn, and Personette, who earlier tweeted about how excited she was for Musk's takeover, received $11.2 mn.

It may be recalled that Musk had originally offered to buy Twitter in April this year. He, however, changed his mind and tried to back out in July. He was back to the negotiation table once again when, on October 4, he filed a letter with the market watchdog Securities and Exchange Commission affirming his commitment to the original deal. On October 28, he tweeted, "The bird is freed", a day after he finally became the social network,s official owner.

Even as telcos race against time for a nationwide rollout of their 5G services, lack of skilled manpower could play spoilsport, warn industry experts. According to the Telecom Sector Skills Council (TSSC), India will need 22 million skilled workers by 2025 as the country takes a leap into 5G-led technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), robotics, and cloud computing to reap the benefits of 5G. However, as per the telecom skilling body, a non-profit organization set up by the Cellular Operators Association of India, the India Cellular and Electronics Association, and the National Skill Development Corporation, the sector faces a massive talent shortage of 28% ,and that may prove to be a major stumbling block for companies looking to capitalize on the growth opportunities offered by this promising new telecom technology. "Considering technologies like the Internet of Things (IoT), AI, Machine Learning (ML), Big Data, cloud computing, and robotic process automation, roughly about 22 million workers will be required to skill up or upskill themselves to match industry demand by 2025," ET quoted Arvind Bali, CEO, TSSC, as saying. He added, India is poised to become a global supplier for both electronics and human resources, and that to achieve this, there will be a need to create an extended skill network with the participation of both industry and academia. Staffing firms such as Teamlease and NLB Business Services too have expressed concern over the shortage of skilled individuals, who can help build applications for the next-generation services, which does not augur well and could hurt the growth prospects of the industry as a whole. 5G rollout could increase the job crunch in the technology sector, with rising demand for skilled individuals, including engineers, who are already in short supply, rue the hiring firms. According to Sachin Alug, Chief Executive, NLB Services, the demand for skilled manpower such as radio frequency engineers, 5G open radio access network architecture specialists, user experience design professionals, and AI, ML and augmented reality professionals has been growing. "Many employers are laying off staff with unessential skill sets. Tech will evolve, and 5G will soon aggravate the skill shortage further," he warned. As per the jobs platform Indeed, job postings for telecom and 5G sectors in the 12 months through September have risen by more than a third, or 34%, while demand for telecom engineers grew 16% between August and September 2022. Other hiring firms too have been reporting similar trends. For example, according to the job site,s 'Monster Employment Index, for September, telecom hiring was up 13% as firms launched digital services across cities, expanded data center capabilities, and hired for specialized roles, Mint said. Another segment that is expected to see an uptick in demand is security professionals. Unfortunately, there is also a significant demand- supply gap. "There was a talent mismatch of 25% for security between August 2019 and August 2022. 5G will lead to a major spike in jobs for designing security systems and strengthening network architectures," according to Saumitra Chand, Career Expert, Indeed India. Apart from these, the demand for trained manpower in areas such as sales could also significantly rise as companies expand their footprint. As per Mayur Taday, Chief Business Officer, TeamLease Services, more professionals will be required for pan-India broadband penetration, resulting in more demand for sales, installation, and wiring technicians. According to him, the rollout of 5G services will continue for the next two years and will likely create 1,000 new jobs every month. "At the advanced level, where 5G IoT is helping to grow use cases in gaming, education, healthcare, smart homes, and agriculture, among others, we see a dearth of highly-skilled IT professionals with skills in IoT, AI, ML, data science and analytics,the cloud, information security, data centers, green energy, etc., and this is where telecom and technology companies can work together," he told Mint.

Rhaetische Bahn (Rhaetian Railway, or RhB)-a Swiss railway operator-has set a new world record for completing a journey with the world,s longest passenger train. The nearly 2 km long train, comprising 100 connected coaches, completed the one-off world record journey, cruising along the UNESCO World Heritage Albula/Bernina route from Preda to Alvaneu and over the Landwasser Viaduct. As the hundreds of thousands of curious onlookers who had lined the valley watched in sheer disbelief and amazement, the train, "plummeted from 1,788 m above sea level at Preda to 999.3 m at Alvaneu, using a succession of spirals, soaring viaducts and tunnels," winding its way about 25 km through the Alps. Indeed, there could,ve been no better way to celebrate the 175th anniversary of the country,s first railway and showcasing its engineering excellence. For the number aficionados, the longest train in the history of the world railways was manned by seven drivers, had 4,550 seats and weighed 3,295 tons, and passed through 22 helical tunnels and 48 bridges enroute the spectacular one-off journey. Swiss passenger rail transport began its journey in 1847, when the country,s first railway, the Swiss Northern Railway (also known as the Spanish-Brotli Railway), operated the Zurich-Baden line. According to CNN, before RhB, the record for operating the world,s longest train was held by Belgium and, before that, the Netherlands.

Brazil,s former leftist President Luiz Inacio Lula da Silva is back at the helm of the country,s affairs after sealing an 'astonishing political comeback,. The ex-president beats the far-right incumbent Jair Bolsonaro in what was, as The Guardian describes, 'one of the most significant and bruising elections in the country,s history,. It is the third time he is taking over the reins as the country,s head. Silva, a former factory worker who became Brazil,s first working-class president exactly 20 years ago, secured 50.9% of the vote, while his opponent, Bolsonaro, a firebrand who was elected in 2018, managed only 49.10%. Addressing journalists at a hotel in Sao Paulo, Lula vowed to reunify his country after a toxic race for power that has profoundly divided one of the world,s largest democracies, The Guardian reported. "We are going to live in new times of peace, love, and hope," said the 77- year-old, who was sidelined from the 2018 election that saw Bolsonaro claim power after being jailed on corruption charges that were later annulled. "I will govern for 215mn Brazilians ... and not just for those who voted for me. There are not two Brazils. We are one country, one people - a great nation," Lula said to applause. "It is in nobody,s interest to live in a country that is divided and in a constant state of war." Lula,s victory marks 'the downfall of a radical rightwing president whose presidency produced an environmental tragedy and saw nearly 700,000 Brazilians die of Covid,.

The US economy posted its first period of positive growth for 2022 in the third quarter, after two successive quarters of negative growth, which may ease recession fears, although temporarily. The country,s Gross Domestic Product (GDP) (a sum of all the goods and services produced) rose 2.6% year-on-year (y-o-y) in the third quarter ended September 30, 2022, according to the 'advance, estimate released by the Bureau of Economic Analysis (BEA). That was above the Dow Jones forecast of 2.3%. The real GDP shrank 0.6% y-o-y in the second quarter and had decreased 1.6% y-o-y in the first quarter. The US real GDP increased 6.9% in the fourth quarter of 2021, while economic growth during the whole of 2021 stood at 5.75%. A narrowing trade deficit and higher consumer spending and government outlays helped the economy rebound during the recently- concluded September quarter. However, the growth came in large part due to a narrowing trade deficit, which economists expected and consider to be a one-off occurrence that won,t be repeated in future quarters, CNBC said. GDP gains also came from increases in consumer spending, non-residential fixed investment, and government spending. The report, the news website said, reflected an ongoing shift to services, over goods, with spending on the former increasing by 2.8% while goods spending dropped 1.2%. Declines in residential fixed investment and private inventories offset the gains, the BEA said.The underlying picture from the BEA report showed an economy slowing in key areas, particularly the consumer spending, and private investment. According to CNBC, consumer spending as measured through personal consumption expenditures increased at just a 1.4% pace in the quarter, down from 2% in Q2. Gross private domestic investment fell 8.5%, continuing a trend after falling 14.1% in the second quarter. Residential investment, a gauge of homebuilding, tumbled 26.4% after falling 17.8% in Q2, reflecting a sharp slowdown in the real estate market. On the plus side, according to the website comments, exports, which add to GDP, rose 14.4% while imports, which subtract, dropped by 6.9%. Net exports of goods and services added 2.77 percentage points to the headline total, meaning GDP essentially would have been flat otherwise. But the biggest news, a positive one, was on the inflation front. The chain-weighted price index, a cost-of-living measure that adjusts for consumer behaviour, rose 4.1% for the quarter, well below the Dow Jones estimate for a 5.3% gain, due in large part to falling energy prices. Also, the personal consumption expenditures price index, a key inflation measure for the Federal Reserve, increased by 4.2%, down sharply from 7.3% in the prior quarter. Core prices, excluding food and energy, increased by 4.5%, about in line with Wall Street expectations. So, the big question now is, would the Fed like to slow its rate hike spree? Or, is another 'big-bang, rate hike in store?

OPEC+ Production Cut

Will It Backfire?
N Janardhan Rao

Amidst the allegations of dominance and political ploys, OPEC and other oil-producing countries (including Russia) announce to cut oil production output, despite an already tight market, in a move that is bound to send energy prices soaring again.

A coalition of oil producing nations, also know as OPEC+, that controls more than 40% of global oil supplies and about 90% of proven oil reserves, took a controversial decision on October 5 to cut production by 2 million barrels a day (mb/d), an amount equivalent to 2% of the world's total output. After the biggest production cut since the start of the pandemic and months of market volatility and missed targets, the oil cartel which comprises the OPEC group of 13 countries and 10 allies led by Moscow, is determined to restore its credibility and regain control of crude oil price. It may be recalled that oil prices have fallen to around $80 a barrel from more than $120 in early June amid growing fears about the prospect of a global economic recession. The decision comes despite the fact the energy cartel has already been producing (3.6 mb/d) less than its quota of 42.4 mb/d.

Forex Markets
Central Banks

Of a Rampaging Dollar, Global Interest Rates, and EM Currencies

The US Federal Reserve's relentless rate hike spree, which has caused a seemingly unstoppable bull-run of the dollar, is ensuring that global inflation pressures are being transmitted to the rest of the world. This has forced other central banks to follow suit or else risk the flight of capital as interest rate differentials narrow.

Most major central banks around the world, led by the West, continue to maintain their hawkish stance in a hint that the war on inflation is far from over. For example, the US Federal Open Market Committee (FOMC) concluded its September 20-21 meeting by hiking the federal funds target rate by another 75 basis points (bps) to a range of 3% to 3.25%. For the record, the Federal Reserve has effected five rate hikes this year so far (albeit in tranches), beginning in March when it raised the benchmark rate by 25 bps to the range of 0.25% to 0.50%-the first rate hike announced by the US central bank since 2018. In the European Union, the European Central Bank, central bank of the 19 EU countries whose official currency is the euro, also implemented a similar rate hike in September, lifting its benchmark rate to 1.25%.


In a Full-Blown Economic Crisis?
N Janardhan Rao

The world's sixth-largest economy is grappling with a plethora of thorny challenges, from soaring food prices to high energy costs to low growth to, last but not least, an unusually long period of political instability. Given that, it is clear the task for the newly appointed government led by Rishi Sunak, the first British PM of color, is cut out.

The UK economy is in a major cri sis, exacerbated by a raft of thorny issues, including the economic fallout of Brexit; Boris Johnson's numerous U-turns; and Liz Truss's shocking departure from 10 Downing Street. Truss, who became the fourth prime minister to resign since 2016, said she was sorry for the mistakes made by her government and accepted responsibility for "going too far and too fast" with her contentious "trickledown" economics approach. However, her faulty policies and her failed bid to deliver "growth, growth, growth" via unfunded tax cuts (which sparked a bond market revolt) have only pushed the economy into an even deeper crisis.

Clean Energy

India's New Hope

India, which has enhanced its share of renewable energy with the support of solar and wind energy, would do well to also include geothermal energy in its armory towards reaching the net-zero goal.

While it is true that India's fossil fuel consumption will remain high for the next few decades, which would push both carbon and greenhouse gas emissions higher, the government is doing well to tap all the possible renewable energy sources, including solar and wind, which could contribute to bringing down emission levels. The need to reduce greenhouse gas emissions and global warming has heightened the urgency of researching new types of renewable energy sources. In that quest, it has now stumbled upon one more such clean energy source: geothermal energy.

Cover Story

The Funding Winter Is Here
Amit Singh Sisodiya

Indian startups' funding winter may last longer than expected as the macro environment becomes all the more challenging, while jittery investors adopt a 'wait and watch' approach.

Altough winter is officially yet to set in, India's startup ecosystem has already begun to feel the biting chill. A massive drop in venture funding, a drying deal pipeline, rising 'dry powder' (an industry jargon) and shrinking average ticket size only confirm that Indian startups are already in the middle of what many call a harsh funding winter, even before winter actually arrives. According to a PwC report titled, "India Start-up Deals Tracker Q3 CY22", funding in the world's thirdlargest startup ecosystem hit a two-year low at $2.7 bn in the third quarter ended September 30, falling both sequentially as well as on a year-on-year basis. In fact, the decline in funding activity was much sharper compared to the same period last year when investors pumped in a record $11.4 bn across 326 deals.

Global Central Banks

Rate Hiking Spree

The rate rising spree of central banks poses recession risks to economies of the world.

Raising interest rates is a dampener for growth. When growth is affected, it impacts the purchasing power of companies and consumers. The increase in interest rates is akin to a levy of taxes which affects the way income for the consumer, investment in capital goods, investment in stocks and investments are made. The reduced purchasing power also leads to a reduced investment in securities and financial assets. All this leads to reduced money in the economy and in turn, leads to recession.

Central Bank Digital Currency

Revolutionizing Digital Payments
Amit Singh Sisodiya

Globally, more economies are increasingly leaning towards digital solutions. Indeed, new technologies like CBDC need to be adopted, as was the case with cryptocurrencies, so that they can be used efficiently in the fast-changing payment ecosystem.

The currency's evolution has been steady, from the exchange of goods and services to metal coin minting to currency notes and now to digital currency. This evolution is inevitable with the end-users' changing needs and global scenarios. However, the evolution has been phenomenal more so during the past decade with the advent of several technological developments that have paved the way for out-of-the-box innovations. The digital currency revolution, conceptualized by the invention of distributed ledger technology (blockchain), started with the introduction of cryptocurrencies like Bitcoin which gained huge popularity and acceptance.

Central Banks Pivot

Shock Therapy on the Global Economy

The drive by central banks around the world to control rising inflation rates is beginning to cause serious cracks in global bond markets while increasing financial instability.

The cost of borrowing and servicing debt is rocketing. Suddenly, investors holding government bonds are facing serious losses, particularly pension funds in Europe that tend to invest in long-term bonds using short-term interest rates to borrow-short-term interest rates are up; long-term bond prices are down. That's a mismatch in asset values. In the case of the United Kingdom, pension funds and others had been employing a piece of financial jiggerypokery called "liability-driven investment" schemes. This was the practice of buying bonds that were then used as collateral for loans to purchase more bonds-as much as €1.5 tn over the last decade since the Global Financial Crisis. If the value of the bonds used as collateral drops like a stone, as it has just done, then the ability to borrow vanishes. So the Bank of England (BoE) has been forced to loan €65 bn to such bondholders to bail them out of their Ponzi scheme.

Digital Lending

A Case for Credit Card Innovation

Despite the overwhelming success of UPI, there exists scope for product innovations in both the B2C as well as B2B credit card segments. This will give a further boost to digital payments in the country and facilitate a faster transition towards a less-cash society.

With seven billion transactions per month, the number of real-time digital payments and transfers in India is three times as much as in China and six times as much as in the US. This incredible feat has decisively muted all those who scoffed at the idea of 'Digital India'.

The buzz in the fintech space is driven by the BHIM UPI application that has facilitated real-time payments from the mobile phone in a flash. With its 2-step secure authentication for the transfer of money from one bank account to another using just the mobile number, BHIM UPI has set new global standards. The winning feature is the digital payment is at zero transaction cost.

Macro Matters
Australia: Yet Another Rate Hike

Amit Singh Sisodiya

Australia: Yet Another Rate Hike
The Reserve Bank of Australia announces another rate hike as inflation hits 32-year high.
With seven billion transactions per month, the number of real-time digital payments and transfers in India is three times as much as in China and six times as much as in the US. This incredible feat has decisively muted all those who scoffed at the idea of 'Digital India'.

The 'Lucky Economy'-one of the many sobriquets by which Australia is known by-needs a stroke of luck (perhaps a bountiful one) as it battles the worst inflation in years. Led by surging housing and food prices, the consumer price inflation in Australia hit a multi-decade high during the just concluded third quarter ended September 30, 2022, which has stoked fears that its central bank will raise rates even further when its board meets next.

Decoding Data
'Crude' (Oil) Facts
Amit Singh Sisodiya

Global Crude Oil Demand Rebounded in 2021 after falling a year before, suggests the latest study by BP.

According to the 'Statistical Review of World Energy 2022' report, released recently by the UK-based petrochemicals giant BP, global oil consumption rebounded sharply in 2021 after experiencing a record decline in 2020 in the wake of the Covid-19 virus outbreak. Crude consumption had risen for nine straight years before demand fell by more than 9% in 2020. As per the study, oil consumption increased by 5.3 million barrels per day (b/d) in 2021, but remained 3.7 million b/d below 2019 levels. Oil demand in 2021 averaged 96.9 million b/d. Much of this weakness, said the report, was concentrated in aviation-related oil demand, which was more than 2.5 million b/d (33%) below 2019 levels. Nevertheless, it has consistently been losing out to renewables and other substitutes. Fossil fuels accounted for 82% of primary energy use last year, compared to 83% in 2019 and 85% five years ago, the report said.

Executive Health, Work Addiction, and Executive Burnout

"Look After Yourself ... As Well As Your Employees!"

In some organizations, there is still a stigma attached to executive illness. Having open and transparent arrangements to support the sick executive will help remove any sense of stigmatization that some (i.e., political rivals perhaps) may wish (inappropriately and unfairly) to attach to an executive's absence.

While the health and well-being of every member of the workforce matters a great deal, this article focuses on executive health and the importance of ensuring that each member of the executive elite takes good care of themselves. If they don't, then who else will?

A primary responsibility of leadership is the welfare of staff. Another is ensuring the continuity, and continuing success, of the business as a whole. The drive to make things happen, be successful, develop the business and consider the well-being and welfare of staff can actually result in a leader neglecting to monitor and manage their own health and well-being.

TS Eliot

Centennial of The Waste Land

As the literary world is quite excited about the centennial celebrations of Eliot's masterpiece of modernism, Analyst too joins the lot in celebrating "What the Thunder Said".

October 2022 marked 100 years since TS Eliot's The Waste Land was published. Literary enthusiasts and critics have already written hundreds of thousands of words to give expression to their impression about these four hundred and thirtythree lines that constitute this landmark poem during the last hundred years and I am sure tens of thousands more are likely to be written in the centenary year alone.

Now, you may question, what is so unique about The Waste Land that stirred modern men to write so much about so few lines that roar all about unfulfilling lives, "broken images" and loss-sounding more like a parody, pastiche, allusion. The answer is simple: breaking from tradition, yet desperately attempting to rebuild with