Reuters reporting latest inflation data from India this morning: (https://www.reuters.com/world/india/indias-retail-inflation-644-feb-eases-mm-2023-03-13/)

India's annual retail inflation eased to 6.44% in February, helped by a fall in the price of some food items, but remained above the central bank's target, reinforcing expectations for a further interest rate hike at its meeting next month.

The February reading (INCPIY=ECI) was higher than the 6.35% forecast by economists in a Reuters poll, and was above the upper band of the Reserve Bank of India's (RBI) 2%-6% target, data released by the National Statistics Office on Monday showed.

Annual retail inflation was 6.52% in January.

from The Economist this morning... India struggles to cool down inflation

The Reserve Bank of India is feeling the heat from high inflation. Even after a prolonged tightening cycle, prices rose by 6.5% year on year in January. That is higher than the central bank’s upper bound of 6%. But inflation has exceeded this bound for much of the past year. New data released on Monday is expected to show that the target was also breached in February, with forecasters predicting an inflation rate of 6.3%. Rising food prices, which account for more than half of India’s consumer-price index, are a big factor. Prices of cereals increased by 16% in January; milk and dairy costs by 9%. 

More inflationary pressure looms with summer arriving early. Temperatures across the country in February were the hottest in 146 years. Farmers are fretting that a heatwave and a poor monsoon might wilt their crops. And that will get central bankers sweating: poor crop yields will drive up food prices.

From Quartz today...

India's GDP growth outpaced China last quarter

The milestone comes despite high inflation and low consumer demand

India’s economy grew by 4.4% in last fiscal quarter, down from 6.3% the previous quarter. 

Economists had expected closer to 4.6%. But this still puts India’s average annual GDP growth for last year at about 7%, making it one of the world’s best-performing economies.

By comparison, the World Bank projects the global economy will grow just 1.7% this year—the third-weakest pace of global growth in almost three decades.

India’s economy has grown despite rising prices. The year-over-year retail inflation rate in January hit 6.52%. That’s well above the Reserve Bank of India’s stated goal of 6%. In response, the Indian central bank raised interest rates by a quarter of a percent last month, bringing it to 6.5%.

China posts lowest GDP growth in years

Meanwhile, Asia’s largest economy grew slower than India’s for the first time since 2016. China’s National Bureau of Statistics reported the country’s annual GDP to be ¥121.02 trillion ($17.94 trillion), a 3% increase from the previous year. China’s GDP exceeded ¥100 trillion for the first time in 2020.

This marks the weakest performance for China’s economy since 1976, excluding the fiscal year impacted by the onset of the Covid-19 pandemic. The slowdown was primarily blamed on the consequences of China’s zero-Covid strategy and reduced global manufacturing demand.

The country’s annual growth was well-below China’s official target of 5.5%, marking the worst discrepancy in projected growth in the history of modern China.

From The Economist this morning:

On Tuesday the Indian government releases its GDP data for the last quarter of 2022. Forecasts suggest that growth slipped to 4.6% year on year, from 6.3% in the previous quarter. Inflation and the central bank’s interest-rate increases have hurt consumption, while the global slowdown has hit exports.

But India’s economy remains a “relative bright spot” amid the worldwide economic gloom, according to the IMF. It expects India to be the fastest-growing big economy in the world in 2023, accounting for 15% of global growth. The ruling Bharatiya Janata Party has announced investments in infrastructure that it believes will propel the country into “Amrit Kaal”, an auspicious period that heralds prosperity. Such bullishness, though, is not shared by ordinary Indians. According to a survey by the Centre for Monitoring Indian Economy, a research outfit, less than a fifth of households believe their incomes will be higher a year from today. 

What next for the Adani Group? On Wednesday the flagship company of the Indian conglomerate cancelled a secondary share offering, which had been fully subscribed, after its share price plunged. The rout started last week when Hindenburg Research, an American short-seller, accused the Adani Group of accounting fraud and share-price manipulation—charges that it forcefully denies.

The threat does not appear existential. Gautam Adani, the founder and until recently the world’s third-richest man, is considered an able operator and his companies own many valuable assets. No rating agency has yet reappraised the group’s debt, which boasts an investment grade.

Yet it is hard to believe that Mr Adani’s grand investment plans will be unaffected. Between 2023 and 2027 his group was forecast to spend more than $50bn on investments. If the yields on Adani bonds remain elevated and its share prices depressed, securing the necessary funds will prove difficult. Foreign investors are not taking any chances. In just two recent days, global funds pulled a net $1.5bn from the Indian stockmarket.

Above from the Economist.

in a larger article they discuss whether this alters the glossy investment case for all things india ? The short answer is: depends if there appears

to be a sensible investigation by Indian stock exchange or whether their is a crony capitalist response to one of Modi’s mates. The government is relying on a bunch of Adani investments to drive a big infrastructure splurge.

You may have seen Hindenburg Research take a large short-sell position in Adani as it dumped a huge bucket of sick on the organisation the last couple of days in this report --> https://hindenburgresearch.com/adani/ . The report alleges significant fraud and share price manipulation across the many Adani controlled organisations. "Today we reveal the findings of our 2-year investigation, presenting evidence that the INR 17.8 trillion (U.S. $218 billion) Indian conglomerate Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades."

I haven't read all of the very detailed report but have skimmed through it. Like all of these things, interesting read. Adani denies the allegations and claims that the report is a "malicious combination of selective misinformation and stale, baseless and discredited allegations" and an attempt to undermine an upcoming Adani FPO --> https://www.outlookindia.com/business/hindenburg-report-is-malicious-attempt-to-damage-adani-enterprises-fpo-says-adani-group-news-256635

The one significant Adani company in the IIND portfolio is Adani Power at about 2% of the portfolio.

Of more general concern may be the sense that one gains from the report of the potential for high-level corruption in India and a regulatory framework that might lack teeth.

Disc: I hold IIND both here and in my SMSF and remain strongly bullish on the India opportunity over the next 10 years

In 2023 (on or around April 14th, guesses the UN) India will seize China’s crown as the world’s most populous country. The crown itself has little value, but it is a signal of things that matter. China’s population is poised for a steep decline; India’s will continue to grow for decades. 

The growth in India’s working-age population should help its economy narrow the gap with China’s, which is six times larger. But to get the full benefit of its demographic advantage India will have to boost the productivity of its youthful people. Less than half of adult Indians are in the workforce, compared with two-thirds in China. Chinese aged 25 and older have on average 1.5 years more schooling than Indians of the same age. China is not about to fade into insignificance. But it will have to contend with India as an emerging superpower on its doorstep.

Source: The Economist

India’s central bank raised its key interest rate by 35 basis points to 6.25% in a further bid to restrain inflation; it is the fifth such hike since May. Retail inflation is currently running at almost 7%, well above the bank’s target. The bank also lowered the country’s growth forecast for this financial year from 7% to 6.8%.

A quick look at rates and inflation (and general bureaucratic malaise) in India from The Economist this morning. I'm long-term bullish on India and hold IIND here and SMSF. It will be a bumpy ride at times but my view is India remains a true long term growth global growth opportunity,

For more than two weeks Indians have been waking to announcements of fuel-price rises. As state-owned oil companies belatedly adjust for the soaring cost of oil, inflation, already above the central bank’s ceiling of 6%, will surge. But the bank is expected to hold its fire when it meets from Friday to Sunday. Indeed, it wants to stave off rate rises until August. That would mean two years without an increase. Few central banks have been so accommodating. 

India’s central bankers insist that unchanged rates reflect their commitment to growth, which slumped during the covid-19 pandemic and now faces new challenges, such as global supply-chain disruptions. But low rates also reduce the cost of public borrowing, which helps the government. An investigation by the Reporters’ Collective, a group of journalists, published on Monday highlighted the extent of ministerial meddling with the central bank’s supposedly independent decision-making. That may explain its unexpectedly dovish stance.

There is an acronym for almost everything – one of them is BRIC – Brazil, Russia, India, and China. It was a term coined by a British economist at Goldman Sachs, Jim O’Neill back in 2001 referring to these economies and the state of economic development. 

Let’s briefly look them BRC-I style.

B - Brazil is a vast landmass with abundant natural resources and a growing technology sector. It is amongst the largest producers of beef, pork chicken, and eggs. A former Portugal claim, the country next year will have the 200-year anniversary of independence. In the years following independence the country has been in multiple terms of political and military turmoil settling into the current elected government only 35 years ago. 

R - Russia while the largest country by size and one of the largest by population has several major problems including military interventions, treatment of its own citizens and lack of a free press. The country is heavily dependent on oil and gas as well as mining. While not officially a superpower anymore, Russia more than 6,000 nuclear weapons. Good times. 

There is no easy way to invest in either Russia or Brazil, even if you could make the case. 

C – China, as Australia’s largest trading partner, we likely both familiar with and have an opinion, so I’ll park this one. 

I - We are left with the not without its own problems, including the country with the largest percentage of the population below the poverty line, India.

As with many emerging markets, corruption is a problem. The way I see it there are two type of corruption – greed and position. While there are both in India, the expression chai paani, or translated, a little bit extra, is pervasive. 

Greed has also played a part. Founder and in 2009 chairman of Satyam performed accounting wizardry that manipulated accounts Enron style – to the tune of USD3B. 

This is changing, with the Lokpal bill which unbelievably came following a political hunger strike, creation of an ombudsman and the movement of many government services to computer-based systems.

The country has built some incredible service organisations, especially in technology. Half of the world’s top 15 tech companies are in India. Companies including Wipro, Tata, Tech Mahindra, and Infosys are talking advantage of the increasingly educated and largely fluent English speaking tech community. My personal experience with tech offshoring has been in Chile, Malaysia, The Philippines, Poland, and India. While the choice a few years ago may not have been, my first choice now would be India. 

As an outsider, until recently it has been impossible to invest in India, unless it was via dual listed companies such as Wipro.

The magic of ETF’s has now delivered us two options, IIND and NDIA but what is under the covers, and which may suit your needs.

These thematic ETF's are great if you want to buy into a trend. Let's look at the two currently available for India:

IIND from Betashares “the 30 highest quality Indian companies based on a combined ranking of the following key factors – high profitability, low leverage and high earnings stability.” For the favour it takes a 0.8% management fee annually.

This unhedged ETF is backing the Indian economy with approximately 75% of the holdings evenly split across in Financials, Consumer Staples, and Infotech. It is benchmarked against the Solactive India Quality Select Index which it has lagged since inception in late 2019.

NDIA is allternative #2 this time from ETF Securities, it is also unhedged. The ETF “offers exposure to the emerging Indian economy through its premier benchmark, the NSE Nifty50 Index.”. This team does us a favour with a marginally lower management fee of 0.69% per annum. 

The allocation is different with 40% financials, 15% Infotech and somewhere near 10% energy. This is a very different mix, especially the financials weighting. NDIA tracks the index, well, ‘cause it is an index fund.

Despite IIND having a slightly higher management fee, and lagging its benchmark, this would be my choice between the two.