India’s U$1.2 trillion initiative strengthens economic challenge to China

A 100-trillion-rupee (US$1.2 trillion) mega project to help India achieve its dream of a US$20-trillion economy by 2040 – and strengthen its challenge to China as a major global powerhouse – is nearing its first anniversary

PM Gati Shakti National Master Plan (PMGS-NMP) was launched by India’s prime minister Narendra Modi on 13 October 2021. Modi believes that technology is the solution to releasing the many bottlenecks hampering new infrastructure developments in India, where half of all projects are delayed, and one in four exceeds its estimated budget

Under PM Gati Shakti — Hindi for strength of speed — Modi’s administration is creating a digital platform that combines 16 ministries and provides multimodal connectivity infrastructure to various economic zones. The portal offers investors and companies a one-stop solution for design of projects, seamless approvals and easier cost estimates.

“The mission is to implement projects without time overrun and cost overrun,” says Amrit Lal Meena, Special Logistics Secretary in the Ministry of Commerce and Industry. “Global companies choosing India as their manufacturing centre is the objective.”

The government believes that fast-tracking projects will give India an advantage, with China still enforcing strict anti-Covid restrictions and largely closed to the outside world, while many companies adopt a “China-plus-one” policy — finding other countries to expand in or source from — to diversify their businesses and supply chains. As Asia’s third-largest economy India not only offers cheap labour, but also a talent pool of largely English-speaking workers, although poor infrastructure deters many investors.

“The only way to compete with China – apart from the fact there are political requirements of countries to move away – is to be as competitive on the cost as you can be,” says Anshuman Sinha, a partner at management consultancy Kearney India. “Gati Shakti is about making it easier to have a flow of goods and manufactured components across the length and breadth of the country.”

The project’s key pillars are identifying potential; new production clusters and linking those sites seamlessly to the nation’s railway network, ports and airports, adds Sinha. “If you peel the layers of Gati Shakti, it’s made up of identifying nodes and strengthening the logistics network connecting those nodes.”

Using technology to cut red tape is central for India to unclog its stalled infrastructure projects. Of the 1,300 projects Gati Shakti’s portal currently oversees, almost 40% were delayed due to issues related to land acquisition, forest and environment clearances, resulting in cost overruns, according to Meena. At least 422 projects had some issues and the portal resolved problems in some 200 of those.

Under Gati Shakti technology can, for example, ensure that a newly constructed road isn’t dug up again to lay out phone cables or gas pipelines, according to a government agency promoting investments in India. The plan envisages modelling infrastructure projects similar to those used for Europe’s reconstruction after the Second World War or by China over the period 1980 and 2010 to raise the nation’s “competitive index,” according to Invest India, the government agency.

“Today’s India is committed to investing more and more to develop modern infrastructure and it is taking every step to ensure projects do not face roadblocks and get delayed,” said Modi when launching the programme. “Quality infrastructure is the key to kick-start several economic activities and create employment on a large scale. Without modern infrastructure, all-round development cannot happen in India.”

However data on the Ministry of Statistics and Program Implementation’s website suggests many projects are still delayed and/or over-budget, hampering the nation’s post-pandemic economic recovery. In May, India had a total of 1,568 projects, out of which 721 were delayed, while 423 overran their budget.

Since taking office in 2014, Modi has increased spending on infrastructure to create new jobs and revive an economy that was particularly hard hit by the Covid-19 pandemic. He has had some early success.

Apple has just announced plans to begin manufacturing the iPhone 14 in India about two months after the product’s initial release out of China, while Samsung Electronics opened the world’s largest mobile phone factory in the country in 2018. Last December local firm Ola Electric Mobility has pledged to build the world’s biggest electric scooter factory in Tamil Nadhu.

Call for new Plaza Accord to weaken dollar

The United States should consider deliberately weakening its own currency to ease strains on the global economy, suggests fund manager Pascal Blanque.

The pound has lost 17% against the US dollar so far this year, the euro is 14% down and the yen 20% lower as the US Federal Reserve aggressively hikes interest rates to tackle inflation.

According to Blanque, chairman of the France-based Amundi Institute, a short-term fix could involve an international deal to weaken the US currency, along the lines of the Plaza Accord which achieved a similar goal back in September 1985.

A steadily rising dollar hurts other countries by pushing up the costs of their dollar-priced imports such as oil and also strains the finances of companies and countries that borrow in dollars. The pound has been the latest to be hit, while Japan’s central bank recently intervened to prop up its currency for the first time in 24 years.

Blanque said: ‘The amount of pain that its protracted rally is currently inflicting, even on other developed economies, is a stark reminder of its entrenched dominance in financial markets and international trade.’ 

The currency disparity will feature on the agenda when finance ministers convene for the International Monetary Fund’s (IMF) annual meeting in Washington from 10 October and when G20 leaders meet in Bali in November.

Blanque said: ‘One short-term fix to address the strains caused by the dollar’s strength could be an agreement to weaken the greenback, like the one that major economies struck at the Plaza Hotel [in New York] in 1985.’

The likelihood of the Federal Reserve agreeing to weaken the dollar seems slim at a time when it is fighting hard to bring down US inflation, which in August stood at 8.3%.

But Jordan Rochester, FX strategist at Nomura, suggested that the Bank of England’s recent emergency intervention to buy billions of pounds of UK government bonds – despite its fight against rising prices – could be the ‘canary in the coalmine’ for other central banks. 

He said: “Inflation is one thing, but clearly avoiding the financial system breaking is more important for the Bank of England for the time being.

“The question is now more for the Fed and the European Central Bank (ECB) – if and when something breaks – how soon will they step in?”

SWIFT completes tokenisation interoperability trial

SWIFT announced that it has “concluded successfully” the tokenised asset pilot launched last December with Clearstream, Northern Trust, SETL and others. It linked tokenisation systems between central securities depositories (CSDs) and global custodians.

Across multiple networks running different technologies, tokens were issued, settled on a delivery versus payment basis, and redeemed. Settlement was executed both conventionally and with central bank digital currency (CBDC).

The financial messaging services provider commented: “In the same way that SWIFT currently provides the glue for cross border payments, it wants to create a common interface to enable the tokenisation of assets to take off.

“We’ve already seen numerous tokenisation platforms launch. The risk is that each becomes a new silo of assets. Investors and asset managers shouldn’t have to integrate with numerous different platforms. That would defeat a key benefit of blockchain in reducing friction. Hence SWIFTs search for an interoperability solution. It also recently announced a proof of concept with Chainlink Labs to link to several public blockchains.”

“Our vision for instant and frictionless transactions not only applies to traditional securities instruments but also to new asset classes as well,” said Vikesh Patel, SWIFT Head of Securities Strategy. “The insights from this exercise with leading capital markets participants will help us define and prioritise the concrete steps required to enable seamless processes for tokenised assets.”

SWIFT added that while tokenised real world assets have not yet reached an inflection point, activity has ramped up over recent months; due in part to the significant cost and innovation benefits offered by distributed ledger technology (DLT) as well as favourable legislation going live in several jurisdictions such as France, Germany, Switzerland, Luxembourg, Singapore and Japan. Additionally, both Europe and the UK are planning sandboxes for experimentation.

Estimates of the potential market for tokenisation vary substantially. In 2015, the World Economic Forum (WEF) predictes that 10% of GDP or roughly US$14 trillion, would be linked to blockchain by 2027. Boston Consulting Group (BCG) recently used the same 10% to estimate US$16 trillion by 2030 although it considered the figure conservative.

SETL used its PORTL token interoperability solution to integrate a range of enterprise blockchain technologies in a permissioned fashion. These included R3’s Corda, Hyperledger Besu, Hyperledger Fabric, Digital Asset’s DAML smart contract language and SETL’s own ledger.

A report on the project is expected to be published this week ahead of the SWIFT’s SIBOS conference in Amsterdam from 10 to 13 October.

Citi still looking to expand in Malaysia as economy rebounds

Citi, which last month secured approval to sell off its consumer banking business in Malaysia to UOB, says that it still has ambitions to expand its reach across the country with corporate clients

Citi’s head of global subsidiaries group for Asia-Pacific, Stella Choe, told local website StarBiz that the US group has “invested heavily” in the setting up of a cash and trade processing hub in Penang which employs about 1,200 people. “We extend our coverage to close to 600 multinational companies (MNCs) in Malaysia,” said the Singapore-based Choe.

She noted that manufacturing investment approvals had recovered sharply in Southeast Asia’s fourth-largest economy since the fourth quarter of 2021 as borders began to gradually open, post-Covid-19.

“Foreign direct investment (FDI) in Malaysia expanded by ringgit (RM) 24.1 billion (US$5.2 billion) to a record RM836.2 billion as at the end of the second quarter of 2022 compared with RM812.1 billion in Q1 22,” she said, citing official government data.

Bank Negara Malaysia governor Tan Sri Nor Shamsiah Mohd Yunus says that Malaysia's economy is no longer in a crisis and the recovery is well underway, showing positive growth momentum. Speaking at a local forum, Nor Shamsiah said that the reopening of international borders continued to lift tourism-related sectors. 

“This will have significant spillovers to the rest of the economy given the importance of the services subsectors,” she added. “Also, investment activity and prospects continue to be supported by the realisation of multi-year projects. Similarly, Malaysia's exports have been recording double-digit growth since the start of 2021 and the order books of our exporters remain healthy.”

US and UK extend sanctions to Russia’s Central Bank Governor

The US has extended its sanctions against Russia, adding the names of its Central Bank governor Elvira Nabiullina and Deputy Prime Minister Alexander Novak, as well as hundreds of other prominent individuals and businesses, punishing the country for President Vladimir Putin’s attempt to annex territory in eastern Ukraine.

The UK is also sanctioning Nabiullina, imposing an asset freeze and travel ban, the British Foreign Office said. Nabiullina has managed the economic fallout from sanctions, while Novak has played a leading role in Russian energy policy.

The latest US sanctions follow Russia’s annexation of Ukraine territory in referendums that Biden administration officials denounce as fraudulent. They target Russian officials, their families and dozens of entities that Washington says are aiding the annexation. They include a warning to other countries that the sanctions apply to any nation that seeks to replace destroyed Russian military and industrial resources.

The US Treasury has sanctioned 14 suppliers, including two international suppliers, “for supporting Russia’s military supply chains” Also blacklisted are 57 new entities in Russia and Crimea that Washington accuses of aiding the “Russian military’s brutal assault on Ukraine”, including companies that acquired or attempted to acquire US origin items for Russia's military and those that sought quantum computer technology for the war effort.

The inclusion of Nabiullina’s name in the new US sanctions has attracted particular attention. She has served as Russia’s central bank governor since 2013 and was appointed to a new five-year term in March. Before that, she served as Putin’s economic adviser. Nabiullina has managed the economic fallout from international sanctions imposed on Russia, quickly adjusting to a wartime policy when the rouble tumbled 30%.

Last month the Bank of Russia’s monetary policy committee cut its key rate by 50 basis points to 7.5%. Shortly after the invasion of Ukraine on 24 February, it has been hiked from 9% to 20% as an emergency measure. “With this level of the key rate, we estimate that we are in the zone of neutral monetary policy,” Nabiullina said in a statement.

“I don’t think that sanctioning Governor Nabiullina itself is going to make that much difference, I think it’s more symbolic,” said Rachel Ziemba, a fellow at the Center for a New American Security. “The big question and step is about the price cap and what happens with the energy markets. That’s the piece that’s still not been addressed. So while it’s a very long list, I’m not sure it’s a full game-changer.”

Société Générale acquires majority stake in PayXpert

France’s Société Générale has signed an agreement to acquire a majority stake in the fintech PayXpert, allowing the bank to broaden its offering for retail and online merchants.

Formed in 2009, PayXpert is a fintech specialised in payment services, offers retail and online merchants secure solutions for accepting customer payments both in-store and remotely, and for all payment methods including card, mobile applications and QR code.

The bank said that with this transaction, it can add to the payment experience to offer a more comprehensive and innovative service on the market, by developing its omnichannel commerce solutions in Europe.

“Together, Société Générale and PayXpert would contribute to developing retail and online merchants’ business by offering them differentiating and value-added services encompassing payments and complementary services such as financing and insurance solutions. Société Générale currently provides both online and in-store payment solutions,” it announced in a release.

Brink’s acquires NoteMachine ATM network

US-based cash management and payment services multinational The Brink’s Company is acquiring NoteMachine, one of the leading ATM networks in the UK, for approximately US$179 million- or 5.0-times adjusted EBITDA.

For the fiscal year ended June 30, 2022, NoteMachine generated revenue of approximately US$131 million and adjusted EBITDA of approximately $36 million at current exchange rates. The acquisition is expected to be accretive to earnings in the first year and was financed using available cash and Brink’s existing credit facility.

Headquartered in Crickhowell, United Kingdom, NoteMachine manages more than 9,000 ATMs. The acquisition expands the footprint of Brink’s ATM managed services business to approximately 130,000 ATMs worldwide.

“We have been actively growing our ATM managed services business, both organically and inorganically, and this is an important step in the execution of our long-term strategy,” said Mark Eubanks, president and CEO of Brink’s. “NoteMachine’s expertise, monitoring and dispatch center, and software technology infrastructure will be of great strategic value in supporting the growth of our global ATM operations, especially those in Europe.”

David Dove, leader of Brink’s global ATM managed services business, will oversee and support NoteMachine’s management team. “We will leverage NoteMachine’s fully integrated model, including its global TestLink parts business, to support growth across both financial institution and retail customer segments,” said Dove.

UK’s Ecospend partners with QR-code based payment service app PENG

UK-based open banking payment provider Ecospend has partnered with QR-code based payment services app, PENG to enable PENG’s small business customers to benefit from open banking services in the form of free transactions and enhanced security.

Founded in 2017, Ecospend’s ‘Pay-by-Bank' technology aims to harness the benefits of open banking for businesses. In the year to date, Ecospend has already processed volumes exceeding £5 billion (US$5.6 billion).

PENG is designed for small businesses seeking to migrate towards emerging payments systems in order to create greater time and cost efficiencies as they look to resume service following the pandemic. PENG’s customers will be able to benefit from Ecospend’s instant payment capabilities, included within PENG’s pricing structure. PENG offers customers two subscription options, FREE and PRO. The PRO version, charged monthly at £19.99, allows customers to send pay requests to the value of £35,000 per month, while the free version limits pay requests at £1,500 per month. Additional credits are available for purchase to customers who exceed their respective limits.

In addition, PENG offers a simplified registration route. Customers need only provide basic details, verify their bank accounts and select their subscription option.