Oil Breezes Past $95 A Barrel As Inflation Fears Return Around The World
High crude prices are obviously a threat to inflation worldwide. Countries like India are already facing heightened inflation levels, presently at 6.83% but embedded in this is high food inflation across pulses, cereals, vegetables and spices, among others
Our Top Reports For Today
- [01:00] Oil breezes past $95 a barrel as inflation fears return around the world.
- [04:21] Why are so many graduates working as food delivery agents ? NCAER’s gig economy report.
- [14:47] Will a 20% tax on outward remittances from October 1 affect flows ?
- [22:00] More countries are automating immigration systems, should India follow.
- [24:03] Disney to invest $60 billion in theme parks and cruises in focus on experiential entertainment.
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
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Oil And Beyond
We spoke about oil in some detail yesterday and it has now sailed past the $95 a barrel mark. The psychologically important figure of $100 a barrel is now in sight, oil analysts worldwide are saying.
This is a 10 month high and the first time it is happening since November. Crude has risen 30% since the end of June.
The price rise has been driven largely by supply cuts by OPEC nations like Saudi Arabia and Russia.
High crude prices are obviously a threat to inflation worldwide. Countries like India are already facing heightened inflation levels, presently at 6.83% but embedded in this is high food inflation across pulses, cereals, vegetables and spices, among others.
On the other hand, inflation has only just started to come down in many parts of the world, a U turn at this point will be difficult to digest and manage.
In the United States, prices at the pump climbed to their highest level of the year on Monday, CNN reported.
Usually, gas prices cool off after the summer driving season ends on Labor Day. But the opposite has happened this year, CNN said, adding that the national average for regular gas hit $3.88 a gallon on Monday, the highest price since October 2022. It quoted the AAA to say the gas prices have jumped by five cents a gallon in the past week alone.
The markets were closed on Tuesday in India on account of Ganesh Chaturthi, also kicking off 10-days of celebrations in the financial capital.
Speaking of finance, the share of mutual funds to bank deposits is growing sharply.
Among other things, it obviously reflects the increase in risk profile and risk taking ability of Indian savers or the sheer desperation to beat inflation. Depends on how you look at it.
This is equally reflected by the fact that the highest growth rates within mutual funds is in equity schemes.
The number of investors in itself has gone from some 40 million to 140 million in 4 years and millions are pouring money into mutual funds.
A report from BOB Research says for August 2023, bank deposit year on year (excluding the HDFC - HDFC Bank merger) was 12% while for mutual funds it was almost 19%.
Starting 2019, mutual funds have grown at almost 25% CAGR to Rs 39 lakh crore. While bank deposits grew only 10% in the same period.
Speaking of bank deposits, Indian households saved 19 percent less in 2022-23 compared to 2021-22 on a net basis, with the absolute amount of Rs 13.77 lakh crore falling to just 5.1 percent of the economy's GDP, data released on September 18 by the Reserve Bank of India (RBI) showed.
At 5.1 percent of GDP, the net financial savings of households is at a 50 year low, reports have said.
In 2021-22, net financial savings of households amounted to 7.2 percent of GDP.
The peak pandemic year of 2020-21, when spending avenues were limited, net financial savings of households had jumped to 11.5 percent of GDP from 8.1 percent in 2019-20.
Graduates in Gig Jobs
Why are gig workers, including food delivery staff, graduate degree holders? What does this say about their mobility and the relative power of the degree?
The NCAER a few weeks ago released a survey titled Socio Economic Impact Assessment of Food Delivery Platform Workers.
The report has some interesting findings.
What struck me for example was that almost 40 percent of Tier 2 city food delivery platform workers were college graduates, some 44 per cent of workers were the sole wage earners in their families, 21 percent were primary wage earners and 33 per cent were secondary wage earners.
Almost 70 per cent of workers were non-migrant, and were working in their own hometowns. 45 percent of workers lived in their own homes; this figure was as high as 70.7 percent for Tier 3 cities.
The study was built out of a telephone survey of 924 food delivery platform workers from one food delivery company spread across 28 cities with representation from all city types.
The majority of workers were below the age of 35. The average age of a food delivery worker was 29.1 (median was 28) and 99.9 percent of food delivery platform workers were not surprisingly men.
There are many more findings in this report which could be useful to understand what role the gig economy is presently playing as a jobs buffer to India’s youth. In big cities as well as in smaller towns
For example, gig jobs do confer a sense of independence and the easy entry and exit from the job, unlike the interview process in a regular job, is a big plus point.
The larger question of course is how could this evolve.
Remember the gig economy itself is not what it was or promised to be or funding has dried up and many companies in the space have wound down or shut shop, demonstrating the inherent lack of business case for these companies to exist.
I reached out to the lead author of this report, Bornali Bhandari, Professor at the National Council For Applied Economic Research or NCAER who studies, among other things, the impact of globalisation on development and analysing skills from an education, employability and employment or 3E perspective.
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TCS Above 20%
Come October 1 and life for a lot of Indian citizens who invest overseas will become markedly difficult.
The Government’s new 20 Tax Collected at Source rule kicks in. There are several categories of presumptive tax that are applicable on money you send out of the country.
Of course you are allowed to, under the Liberalised Remittance Scheme of the Reserve Bank of India, remit upto $250,000 in a financial year.
Starting October 1, which is in two weeks time, all outward remittances except for medical and educational purposes, over a threshold limit of Rs 7 lakh in a financial year will attract a TCS of 20%.
Which means that remittances such as overseas investment will attract a TCS at 20% over a threshold limit of Rs 7 lakh in a financial year. So if you are investing more than Rs 7 lakh in foreign stocks, mutual funds or property in a financial year, be ready to shell out 20% TCS on amounts above Rs 7 lakh in a given financial year.
This deadline is leading to some shifts, some deliberate and some not so because interest in equity investing overseas has waned, because people have taken some solid knocks and Indian stock markets have been performing very well.
Be that as it may, you will lock up 20% of every Rs 1 lakh or Rs 1 crore you spend in the safe hands of the government of India for several months at the very least. And most importantly, without any interest. It's a lot actually if you add up. And a good deterrent for investors at least.
In the first of a few conversations on this topic to follow, I reached out to Achin Bhardwaj, Director Asset Allocation for Delhi-based wealth management firm Client Associates and began by asking him what was likely to happen after October 1.
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HDFC MD
Speaking of banking transactions, the Reserve Bank of India (RBI) has approved the re-appointment of Sashidhar Jagdishan as the Managing Director and Chief Executive Officer of HDFC Bank, the bank told exchanges on September 19.
The re-appointment is for a period of three years with effect from October 27, 2023, the bank said.
The RBI had first approved the appointment of Jagdishan as CEO of HDFC Bank for a period of three years from October 27, 2020, when he took the charge from Aditya Puri.
There was nothing in this appointment that was unexpected or unusual of course and has been more procedural than anything else.
Where things may not be so procedural is who the RBI will approve as the next head of Kotak Bank, presently run by an interim CEO Dipak Gupta who will retire at the end of the year.
The bank has submitted two names including two whole time directors K V S Manian and Shanti Ekambaram, it is learnt.
There could of course be a third name from outside the bank.
Kotak Bank founder Uday Kotak stepped down as CEO on the 2nd of September, much ahead of his scheduled departure. He said his resignation was not abrupt and wanted to sequence it in a way that all senior people and old timers were not leaving at one time.
This happened by the way with HDFC when Deepak Parekh, Keki Mistry and Renu Karnad Sud all stepped down on the same day in sync with a merger with HDFC Bank.
Ease of DEPARTURE
In Canada, perhaps not the best example to quote right now, you can enter the country by merely interacting with a machine for a few minutes, including scanning your passport, having your picture taken and answering a few questions on the screen.
No humans.
In countries like Korea, you can go through immigration while leaving the country without interacting with a human being, again by scanning your passport and picture.
Singapore is now saying that some passengers will soon be able to depart from its Changi Airport without a passport, as part of changes to the city-state’s immigration law that allows for end-to-end biometric clearance, Bloomberg is reporting.
From the first half of 2024, biometrics will be used for authentication at various automated steps in the departure process, from bag-drop to immigration and boarding, communications minister Josephine Teo said in parliament Monday.
“This will reduce the need for passengers to repeatedly present their travel documents at these touchpoints, allowing for more seamless and convenient processing,” Teo said.
Singapore is gearing up for more traffic and passengers and expecting to return to pre-pandemic peaks shortly, alongwith building a 5th terminal and a high speed rail linkage to Malaysia’s southern state of Johor expected to be ready in a few years. And as to why more people could come to Singapore in coming years, one answer will follow shortly.
In India, inbound and outbound immigration can be a matter of luck and chance in several cities. If your luck is bad, then you could spend hours in the middle of the night, particularly inbound, or you could sail through in 10-15 minutes.
India’s checks outbound in general seem more rigorous than inbound, being of course an anecdotal observation shared by many I know.
But as we speak of biometric passports and Digi Yatra kind of facilities where we have the demonstrated ability to link databases at the back end and real time, we should be looking at automating immigration for quicker flows at airports.
Perhaps outbound to start with and then inbound, or inbound for citizens and outbound for all later.
DISNEY to invest in $60 billion theme parks
Before I go, interesting news from Disney which is in the midst of some turmoil at the top deck. The entertainment giant has announced it will invest around $60 billion to expand its theme parks, cruise lines and similar ventures over the next decade.
The announcement is interesting because in many ways it suggests at least one firm path entertainment is heading towards which is more in the area of real world experiences, as opposed to lets say, filmed entertainment though Disney may have separate growth plans.
The company said that because of its strong financial standing it could invest more in its parks, experiences and products division. Disney announced the increased investment in a filing yesterday morning with the Securities and Exchange Commission, the Wall Street Journal reported.
Disney said it would prioritise spending on projects that could generate strong returns, including for its U.S. and international parks and cruises.
Disney said it has more than 1,000 acres of land it could develop into theme park space. The company plans to roll out more cruise ships and establish a new home port in Singapore in 2025.
Disney says it has the largest physical footprint of any global theme park travel business, comprising 12 parks across six sites globally and Disney Cruise Line, which visits 94 ports in 40 countries. “Notably, Walt Disney World Resort is twice the size of the island of Manhattan,” Variety magazine quoted the company saying while “Disneyland is the most ‘Instagrammed’ place on Earth, and tens of millions of guests travel on Disney’s transportation networks each year.”
About 100 million people visit Disney’s theme parks each year, but “there is still enormous untapped potential for reaching more consumers,” the company said. According to Disney’s internal research, the addressable market for its theme parks is more than 700 million people.
On that note of wanderlust and fun real world experiences, have a great day ahead and do log into www.thecore.in and check out our newsletter and website.
See you.
