Aurelia Butler

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Europe and Latin America failed to agree on even an expression of “concern” over Russia’s invasion of Ukraine, but leaders of the two regions maintained that their first summit in eight years had pushed forward relations.Wording on Ukraine had already been significantly watered down over the course of the two-day meeting, including by removing any reference to Russia, to the frustration of European leaders who have sought to win over the “global south” to Ukraine’s cause.But Nicaragua, whose president Daniel Ortega is an ally of Vladimir Putin, was the sole holdout on a text approved by 59 other nations that expressed “deep concern on the ongoing war against Ukraine”. That prevented a unanimous statement on the issue.After the summit, Charles Michel, the president of the European Council, said: “It’s also essential to note that our friends in Latin America and the Caribbean support us . . . the war is a problem for Europe and the world.”European leaders stressed they had achieved broad agreement for the expression of “concern” about the war, including from other Russian allies such as Cuba, Venezuela and Bolivia. The countries in attendance, minus Nicaragua, issued a joint declaration.“What’s important to me is that all the EU members are aligned on that and all the Celac [Community of Latin American and Caribbean States] members are aligned except Nicaragua,” said Emmanuel Macron, the French president. “The meeting was very important and very ambitious,” said Alberto Fernández, president of Argentina. “Never before have we been able to reach so many points of agreement as we have achieved now.”Macron also praised the role of Brazilian president Luiz Inácio Lula da Silva in supporting efforts to find common language. “[Lula] doesn’t go as far as some allies of Nato but he is perfectly lucid on the nature of this war and its consequences, including on food,” said Macron, referring to Russia’s decision to back out of a deal to export Ukrainian grain across the Black Sea.While talks on the joint statement were held up by Nicaragua, there was progress in side-meetings at the two-day summit. Both Lula and European Commission president Ursula von der Leyen said they hoped to reach agreement on the long-delayed EU-Mercosur deal by the end of the year. Lula, Macron, Fernández and Gustavo Petro, the president of Colombia, brokered the first meeting between the government of Venezuela and its opposition since talks broke down between the parties in Mexico in November 2022. Countries also reached accord on the post-Cotonou agreement, a political and trade agreement between the EU and African, Caribbean and Pacific countries, which had been blocked by Poland. Establishing more regular contact with Latin American leaders had also been a goal of the summit. The leaders agreed to meet in Colombia in 2025.Additional reporting by Henry Foy in Brussels and Michael Stott in London More

India said on Tuesday that G-20 finance chiefs and central bankers had made headway on the group’s ambitious agenda to reform the world’s financial architecture, despite differences over the war in Ukraine that surfaced during the talks. “The Indian presidency received wide support on all the agenda items,” Nirmala Sitharaman, the finance minister, said after the conclusion of meetings in Gandhinagar. Ajay Seth, another finance ministry official, also said that India was “taking the discourse forward” after top policymakers from the club of large economies met to discuss plans to overhaul multilateral lenders, forge an agreement on international taxation, and share the burden of restructuring poor countries’ debt. India holds the G-20’s rotating presidency and is due to host a summit of its leaders in New Delhi in September at a time when the war in Ukraine has split a group that includes Russia and China, alongside the US and leading European economies. Sitharaman confirmed that Russia’s exit on Monday from the Black Sea grain deal that ensured shipping of food from Ukraine — one of the world’s top agricultural producers — and subsequent attack on Ukrainian ports, had come up during Tuesday’s talks. “Several members condemned it, saying this shouldn’t have happened,” she said. “Food passing through the Black Sea shouldn’t have been stopped or suspended.” The deal had helped lower global food inflation in recent months and allayed concerns that hunger would become widespread. However, Sitharaman said there were signs of progress on deals to provide more debt relief to some of the world’s most economically vulnerable countries, such as Sri Lanka, Zambia, and Ghana. China, a major bilateral creditor, had been blamed by western nations, including the US, for delaying deals to restructure vulnerable countries’ debts. Beijing, which is the largest bilateral lender to several developing countries, had been reluctant to provide debt relief, up until recent weeks, when it agreed to provide some support to Zambia. Sitharaman said she was now “very hopeful” that Beijing could be brought fully onboard in other debt restructurings. “We were able to push this agenda of debt distress, particularly among the Global South countries,” Sitharaman said. “A speedy resolution, an effective resolution should happen.” India has hosted G-20 ministerial meetings across the country in the run-up to the leaders’ summit on September 9-10. It has faced, however, difficulties in trying to hammer out consensus among the bloc’s members at a time of war, financial distress in some indebted countries and slowdown in most leading economies. India has remained neutral in the war. But it has been vocal about the conflict’s impact on countries in the Global South, of which it sees itself as a leader, while trying to bridge differences between Russia and China on the one hand and western democracies that have supported Ukraine and sanctioned Moscow.

India is also pushing the group to accept the African Union as a full member during its presidency. Amitabh Kant, India’s G-20 Sherpa, told the Financial Times in an interview last week that India had invited all the G-20 leaders to September’s summit, and that it expected them all, including Russian President Vladimir Putin and Chinese leader Xi Jinping, to attend. “We are expecting all leaders to come,” Kant said. “We haven’t heard from anyone that they’re not coming.” China’s finance minister and Russia’s acting finance ministry director attended this week’s G-20 meetings. More

The enemy of my enemy is my friend. On this basis, closer western relations with India make good sense. Joe Biden’s warm embrace of the once-banned Narendra Modi, now its politically dominant prime minister, in Washington and Emmanuel Macron’s equally warm embrace of the Indian leader in Paris are aimed at forging a close relationship with a country expected to be a powerful counterweight to China. Is this a good bet for western powers? Yes. India is indeed likely to be a rising great power. Interests also align. But how far values are shared is a more open question.Where is India now and where might it go, economically and politically?Today, India has the world’s fifth-largest economy at market prices and third largest at purchasing power. Its population is 1.43bn, almost exactly the same as China’s. By 2050, however, India’s population is forecast by the UN to reach 1.67bn, against 1.31bn in China.India’s GDP per head (at purchasing power) is close to 40 per cent of China’s levels, according to the IMF. Back in 1990, India and China were both almost equally poor, with GDP per head, measured at purchasing power, estimated at 4.6 per cent and 4.1 per cent of US levels, respectively. In what is surely the most remarkable economic performance in world history, China’s GDP per head reached 28 per cent of US levels last year, against India’s 11 per cent. Yet, while China’s relative performance was incomparably the best, India came second among the seven largest emerging economies.

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China’s was an extreme example of the most successful development strategy of the modern era — high investment, rapid industrialisation and progressive upgrading of exports of manufactures. This was also Japan’s path. India has followed a very different one. Between 2014 and 2023, its investment rate has averaged just 31 per cent of GDP, against China’s 44 per cent, and its national savings rate averaged 30 per cent, against China’s 45 per cent. More strikingly, the share of manufacturing in India’s GDP has been falling, not rising, as would have been expected at this stage in its development. This share was 13 per cent of GDP in 2022, against China’s 28 per cent. While the ratios of trade to GDP (at market prices) have become roughly equal, China is by now a far bigger exporter to world markets.

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What then might lie ahead?Let us start with the fundamentals. India’s gross savings rate, though not as high as China’s, is high enough, particularly given the possibility of importing capital, to finance a growth rate of at least 5-6 per cent. India also has reasonable macroeconomic stability. Entrepreneurship is abundant and infrastructure is improving. India will definitely not suffer from labour shortages, but the opposite. As Ashoka Mody notes in India is Broken, the inability to generate sufficient good jobs is a great failure. Yet another is the inability to educate the population to a high standard: human capital is likely to prove a far tighter constraint than physical capital.

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India is an obvious location for companies following a “China plus one” strategy. It also has the advantage over obvious competitors of a large home market. Nevertheless, India has repeatedly failed to exploit opportunities for fast growth of exports of manufactures over the last 75 years. Suspicion of open trade always gets in the way.As was true of many other countries, India has suffered from an overhang of bad debt since the global financial crisis. This “twin balance sheet problem” was a significant constraint on growth. But, argues this year’s Economic Survey, “in the course of the last decade, Indian non-financial private sector debt and non-financial corporate debt as a share of GDP declined by nearly 30 percentage points”. Bank balance sheets have also been repaired. In all, the credit engine is once again in quite good shape.

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The IMF forecasts annual economic growth at a little over 6 per cent from 2023 to 2028, with GDP per head growing at roughly one percentage point more slowly. Such growth would be quite close to the averages of the past three decades. Provided the country is not buffeted by big global or domestic shocks, this sounds perfectly feasible, even rather plausible. But what about the longer term? Remember that India still has huge room for catching up. It is also a young country, with a grossly underemployed labour force, potential for improving the quality of that labour force, a reasonably high savings rate and increasingly widespread hopes of greater prosperity. A great deal of adaptation will be required to meet the climate change challenge, given the failure to bring global emissions down. But the energy transition also offers huge opportunities to India. On balance, I judge that India should be able to sustain growth of GDP per head at 5 per cent a year, or so, up to 2050. With better policies, growth might even be a bit higher, though it could also be lower.

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So, let us assume that India’s GDP per head continues to grow at 5 per cent a year, while that of the US grows at 1.4 per cent, roughly as it has over the last three decades. Then, by 2050, India’s GDP per head (at purchasing power) would reach about 30 per cent of US levels, roughly where China’s is today. According to UN median forecasts, India’s population would also be 4.4 times as big as that of the US. So, its economy would be some 30 per cent larger than the US’s.It is, in sum, quite reasonable to assume that India will become a great power. It is not that hard to imagine that its economy will be of a similar size to that of the US by 2050. Thus, western leaders are making a sensible bet on an alliance of convenience with India. But will India also be a liberal democracy? I will discuss that issue next [email protected] Martin Wolf with myFT and on Twitter More

This beat analysts’ expectations for annual inflation to fall to 3.0%, down from 3.4% in May.STORIES:Market reaction: CAD/Link: COMMENTARYROYCE MENDES, DIRECTOR & HEAD OF MACRO STRATEGY AT DESJARDINS “The Bank of Canada’s preferred measures of core inflation, which exclude significant moves in individual categories, shows that underlying price pressures remain sticky. The three-month annualized rate of the core median measure remained at 3.6%, while the trimmed mean indicator accelerated to 4.0% from 3.9% in May.””According to our calculations, the core-services excluding shelter measure was also down just a tick in June to 4.8%. As a result, there’s scope for headline inflation to reaccelerate in the months to come as some of the recent progress can be chalked up to one-off moves lower in prices.””That said, despite signs of sticky underlying inflationary pressures and resilience in economic activity indicators, the Bank of Canada has given itself a long time to reach the 2% target.”MICHAEL GREENBERG, SVP AND PORTFOLIO MANAGER, FRANKLIN TEMPLETON INVESTMENT SOLUTIONS”Clearly, the headline number has come down below expectations, actually below 3%, which is a big milestone … But when you look at the more core measures that the Bank of Canada tends to focus on, they do remain elevated, well above that 2% target.””So that continues that narrative that inflation is definitely moving in the right direction, but we’re seeing stickier and more persistent core measures.””Our view is that the lagged effects of previous hikes, with inflation trending in the right direction, they’re (the Bank of Canada) probably going to be able to pause and allow rates to do their thing.”ANDREW KELVIN, CHIEF CANADA STRATEGIST AT TD SECURITIES “As much as the headline number, you would much rather see a downside surprise, rather than an upside surprise. I don’t think the Bank of Canada is going to be too encouraged by this number just because we do see this persistence in core inflation.””It would be a little bit too premature to just start celebrating … I think the message is that there is still more work to be done.”JULES BOUDREAU, SENIOR ECONOMIST AT MACKENZIE INVESTMENTS:”They’re promising, decent numbers. Interesting that core seems to be a little bit more sticky than expected. But when you look at the headline, disinflation is really among us. I’ll have to dig into the numbers more, but it’s a good sign for the (central) bank.”If everything else comes in – obviously there’s a lot of stuff that’s going to be coming out before the next decision – but if everything comes in around what the bank was expecting, we should be seeing the end of the rate hikes, especially because we know that they weren’t certain about hiking in July.””Going forward base effects are going to be slightly positive – very, very small. But the era of big bass effects that we have for the past few years is pretty much done. So I think, from now on the year-on-year is going to be more in line with the month-on-month. But the monthly inflation this month was super low, in part because of energy. If you look at core inflation three-month annualized, we’re still above 3.5%. So there’s still some work to be done. But policy is probably restrictive enough at the moment to do that.” More

The company relies primarily on clients’ uninvested cash to fund its interest-earning businesses such as purchase of fixed-income assets and lending.However, some clients have been moving cash to alternatives that fetch better returns to make the most of a high-interest rate environment following hefty rate hikes by the Federal Reserve to rein in sticky inflation. Schwab has had to turn to supplementary funding sources to counter this churn. Last month, the Westlake, Texas-based company said it was relying on more expensive funding sources, like borrowing from the Federal Home Loan Bank, to supplement its cash flow. This weighed on Schwab’s net interest revenue. It tumbled 10% to $2.29 billion in the second quarter.Meanwhile, inflows into the company’s funds boosted asset management and administration fees by 12% to $1.17 billion. The report comes during a banks-heavy earnings week when investors will be scrutinizing updates for any sign of lingering trouble after the crisis earlier this year rattled the industry.Excluding one-time costs, Schwab’s profit fell 25% to $1.49 billion, or 75 cents per share, for the three months ended June 30. Analysts had expected 71 cents per share, according to Refinitiv IBES data. More