Dec 09: China's historic trade leap, India's ambitious space economy

Fam - unfortunately, the day has come.

With a heavy heart we must announce that we’re pausing Desi Dispatch. We write with love (and a bit of sarcasm) everyday but that also means that it takes time and effort. And given the return is lots of love (which we love) but also zero rupees it’s become harder and harder to keep going.

Hence, we’re taking a hiatus. Who knows, we may be back at some point.

Until then, Hasta la vista, baby. We’ve loved every second of this.

Now, let’s get into the FINAL Dispatch! 🚀

Today’s reading time is 6 mins.

The Indian stock market fell sharply on Monday, with the Sensex dropping 610 points and the Nifty down 226 points, driven by caution ahead of the US Fed policy and FII selling. Investors lost over ₹7 lakh crore.

What happened: China achieved a significant economic milestone in November, recording an annual trade surplus of over $1 trillion for the first time. This achievement was primarily driven by robust exports to regions outside the United States. The historic surplus was announced amid ongoing trade tensions with the US, even as a temporary truce eased some tariff pressures. The surplus underscores China's growing influence in global trade, despite challenges in its domestic economy and strained relations with major trading partners.

What Changed: Recent talks between Presidents Xi Jinping and Donald Trump led to a temporary halt in their trade dispute, pausing punitive tariffs and export controls. Despite this easing of tensions, Chinese exports to the US fell by 28.6% in November, dropping to $33.8 billion. However, overall exports grew by 5.9% compared to the previous year, reversing a minor decline in October. This growth exceeded Bloomberg's forecast of 4%, bolstered by increased orders from non-US regions, effectively offsetting the slump in US demand.

The Numbers: China's trade surplus for the first eleven months of the year reached $1.08 trillion, surpassing last year's full annual figure. Import growth, however, was sluggish, rising only 1.9% in November, below Bloomberg's prediction of a 3% increase. Analysts, including Zichun Huang of Capital Economics, suggest that trade rerouting and competitive pricing due to deflation are helping maintain export resilience.

Looking Ahead: As China continues to expand its trade surplus, tensions with Western countries could escalate. French President Emmanuel Macron has warned of potential European tariffs if China does not address its trade imbalance with the EU. The temporary trade truce with the US is set to expire late next year, with experts skeptical about its longevity. China’s leadership aims for 5% economic growth in 2024 and will convene this week to strategize. However, financial analysts caution that external demand may weaken, posing challenges for sustaining such growth.

What’s the buzz: India is ambitiously setting its sights on building a $45 billion space economy by 2035, largely driven by private firms. This push is part of a broader strategy to establish the country as a global leader in space technology. India's Space Minister, Jitendra Singh, emphasized this goal during a recent interview. The aim is for India to close the gap with countries like China, which already have advanced space capabilities, including plans to send astronauts to the moon by 2030.

What Changed: The significant shift towards private investment marks a new chapter for India's space sector, which previously had minimal economic impact. According to Singh, opening the sector to private firms has already increased its value to about $8 billion. The Indian government is now actively fostering an environment conducive to private sector growth, with the expectation that this will propel the space economy to the $45 billion target within the next eight to ten years.

The Numbers: Currently, around 400 Indian space startups are contributing to this ambitious target, engaging in activities like satellite manufacturing, launch services, and space-based data analytics. To support this growth, the government announced a 1 trillion-rupee ($11.1 billion) Research, Development and Innovation Scheme. This initiative aims to boost private-sector advances in deep technology sectors through concessional financing, focusing on projects with a Technology Readiness Level of 4 or above, indicating they are nearing market readiness.

The Larger Picture: As India gears up for its first crewed mission into space by early 2027, these developments highlight a transformative phase for its space industry. The government's focus on private sector participation is expected to not only enhance technological capabilities but also create a robust economic framework supporting space exploration. This initiative could position India as a formidable player in the global space race, potentially leading to significant technological and economic benefits.

IndiGo Faces Operational Crisis Amid New Regulations: IndiGo, which controls about 66% of India's domestic air market, is grappling with operational chaos due to new Flight Duty Time Limitations. Over 1,000 flights, nearly half its daily operations, were canceled on Friday, stranding passengers nationwide. Brokerages have reacted by cutting target prices: UBS to ₹6,350 and Investec to ₹4,040, citing increased costs and regulatory compliance.

RBI's Dovish Moves Create Bond Market Opportunity: The Reserve Bank of India has cut the repo rate and infused liquidity, aiming to ease borrowing costs amid inflation at multi-year lows. This dovish stance is seen as a boon for bond investors, with experts suggesting investments in short-duration corporate bonds and long-term government securities. The RBI's actions, including a $5 billion currency swap, are poised to stabilize yields and may lead to further rate cuts, enhancing the bond market's appeal.

Jio Hotstar to exit deal: The International Cricket Council (ICC) is seeking $2.4 billion for India media rights from 2026 to 2029 after JioStar signaled its intent to withdraw from a deal through 2027. Despite a $474-million surplus in 2024, the ICC faces challenges as potential bidders like Sony Pictures Networks India, Netflix, and Amazon Prime Video express concerns over pricing. India's dominance in cricket media is evident, accounting for nearly 80% of ICC revenue, but rising costs and market pressures complicate future broadcasting commitments.

EU Team Discusses Free Trade Agreement with India: A European Union delegation is scheduled to meet with India's Commerce and Industry Minister, Piyush Goyal, on Monday to assess the progress of Free Trade Agreement negotiations. The talks aim to enhance trade relations and economic cooperation between the EU and India. If successful, the agreement could significantly boost trade volumes and economic ties, benefiting businesses and consumers in both regions.

ITC Hotels Targets Growth with Expansion and New Projects: ICICI Securities projects ITC Hotels' revenue to grow at a 12% CAGR from FY25-28, driven by new launches and increased managed properties. The brokerage values ITC Hotels at Rs 520.9 billion, with EBITDA margins expected to rise to 37% by FY28. ITC aims to expand to 220 hotels by 2030, adding 6,400 keys. Recent openings and a strong cash balance support this growth. BAT's recent stake sale in ITC Hotels has also drawn attention.