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Good morning. In today’s edition — lack of air cargo capacity could pose threats to India’s smartphone exporting dreams; Honda boss admits a weakening consumer sentiment in India; and India’s services sector sees slower growth.

DECODE THE NEWS

Air Cargo Woes Could Shatter India’s Smartphone Export Dreams

India’s smartphone exports, valued at $10 billion in FY2022-23, have climbed rapidly thanks to factors like the production-linked (PLI) schemes, government initiatives like Make in India, and companies shifting bases from China to India. 

But surrounding infrastructure and logistical capabilities needed to send these phones to their destinations haven’t kept pace with this growth. 

Thus on November 23, the Indian Cellular and Electronics Association (ICEA) raised concerns with the government about infrastructure challenges at the country’s airports, highlighting the need to expand airport capacity and improve cargo turnaround times.

“We often face situations where there’s simply no space to unload cargo, which adds unnecessary delays to the shipment. Then there is the inspection and customs clearance process that further extends the time. It is a system that needs efficiency at every step,” Rajesh Sharma, principal advisor to the ICEA, told The Core.

With India projected to achieve $14 billion in smartphone exports next year, experts said that investment in cargo infrastructure is vital to sustain this momentum. In comparison, countries like China rely on well-established freighter networks, enabling them to dominate global smartphone exports. According to Business Standard, Chinese mobile phone exports slipped from $136.3 billion in FY23 to $132.5 billion in FY24, a 2.8% decline representing a $3.8 billion reduction. This dip underscores shifting dynamics in the smartphone supply chain and competitive pressures from emerging players​. 

India’s focus on airport expansion and logistical enhancements will be a key determinant of whether India can continue to close the gap with China in electronics exports.

PODCAST

The Stock Markets Continue To Rise

On Episode 450 of The Core Report, financial journalist Govindraj Ethiraj talks to Vijai Mantri, Co-Founder and Chief Investment Strategist at JRL Money as well as Garima Kapoor, Economist at Executive Vice President and Elara Securities.

• The stockmarkets continue to rise, albeit steadily.

• Which way will liquidity flow in coming days, between Indian and global and what will influence markets?

• India’s GDP Q2 came in at 5.4%, the ball is now in the RBI’s court but will the central bank do anything and what should it?

• Temperatures this winter season could be higher and affect crops.

CO:RELATION

Leader Is The Laggard 

It is a week since Capital Markets Day 2024 that Hindustan Unilever, the nation’s top-listed consumer company, organised to highlight the vision of Rohit Jawa, the new MD and CEO. Investors are barely enthused. HUL shares are down, while Nifty 50 is up. Even if you stretch the time frame to five years, HUL shares are rank underperformers, gaining only 22% in value while your money in a Nifty 50 ETF has doubled. Investors should have reasons to be concerned. 

The company, though, has a grand vision of double-digit profit growth. That would be achieved by pushing for the premiumization of products in the flagship personal care business segment. The company told investors that by 2030, India’s affluent middle class will likely grow to 386 million. The income group demography will change from a traditional pyramid to a diamond with more households at the top and higher spending power. Investors are in no hurry to buy for now.

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NASSCOM CONVERSATIONS

Building India’s AI Talent Ecosystem with Sanjeev Jain

In this week’s Nasscom Conversations, member of the executive board and chief operating officer at Wipro Sanjeev Jain speaks about how the company is not only preparing its employees for the future of artificial intelligence(AI) but also integrating it into the internal systems of the company. During the conversation Jain said that Wipro’s employees have been put through training that creates awareness about AI and also its responsible usage. Wipro is also using AI to make the life of its employees easier. For example if an employee wants a payslip or wants to apply for leave, they can do it through AI chatbots. Jain said, “Earlier I would have had to go somewhere, log in, download or send an email to someone. So there are many use cases where our expense processing, all the travel reports expenses, all our lease processing, all our queries with HR, queries with IT help desk, I think have actually gone live. We are actually seeing real benefits of these cases in production today,” Jain said. Tune in to listen to the entire conversation. 

CORE NUMBER

Rs 56,993 crore

This represents the total yearly subsidy disbursed by Indian Railways to passengers in 2022-2023, amounting to an average concession of 46% per person. This translates to a ticket price of Rs 54 for every Rs 100 spent on providing the service, according to data shared in the Lok Sabha during question hour on Wednesday. Despite this substantial subsidy, the safety record of Indian Railways remains a concern. The Hindu reported recently that over the past five years alone, 351 people died and 970 were injured in 200 consequential railway accidents. In 2021-2022, there were 34 such accidents, 48 in 2022-2023, and 40 in 2023-2024. Consequential accidents result in injuries or fatalities, damage railway infrastructure, and disrupt rail traffic.

FROM THE PERIPHERY

—🔧 India’s steel industry is reeling under a flood of cheap Chinese steel, with mill owners considering job cuts as they compete with Chinese imports, Reuters reported. This has especially affected small and medium sized mills that have had to scale down operations despite a construction boom in the country. The Reuters report comes close on the heels of the steel industry warning that Donlad Trump taking over as the president of the US could make things worse. It is likely that Trump may impose tariffs on China which will make the country redirect volumes to countries like India. The steel industry has been calling for government regulation against these imports. 

—📶 Telecom giant Bharti Airtel told the country’s stock exchanges on Wednesday that it had awarded a “multi-year, multi-billion extension deal” to Sweden based Ericsson to deploy network solutions in the country. Ericsson will build 4G and 5G infrastructure and also upgrade the current 4G networks. Bharti Airtel is currently the second largest telecom operator after Reliance’s Jio. Vi, another competitor of Bharti Airtel, had also announced a Rs 30,000 crore deal with Nokia, Samsung and Ericsson to expand its 4G networks. 

—📉 India's services sector saw slower growth in November, with the S&P Global PMI slipping to 58.4 from October's 58.5. Despite robust demand driving hiring surges and strong international orders, new business gains and output showed slight declines, Business Standard reported. Firms cited growing orders from Asia, Europe, Latin America, and the US as key contributors to expansion. However, rising food and labor costs pushed input prices to a 15-month high, while selling prices surged at their fastest rate in nearly 12 years. Businesses continued recruitment drives to boost capacity amid mounting price pressures, signaling cautious optimism.

—🚗 After months of India’s auto dealers complaining about piling inventory, Indian car makers are likely beginning to see the problem. On Wednesday, Honda Cars India president & CEO Takuya Tsumura told The Economic Times that consumer sentiment in the local market was weak and that increasing discounts were generating artificial demand. “What is happening compared to last year is that the industry has additional one month stock. More supply (is) happening. So actual demand is one month lower than last year. Certain OEMs are trying to manage that stock level, but the demand is, anyway, not so strong”, Tsumura said. While certain luxury and higher end segments have seen demand, entry-level cars have slogged the most. 

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