Top of the Morning

Markets eye surge on exit poll predictions

Episode Summary

Service sector leads business registrations; behind India’s rising savings

Episode Notes

Welcome to Top of the Morning by Mint, your weekday newscast that brings you five major stories from the world of business. It's Monday, June 3, 2024. My name is Nelson John. Let's get started:

2024’s marathon seven-phase elections finally came to an end on Saturday, with voters across 57 constituencies exercising their democratic rights. In just 24 hours, elections officers across the country will start counting votes that will decide the future of India. The pollsters, however, have already spoken. Almost all of the exit polls predicted a sweeping victory for the BJP-led National Democratic Alliance , and along with a third term for Prime Minister Narendra Modi. Buoyed by the poll predictions, market experts expect Nifty to surge by 2.5-3% when markets open today. This expectation is leading to a scramble among foreign institutional investors and proprietary traders to cover short positions, anticipating the NDA securing well over the expected 300-310 seats. Exit polls predict around 350 seats for the NDA, with some forecasts even suggesting as many as 400 seats. This is likely to boost market sentiment as it solidifies expectations of continued policy and fiscal stability. Mint’s markets correspondents Ram Sahgal and Dipti Sharma report the bullish sentiment among traders on D-street on the eve of election results. 

Artificial intelligence systems, often compared to "black boxes," work in complex ways that are hard to explain. Like the human brain, they process information through multiple layers but, unlike humans, their decision-making paths are not easily traceable. This makes it difficult to understand why an AI makes certain choices, such as a self-driving car failing to stop for a pedestrian. To address these challenges, the field of explainable AI or XAI aims to make AI decisions more transparent and understandable. Mint’s senior editor Leslie D’monte explains the emergence of this new field, which involves developing methods to clarify AI processes, auditing these decisions, and implementing regulatory measures to ensure accountability. Companies like Google, Microsoft, and IBM, alongside research institutions and government bodies, are actively working on XAI technologies. 

India's external debt, at 18% of its GDP, is relatively low among G20 countries, as pointed out by Finance Minister Nirmala Sitharaman. However, to fully understand what India owes to other countries, it's better to look at the International Investment Position, which covers all foreign financial assets and liabilities. This includes the country's reserves and any domestic assets owned by foreigners, such as investments and loans. India's net international investment position is negative, meaning the country owes more to the rest of the world than it owns in foreign assets. This debt increased from 60 billion dollars in 2003 to 396 billion dollars in 2023, rising from 9.9% to 11.1% of its GDP. This status places India among countries that owe more internationally than they possess, writes Deepa Vasudevan. 

In India, the services sector is taking the lead when it comes to starting new businesses. Out of nearly 16,000 firms that popped up in April, 72% were in services, while manufacturing tagged along at 15%. That’s what the latest data from the Ministry of Corporate Affairs tells us. This isn't just a one-off thing; services have been dominating the new business scene for a while. As of April this year, 65% of all active companies in India were in the services sector. That's a jump from 61% back in 2015. Throughout the last financial year, the services sector consistently claimed 70-72% of all new business registrations each month, dipping slightly to 69% in April 2023. So, what kind of services are we talking about? Well, it's a broad mix—everything from schools and hospitals to fitness centers and professional associations. Mint’s senior editor Gireesh Chandra Prasad reports these numbers. 

India’s savings landscape is seeing a potential shift, claim  economic analysts. After years of decline, financial savings—like cash, bank deposits, and investments—might actually be on the rise. In 2011-12, these savings were 7.4% of our GDP, but by 2022-23, they dropped to 5.3%. Now, Goldman Sachs and Crisil suggest we might see these savings bump up to 6% of GDP for 2023-24. What's driving this? Even though our economy grew by 8.2% last year, it looks like households might be tightening their belts, possibly boosting their savings as private consumption cools down. But what does this mean for the economy? Normally, if folks are saving rather than spending, it's not great news for economic vibrancy. However, these savings do provide essential funds for businesses to invest and grow, so it’s not all doom and gloom.

Looking at the broader picture, India’s total savings rate, which combines savings from households, businesses, and the government, dipped from about 35% of GDP in 2011-12 to 30% by 2022-23. But for the current fiscal year, it's expected to inch up slightly above 31%. The drop over the past decade is mainly due to a decline in household savings, which fell from about 24% of GDP to 18%. This Long Story by takes a deep dive into the rise in India’s savings, and whether it is a sustainable rise.  

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Show notes:

Markets likely to open higher as exit polls signal sweep for NDA

Will decoding AI ‘black boxes’ make AI models safer? 

India can cheer its low debt, but here’s the catch

At 72%, service sector dominates new business registrations in April

Indians may have saved more in FY24. Is the rise sustainable?