The Stock Markets See Longest Rally Of 2024
Indian stock markets rose for the seventh straight session on Friday, their longest rally this year
On Episode 371 of The Core Report, financial journalist Govindraj Ethiraj talks to Dhairyashil Patil, president of the All India Consumer Products Distributors Federation as well as Shankkar Aiyar, economic journalist and author.
Our Top Reports For Today
SHOW NOTES
(00:00) The Take: How the gap between private and government jobs is increasing
(05:38) The stock markets see longest rally of 2024 and now braced for opening of the sluice gates
(07:18) Silver imports are set to zoom as industrial and personal application demand increases
(08:30) Sebi cracks down on Anil Ambani but not other agencies
(10:29) Why is the Government not being as strident about quick commerce while attacking the Amazons of the world?
(20:03) The Government’s job’s conundrum, the way forward
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regards any feedback, you can drop us a message on [email protected].
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Good morning, it's Monday, the 26th of August and this is Govindraj Ethiraj, headquartered and broadcasting and streaming from Mumbai, India’s financial capital.
The Take: How the gap between private and government jobs is increasing
Close to 5 million people earlier applied for around 60,000 jobs in the Uttar Pradesh police.
The Karnataka Examinations Authority received around 500,000 or half a million applicants for 1,000 village administrator jobs according to a local news portal News Karnataka.
The figures might not be fully accurate but looking at the number of similar examples we hear periodically of massive numbers of people applying and physically landing up, often risking life and limb for Government jobs, the truth cannot be too far or would be worse.
The central government has approved a new Unified Pension Scheme which is expected to benefit around 2.3 million government employees and will also serve as an alternative to an existing National Pension Scheme.
There are several aspects to the new pension scheme which assures pension post retiring, the best case being a qualifying service of 25 years after which the pension would amount to 50% of the basic salary drawn for the past 12 months plus dearness allowance
I am not getting into more details, for example, the assured pension on demise and so on, because you can find them quite easily.
What it does mean is this.
The perception of Government jobs as a means to safety and security over the long term will only increase and thus amplify the disparity that already exists in the minds of young Indians.
A driver who worked with me a few years ago said he was leaving me because he was applying to a Government job involving driving a truck in conditions which sounded quite harsh.
He admitted the salary was actually a little lower but he said he would get long term job security and medical benefits for his family.
He had even paid off some agent to help as I could see.
I wished him all the best and as it happened ran into him a few years later, still before Covid. When asked how his Government job was going, he said he did not get it and was cheated by someone.
And he was back to working with some family.
The latest Unified Pension Scheme only increases this perception of job security with the Government.
Some people will say that taxpayer money is increasingly funding Government employees who don’t deliver their best services to us.
Be that as it may, the larger problem is that the private sector will not and cannot keep up to the promise and challenge of job creation, at least at the level required.
Last week, the IMF's First Deputy Managing Director said India needs to create between 10 to 24 million jobs annually in the next 5-6 years.
The Government’s Chief Economic Advisor said 8 million jobs last month.
Now contrast the need versus the availability of Government jobs.
Now, the Government, by offering better pension schemes which also it may not have a choice about, is increasing the gap between the uncertain private jobs and the certain Government jobs.
The larger problem is that Government jobs promise a certainty which they should not in this era.
A Government job may offer relatively more security but it cannot be that once in, you remain for life and only lose out when caught out committing a crime or such.
There are of course options for pension contributions in the private sector too but that is for the handful of well paid organised sector jobs which is only around 7% or so of all jobs.
And none of them will pan out the same way.
Ask me, I am the child of a public sector employee and I marvel at the perks that my parents were entitled to even after retirement which I cannot even dream of.
Either way, it's my problem to figure out, whether through smart investing or appropriate life insurance and health insurance schemes.
But most unorganised sector workers, despite some of the newer savings and insurance options available, can barely expect the same level of security and safety of Government jobs as we know them today. So even if they work in the unorganised sector they will always aspire for a Government job.
One reason why unemployment levels stay higher for longer among young people is because they are going after Government jobs, year after year, including the most desired, in the Indian Administrative Service.
Which in turn drives a thriving industry of predatory coaching classes which prey on insecure parents and their children.
More on India’s jobs challenge with my guest shortly but
This is a problem that needs to be attacked at various levels but we must also work towards making Government jobs less secure and thus creating more balance in the jobs market.
In that process, we can actually pay Government employees more and thus better link productivity and performance.
None of these are brand new ideas but the time to do it has come. Creating more disparities and asymmetries in the job market is dangerous. The new pension scheme will make Government employees potentially happy but it will create much discontent elsewhere.
Which brings us to the top stories and takes:
The stock markets see longest rally of 2024 and now braced for opening of the sluice gates
Why is the Government not being as strident about quick commerce while attacking the Amazons of the world ?
Silver imports are set to zoom as industrial and personal application demand increases.
Sebi cracks down on Anil Ambani but not other agencies.
The Government’s job’s conundrum, the way forward.
Markets & More
Indian stock markets rose for the seventh straight session on Friday, their longest rally this year though the euphoria, if so, was muted as all eyes turned to the Federal Reserve and its September moves.
More on that shortly.
The benchmark indices Sensex and Nifty ended Friday's mostly flat trading session slightly higher as investors awaited clues about possible interest rate cuts by the Federal Reserve.
At the closing bell, the BSE Sensex was at 81,086.21, up by 33.02 points while the broader Nifty 50 was at 24,823.15, up marginally by 11.65 points.
Now, the Federal Reserve Chair Jerome Powell’s widely anticipated speech affirmed expectations for an interest-rate cut at the central bank’s next gathering on Sept. 17-18, bolstering stock prices and Treasuries, Bloomberg reported.
“The time has come for policy to adjust,” Powell said Friday. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks, he said.
And of course while everyone is watching the Federal Reserve, other central banks are also indicating lowering rates further.
Bank of England Governor Andrew Bailey said Friday that while it’s “too early to declare victory” over inflation, the risks of persistent price pressures appear to be receding.
The UK central bank lowered its benchmark interest rate earlier this month while several members of the European Central Bank’s Governing Council present at the conference said they would support another reduction in interest rates next month.
The ECB lowered borrowing costs in June. Centeno called a decision to ease in less than three weeks “easy,” given the data on inflation and growth.
Silver Imports
In commodities, something we have been discussing here for some time, consumption of silver is set to shoot up as people will buy for both industrial and non industrial purposes or for jewellery.
India's silver imports are on course to nearly double this year due to rising demand from solar panel and electronics makers, and as investors bet the metal will give better returns than gold, Reuters quoted importers saying.
India imported 3,625 metric tons of silver last year.
There has been a general feeling among commodity experts The Core Report has spoken to in recent months that that silver has turned out to be a good investment purchase with the ability to deliver similar returns to gold and prices are already quoting at a decade high.
This year's purchases could rise to between 6,500 and 7,000 tons due to the rising industrial demand, a silver importer told Reuters.
India imported around 4,554 tons of silver in the first half of the year compared to 560 tons a year ago, trade ministry data showed.
Sebi Cracks Down on Anil Ambani
India's markets regulator Securities & Exchange Board of India on Thursday banned Anil Ambani, brother of Mukesh Ambani, Chairman of Reliance Industries and 24 others from the securities market for five years on charges of diversion of funds.
Prior to a messy split up in 2005 or almost 20 years ago, the two brothers were in the same company or parent Reliance Industries.
Anil Ambani left with several companies including power, telecom, finance and entertainment, almost all of which are now wound down, including the company in question.
The Sebi also imposed a fine of Rs 25 crore on Ambani, saying he orchestrated a scheme to "syphon off" funds from Reliance Home Finance Ltd
Reliance Home Finance was in insolvency and then bought by another company.
The ban means Ambani and the others affected are restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, the regulator said.
The regulator charged Anil Ambani on two grounds - diversion of substantial funds of the company to the detriment of the company and its stakeholders, and for acts of concealment from shareholders by manipulating its financial accounts.
The regulator said more than Rs 9,000 crore worth of loans from Reliance Home Finance were made to "nondescript borrowers who had no demonstrable financial ability to repay any of it", according to Reuters which quoted the regulator saying more than Rs 5,000 crore worth of loans were granted to entities connected to promoters of Reliance Group.
“The facts of this case are particularly disturbing since it reveals a complete breakdown of governance in a large listed company, apparently orchestrated by and/ or at the behest of the promoter aided by the indulgent management of the company,” SEBI added.
So the interesting thing is that the case is being handled as a securities industry problem and not a banking industry challenge, presumably because the funds are shareholder funds and not borrowed from banks or as I can see at this time.
If bank money was involved, this would have become a case involving the Indian penal code.
Why Is The Government Not So Strident On Quick Commerce?
India’s trade minister the other day fired a fresh salvo at Amazon, repeating what he said four years ago and words to the effect that they were bringing in investment to fund their losses.
Not only that, he wondered about the social impact of ecommerce.
All this he did at an event to release a report that ostensibly talked about how ecommerce had created jobs and opportunities for small businesses.
Interestingly, he seems to have taken a step or two back after that statement in a subsequent event but some of his points are valid and are definitely worth discussion for instance the fact that foreign ecommerce companies cannot own inventories of the products they sell.
They don’t at least technically it would appear though to a consumer it's all seamless.
But the same logic applies to quick commerce companies.
The only difference is ecommerce companies like Amazon and Walmart-Flipkart are foreign or American companies with Indian subsidiaries while the quick commerce are much feted Indian startup founders with almost entirely foreign capital.
That distinction of attacking one while staying silent on the other is not a very fair one I would think if we are to draw one.
Because if you take away the Silicon Valley type venture capital which is funding the quick commerce companies, their ability to do reckless discounting would disappear almost overnight.
Because quick commerce which in many ways is a bigger threat to precisely the constituency that arguably matters more politically.
Quite simply, quick commerce operations at scale have a direct impact on small shops and kirana stores, far more than Amazon does.
How much and why is something we will come to shortly.
The latest development is that the fast consumer consumer goods (FMCG) distributors' association has written to the Ministry of Commerce and Industry, expressing its apprehensions that the "unchecked expansion" of quick commerce platforms was leading to severe disruptions in the retail ecosystem.
The All India Consumer Products Distributors Federation on Thursday wrote to the government, saying that significant challenges were posed by the rapid growth of quick commerce platforms such as Blinkit, Zepto and Instamart to the traditional retail sector and the FMCG distribution network in the country.
“While we acknowledge the role of innovation and technology in shaping the future of commerce, the unchecked expansion of these quick commerce platforms is leading to severe disruptions in the retail ecosystem,” the letter said.
“The FDI rules clearly prohibit e-commerce entities operating under the marketplace model from holding inventory or exercising control over inventory sold on their platforms. However, it appears that these quick commerce platforms may be engaging in practices that blur the lines between a marketplace and an inventory-based model, potentially violating FDI norms,” it said.
The FMCG distributors’ association asked the government to initiate an investigation into the operational models of these quick commerce platforms so that they ensure compliance with FDI norms, implement measures for small retailers and traditional distributors to safeguard their interests and prevent monopolistic practices and facilitate a dialogue between all stakeholders from the retail sector, FMCG companies and quick commerce platforms.
I reached out to Dhairyashil Patil, the Kolhapur-based President of the All India Consumer Products Distributors Federation and began by asking him why his Federation had written the letter now.
INTERVIEW TRANSCRIPT
Dhairyashil Patil: The basic reason to send this letter to the Ministry of Commerce is and now discount war has been begun, yet we were where decided since last two, three years after the release of Westmore, but with the entry of quick commerce, the race to gain peace in the market has again started, and the easiest way in is to give some more and more discounts on the products, which is not realistic, which is having the entire ecosystem as the retailers.
Govindraj Ethiraj: How are you distinguishing between E-commerce and quick commerce?
Dhairyashil Patil: it is just a terminology, e commerce and quick commerce is just the same. Now, if you see the players, players like Flipkart and Amazon are trying to gain on quick commerce as well. Quick commerce is nothing but just expediting or reducing the delivery time. Rest of the operation is mostly the same, because in in E commerce, a normal delivery is from three days to seven working days. And in quick commerce, the delivery is from, say, about 10 to 20 minutes. For us, it is not different. The modus operandi of both is mostly the scene of predatory pricing and big discounting,
Govindraj Ethiraj: But your focus at this time is the quick commerce companies?
Dhairyashil Patil: Yes, because we believe that India, we have a e commerce model where inventory is is not permitted by the norms of FDI. So here in we see that the dark stores which have been built under the name of quick commerce to supply and replenish the entire inventory, which is entirely under the control of the quick commerce company. The thin line between the rules and whatever is happening seems to be a bit dicey for us.
Govindraj Ethiraj: Right. What do you feel is the way forward?
Dhairyashil Patil: We have requested the Minister to look into this matter, and we have gone through some reports since yesterday, after our need has been reached to the ministry that quick commerce is pretty small, and it is not yet to be under any regulation, but we hardly see any difference between E commerce and quick commerce. So we want the government to add as swiftly as it can, because the damage has been already done by the E commerce to the entire ecosystem of all traders, and we have seen the way things have happened in past, but this commerce development would brings the end of very nearer as the competition is going steeper. You've seen players like Flipkart has just launched in August, which is giving discounts more than whatever was offered by other players, 10% more. So this is a never ending story, and it is going to be very lethal once it progresses. So it is better to have an early check on this quick commerce tool, and protect the entire retail because we are having approximately about 1.5 crore stocks and most Kirana stores which are directly affected by this quick commerce, particularly in quick commerce, three things are being concentrated by these companies. One is grocery, the second with this FMCG, and third one is vegetables, which are presently done by all these pops and mom stores, are directly been affected.
Govindraj Ethiraj: You said that at this point, the size of the threat is not much also, because obviously there is a large amount of discounting that's going on and that cannot be sustained. Do you feel that in coming months, the quick commerce companies will also be forced to reduce their discounts Levy, let's say a delivery charge or a higher delivery charge, and that might equalize things we first
Dhairyashil Patil: wanted the government to look into the operations of this, because we see that the law is not being followed in the letter and spirit, where inventory based e commerce is prohibited by the government organizations in the roughly -, where you cannot have a control or entire monopoly over the inventory what you are carrying. And it seems that under dark stores, this has been happening. So this is just a new name for a old business. So it is e commerce and extension with quick commerce, players are almost the same, and the amount of money flowing in right now is a pretty alarming situation, as the Honorable Minister has said, the money which has come in is not a part of investment. It is just the debt service, where it is not going to generate any more jobs, neither it is going to have any more infrastructure. It is just servicing their debt, which they have lost in the last year. So bringing in the show, which has made by all these companies, that the lot of investments coming that is not going to help our country or the trades.
Govindraj Ethiraj: Right. You know, we are now into the second quarter, there is how are things looking, overall for in terms of consumer demand, just ahead of festival season.
Dhairyashil Patil: See, as you have seen, the first quarter was not that encouraging for the entire FMCG segment, but we are very much hopeful that this being festive season, that we will have a normal festival season. We just have passed rakshabandhan, we have Ganpati and Diwali in upcoming quarter, so we are very optimistic that we would do good sales in this. But as I've said, things are not pretty encouraging at the end of consumer offtake consumer offtake is still a bit sluggish
Govindraj Ethiraj: Right. Dhairyashil, thank you so much for joining me.
The Jobs Question
We discussed India’s jobs conundrum earlier.
The big question is of course the big gap between the job demand and supply which is not likely to get better.
The Government to its credit has been trying different things, including the most recent being the announcement of an internship programme, the design of which is awaited.
Apart from incentives and income support for new jobs created by industry.
I reached out to veteran economic journalist and author Shankkar Aiyar and began by asking him, what does the new pension scheme reflect in the context of the larger economic and jobs challenge.
INTERVIEW TRANSCRIPT
Shankkar Aiyar: For all governments, sort of they wrestle with the idea that there are two constituencies. One, there is a political constituency, and then there is the economic constituency. The government's earlier concern in the economic constituency was about pension costs and stuff like that, and the layering of liabilities on the future. The political constituency has spoken in the past few elections, so the government has made some adjustments. So this solution actually falls in the overlap of the political constituency and the economic constituency in the sense that it could satisfy both the users in the government and also the folks who are concerned about liabilities. So I believe that the solution between the new pension scheme and the old pension scheme was originally scripted in Andhra Pradesh, and so they have, sort of, there has been some drip irrigation, or lift irrigation, as we may call it, by the government of India.
Govindraj Ethiraj: Right. Now, while these, let's say government employees, will be now better positioned and will obviously have reason to feel a little more secure than they were earlier for their future. What does this mean for the rest of the economy?
Shankkar Aiyar: Well, this will once again underlying the advantage of being in a salaried government job, and so the pressure that you witness whenever new posts are announced or tests happening will sort of be amplified historically families which have had a government job have had a more secure future because there is predictability, and there is also the inflation adjustment that you get in the DEA and other stuff, which is why I thinkeven in rural India, it is a very priced thing. If you add a government job, you get the better bride, better house, better everything. So the worry is that there is so much dependence on this kind of government jobs, and that dependence comes from the fact that not enough jobs are being created in the hinterland by the private sector. If you look at it, I mean, it's not that the government hasn't thought about it. If you remember Prime Minister Modi, when he came to power 10 years back, spoke about India being the manpower solution for the world. And so there was a report written on global opportunities. At that point, there was an attempt to sort of take that idea forward. And in recent years, you would have seen some agreements with Israel or with Japan, on other countries,on labor context. But there is also the other aspect, every state. Now, let me put this in two buckets. There is a global opportunity, and then there is the local opportunity. In the local opportunity, it should be measured whether it's happening or not, every state has some kind of investment thing, magnetic, Maharashtra, kinetic, Karnataka, whatever happens, and there is no review of it. And the ideal institution to do these kind of reviews whether those investment conferences lead to investments, and whether those investments are creating jobs, it is not enough to depend on PLI, so the NITI Aayog is best place to sort of study these, understand this, and advise governments. The other ways to look at is, where are the jobs being created, say, Tamil Nadu. What is Tamil Nadu doing that is so good that is happening? Or why are more jobs now being created in Odisha in the last five years? So those best practices need to be shared. I think there is surfeit of information and vacuum of knowledge in the government.
Govindraj Ethiraj: Okay, so you've already sort of touched upon the point of the larger jobs challenge and how we can or cannot, but at this point of time where we are now that one, let's say segment of the populace has been given a gift of sorts. What should the government be doing or what should be the way forward?
Shankkar Aiyar: Let's arrange the facts so you have a report about global opportunities, you have some understanding about the skill sets. You have some knowledge about how much skill training has happened, and the challenges of placement, and those who sort of design the internship in private sector program would have had some database. Now, if you align all of these database, you know that you need to create X number of jobs and only X minus whatever is being created the the other challenges that, as geopolitics unravels across the world and disruptions unravel, the ability of the Indian economy to support jobs will be challenged, whether it is in those who are, for instance, you have to move to the net zero or, you know no new fossil fuel idea, and that will challenge job creation in the fossil fuel economy. There is also the challenge of AI. There is a challenge of AI-assisted healthcare. In the US, for instance, what is happening to retail and fast food economies, companies, because of the weight loss drug, similar things will arrive in India. I think that there is an understanding that these jobs has a political implication. But I don't think the government has paid sufficient attention as to how to process this information on a monthly basis. So if you look at all the information, what are the missing opportunities? What are where the government can move in, they can do that. And instead of sort of going blue in the face, denying that there is joblessness, or there is job growth or there is underemployment, I would think that let's try where the issue is and address those issues. I mean, already, if you see this year, growth will be not as robust as last year, which has consequences for job creation, global growth will be lower, which has consequences for the IT sector, which is the largest employer, I would suggest that the government should have like an interstate Council, which meets every month and discusses what's happening to the economy and thereby the job creation.
Govindraj Ethiraj: Right. Shankkar, thank you so much for joining me.
Shankkar Aiyar: Thank you, Govind.
