India coal stockpiles at power plants are the lowest in four years & so it has to choose whether to import expensive coal or have blackouts.
What is happening in China is not a China story but regional & global.
Winter is coming. 🥶🇮🇳🇨🇳
And as my Indian followers pointed out: India (and like much of Southeast Asia), winter is actually good for electricity demand, as in it would go down because cooler temperatures require less cooling & not much heating.
The same cannot be said for China.
I'm pretty proud of the US regarding our sources of electricity. We got the most clean fossil fuel - natural gas, which is seen as a good complement to renewables as renewables cannot serve all the energy needs for now.
Coal < renewables in the US as a source of electricity.
Yay for the US source of electricity. Pretty even mix of things & we are rather energy independent & use more renewables vs coal 🇺🇸.
Let's talk about what happened to renewables globally this year: climate change.
The very thing to fight it is susceptible to it. Let me explain.
I know Greta doesn't like the US but can I say we're pretty good if you compare us to emerging markets.
😇🇺🇸I'd say we're angels of electricity looking at the share of renewables.
Anyway, so u know hydro is key for renewables right (#1 source for China for example).
So?
The issue is this: renewables (hydro, wind, solar) depend on the weather.
Hydro by definition requires water. And WATER is a resource that is getting pretty scarce or UNDEPENDABLE due to CLIMATE CHANGE.
Have you heard of droughts in the US & Brazil? 🇺🇸🇧🇷
So as a result of climate change, leading to more volatile weather, which we must fight by doing more renewables, we actually got less energy from renewables.
As in, hydro got dried out by extreme droughts. Brazil gets tons of it from hydro but no good due to severe droughts.
Here is a summary of hydro in emerging markets and Europe. In China, hydro was up but varies by region. Sichuan got lower output.
India got lower hydro output. In Europe it is up but Turkey, which invested in more hydro, was impacted by droughts & output fell -30%
Volatile!
Key charts on hydro down in key markets. Anyway, hydro is not the greenest of renewables (solar is better & less disruptive to the environment due to building of dams etc).
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India unveiled its FY25 budget yesterday (btw, they have another one in 6 months) & it was very much a fiscal consolidation, jobs, and responding to people's beef about the woeful labor market (Modi lost seats in Uttar Pradesh).
Before I talk about the Budget, let's talk about India labor supply & demand. Ready?
As you know, India is the most populous country in the world today & will be even more so in the future.
Let me put it a different way, by 2040, one out of 5 people will be Indian.
So what happens to India matters because it's a fifth of the world population by 2040.
India will have more people than China or the same as China and the US combined.
Yes, a lot of people. That's beautiful (generally referred as demographic dividend assuming that we have jobs for them) and highly problematic for India (high joblessness and civil unrest), Indian politics and also how to manage this massive supply of people (skilling them, finding jobs for them etc).
First, nickel is a material that has to be DUG out of the earth & process. Some easier (colder nickel in Russia) & some harder like wet & warm places like Indonesia where you have plenty of it but it's the processing that's difficult.
Here comes China.
The mining & processing of nickel are energy intensive. And more importantly, for Indonesian nickel, it was considered too low grade to do & China had breakthroughs in a technology called high-pressure acid leaching (HPAL). "Low-grade nickel ore is placed into pressure vessels, where it’s treated with sulfuric acid and heated. After that, the nickel that separates out will be suitable for batteries, once it’s refined"
China new home sales fall further & while some may say that the real estate is now not so important for China, it remains a key driver of wealth effects & that is negative. Meaning, the data dump that we will get in 10 mins will likely show a further misaligned economy where consumption falters while supply rises.
This will add to further tensions with the West & even the South as China will need to export that excess supply, driven by policy to rise in the value chain, or to vertically integrate its supply chain, to the rest of the world.
Chinese corporates will increasingly have to do it via tariff arbitrage, as in third country export or building factories where they want to sell.
Some say it doesn't matter as Chinese firms gain market share.
Actually, it does matter. Employment matters. So unless they can get Chinese workers to manufacture goods in third country or in the country/region of export, over time, employment demand will fall in China for manufacturing.
Instead of a landslide, we got earthquakes, Modi & the BJP got the most seats but much less than they benchmarked (400) & less than 2019 (303) at 240. To govern, they need to work with fickle allies to operate a coalition government.
This will require a much more consensus driven governance.
That may be positive or negative depending who u are. Meaning, in the short-term, forming a government takes priority over long-standing reforms that are already politically difficult when they had the government. We may have more fiscal welfares & so if we continue with the same capex, fiscal deficit may widen. Or we may have less capex than before. Irrespective, this area will be watched carefully. Under Modi, grain & fertiliser subsidies remain large & was promised to be in place.
Note that India fiscal deficit has consolidated as of late but remains large. What has changed is the quality - higher tax rev ratios & more capex & less subsidies as share of GDP
Some say that a coalition won’t change as it is still Modi in change. But that is IF a coalition stays the course (he got some really fickle allies) & this that if adds to risk premium in the short-term.
Irrespective, India fiscal is in a rather decent shape so we have a solid foundation to work with here.
This article in the FT doesn't make any sense. The author argues that Modi fails to create job for low-skilled people, esp labor-intensive manufacturing. It also faults Modi for its high-end growth (services, high-tech, infra, etc)
But then it ends with saying, well, don't bother to even develop manufacturing and just work on service exports.
Btw, all the critiques of India makes sense. The issue I have with Rajan and also Congress is their solutions.
They don't have one. Literally. Rajan tells India to forget about trying to do manufacturing & focuses on services.
India exports a lot of services. Manufacturing is the weak spot, not services!!! And if u want a lot of jobs, u need labor-intensive manufacturing.
A country with such a large population needs to growth via all sectors - services, manufacturing, agriculture etc. You can't leapfrog development & go to services.
India & the Philippines have tried that. Not working & hence need to include manufacturing & infrastructure building.