Good morning. In today's edition: the looming climate crisis under Trump's comeback; Indian hotels' shares grow on wedding bells expectations; India's widening trade deficit gap, and Ola's never-ending troubles continue.

JANUS VIEW

The Looming Climate Crisis Under Trump's Comeback

The return of Donald Trump as the president of the United States, with effect from January 20, 2025, has dominated world events this past week. Trump’s campaign promise to end wars around the world – both Israel’s war on Gaza and the Ukraine war go on only because of massive US support for each – would work to ease oil prices, both by shaving off the risk premium and by augmenting supplies through unfettered flow of Russian oil and gas into global markets. The US is already the world’s largest producer of oil and a major exporter of Liquefied Natural Gas, and Trump’s policy is to promote American hydrocarbons further, adding to global supplies.

Another place where a major Trump impact is being felt is in Baku, Azerbaijan, the site of the 29th Conference of Parties to the UN Framework Convention on Climate Change, called COP29. Trump, as the 45th president of the US over 2017-20 had withdrawn from the Paris Accord worked out by 196 countries by COP21 at Paris in 2015. He calls climate change a hoax, and is likely to take the US out of global efforts to combat climate change, once again. The US delegation at Baku has been stripped of the agency to make any new commitments.

India plays along with the emission reduction narrative, even though 75% of its electricity is generated from coal. India is massively adding to its renewable capacity in both wind and solar. Ethanol is another area of so-called renewables, but this is misguided. Producing ethanol from sugarcane, corn or any other crop is resource-intensive, and guzzles subsidies on irrigation water, power for pumping out the water from deep underground, fertilisers, and on financial incentives for farmers. Diverting corn to biofuel could raise the cost of animal feed, and push up food prices.

Where India lags is in two areas of climate action. One is in passively going along with the Western narrative that because climate change is a global problem, everyone should share the burden. Once climate action is identified as reducing additional emissions, this makes perfect sense. However, reducing emissions is ineffectual, as a tool for combating climate change. The urgent task is to remove a goodly part of the 2,400 Gigatonnes of CO2 equivalent of emission that have accumulated in the atmosphere since the mid-19th century. We need net negative emissions now, not reductions in additional emissions.

CO:RELATION

Wedding Booster

Indian Hotels shares have had a dream year. With an outperformance led by a solid financial performance, the company’s share price is building expectations. A significant share of these expectations is led by the upcoming wedding season. The conference call for the quarter ended September 2024 contains 15 references to the wedding season. Analysts were asking the company about the prospects for new business in the wedding season. While the company did not provide any statistics on the potential business from weddings, they said they have hotels at 125 iconic locations where there could be ‘Instagram-able’ moments. 

If the number of weddings is significantly higher this year than last, that should also rub off on other companies like Titan or Kalyan Jewellers. However, the share price trend does not reflect that level of optimism. The surge in Indian Hotels shares is also due to the ‘capital light’ expansion strategy. That includes managing more properties than just owning them. While the idea is to capitalise on demand and focus on growth, it is not happening at the expense of profits.

CORE NUMBER

$27.14 billion

This is India’s merchandise trade deficit surged to a two-month high in October, marking a red flag during an inflationary phase. This widening gap, up from $20.78 billion in September, was fueled by a sharp rise in imports. Economists had anticipated a lower deficit of $22 billion, highlighting the unexpected scale of the shortfall. Meanwhile, services exports grew to $34.02 billion, offering some relief, though services imports also rose. Weak global demand, geopolitical tensions, and high fuel costs have pressured trade, with exports led by engineering and petroleum goods and imports dominated by crude oil and electronics.

FROM THE PERIPHERY

—🔼 India's wholesale inflation surged to 2.36% in October, its highest in four months, driven by spiking food costs, according to government data. This rate topped the 2.2% forecast by economists and rose from September’s 1.84%, Reuters reported. Food inflation spiked to 11.6%, with vegetables alone soaring 63%. Cereal prices climbed 7.9%, while manufactured goods saw a modest 1.5% rise. On the flip side, fuel and power prices dropped 5.8%. Retail inflation also hit a 14-month high at 6.2%, putting pressure on the central bank to reconsider an interest rate cut.

—🧑‍⚖️ India's Competition Commission (CCI) may approach the Supreme Court to consolidate over a dozen petitions filed by sellers against Amazon and Flipkart, accusing them of favouritism and procedural flaws. According to The Business Standard, these cases, spread across high courts, have frozen the CCI’s antitrust probe. The CCI's August report flagged potential violations, citing preferential treatment of select sellers and aggressive discounting. Legal experts say a Supreme Court transfer could streamline proceedings. The Karnataka High Court granted a temporary stay, with further hearings scheduled for November 20.

—🛵 Ola Electric, the electric two-wheeler manufacturer, is facing fresh scrutiny from the Central Consumer Protection Authority (CCPA) over concerns about its after-sales service practices.  The investigation, initiated by the CCPA’s investigative arm, will examine the nature of complaints and any deficiencies in services reported against Ola Electric, Business Today reported on Thursday.  This follows government authorities expressing dissatisfaction with Ola Electric’s claim of resolving 99.1% of complaints, raising questions about the effectiveness of its consumer service processes.   Currently, three different government bodies — the Ministry of Road Transport and Highways, the Ministry of Heavy Industries, and the CCPA — are looking into alleged irregularities in Ola Electric.  

—🧑‍⚖️ The Solar Energy Corporation of India (SECI) has issued a show-cause notice to Anil Ambani-led Reliance Power, seeking an explanation for submitting fake bank guarantees for a bid. The action follows SECI's ban on Reliance Power from participating in clean energy project tenders for three years. SECI, a government agency under the Ministry of New and Renewable Energy, found that Reliance Power's unit, Reliance NU BESS, submitted a fake endorsement of a foreign bank guarantee. SECI has deemed this a deliberate act to manipulate the tendering process and fraudulently secure the project capacity.

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