Aurelia Butler

India’s central bank has held its benchmark interest rate unchanged, in an unexpected move that came amid banking turbulence in the US and Europe, renewed oil price volatility and as the country’s robust economic growth showed signs of abating.Reserve Bank of India governor Shaktikanta Das said the central bank’s six-person monetary policy committee had voted unanimously on Thursday to maintain the repo rate at 6.5 per cent, defying expectations of a 0.25 per cent rise and breaking a tightening cycle that began last May.The RBI is the second major central bank to hold rates this week after Australia opted to keep rates steady on Tuesday following 10 consecutive rate rises. Central bankers worldwide are trying to balance concerns about worsening economic conditions with persistent inflation, which has hurt consumer spending.India’s Sensex equities benchmark ticked up 0.25 per cent.Although the global economic picture has brightened this year, Das said the “outlook is now tempered by additional downside risks from financial stability concerns”. He emphasised that Indian banks “remain healthy” amid a backdrop of the takeover of Credit Suisse by Swiss rival UBS and recent banking collapses in the US.Economists had expected the RBI to raise rates one more time, as India’s inflation had softened in February to 6.4 per cent but remained above the bank’s upper tolerance level of 6 per cent.Das stressed that the pause in rate rises was “for this meeting only” and that the decision was a “pause, not a pivot” as he stressed that “the war against inflation has to continue”. He said the central bank was waiting to observe the economic impact of the 250 basis point increase in the repo rate over the past six meetings.The RBI also set its gross domestic product growth forecast for the financial year beginning this month at 6.5 per cent, up slightly from its previous 6.4 per cent outlook but lower than its forecast of 7 per cent growth for the current financial year.

“Overall we are optimistic about the Indian economy,” said Das, who highlighted risks from external factors such as the shock Opec oil production cut this month.India’s gross domestic product growth rate slowed to 4.4 per cent in the fourth quarter of 2022. Analysts have highlighted weakening consumer spending, among other concerns. The RBI on Thursday said that “private consumption showed some signs of slowdown”.Amar Ambani, head of institutional equities at YES Securities, said the RBI’s growth forecasts were “over-optimistic”, citing a consensus estimate of 6 per cent. He added that he expected 6.5 per cent would now be the terminal rate. More

Good morning. A scoop to start: Kyiv is willing to discuss with Moscow the status of Crimea if its troops reach the border of the Russian-occupied peninsula, a top adviser to president Volodymyr Zelenskyy told the FT.Today, our Brussels team picks over the carcass of the EU’s moribund China investment deal, and our man in Turkey says a visit by Russia’s foreign minister will test Ankara’s diplomatic dance.There will be no Europe Express tomorrow or on Monday. Have a great Easter weekend.Shelf lifeThree years ago, EU commission president Ursula von der Leyen hailed the EU-China Comprehensive Agreement on Investment as an “important landmark” in the two economies’ relations.Today, Brussels views the CAI in a far less positive light, write Sam Fleming and Andy Bounds.Context: The EU-China deal has been in the deep freeze since 2021 after China slapped sanctions on members of the European parliament in response to EU penalties. Relations have slumped to their lowest ebb in decades, amid tensions over the Ukraine war and Taiwan.The commission president last week warned that the EU was going to have to “reassess” the deal, in a speech that warned Beijing is becoming “more repressive at home and more assertive abroad”.The tone from China has been markedly more upbeat. Fu Cong, China’s ambassador to the EU, last week told the Financial Times that politicians should muster the “courage” and political force to ratify the agreement. Beijing wanted both sides to lift their sanctions to unblock the deal, he said, adding that China was willing to listen to “views or proposals from the other side”.So why the contrast? In its heyday, the CAI was seen as conferring bigger economic wins on EU business than their Chinese counterparts.Today, however, it has gained political attractions in Beijing. Any progress would signal that Europe is standing apart from the US and its attempts to decouple significant parts of its economy from China. As the US-China rivalry hardens, Beijing is eager to seize on anything that suggests deep economic ties with Europe.As von der Leyen and France’s president Emmanuel Macron meet their counterparts in Beijing today, there is little pressure back home for the CAI to be reheated in its current form.Among member states there are two camps: those who back von der Leyen’s tougher approach to China, and those that do not think it is tough enough. “I can’t think of anything the Chinese could offer that would revive CAI,” said one EU diplomat. The BDI, Germany’s business federation, yesterday echoed von der Leyen’s call for a reassessment before ratification can resume.There are also far more alluring prizes on the EU’s agenda, including an elusive trade deal with the four Mercosur economies in South America.As Brussels looks at ways of “de-risking” aspects of its trade with China, including outbound investment screening, the CAI — in its current form at least — seems set to remain stuck on the shelf.Chart du jour: In bulkOnly 2-10 per cent of containers flowing through EU ports every year are actually checked by authorities, according to a report published by Europol yesterday. An easy opening for criminals and drug traffickers: Last year, some 160 tonnes of cocaine was seized in Rotterdam and Antwerp alone.Balancing actRussia’s top diplomat Sergei Lavrov begins a two-day visit to Turkey today, testing Ankara’s prowess at managing its relationship with Moscow while appeasing western allies, writes Adam Samson.Context: Russia has become an increasingly important trading partner for Turkey, after president Recep Tayyip Erdoğan declined to join western sanctions against Moscow, irritating Nato allies. Russia accounted for 5.4 per cent of Turkish exports in February, against 2.3 per cent in the same month last year. Lavrov’s meeting with his counterpart Mevlüt Çavuşoğlu comes at a delicate time, just over a month before a pivotal election.Several executives in an Erdoğan stronghold in central Turkey told the FT that they were happy to serve Russia. A number of regular citizens said if it was in their country’s economic interest to retain relations with Moscow, it was the right thing to do. This matters a great deal to Erdoğan, whose popularity has been severely dented by Turkey’s economic crisis. Analysts say the elections on May 14 will be his toughest test in two decades in power. Erdoğan has played a pivotal role in the Ukraine conflict that has garnered favour from the EU and the US, including brokering a deal for Ukrainian grain exports and shipping Kyiv inexpensive drones. But concerns have risen in western capitals over whether Turkey is helping Russia’s war effort by exporting so-called dual use goods: seemingly innocuous items that can also have military applications. Turkey has said that it found no instances of this and is prepared to investigate if provided with examples. What to watch today Ursula von der Leyen and Emmanuel Macron meet China’s president Xi Jinping.Sergei Lavrov meets Mevlüt Çavuşoğlu in Turkey.Now read theseLetter from prison: The Kurdish vote will decide Turkey’s upcoming election, says jailed opposition politician Selahattin Demirtaş.Bounced cheques: Switzerland has cut bonuses for 1,000 senior bankers at failed, then rescued, Credit Suisse.Toxic traits? A deep dive into the kind of masculinity that influencers are teaching children. More

A few weeks ago, I went to dinner in Manhattan with friends who work in finance on America’s East and West coasts. Nothing odd about that, you might think. But this gathering was memorable: over wine, my companions traded tales about the tactics they and their colleagues had used the previous day to yank deposits from troubled banks such as Silicon Valley Bank (SVB) and First Republic. Some had done this on their laptops or smartphones, sitting in taxis and meetings, or while attending the South by Southwest tech conference in Austin, Texas; others had dispatched emails to their assistants instead. Either way, as the tales piled up, I kept surreptitiously glancing at my own phone for updates on the panic. Physically we were in a sushi restaurant; but in cyberspace we had a ringside, real-time view of a modern-day bank run. In some senses, it felt wearily familiar. I have watched two financial crises unfold before: once in 1997 and 1998 in Tokyo, as an FT correspondent, when Japanese banks imploded after the 1980s bubble; then in 2007 and 2008, when I was capital markets editor in London during the global financial crisis. I wrote books on both.

Those events taught me a truth about finance that we often ignore. Even if banking appears to be about complex numbers, it rests on the slippery and all-too-human concept of “credit”, in the sense of the Latin credere, meaning “to trust” — and nowhere more than in relation to the “fractional banking” concept that emerged in medieval and early Renaissance Italy and now shapes modern finance. The fractional banking idea posits that banks need to retain only a small proportion of the deposits they collect from customers, since depositors will very rarely try to get all their money back at the same time. That works brilliantly well in normal conditions, recycling funds into growth-boosting loans and bonds. But should anything prompt depositors to grab their money en masse, fractional banking implodes. Which is what happened in 1997 and 2007 — and what I saw unfold in the sushi restaurant last month.However, in another respect, this latest panic was different — and more startling — than I have seen before, for reasons that matter for the future. The key issue is information. During the 1997-98 Japanese turmoil, I would meet government officials to swap notes, often over onigiri rice balls. But it was a fog: there was little hard information on the (then nascent) internet and the media community was in such an isolated bubble that the kisha (or press) club of Japanese journalists had different information from foreigners. To track the bank runs, I had to physically roam the pavements of Tokyo. Anxious customers check their smartphones as they wait to enter a branch of Silicon Valley Bank © Xinhua News Agency/EyevineA decade later, during the global financial crisis, there was more transparency: when banks such as Northern Rock or Lehman Brothers failed, scenes of panic were seen on TV screens. But fog also lingered: if I wanted to know the price of credit default swaps (or CDS, a financial product that shows, crucially, whether investors fear a bank is about to go bust), I had to call bankers for a quote; the individual numbers did not appear on the internet.No longer. Some aspects of March’s drama remain murky; there is no timely data on individual bank outflows, say. Yet CDS prices are now displayed online (which mattered enormously when Deutsche Bank wobbled). We can use YouTube on our phones, anywhere, to watch Jay Powell, chair of the US Federal Reserve, give a speech (which I recently did while driving through Colorado) or track fevered debates via social media about troubled lenders. Bank runs have become imbued with a tinge of reality TV. A Sapporo resident scans a special edition of a newspaper in November 1997 for news of the financially troubled Hokkaido Takushoku Bank © AFP/Getty ImagesThis feels empowering for non-bankers. But it also fuels contagion risks. Take Silicon Valley Bank. One pivotal moment in its downfall occurred on Thursday 9 March when chief executive Greg Becker held a conference call with his biggest investors and depositors. “Greg told everyone we should not panic, because the bank will not fail if we all stick together,” one of SVB’s big depositors told me. Similar conversations took place in Japan in 1997, physically, in smoke-filled rooms. But few customers knew. Not so in 2023: reports of Becker’s words leaked into the internet, fuelling a stampede. In a few hours, some $42bn — or a quarter of SVB’s funds — departed. Back in 1984, by way of comparison, it took depositors an entire week to withdraw half their funds from Continental Illinois — in person — when that giant lender failed. The SVB managers asked the Federal Reserve for help in meeting depositors’ claims. But unlike mobile banking, the Fed facilities are open for only a few hours a day. By Friday morning “a total of $100bn was scheduled to go out the door”, Michael Barr, Fed vice-chair for supervision, later told Congress. The bank was dead. Or as Jane Fraser, chief executive of Citigroup, noted: “There were a couple of tweets and then [SVB] went down faster than we have seen before.” A blue-jacketed trader sits to check his tablet on the floor of the New York Stock Exchange in February 2007 © Polaris/EyevineAnd the panic did not end there: as rumours snowballed, cyber-herds targeted groups that were seen as vulnerable, be that Signature Bank (which was perceived to have mismanaged interest rate risk and had big exposures to real estate), First Republic (which, like SVB, had a high proportion of rich customers whose accounts exceeded the official $250,000 bank insurance limit, making them a potential flight risk), or Credit Suisse (which was so scandal-tainted and poorly managed that depositors were already withdrawing their funds.) Such contagion had erupted before in finance; think of the crowd panic in the streets of London during the South Sea Bubble of 1720. But as Powell ruefully observed: “The speed of the run [is] very different from what we’ve seen in the past.” Or to cite Fraser again: social media and mobile banking today are a “game-changer” for finance — as in many other areas of our lives.So how should investors, regulators and bankers respond? One obvious answer would be to drag central banking processes into the 21st century, and keep them operating 24/7 in a crisis. Regulators could also bolster capital reserves, protect more deposits, or make it harder to withdraw money at such times. But ultimately, banks and investors will become more risk-aware — and risk-averse — only by doing what airline pilots do: prepare for future shocks by studying past accidents or near-disasters. And from my observations over three decades in Tokyo, London and New York, there are five key lessons to ponder.

1. No bank is an islandThe first lesson is that when a bank implodes, this is almost always a symptom — not a cause — of something askew in the wider financial world, affecting other institutions. Financiers rarely want to admit this. When Fraser of Citi recently appeared before the Economic Club of Washington DC, she insisted in a chirpy, no-nonsense manner that the problems at SVB and Credit Suisse were “idiosyncratic”. Perhaps so. “Idiosyncratic sounds like idiotic — and Silicon Valley was that,” says Lawrence J White, a finance professor at New York University who formerly worked in government during the savings and loan crisis. Or as Powell observed: “At a basic level, Silicon Valley Bank management failed badly [because] they grew the bank very quickly, they exposed the bank to significant liquidity risk and interest rate risk, didn’t hedge that risk.” In plain English, the core reason a panic erupted was that SVB’s balance sheet was stuffed with long-term Treasury bonds whose value has plunged in the last year as the Fed has raised rates, creating losses.But SVB was not entirely alone. “Other banks have substantial unrecognised losses on investments and high levels of uninsured deposits,” says White. That stems from the most crucial problem: after 15 years of ultra-loose monetary policy, many financial institutions have strategies that are designed for a low-rate world, and are ill-prepared for higher rates. I have seen this before. When banks such as Japan’s Long-Term Credit Bank failed in the late 1990s, critics wailed about idiosyncratic “scandals”, such as the fact that some LTCB managers stuffed embarrassing records of loan losses into manholes (yes, really). But that was a symptom of a bigger problem: the Japanese banks were so flush with extra cash in the 1980s that they threw money into real estate deals that went wrong. Similarly, when Lehman Brothers failed in 2008, and politicians vilified its former head, Dick Fuld, this was part of a bigger pattern: a decade of financial engineering by banks had encouraged dangerous risk-taking. Cheap money always carries costs.

2. Don’t fight the last warThe second lesson is that investors and regulators often miss these bigger structural flaws because they — like the proverbial generals — stay focused on the last war. Take interest rate risks. These “flew under the supervisory system’s radar” in recent years, says Patrick Honohan, former central bank governor of Ireland; so much so that “the Fed’s recent bank stress tests used scenarios with little variation [and] none examined higher interest rates” — even amid a cycle of rising rates. Why? The events of 2008 left investors obsessively worried about credit risk, because of widespread mortgage defaults in that debacle. But interest rate risk was downplayed, probably because it had not caused problems since 1994.The global financial crisis was similar: when I asked bankers at entities such as UBS in late 2008 why they had missed mortgage default risks in earlier years, they told me that their risk managers were too busy worrying about hedge funds and corporate loans instead. That was because a big hedge fund (Long-Term Capital Management) imploded in 1998 and the dotcom bubble burst in 2000, creating corporate loan losses. The past is not always a good guide to future risks.

3. Safety is a state of mindA third, associated, lesson is that items considered “safe” can be particularly dangerous because they seem easy to ignore. In the late 1990s, Japanese bankers told me that they made property loans because this seemed “safer” than corporate loans, because house prices always went up. Similarly, bankers at UBS, Citi and Merrill Lynch told me in 2008 that one reason why the dangers around repackaged subprime mortgage loans were ignored was that these instruments had supposedly safe triple-A credit ratings — so risk managers paid scant attention. So, too, with SVB: its Achilles heel was its portfolio of long-term Treasury bonds that are supposed to be the safest asset of all; so much so that regulators have encouraged (if not forced) banks to buy them. Or as Jamie Dimon, head of JPMorgan, noted in his annual shareholders’ letter, “ironically banks were incented to own very safe government securities because they were considered highly liquid by regulators and carried very low capital requirements”. Rules to fix the last crisis — and create “safety” — sometimes create new risks.

4. Beware blind spots Fourth: bankers need to recognise that cultural patterns matter. They often ignore this — in themselves and others — because they are trained to focus on hard numbers. But it mattered hugely with SVB. Its culture emulated its client base, which was mostly from the tech and start-up worlds, which tend to have a “skew” in their concept of risk: they are willing to take bold bets, knowing that there is a small chance of a massive payout (say, if their brilliant idea goes viral), while thinking that they can always reinvent themselves after a downside risk (ie, their company fails). This, as behavioural economist Colin Camerer notes, is different from finance. “Risk management culture, as it’s usually practised [in banks], is antithetical to the Silicon Valley culture.”

Bankers have their own tribal patterns. Another reason why banks failed to see the looming mortgage risks before 2008 was they were often detached from “real” life (ie, what subprime borrowers were doing with their loans) and different teams inside big investment banks were often fighting each other to protect their bonuses and did not share information. And right now there is another crucial cultural issue that potentially matters even more: consumer behaviour. Torsten Slok, an economist at Apollo, notes that “the share of [US] households using mobile banking or online banking increased from 39 per cent in 2013 to 66 per cent in 2021”. Until now, the models used in finance do not seem to have taken account of the fact that consumer behaviour online might be different from that in the old-fashioned, physical banking world. But one striking feature about American banks, even before the March panic, was that consumers were moving money out of low-paying deposit accounts into better-yielding money market funds at a dramatically faster pace than at similar points before in history.

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That might imply that greater information transparency accelerates consumer reaction to news, even outside crises, increasing the risk of “herding”. Either way, we urgently need some behavioural finance analysis, since American banks will stay healthy only if they hang on to deposits — and digital herding could increase the risks of turmoil in other markets, such as Treasury bonds, if shocks emerge there too.

5. Don’t bet against bailouts The fifth lesson is that banks are never “just” businesses. In calm times, bankers dress themselves up in free-market language and talk about their profits and business plans as if they were selling hamburgers, laptops or holidays. But that free-market mantra vanishes when panic erupts, since governments almost always step in to protect some depositors, buy bad assets or even nationalise entire banks. That happened in 1990s Japan and around the world during the global financial crisis.So, too, last month: although deposit insurance was supposed to cover only the first $250,000 of SVB and Signature accounts, the government protected them all, at a cost of more than $20bn. And the Swiss regulators not only protected depositors when Credit Suisse imploded but — controversially — gave some (very small) value to shareholders too. On both sides of the Atlantic central banks have offered liquidity lines to banks (and in America, the Fed is letting banks exchange their holdings of Treasuries for cash at face value, as if rate rises never happened). Governments do this partly because banking is essential to the wider economy. But also because of contagion. The dangerous weakness of fractional banking is that if nobody has a reason to panic, banks are safe; but if everyone runs, a bank can collapse, even if it previously passed tests on issues such as capital adequacy — unless a government steps in. And while the government never used to worry about smaller banks collapsing, now they fear the digital domino effect. Maybe governments can contain such risks. After all, the “March madness” — as some journalists and traders now call it — has died down, and the losses have been relatively small to date compared with the previous bank shocks. I can go to dinner without constantly feeling the need to check my phone.

But when I consider the last month, another lesson I learnt from Tokyo and London keeps coming to mind: the trajectory of financial crises can be lengthy, with ebbs and flows. In Japan in the 1990s, the moment of most panic (the collapse of LTCB) came months after the first ructions around Nippon Credit Bank. In the global financial crisis, Lehman Brothers collapsed more than a year after the first subprime mortgage dramas.I desperately hope we will buck history this time — and ensure that investors and regulators around the world quickly learn from the SVB debacle and improve risk management skills. But I also fear that the past decade of quantitative easing has distorted finance so deeply that there will be unexpected chain reactions, if not in banks, then other corners of finance. SVB might now have a place in the history books. Sadly, this story is unlikely to end here. Gillian Tett is chair of the FT’s editorial board and US editor-at-largeFind out about our latest stories first — follow @ftweekend on Twitter More

MUMBAI (Reuters) – India’s central bank is widely expected to raise its benchmark rate on Thursday for the seventh consecutive meeting and leave the door open for more increases to bring inflation back within its target range, economists said.A large majority of economists, 49 of 62, said the Reserve Bank of India (RBI) would lift its repo rate by 25 basis points to a seven-year high of 6.75% at the conclusion of its three-day meeting on April 6. The central bank has already raised rates by 250 basis points since May last year.”The need for another rate hike is driven by elevated level of core inflation which has remained near or above 6% since middle of 2021,” said Gaura Sen Gupta, an economist with IDFC FIRST Bank.Retail inflation rose 6.44% year-on-year in February, easing from 6.52% in January but has remained above the central bank’s mandated target range of 2%-6% for 10 out of the last 12 readings. Core inflation, which excludes volatile food and energy components, was also expected to have stayed high between 6.05%-6.12% in February, according to estimates from three economists.Unseasonal rains could keep food prices high and a surprise decision by OPEC and its allies to cut output recently has also pushed up oil prices which could add to imported inflation.”The policy space to focus on inflation is lent by domestic growth conditions holding-up, supported by urban consumption and services sector recovery,” Sen Gupta said.India’s manufacturing sector expanded at its fastest pace in three months in March while services industry growth eased slightly from February’s 12-year high, private business surveys conducted by S&P Global (NYSE:SPGI) showed.A few economists, however, said that signs of turmoil in the U.S. and European banking sector could lead to tighter financial conditions and a steeper global slowdown. Early signs of a slowdown in India are also visible in easing imports and plateuing bank credit demand.”Risk management considerations mean that MPC will opt for a pause in April,” said A Prasanna, head of research at ICICI Securities Primary Dealership. The committee will retain its option to hike later by maintaining its phrase ‘withdrawal of accommodation’, he said, essentially holding on to its tightening bias.The Reuters Poll showed that a majority of respondents, 20 of 36, expect the central bank would maintain its ‘withdrawal of accommodation’ stance while the remaining 16 said it would shift to neutral. Banking system liquidity has improved in recent days after having been in deficit towards the end of March. Liquidity surplus stood at 2.11 trillion rupees on Wednesday, its highest since Sept. 5 and more than double the 1.04 trillion rupees surplus in the previous session.However, after the initial few days in April, liquidity is expected to tighten again as the government kickstarts its borrowing programme and credit offtake from banks’ increases. “While the central bank might step in to thaw conditions via ad hoc variable repo rate operations, preference will be to keep the net liquidity balance close to non-inflationary neutral or slight deficit, with relief expected by way of government spending or likely return in portfolio inflows,” said Radhika Rao, senior economist at DBS Group (OTC:DBSDY) Research. More

On course: new tech helps plot shipping routes © CFOTO/Future Publishing via Getty ImagesAsia’s logistics sector is booming. And it is technology — whether used to map global shipping routes or plan customer deliveries — that is helping propel growth at companies large and small.From shipping groups to warehouse owners, logistics businesses have often been slow to embrace digitalisation. But global supply chain disruptions early in the pandemic forced a rethink as companies turned to tech-based solutions to locate and help transport goods.Nowhere is this more evident than in Asia, where surging ecommerce sales and western unease around Chinese suppliers is putting pressure on logistics groups.Online sales in Asia hit almost $3tn in 2021, according to research group Insider Intelligence. China is by far the biggest market, but sales are expanding rapidly in countries across the region and logistics start-ups are springing up to help meet demand.Singapore start-up uParcel launched in 2015 with a crowdsourcing model for drivers, using AI to match them to locations and deliveries. With a compound annual revenue growth rate of 64 per cent between 2018 and 2021, it is included in this year’s FT/Statista ranking of high-growth companies in Asia-Pacific.

Co-founder and chief operations officer Wee Leong Ng says high demand for online deliveries meant his company struggled to fulfil orders in peak periods. Many times, he was unable to source drivers and had to deliver the parcels himself — “but doing so makes me want to build better technologies”, he says.The start-up, which focuses on same-day deliveries for goods — from groceries to medicines — has expanded into Malaysia and plans to launch in India this year, Leong Ng says.Growth in the wider region’s logistics industry has been driven by new technologies for plotting shipping routes, tracking goods, operating warehouse robots and managing driving fleets, according to analysts.Asia’s $231.2bn contract logistics market is expected to achieve compound annual growth of 5 per cent between 2019 and 2028, according to logistics data provider Mordor Intelligence.“All large logistics companies are dedicating huge amounts [of cash] to digitalisation,” says Viki Keckarovska, research manager at UK-based logistics consultant Transport Intelligence, “because demand for visibility [of company operations] has increased, putting a lot of pressure on logistics companies to invest in real time visibility.”

The automotive sector is one of the main users of logistics technology © Tang Ke/VCG via Getty Images

Tracking shipments and operations is important for the automotive sector, one of the biggest users of logistics groups, globally.Industry trends including the switch to electric vehicles and rising exports from China mean that, as production demands shift, logistics operations must adapt.“All of those supply chains that were set up and configured in a certain way — all of those logistics services — are now having to rethink and reconfigure,” says Tim Foster, lead logistics adviser at Cushman & Wakefield.Steve Saxon, partner in McKinsey’s Shenzhen office, says logistics companies need to be flexible enough to connect new components to manufacturers in new locations, as parts now come from across the region. “Japan has a lot of the high-tech components in a car and the tyres are coming from south-east Asia, or at least the rubber is,” he notes. “People involved in the supply chains of automotive are doing well.”Elsewhere in manufacturing, analysts expect logistics groups to benefit as western companies source more suppliers outside China amid tensions between Beijing and Washington.Supply chains are increasingly bypassing China, says Keckarovska, and “it will be south-east Asia and India which will be more attractive production and sourcing destinations”.

Companies “are diversifying because they have to”, says Saxon. “The risk of being reliant only on manufacturing in China is too high.” But logistics companies, he adds, are “a bit behind the manufacturers, playing catch-up”, and are focused on growth in India, Indonesia, Pakistan, Bangladesh and Vietnam.Saxon also warns that some logistics revenue growth may prove “temporary”, due to a rise in container freight rates in the pandemic, as restricted capacity drove up prices.Companies with “scarce assets such as container ships and aircraft” racked up huge revenue and profit increases in the period but this is not sustainable, he argues.All the same, opportunities remain for logistics groups because of rising ecommerce, says Keckarovska — but companies will have to “dedicate more resources” to technology to sustain growth. More

Kinara Capital has had a front-row view of the trends driving India’s $3.5tn economy over the past decade. Founded in 2011, as one of a new generation of small business lenders, its customers have ridden shocks ranging from a tax overhaul in 2017 to Covid-19. “During the pandemic, things were a little dicey,” says chief executive Hardika Shah.But, after a difficult few years, Shah senses a bullish mood: “Everybody is ready to get back to business. Everybody is thinking, ‘How do I expand?’”Kinara is one of 73 Indian businesses on the FT/Statista ranking of high-growth Asia-Pacific companies in 2023. And its customers are borrowing more than ever. Small-scale manufacturers are investing in areas such as machinery, Shah says, as they try to meet demand for auto parts and other products. Meanwhile, traders are switching en masse from the cash-based economy to a digital one, using tools such as India’s Unified Payments Interface network.This comes as the OECD estimates that India’s economy expanded by 6.9 per cent in the financial year to March 31, making it one of the fastest growing among larger nations. Indian equities have also been star performers, internationally, since the pandemic began. India’s geopolitical heft has grown, too, as the country — which, with 1.4bn people, is set to overtake China as the world’s most populous this year — hosts the G20 summit in September.

Kinara Capital’s founder and CEO Hardika Shah © Rahul M Sindhe

But, at a time of global economic gloom, corporate executives and investors are watching to see whether the bullish momentum around India lasts. The country has long struggled to deliver on heady economic expectations, with repeated predictions that it would go on to recreate China’s phenomenal economic and corporate growth still unfulfilled.Yet, with geopolitical tensions between the west and Beijing forcing investors to explore alternative investment destinations, prime minister Narendra Modi wants to promote India’s potential.His government has announced plans to boost capital spending by a third over the fiscal year from April, to Rs10tn ($122bn), following similarly large increases in recent years, in a bid to improve infrastructure and drive growth. The budget also included tax breaks for young companies, and other steps designed to help start-ups.Per capita growth had been in decline over the past decade, according to a recent report by the Centre for Social and Economic Progress.While services such as IT thrived, as the country’s large pool of skilled, English-speaking engineers helped to turn India into the world’s outsourcing hub, the manufacturing sector has disappointed.Only five Indian manufacturers make it into in this year’s FT/Statista ranking, compared with 16 businesses from the IT sector. Manufacturing as a share of gross domestic product has been similarly limited to about 15 per cent since Modi came to office in 2014, despite his multiyear “Make in India” campaign, designed to boost the industry.

Analysts say more manufacturing growth is needed to create the sort of mass employment enjoyed by China in recent decades.New Delhi did enjoy a boost last year when Apple, which has been manufacturing low-end iPhones in India since 2017, started building its latest models in the country. But the operations remain at an early stage and beset by teething problems.Other businesses are exploring whether to follow suit. Last month, Swedish bank SEB arranged a tour for Nordic chief executives seeking investment opportunities in India, which included meetings with officials and business leaders.It has not yet translated into more deals, though, reports Priyanka Kishore, economic director at IMA Asia, a forum for regional executives. “When they start talking about where else to shift, India features very highly in talks,” she says. “But I’d say the execution is not at the same level as the assessment on paper.”“They’re still not that convinced that the ecosystem for multinationals is in place,” she adds, citing the country’s inferior infrastructure and lower purchasing power compared with China.Indian authorities are working hard to change this perception. The southern state of Karnataka, for example, this year liberalised its labour laws to allow for two-shift production — a longstanding demand from companies that say byzantine labour and land regulations put India at a disadvantage to other Asian countries.“Those kinds of things show state governments in India becoming more business friendly, at least for big ticket investments,” says Ashish Dhawan, a private equity investor whose non-profit Convergence Foundation focuses on India’s growth and development. He adds that manufacturing “will do better, but still has long ways to go”.India’s economy is partly shielded from global shocks thanks to its large domestic market. But it is not immune: the country’s growth is expected to slow in line with global trends, with export-oriented sectors, such as IT, particularly exposed.After a stellar run last year, equities, too, have struggled. Markets were rocked in January and early February by fraud allegations against India’s Adani Group, one of the country’s largest private conglomerates. A sell-off among Adani’s 10 listed companies wiped more than $100bn off the value of the group, a large borrower from Indian banks.

The fallout from the allegations — which Adani vehemently denies — has been contained so far, with no sign of contagion spreading through the financial sector. But research firm Capital Economics says it expects Indian equities to remain under pressure.Indian start-ups are also exposed to slowing global growth, which has led foreign investors to redirect funds away from emerging markets. Foreign venture capital funding of Indian start-ups has slowed sharply: falling 40 per cent, to $25.7bn, in 2022 compared with the previous year, according to data provider Tracxn.Shah of Kinara argues that India, nonetheless, appears to be an outlier when other countries are facing recession, with more of its clients looking to hire, for example. “When I talk to my friends and family elsewhere in the world, there’s this doom and gloom sensation out there,” she says. “But India is counterintuitive.” More