Aurelia Butler

Eurozone bond markets are at risk of a sell-off caused by a sudden retreat of Japanese investors if the Bank of Japan ends its ultra-loose monetary policy, the European Central Bank has warned.“If the Bank of Japan decides to normalise its policy, this might influence the decisions of Japanese investors who have a large footprint in global financial markets, including the euro area bond market,” the ECB said in its twice-yearly financial stability review published on Wednesday.The ECB said the risk of “Japanese investors withdrawing abruptly from the euro area bond market” was among the myriad possible threats to the eurozone financial system, while it judged the bloc to be largely resilient even after the recent banking turmoil in the US and Switzerland.The fallout from a potential policy shift in Japan would be accentuated for eurozone debt markets because it would coincide with the ECB starting to shrink its own bond holdings this year, the Frankfurt-based institution said.Japan’s central bank recently signalled the first step in unwinding its ultra-loose monetary policy by ditching its forward guidance that interest rates would remain at or below current levels after inflation in the country rose at the fastest rate in four decades.Japanese investors have significant holdings in eurozone government bonds, particularly French debt, as well as vast investments in US Treasuries and Australian bonds.The ECB said normalisation of Japanese monetary policy could lead to “a rapid decline in rate differentials and increased exchange rate volatility”, which it said could “reduce the attractiveness” of carry trades — in which investors borrow at low rates in Japan to invest in higher-yielding bonds abroad.Higher Japanese rates could prompt investors to repatriate money, it said, while “valuation losses on local bond portfolios and higher risk-free rates could inhibit the investors’ risk-seeking behaviour, including their willingness to invest abroad”.Luis de Guindos, ECB vice-president, said its own recent policy tightening — including a 3.75 percentage point rise in its deposit rate since last summer — “can reveal vulnerabilities in the financial system”.He said it was “critical” to monitor such threats, including falling commercial property prices, higher borrowing costs for governments and banks, increasing bankruptcies, and lower liquidity in financial markets.These increased risks, coupled with mounting uncertainty over the economy, made it even more important for political leaders to “fully implement the banking union” in the single currency bloc by introducing a common deposit guarantee scheme, he said.Banks in the eurozone had “proved resilient” to the collapse of several US banks and the crisis at Credit Suisse that forced it into the arms of its rival UBS, the ECB said, pointing to “strong capital and liquidity” positions among the region’s lenders.But it warned that there were signs of a deterioration in the credit quality of loans on banks’ balance sheets as higher borrowing costs, weak growth and high inflation triggered a rise in insolvencies. “Banks may therefore need to set aside more funds to cover losses and manage their credit risks,” it added.Property markets in the eurozone “are undergoing a correction”, the ECB said. Recent house price falls had been “orderly so far”, but it warned that if demand continued to be hit by rising mortgage costs this could become “disorderly”. The downturn in commercial property markets “could test the resilience of investment funds”, it added. More

A Chinese fighter jet performed an “unnecessarily aggressive manoeuvre” near a US military aircraft that was flying over the South China Sea last week, the Pentagon said on Tuesday.The US Indo-Pacific Command released video footage of the incident, which it said happened on Friday, as US defence secretary Lloyd Austin was on his way to the region for a visit with stops in Japan, Singapore and India.It was the latest in a number of similar encounters and comes at a time of heightened tensions between Washington and Beijing. China’s military has repeatedly rebuffed US efforts to arrange a meeting between Austin and his Chinese counterpart, including one that could have taken place this week.US military officials have accused China’s People’s Liberation Army pilots of increasingly reckless behaviour in the region, including an incident in December when a Chinese fighter jet flew within 6 metres of a US military aircraft operating in the South China Sea.A US defence department spokesperson said the Chinese fighter jet came within 400ft (about 121 metres) of the nose of the aircraft.After the Chinese pilot “flew directly in front of the nose” of the RC-135, the US aircraft was forced “to fly through its wake turbulence”, the US military said.The plane was “conducting safe and routine operations” in international airspace and would continue to do so “wherever international law allows”, the Pentagon added.China, which claims most of the South China Sea as well as Taiwan, frequently accuses the US of endangering peace in the region. Washington argues its military operations uphold the international rules-based order against threats and coercion.Chinese foreign ministry spokesperson Mao Ning said on Wednesday that “provocative and dangerous” behaviour on the part of the US were to blame for maritime tensions in the region and had “severely violated China’s sovereignty and security”.“China will continue to take necessary measures to safeguard its security and sovereignty,” she added.Last week’s incident highlights the risks of unintended conflict between Beijing and Washington when diplomatic ties are fraying amid geopolitical and economic tensions.

In 2001, an American spy plane collided with a Chinese fighter jet about 70 miles off the coast of Hainan Island and the US aircraft was forced to make an emergency landing. Relations between the powers plunged in the aftermath of the crash, which resulted in the Chinese military interrogating and detaining the crew.Biden administration officials have been seeking more meetings with their Chinese counterparts to try to stabilise the relationship with Beijing.US commerce secretary Gina Raimondo met Chinese commerce minister Wang Wentao last week in Washington, in what was the first senior-level Chinese visit to the US capital since 2020. Jake Sullivan, US national security adviser, also recently met Wang Yi, China’s top foreign policy official, in Vienna.However, China has not agreed to reschedule a visit to Beijing by US secretary of state Antony Blinken. He cancelled a previously planned trip in February after the diplomatic fallout from the shooting down of an alleged Chinese spy balloon over the US.Additional reporting by Maiqi Ding in Beijing More

A top official at the Federal Reserve said there was no “compelling” reason to wait before implementing another interest rate rise should economic data confirm that more must be done to bring US inflation under control. In an interview with the Financial Times, Loretta Mester, president of the Cleveland Fed, pushed back against recent suggestions from some policymakers who argued the US central bank should forego a rate rise at its next meeting in June. “I don’t really see a compelling reason to pause — meaning wait until you get more evidence to decide what to do,” she said. “I would see more of a compelling case for bringing [rates] up . . . and then holding for a while until you get less uncertain about where the economy is going.”The agreement this weekend between the White House and Republican congressional leaders on the US borrowing limit “relieve[s] a big piece of uncertainty about the economy”, she added. The deal must still be approved by both chambers of Congress, with the first vote expected to take place on Wednesday in the House of Representatives. Mester’s comments come amid divisions among US policymakers over fresh rate rises, with some officials hinting at a pause in June before restarting at a later date when the economic picture becomes clearer. Meanwhile, others indicate the Fed may not need to tighten any further. However, Mester argued the bank would always have to operate with some uncertainty over the trajectory of the economy and said she thought the Fed should only pause when the risks of doing too little were evenly balanced with doing too much. The only reason for skipping a rate increase when it is clear more tightening is necessary would be extreme market volatility or some other shock, Mester said, such as a possible US debt default. Mester said she could still be swayed by incoming employment data due on Friday as well as the next inflation report, which will be released just as US central bankers convene for their two-day gathering starting June 13. However, Mester, one of the more hawkish regional presidents, signalled she was disappointed at progress on containing price pressures so far. “I just think that we may have to go further,” she said. “At this point, I don’t really necessarily see a compelling reason that we wouldn’t want to take another small step to counter some of that really embedded, stubborn inflationary pressure.”Her comments mark the latest intervention in the tense debate among officials over whether the Fed has squeezed the economy enough to bring inflation down. It has raised its benchmark rate by more than 5 percentage points in a little over a year. After the series of jumbo rate rises, the fed funds rate now hovers between 5 per cent and 5.25 per cent. In March, most officials projected that level would mark the peak of the tightening campaign. Mester, who will not become a voting member of the policy-setting Federal Open Market Committee until next year, said rate-setting decisions will become more fraught in the future. Several voting members of the FOMC have recently expressed their scepticism over the need for an imminent pause.However, chair Jay Powell recently hinted he supported a pause, pointing to the number of rate rises the Fed has implemented. He has also argued the recent banking turmoil will tighten financial conditions and in effect do some of the central bank’s job for it. “We’re getting to the real hard part here of how we assess trade-offs,” Mester said. “Different policymakers will have different views about how they are assessing things.” More

TaiwanFearing a potential conflict in Asia, western companies are looking to move production out of Taiwan. But turning away from the self-ruled island will come at a high price for manufacturers In the days after then US House Speaker Nancy Pelosi visited Taiwan last year, Taiwanese suppliers to American tech giants including Apple, Google, Meta and Amazon were inundated with requests from their customers. Could they produce from outside Taiwan to secure supplies, in case Beijing went to war over the island?Pelosi’s visit had sparked more than a diplomatic spat between Washington and Beijing, which conducted unprecedented military exercises around Taiwan in response to her trip. It triggered a tech industry crisis, which may now threaten the global electronics supply chain.“If anyone hits Taiwan, or there is a serious disruption . . . the tech and electronics industry worldwide is basically screwed,” says Hsieh Yong-fen, founder of chip and material testing provider MA-tek.Taiwan is best known for making cutting-edge semiconductors. But its companies also turn out other crucial components from printed circuit boards to advanced camera lenses and they run huge device assembly operations in China.This has created a triangle of critical interdependence between Taiwan, China and the US that has deepened even as tensions between Taipei, Beijing and Washington have risen.To understand why, take a look inside the ubiquitous iPhone.It is one of the most successful consumer devices of all time: 2.4bn units sold since its launch in 2007, racking up over $1tn in revenue for Apple in 15 years.Its success rests on a sprawling Asian supply chain producing chips, displays, speakers and more on an almost unimaginable scale. At its heart lie both mainland China and Taiwan.The iPhone’s components reveal just how tightly bound the supply chains of the US, China and Taiwan have become. Each iPhone needs some 1,500 different components.Nearly 70 per cent of Apple’s top suppliers, making everything from processors to casings, are based in either China (26 per cent), Taiwan (23 per cent) or the US (18 per cent). Japan and South Korea round out the top five.The most valuable components — including core processors, 5G modems, Wi-Fi chips, and premium camera lenses — are made in ⬤ Taiwan by Taiwanese companies. All told, the island’s suppliers account for nearly $200, or 36 per cent, of the total materials bill for each iPhone.These chips, however, are designed by Apple, or other ⬤ US, Japanese or European chip developers, such as Qualcomm, Sony, and Bosch. High performance materials are also provided by American makers, such as display glass from Corning and adhesive from 3M.Chinese suppliers are concentrated in less technologically demanding areas, like product assembly and mechanical parts. The number of ⬤ China-based suppliers has overtaken all other countries to become the largest supplying source by number of companies over the past few years. They have also started to move up the supply chain.China’s Luxshare Precision Industry, originally a component supplier to Apple, started to build iPhones in 2021. Its display champion, BOE Technology Group, now makes some of the advanced OLED screens for iPhones, previously the exclusive domains of South Korean manufacturers. Chinese camera lens maker Sunny Optical appeared for the first time in the 2023 supplier list, eating into a market that formerly belonged only to Taiwanese players.China is also where 95 per cent of all iPhones are assembled, a figure that has changed little since its launch. The country is a major market for Apple, too, providing around a fifth of its total annual revenue.Complicating the picture is the fact that many Taiwanese and US suppliers serve Apple from hundreds of facilities in mainland China. Apple declined to comment on this story.Without any of these components, an iPhone would not be an iPhone. But a formula that has worked for a decade and a half is being put to the test as geopolitical tensions rewrite the rules of tech manufacturing.G7 leaders meeting in Japan this month vowed to “reduce excessive dependencies in our critical supply chains”. Washington is determined to claw back advanced chip production from Asia while Beijing is racing to establish its own tech supremacy. Taiwan is caught in the middle.Made in AmericaIn early December, standing under the blinding Arizona sun, Apple CEO Tim Cook took the stage with President Joe Biden to celebrate a milestone: Taiwan Semiconductor Manufacturing Co was moving equipment into its new $40bn chip plant in Phoenix — the Taiwanese contract chipmaker’s first plant in the US in more than 20 years.“This is an incredibly significant moment. It’s the chance for the United States to usher in a new era in advanced manufacturing,” Cook told the crowd of assembled politicians and tech industry heavyweights. TSMC, the world’s biggest contract chipmaker, plans to make some of its most advanced semiconductors on US soil starting next year.And as one of the plant’s earliest customers, Apple will be able for the first time to stamp “Made in America” on core chips it has designed.Left unsaid was that advanced semiconductors like these are only a small part of the electronics supply chain. A single smartphone requires a wide range of chips, including a host of less advanced “companion chips” not to mention final assembly, all of which are concentrated in Asia, particularly China and Taiwan.Left: TSMC’s only advanced semiconductor factory in China is located in Nanjing, Jiangsu province; Right: A worker tests chips at a semiconductor plant in Suqian, Jiangsu province, China © Future Publishing via Getty Images.Top: TSMC’s only semiconductor factory in China is located in Nanjing, Jiangsu province; Bottom: A worker tests chips at a semiconductor plant in Suqian, Jiangsu province, China © Future Publishing via Getty Images.The Covid pandemic revealed the logistical weak points of the international supply chain, which was built up over decades of globalisation. Geopolitical tensions — more specifically the threat of war over Taiwan — are heaping additional pressure on tech companies to change how they operate.In one indication of the nervousness, a top US air force general recently predicted America and China are likely to go to war over Taiwan in 2025.“Two years ago, due to Trump’s trade war, customers told us they wanted ‘out of China’ production options, so we decided to enlarge manufacturing capacity in Taiwan, our home base,” said an executive with Unimicron, a printed circuit board maker supplying Apple, Intel and others.Then, as the company was in the midst of a multibillion-dollar expansion in Taiwan, Pelosi visited Taipei last August. An infuriated Beijing, which considers the island part of its territory, responded by conducting live military drills off Taiwan’s coast — and Unimicron’s clients got nervous.“Our customers then said they wanted some production alternatives that are outside of China and also out of Taiwan over fears of a war,” the executive said. “We were stunned and speechless, and so were a lot of our peers . . . How can the supply chain be moved out of China and Taiwan? The majority of electronics supply chains are here.”Since the middle of last year, Intel, AMD, Nvidia, Meta, Google and Amazon have all requested production capacity outside of both China and Taiwan, several tech executives told Nikkei Asia and the FT. HP and Dell — the world’s second and third biggest makers of notebook computers — told their suppliers specifically to start building capacity in south-east Asia. Dell even aims to phase out made-in-China chips by 2024.“We have a business contingency plan — the so-called BCP — to prepare for supply chain disruptions, such as a war,” an executive at chip testing equipment maker Advantest of Japan told Nikkei Asia and the FT. “But if a military conflict really happens here in the Taiwan Strait, honestly, I think any BCP will be totally useless. It would be doomsday for the chip supply chain, and no one ever wants to imagine that happening.”AMD said it worked continuously with suppliers to improve business continuity plans, including the “important” goal of geographical diversification. Intel said it had consistently supported its suppliers’ “long-standing” efforts towards diversification, which were not related to Pelosi’s Taiwan visit. Nvidia declined to comment.Dell has said previously that it continuously explores supply chain diversification across the globe. HP has said it has a robust global supply chain. Meta, Google and Amazon did not respond to requests for comment.Even without a full-scale war, disruption from, say, a Chinese blockade of Taiwan could cause serious global turmoil. According to a Semiconductor Industry Association estimate, a disruption in the production of logic chips at contract chipmakers in Taiwan could cause nearly $500bn in lost revenues for electronic device manufacturers that depend on this supply. A recent estimate by Rhodium Group said a Taiwan conflict would put well over $2tn of economic activity at risk.“People underestimate Taiwan’s position in the supply chain. It’s much more than just about semiconductors. We have a very complete supply chain from chips, components, PCBs [printed circuit boards], casings, lenses to assembly . . . anything you can think of,” a senior executive at Compal, a vital product assembler to Dell, HP and Apple, said. “If there’s military friction happening to Taiwan, the entire global supply chain will collapse for sure.”Such a scenario, in other words, would leave Apple with “Made in America” chips and no devices to put them in.The threat of conflictAt first, fears over a possible conflict came largely from western clients. But now even Taiwanese companies are concerned by developments across the strait.Beijing concluded another round of military exercises on April 10, encircling Taiwan in protest against Taiwanese President Tsai Ing-wen’s meeting with US House Speaker Kevin McCarthy in California. The three-day drill included 91 incursions in a day.“We grew in tandem with China’s reform and opening-up in the past several decades, but now the good old days are over. It’s becoming obvious that Beijing puts politics over economic growth,” said an executive at an Apple supplier whose facilities in China employ hundreds of thousands of workers. “Our strategy is to lay low, to accelerate production shifts [to south-east Asia and India], and divest our money gradually from China in the next few years.”“Gradually” is the operative word for many companies looking to diversify their supply chains, whether they want it to be or not.“It takes at least three years in some countries and even five years [in others] to build a semiconductor plant from start to finish, and then it needs to start operation,” said Benjamin Hein, an executive for China and south-east Asia at Germany’s Merck, a chemical and material group. “Sometimes there are some misunderstandings that this [supply chain shift] could happen overnight because of some geopolitical issue [but] it could take us at least five years, and even more than 10 years, to see some more fundamental shift.”Washington is attempting to speed the process along, with a focus on chips. It is offering incentives to encourage companies like TSMC and Samsung of South Korea to help build up America’s semiconductor industry.TSMC’s plant in Arizona, which will make ultra-advanced 3-nanometer chips that can be used in supercomputers, smartphones, cars, fighter jets and military equipment, is seen as one of the crowning achievements of this push.TSMC’s new semiconductor plant in Phoenix, Arizona, will start producing cutting-edge chips next year. The site has space for six factories, with a second planned to open in 2026 © Planet LabsIf all currently planned investments go through, from both foreign and domestic players, the US will be making 26 per cent of the world’s advanced chips by 2027, up from 10 per cent now, according to a Counterpoint projection. Taiwan’s share would slip from 54 per cent to 45 per cent over that same period.When it comes to technology specifically, the three economies are locked together even more tightly.This is most obvious in advanced microchips. TSMC and its smaller Taiwanese peers control two-thirds of the world’s market for contract chipmaking, turning the semiconductor designs of Apple, Google and others into physical chips. As global leaders in cutting-edge chip technology, their output is indispensable for the production of everything from Chinese smartphones to American fighter jets.Taiwan is also the leader in the humbler parts of the tech supply chain. One overlooked element is chip packaging and testing — the last stage of semiconductor manufacturing — where Taiwan controls 30 per cent of global market share. Another example is printed circuit boards, the basic material on which chips are mounted. The island makes just under a third of the world’s supply, much of which is shipped to assemblers in China for final production.Apple’s “Made in America” chips, mounted on Taiwanese-made printed circuit boards, may well find their way to China before ending up in a smartphone or laptop bound for the US market.Even where US companies appear to be making progress in reducing their reliance on China, the situation is less than straightforward.Apple, for example, has spent years urging its suppliers to build capacity outside of China and has at least some alternative production capacity for all of its main product lines in countries such as India and Vietnam.But more than 80 per cent of Apple’s top 188 suppliers still have at least one facility serving the company in China, according to a Nikkei Asia-FT analysis of the latest annual list published by Apple in 2023. Many key suppliers, including 3M, ON Semiconductor, Foxconn and Luxshare have three or more production sites in the country.Number of Apple suppliers in China and TaiwanOf the 188 suppliers Apple disclosed in 2023, 151 (more than 80%) had production facilities in China and 41 had facilities in Taiwan (22%). The total number of facilities in China making parts for Apple increased to 276 from 251 the previous yearIn total, there are more than 270 manufacturing facilities making components or providing manufacturing services to Apple in China, still the largest supply chain hub. In Taiwan, more than 70 sites are serving Apple, mainly making various chips, high-end chip substrates, printed circuit boards and premium camera lenses, as well as providing chip packaging and testing services.Apple spent more than a decade building the world’s most sophisticated tech supply chain, trading security and resilience for efficiency and low costs. Plenty of other global companies followed suit, putting China and Taiwan at the heart of their manufacturing strategy.Now that the time has come to rethink that approach, suppliers and their clients are grappling with the complexity and cost of the task before them.Suppliers who have met with Apple’s procurement team say they have been asked to do the impossible: come up with a way to make parts in other countries at the same price as in China or Taiwan.“We’re often very puzzled after wrapping up those meetings. We really want to escape them,” an executive close to Foxconn said. “Apple wants the price of components to go into their Indian-assembled iPhones to be the same as in China . . . but how is that going to be possible? You’ll need to hire new people, you may need to build a new factory, or at least ship components from abroad. And then you’ll have additional logistics costs.”Decoupling from China will not be cheap, but severing ties with Taiwan will come at an even higher price. Will anyone be prepared to pay for it? More

TOKYO (Reuters) – The Bank of Japan (BOJ) may raise short-term interest rates early next year if sustained wage growth becomes a real prospect, Tsutomu Watanabe, an academic who participated in a key government panel on economic policy, told Reuters.Inflation will remain elevated as companies become more convinced that they can hike prices without scaring away consumers, said Watanabe, a former BOJ official and an expert on Japan’s price trends.”Talking to firms and looking at various data, it’s hard to see inflation slow ahead,” Watanabe said in an interview on Tuesday. “Japan is already seeing budding signs of sustained, domestic demand-driven inflation.”His projection contrasts with the BOJ’s view that inflation, which is now well above its 2% target, will slow back below that level later this year as the boost from past rises in import costs dissipate.Despite prospects of rising inflation, the BOJ must maintain ultra-loose policy for now given uncertainty on whether firms would continue to raise pay next year, he said.”It’s important that a virtuous cycle of durable inflation and wage growth becomes embedded in society. Once that happens, the BOJ can normalise monetary policy,” Watanabe said.Before raising short-term rates, the BOJ must dismantle yield curve control (YCC) by removing a 0% target set for the 10-year bond yield, he said.”Controlling the shape of the yield curve with two rate targets has proved difficult when global market forces put upward pressure on bond yields,” Watanabe said, adding that YCC must be abandoned as soon as possible.Once the 10-year yield target is removed, the BOJ can raise short-term rates to positive territory, he added.”If the BOJ sees prospects of sustained wage growth, it may raise short-term rates early next year,” he said.Under YCC, the BOJ sets a short-term rate target at -0.1% and guides the 10-year bond yield around 0%.Japanese firms offered wage hikes not seen in the past three decades at this year’s negotiation with unions, as they faced pressure to compensate employees for the rising cost of living.Markets are rife with speculation that new BOJ governor Kazuo Ueda will gradually dismantle his predecessor’s massive stimulus including YCC, which has drawn criticism for distorting bond market pricing and triggering excessive yen falls that pushed up import costs.Ueda, however, has stressed the need to wait until wage growth becomes more sustained, before phasing out ultra-loose policy.Watanabe who, as an academic knows Ueda well, welcomed the governor’s decision to add wage growth to the BOJ’s guidance that pledges to keep ultra-loose monetary policy.He said the BOJ could offer more clarity on what kinds of wage data it will focus on in deciding when to end ultra-loose policy, to increase predictability of its policy direction.A professor at the University of Tokyo, Watanabe was among academics who spoke at a key government panel session on macro-economic policy held earlier this month. He is also a frequent speaker at BOJ-hosted seminars. More

Appearing before lawmakers, Reserve Bank of Australia Governor Philip Lowe said inflation expectations were well anchored for now, but that cannot be taken for granted and entrenched inflation would lead to higher interest rates and unemployment. The RBA has projected headline inflation to return to the top of the bank’s target of 2%-3% by mid-2025, a slower path than many other economies as Lowe wants to preserve strong gains in the labour market.”Mid-2025 is pressing the length of time we can reasonably take, because if we take longer than that, people may reasonably say: ‘Are you serious about the inflation target?’ I want to reassure you we’re serious,” said Lowe.”The risk to inflation is to the upside and we need to be attentive to that.” Services price inflation could remain elevated due to high unit labour costs if productivity growth failed to pick up, warned Lowe, adding that there are also uncertainties about the slowdown in household spending and the global economy. The RBA has already raised interest rates by a whopping 375 basis points since May last year to an 11-year high of 3.85%. It has warned that more rate rises may be required to bring inflation back to target. Lowe said success in the inflation fight is not guaranteed, and “it’s going to be painful for a while yet” for Australian households.”We won’t be declaring victory until victory is achieved.”Markets see the RBA holding rates steady next month, but there is a sizeable chance of another quarter-point hike in August or September, and rates are expected stay elevated for the rest of the year.Economic data over the past month has been on the soft side. Retail sales were flat in April as consumers cut back spending on food and dining out, while quarterly gains in wages missed forecasts and a red-hot labour market showed signs of cooling. More

NEW DELHI (Reuters) – India is set to release data on Wednesday that is expected to show the economy grew by 5% in the January-March quarter from a year earlier, accelerating from 4.4% in the previous quarter due to steady urban demand and government spending.The median forecast from a Reuters poll of economists hinged on the robust performance of services like travel and retail, and the boost given to demand by falling food prices and the drop in oil prices globally.Moving forward, India could be at the mercy of a potential global slowdown.”Slowing global growth, protracted geopolitical tensions and a possible upsurge in financial market volatility” could pose downside risks to the economic growth, Reserve Bank of India, the central bank, warned in its annual report on Tuesday.The last official estimate for the full 2022/23 fiscal year put growth at 7%, though that could be revised when the GDP data is released on Wednesday at 1200 GMT. Some private economists reckoned growth in the year to March 31 could turn out around 6.8%.During the March quarter, high frequency indicators showed that a rise in urban incomes had boosted sales of expensive cars, Apple (NASDAQ:AAPL) mobile phones, and air travel. The performance looks less impressive considering that the economy was still working through the tail-end of the pandemic during the previous year.Farm and manufacturing workers suffered flat growth in real wages due to high inflation, and that kept sales of motorbikes, low-end consumer goods and railway traffic below pre-pandemic levels.Prime Minister Narendra Modi remains widely popular after nine years in power, but his Bharatiya Janata Party lost assembly elections in the southern state of Karnataka this month as the opposition Congress party promised to step up subsidies for households hit by inflation and unemployment. Modi must call for a national election by early 2024, and there a several more state polls due before then. Lack of good paying jobs remains a major issue among the youth as reflected in unemployment rate rising to 8.11% in April and more workers joining the workforce, according to Mumbai-based think tank Centre for Monitoring Indian Economy. More

WASHINGTON (Reuters) -The U.S. Congressional Budget Office said on Tuesday its budget deficit projections would be reduced by about $1.5 trillion over the next 10 years if the debt ceiling bill now up for a vote in Congress were enacted in its present form.The projection comes following the debt ceiling deal struck last weekend between Democratic President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy. A vote on the deal is expected on Wednesday.The agreement would suspend the debt limit through Jan. 1, 2025, cap spending in the 2024 and 2025 budgets, claw back unused COVID funds, speed up the permitting process for some energy projects, and include extra work requirements for Americans who receive food aid.”Reductions in projected discretionary outlays would amount to $1.3 trillion over the 2024–2033 period,” the CBO said on Tuesday, adding the bill would reduce mandatory spending by $10 billion and revenues would fall by $2 billion over the decade.Interest on public debt would fall by $188 billion, it added.The bill, if approved by Congress, will prevent the U.S. government from defaulting on its debt and comes after weeks of heated negotiations between Biden and House Republicans. It has drawn fire from both hardline Republicans and progressive Democrats, but Biden and McCarthy are banking on getting enough votes from both sides.McCarthy has predicted he would have the support of a majority of his fellow Republicans for the deal to lift the $31.4 trillion U.S. debt ceiling, and House Democratic leader Hakeem Jeffries said he expected Democratic support.The 99-page bill would authorize more than $886 billion for security spending in fiscal year 2024 and over $703 billion in non-security spending for the same year, not including some adjustments. It would also authorize a 1% increase for security spending in fiscal year 2025. More