⚖️ India's budget-balancing act

Good morning. SpaceX launched four private citizens into orbit yesterday for the Polaris Dawn mission. The aim: complete the first commercial space walk in human history 🤯 🚀 

- Ruchirr Sharma & Shatakshi Sharmaa

TABLE OF CONTENTS

• ⚖️ India's budget-balancing act

• 🚚 Swiggy delivers growth, eyes IPO

• 🗞️ Bite-sized summaries

  • 🍎 Apple’s time to pay up

  • 🤔 Will ULI be successful?

  • 🚗 Uber needs more drivers!

• 🧑‍🍳 What else is cookin’?

• 🍿 Entertainment, Entertainment, Entertainment

MARKETS

🇮🇳 India

• Indian benchmark indices closed higher, tracking a US rally. Sensex gained 361 points (0.44%) to 81,921, and Nifty 50 rose 104 points (0.42%) to 25,041. Gains were led by HCLTech and Divi's Labs, while Bajaj Finserv and HDFC Life led losses. SmallCap rose 1.53%; Media gained 2.69%.

🌍️ International

• The S&P 500 and Nasdaq gained ground as investors await key inflation data. Bank stocks faced pressure after JPMorgan warned of reduced interest income and highlighting economic vulnerabilities. The CPI report is expected to show inflation nearing the Fed's 2% target, raising speculation about potential interest rate cuts next week. Financial markets anticipate a 71% chance of a 25 basis point cut at the upcoming Fed meeting.

INDIAN BUDGET

⚖️ India's budget-balancing act

India's economy has been growing at an impressive rate, but with rapid growth comes the challenge of managing the budget deficit.

In the fiscal year 2023-2024, India's fiscal deficit stood at 5.63% of GDP, amounting to approximately ₹16.53 lakh Cr.

While this figure seems substantial, it actually represents an improvement from earlier estimates of 5.8%, thanks to higher-than-expected revenue collections and controlled expenditure levels.

Now, the government is taking decisive action to address this deficit. A recent report by Fitch Ratings highlights India's strong commitment to reducing its budget deficit over the medium term, despite the challenges of coalition governance and the focus on supporting economic growth through increased public capital expenditure.

Here’s the TL;DR:

1. Fiscal Consolidation Priority: India is prioritizing fiscal consolidation over additional spending. This is evident in its use of the Reserve Bank of India's dividend to lower the fiscal deficit target for FY 2024-25.

2. Lowered Deficit Target: The government has reduced its fiscal deficit target to 4.9% for the current fiscal year, down from the 5.1% estimated in February's interim Budget.

3. Improved Fiscal Credibility: India has consistently met or outperformed its budget deficit targets in recent years, enhancing its fiscal credibility.

4. Debt-to-GDP Ratio: Fitch expects India's debt-to-GDP ratio, currently at 83%, to decrease between 2024 and 2026.

Looking ahead: While India's fiscal consolidation efforts are promising, Fitch notes that any shocks challenging this trend could put downward pressure on the country's rating.

The report also highlights that India, along with some other Asian countries, still has debt levels significantly higher than their respective rating category medians.

As India continues to navigate its path of economic growth, the government's ability to balance fiscal consolidation with development needs will be crucial.

The coming years will be pivotal in determining whether India can maintain its growth trajectory while bringing its deficit and debt levels in line with international standards.

P.S.: Here’s a fun bit of historical trivia!

The Fiscal Responsibility and Budget Management Act (FRBM), implemented in 2004, played a crucial role in initially reducing the central government's deficit. This effort led to India's upgrade to investment grade in 2006, marking a significant milestone in the country's financial history.

Read more: Economic Times

QUICK COMMERCE

🚚 Swiggy delivers growth, eyes IPO

Swiggy is making significant strides in both its quick commerce and financial strategies as it prepares for an upcoming IPO.

Let’s talk about it 👇

1. Instamart's Rapid Expansion

   • Swiggy's quick commerce unit, Instamart, has expanded its reach from 27 to 43 cities across India in just six months, with plans for further expansion, particularly in tier 2 and 3 markets.

   • This expansion includes new markets such as Thrissur, Mangalore, Kanpur, Udaipur, and Bhopal. 

   • The move is strategically timed to meet growing consumer demand during the festive season.

   • The company is also looking to partner with local brands to offer region-specific products, as they look to improve on the reported 58% increase in gross order value to nearly $1B in FY24. 

2. IPO Plans and Financial Performance: Swiggy is gearing up for its Initial Public Offering (IPO) with some notable changes:

   • Increased the fresh issue component from ₹3,750 crore to ₹5,000 crore

   • Seeking shareholder approval at an EGM on October 3

   • Made a confidential filing of its draft prospectus with SEBI

   • Reported strong financial performance for FY24:

     • 36% growth in operating revenue to ₹11,247 Cr.

     • Reduced net loss by 44% to ₹2,350 Cr.

So why is Swiggy going all in with the expansion plus IPO plans? Well, the TL;DR is that the quick commerce space is heating up:

• Competitors like Blinkit and Zepto are also expanding operations

• Larger e-commerce players like Flipkart and Amazon are entering the quick commerce space

• Amazon India is reportedly exploring the possibility of acquiring a stake in Instamart

So as you can imagine, the investor interest is strong, with Swiggy attracting some diverse investors ahead of its IPO:

• Bollywood superstar Amitabh Bachchan's family office has acquired a small stake. 

• Motilal Oswal Financial Services chairman Raamdeo Agrawal and Hindustan Composites have also invested.

Overall: As Swiggy prepares for its public debut, its aggressive expansion and improved financials position it strongly in the competitive Indian food and grocery delivery market. 

The company's ability to attract high-profile investors and its focus on regional markets indicate a robust growth strategy as it moves towards its IPO.

Read more: Economic Times

GENERAL OVERVIEW

🗞️ Bite-sized summaries

🍎 Apple’s time to pay up - Apple has lost a legal battle with the European Union and must now pay Ireland €13B ($14.4B) in back taxes. The European Court of Justice ruled that Apple benefited unfairly from Ireland’s old tax regime, which allowed multinational corporations to reduce tax payments through a scheme known as the “Double Irish.” Despite Ireland’s efforts to challenge the decision, the court sided with the EU, concluding that Apple exploited loopholes. Apple has expressed disappointment, while Ireland may use the funds to bolster its sovereign wealth fund or increase government spending ahead of its October budget.

🤔 Will ULI be successful? - The RBI's Unified Lending Interface (ULI) is aiming to improve credit access for farmers and MSMEs through digital records, but its success is uncertain. Despite its advanced design, ULI faces challenges as banks' lending decisions are driven by profitability and regulatory constraints, not just access to borrower data. Banks consider risk and profitability, and thin profit margins, poor GST registration rates, and high servicing costs may hinder lending to ULI's target borrowers. While ULI offers flexibility and privacy safeguards, its success depends on improving financial inclusion in a profitable way, which may prove difficult in India’s current financial landscape.

🚗 Uber needs more drivers! - Uber India faces a shortage of vehicles to meet rising demand, despite having over 1.1 million active drivers. Prabhjeet Singh, president of Uber India and South Asia, attributes the supply gap to high asset ownership costs and India's commercial licensing requirements, which restrict new drivers from entering the market. Although Uber's growth in India is outpacing market trends, the company is also facing increased competition from players like Rapido and BluSmart. While diversifying services, Uber is investing in India thoughtfully, aiming for long-term profitability, with in-app advertising as a key revenue stream.

HEADLINES

🧑‍🍳 What else is cookin’?

What’s happening in India (and around the world 🌍️)

• Apple set to grab biggest bite of made-in-India semiconductors; in talks with Micron, Tata Group to source chips worth $12B.

• Tata Electronics signs a memorandum of understanding (MoU) with a Japanese semicon firm for equipment infrastructure.

• Kamala Harris and Donald Trump will square off in a crucial US presidential TV debate at 6.15 am IST.

• UAE inks pact for India to operate nuclear power plants in Gulf nation.

• Typhoon Yagi, the most powerful storm to hit Asia this year, has claimed at least 49 lives in northern Vietnam, with 22 people still missing.

CULTURE

🍿 Entertainment, Entertainment, Entertainment

• Trailer for the much anticipated Devara Part -1 drops. Telugu version here and Hindi version here.

• Taapsee Pannu and Kanika Dhillon team up again with Netflix for ‘Gandhari’ following ‘Phir Aayi Hasseen Dillruba’.

• Visfot review: Riteish Deshmukh and Fardeen Khan led crime-drama is loaded with ample thrill and masala to classify as an entertaining watch.

• Kate Middleton completes cancer treatment as Royal Family announce health update.