(Bloomberg Opinion) — Two years ago, India rolled out a laudable plan to unlock the capital trapped in some of its smaller airports. But the actual outcome from privatization was less than reassuring: All six airfields put on the block went to one bidder.
If that wasn’t enough, multiple media reports now say that Ahmedabad, Gujarat-based billionaire Gautam Adani, an early and enthusiastic supporter of Prime Minister Narendra Modi, might also succeed in taking control of the already-privatized Mumbai airport, as well as a new one coming up on the financial center’s outskirts.
Airports are natural monopolies. To have one private owner controlling eight or more — a fresh batch of six will soon go under the hammer — can’t possibly be great news for airlines, fliers, or businesses operating from the premises.
More worryingly, the concentration of economic power in aviation infrastructure is now symptomatic of a broader trend in India, particularly in businesses where the government supplies a key ingredient, such as telecom spectrum.
The splashy 2016 entry of tycoon Mukesh Ambani in 4G mobile was a huge boon. The richest Indian single-handedly crushed data charges for customers to 9 cents a gigabyte, the lowest in the world. But a field that once boasted a dozen players is now effectively a duopoly. The fate of a third service will be decided by a court order about how much time Vodafone Idea Ltd. has to pay its share of the $19 billion demanded by the government from telecom firms as past dues.
If Ambani’s vision of a carriage, content and commerce triple play is sexy enough to attract investment from the likes of Facebook Inc. and Alphabet Inc.’s Google, Adani’s ambition of owning ports, airports, railway tracks, power plants and energy distribution utilities, is humdrum but lucrative.
The worry is that dominance by a handful of capitalists may not leave enough space for others. But then, who’s even ready or willing to compete, especially in sectors where state policy has a big role in determining winners? Barring some notable exceptions, the Indian business class is overextended, trapped in the debris of assets created with the help of syndicated loans from pliant state-run banks. Politicians even have a name for it: phone banking, where they make the calls and tell bankers to whom to give loans.
It’s impossible to carry on this way. After the Covid-19 disruption, government-owned Indian banks will require as much as $28 billion in external capital over two years to raise their loss provisions on bad loans to 70% and double credit growth from last fiscal year’s abysmal 4%, according to Moody’s Investors Service. Much of this money will have to come from a government that can’t keep a lid on its borrowing costs. A sharp, private credit-fueled recovery for the economy appears to be out of the question.
That’s probably why policy makers are resigned to letting whoever has any financing muscles take what they can. There are antitrust laws, but they’re being used to investigate discounting practices of Amazon.com Inc. and Walmart Inc.-owned Flipkart, even though their share of overall retail is minuscule. Tax laws have been used to hound startups.
Courts, which can enforce fair and stable relations between the state and business, are adding to the confusion by asking if banks have a claim on airwaves — a sovereign asset — held by insolvent telcos. Who’ll lend for 5G networks when such basic issues in creditor rights are undecided?
To top it all, the pandemic and badly soured relations with China provide ample cover for an isolationist campaign of economic self-reliance, which can be used by tycoons to charge local customers more. Adani won the bids for six airports fair and square, but then used Covid-19 to negotiate for extra time to take over three of them. However, when it came to winning the Mumbai terminal from GVK Power & Infrastructure Ltd., its liquidity-strapped current owner, disruption to travel doesn’t seem to have damped the group’s eagerness. Abu Dhabi Investment Authority and PSP Investments, a Canadian pension fund, were separately talking to GVK about a deal. They have written letters to the Indian government, asking for a transparent transaction, the Economic Times has reported.
India’s 2016 adoption of a modern bankruptcy law raised hopes that global capital would have an equal chance to take productive assets out of weak hands. The expectation was that the government would follow the Australian asset-recycling model to pay for $1 trillion worth of new infrastructure. But with insolvency courts temporarily shut to new cases, and so many airports going to one buyer, it’s unclear if foreigners’ ardor will endure. After the coronavirus, there’s no dearth of distressed assets globally.
Just as opening up the economy in the 1990s was a windfall for the current generation of middle-class Indians, excessive economic concentration will be a headache for the next. Like in South Korea, people may one day realize how a few conglomerates are sapping the entrepreneurial energy of everyone else. By then, it will be too late, and the country might be burdened with the equivalent of a “chaebol discount.” Laying the foundations of a competitive economy is still possible. But if India can’t ensure that with state assets, the corporate landscape will start looking like a Monopoly board, to its aspiring oligarchs and the rest of the world.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
