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Moneycontrol Pro Panorama | Regional may be the new global as protectionism grows

In today’s edition of Moneycontrol Pro Panorama: Changing contours of protectionism, India Pesticides IPO, the unknown side of Keynes, the vaccine juggernaut, Bandhan’s Assam challenge, succession worry at India Inc and more

June 23, 2021 / 02:58 PM IST
Representative image

Representative image


Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

Aditya Birla group Chairman Kumar Mangalam Birla believes a global reset has struck at the heart of globalisation. His group will no longer consider acquiring a business dependent on a global supply chain, according to a Bloomberg report. Instead, he is looking at a regional business model to contain the risks from protectionism.

The shift towards protectionism is not new. Even before the pandemic, in the commodity industry for instance where Birla’s companies maintain a prominent presence, countries have been actively encouraging value addition within their borders. While companies may have found it more viable to simply export ore to their processing facilities in their home country, the governments would encourage local value addition and even discourage raw material exports through levies. The economics of the project itself would then take a hit.

Then there was the cross-continental attack by the United States for four years, under former president Donald Trump, to bring back production of goods and even services back to the US. The tit-for-tat response by governments trying to display their muscularity to a domestic audience made matters worse. This hurt the cause of globalisation further.

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But nothing brought protectionism to the forefront like the pandemic did. While it was most visible in medicines and vaccines where countries moved to first protect themselves, it was visible in other areas too, such as microchips that were in short supply. Global supply chains suddenly found themselves being tripped by policy changes, invocation of rarely-used laws and massive trade disruptions. The cost of doing business became higher if the supply chain was a stretched one.

It appears these shifts are here to stay, but hopefully they don’t. After all, the largest multinationals come from Western countries and you can’t really hope to stand up to them by having a regional presence. Also, while the Birla group may have spread its presence across continents and can now think of creating regional hubs, India’s ascent in the global economy has just begun. More entrepreneurs will want to get into the global queue.

After all, only one in a thousand adult Indians is a millionaire, compared to 200 in China and 80 in America, according to the Credit Suisse wealth report in FT (free to read for Pro subscribers). Narrowing that gap won’t be possible in a protectionist world.

Globalisation has also led to the transfer of technology and people mobility that has benefited countries and their citizens. The search for a more cost-efficient base or one that can provide scale benefits is what has led to many economies in the developing world grow. Maybe, a model where aspirations are global but the risks are contained is the way ahead.

Question: This famous economist who published ‘General Theory of Employment, Interest and Money’, in February 1936, was also a famous investor and an avid speculator. You could say he was one of those few economists who tried putting his theoretical learnings into practice and burnt his fingers on a few occasions. But like a good investor, he never gave up. Who was he? John Maynard Keynes. He features in today’s edition in GuruSpeak, in an engaging essay on his investing methods and his philosophy.

Investing insights from our research team:

Will Assam MFI package help Bandhan Bank’s stock?

India Pesticides IPO: What does this IPO have in store for investors?

Multiple energisers to help NTPC maintain good show

What else are we reading today?

Record single day vaccination raises hopes of beating COVID-19

The perennial succession woes of Indian companies are baffling

UNCTAD report — A reality check on dollar deluge

Nazara Tech may be expensive, but it opens up new possibilities for investors

Technical picks: ONGCMOILWipro and Alkem (These are published every day before trading begins and can be read on the app)

 

Ravi Ananthanarayanan

Moneycontrol Pro
Ravi Ananthanarayanan

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