Good morning. The Prime Minister’s Office has announced that Prime Minister Narendra Modi will attend the ASEAN summit virtually instead of traveling to Malaysia. This has stirred speculation about a potential meeting with Donald Trump.
While domestic media is buzzing about a trade deal on the horizon, notable differences in the bilateral relationship persist. Following the Deepavali phone call between the two leaders, Modi emphasized a united front against terrorism. In contrast, Trump pointed to discussions around trade and curbing imports of Russian oil. It appears his pressure is beginning to take effect; Reliance, a major player, mentioned it would adjust its policies to align with government directives.
Will Trump’s pressure actually bring Russia to negotiate? And what implications will this have for oil prices? There’s an explanation in depth.
Big Deal
Emirates NBD is set to acquire a 60% stake in RBL Bank for $3 billion, marking the largest cross-border acquisition in India’s financial sector. The agreement details reveal Emirates NBD will initially secure at least a 51% stake through a priority issue. The Reserve Bank of India is expected to approve this deal, especially since it previously greenlit Emirates NBD’s subsidiary establishment application earlier this year.
The Dubai-based bank will also propose a tender offer for 26% of shares from RBL’s public shareholders, with a price set at Rs 280 per share to comply with market regulations. Currently, RBL’s shares are trading at Rs 318, boosted by the acquisition announcement. As India’s 13th largest company by market capitalization, RBL aspires to break into the top five, although this could be challenging.
More importantly, this announcement signals a shift in the RBI’s stance. If sanctioned, this would be the second instance this year that the central bank has allowed majority foreign investment in an Indian bank, following Japan’s Sumitomo Mitsui Banking Corporation acquiring a 20% stake in Yes Bank earlier in May. There have also been investments from Singapore’s DBS and Canada’s Fairfax. India permits up to 74% foreign investment in private banks, but typically limits any single foreign investor to 15%.
The RBI seems to favor a case-by-case approach to opening the sector, which has its pros and cons. Each transaction will be thoroughly assessed on its merits, potentially leading to heightened scrutiny and lower risks in certain areas. Yet, this could also create a climate of policy uncertainty that might deter significant, credible investors from entering the Indian market.
The influx of foreign capital is likely to heighten competition in the banking sector, especially among established private banks. This move could deepen the financial landscape, introduce stricter governance standards, and provide more choices for consumers while fueling India’s expanding fintech sector. What’s not to appreciate about that?
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Chinese Grouse
China has lodged a complaint with the World Trade Organization regarding India’s production incentives for batteries and electric vehicles. Beijing argues that India’s system infringes on several WTO commitments, notably the principle of national treatment, which mandates equal treatment for imported and domestic goods. They contend it serves as a subsidy for import substitution, which is prohibited under various trade rules.
The timing and motivation behind China’s complaint are somewhat confusing. Domestically, there seems to be no real competitive threat from Indian manufacturing, even though part of the PLI scheme dates back to 2021. Latest data indicates that while 115 applications were submitted, only 82 were approved, and no funds have been disbursed as of yet, casting doubt on the plan’s viability.
China holds around 70% of the global market for electric vehicles. It may take India an extensive period to catch up. Most Indian EV companies rely on Chinese technology, as noted by JSW Group Chairman Sajjan Jindal, who remarked that even Europe is acquiring tech from China. “China has outpaced European car manufacturers, and we don’t really have a choice,” he commented. A significant challenge for India’s EV sector is battery production, with most components imported from China, Japan, and South Korea. Projections suggest that by 2030, domestic production will only meet 13% of India’s battery cell requirements, according to S&P data.
The timing of China’s complaint might be influenced by tariffs and minimum prices set by other nations on its EV industry. As diplomatic relations with New Delhi thaw, Beijing likely seeks to enhance its EV exports to India. Effectively, a WTO complaint could provide China with leverage amid a broader trade downturn, not necessarily out of fear of India’s manufacturing capabilities, but rather as a way to gain a talking point.
Go Figures
India’s core sectors saw a decline in growth last month, as reported by government statistics. Fertilizers and the four fuel-related sectors—crude oil, coal, natural gas, and refined petroleum—were particularly impacted.
Read, Listen, See
I’ve been engrossed in Kiran Desai’s novel about Sonia and Sunny, who experience loneliness. Readers familiar with Indian contexts will recognize their setting. The narrative centers on two young adults from Delhi navigating college and work in the U.S. Various influences shape their choices, spanning family, identity, race, and culture. Desai’s sharp observations offer a thrilling glimpse into the life of a cosmopolitan Indian, though I feel like I need to caution about the emotional weight of the story.
I appreciate all the feedback you provided for last week’s program.
Buzzer Round
Can you name the dish originating from Nepal and Tibet, made with flour and water, typically filled with meat, shaped either as half moons or full moons? It can be steamed or fried.
Please send your answers to indiabrief@ft.com, and check out Tuesday’s newsletter to see if you guessed correctly.
Last week, we asked about which product’s worldwide popularity has left Japanese farmers struggling to meet demand. The answer, of course, is matcha!
Congratulations to Anuj Balaji for getting it right first! Also, kudos to Suvodeep Rakshit, Aniruddha Dutta, Ram Teja, Prasanna Venkatesh, and Anjaneya Das. We’re thrilled about the strong participation in the buzzer rounds this week. We had considered launching a leaderboard, but it hasn’t happened yet. We’ll work on it—promise!
Thank you for reading. Feedback, suggestions, or just friendly gossip can reach us at indiabrief@ft.com.
