Modi's in Delaware

Hello. Prime Minister Narendra Modi attended the Quad Summit in Delaware, meeting with U.S., Australian, and Japanese leaders. We’ll discuss the key takeaways, and then close with Gupshup, a round-up of the most important headlines.

BTW: Which ancient monument reveals that ancient Indians had an advanced understanding of metalworking? (Answer at bottom)

Markets

Read here for an appendix on the above.

Explainer

What Modi Accomplished in Delaware

This past weekend, President Biden hosted Prime Minister Narendra Modi at his Delaware residence (his home state), along with Australia’s Anthony Albanese and Japan’s Kishida Fumio, for the Quad Leaders Summit. The nations committed to a “free and open Indo-Pacific” where trade routes will be protected and economic partnerships will be expanded. The Quad, which is not a formal security or military alliance, is perceived as an explicit effort to curtail Chinese influence in the region, meaning its work could make it one of the most important alliances of the 21st century.

Maritime Security   The Indo-Pacific accounts for 60 percent of the world’s maritime shipping, roughly $3.4 trillion worth of goods a year, making it a critical juncture for global trade and a key target for the United States to expand its influence and extend its security umbrella.

The Quad countries agreed to expand programs for monitoring vital sea lanes, through the Indo-Pacific Partnership for Maritime Domain Awareness (IPMDA), launched in 2022. The initiative focuses on sharing real-time satellite data to counter illegal fishing, piracy, and trafficking; the negative externalities collectively cost over $20 billion.

Competing with China   The Quad announced a funding boost for the IPMDA, the Indo-Pacific Partnership for Maritime Domain Awareness, an initiative that uses “innovative technology, such as commercial satellite radio frequency data collection, to provide partners across Southeast Asia, the Indian Ocean region and the Pacific with near real-time information on activities occurring in their maritime zones,” as per the Australian prime minister’s office. The effort aims to reduce information asymmetry between trading partners to boost collaboration in protecting trade routes.

The effort is seen as a counterbalance to China’s naval security expansions in the Indo-Pacific. China’s foreign ministry spokesperson issued a statement this morning about the weekend’s Quad Summit, saying, “The US needs to get rid of its obsession with perpetuating its supremacy and containing China, stop using regional countries as its tool.”

Excluding China is strategic, but might make Quad efforts doomed to fail, as China manufactures more than all of the Quad countries together. The Quad comprises 25.88 percent of global manufacturing (United States at 15.9, Japan at 6.5, India at 2.9, and Australia at 0.6 percent), while China is responsible for 31.6 percent of global manufacturing. Efforts to increase security in Indo-Pacific trade routes while excluding China may increase conflict rather than reduce it.

India’s Hesitations?   India is a reluctant participant of Quad, which has been described as the cooperation’s “weakest link.” Since its 1947 non-alignment principle between the United States and the Soviet Union, India has tried to play both sides of the U.S.—Russia rivalry, recently being muted about Russia’s invasion of Ukraine, much to the detriment of the U.S. In 2021, India installed Russian’ S-400 air defense systems, the same action that caused the U.S. to kick Turkey, its NATO ally, out of its F-35 fighter jet production program. However, since 2023, India has reduced its procurement of Russian arms, curtailing its decades-long defense partnership. This move gives India increased flexibility to work with the U.S., which has shown willingness to share data with Quad members about the location of its navy ships in the Ind-Pacific to improve trade route safety and cooperation.

Other Outcomes   According to the White House’s joint statement, other outcomes of the summit include 1) Quad Cancer Moonshot, which will increase funding for cancer research, 2) expansion of the “Quad Partnership on Humanitarian Assistance and Disaster Relief in the Indo-Pacific” or HADR, which increases coordination for natural disasters, 3) a new regional Maritime Initiative for Training in the Indo-Pacific (MAITRI), to share resources and training of staff to protect trade routes, of which the inaugural workshop will be hosted in India in 2025, 4) the Quad-at-Sea Ship Observer Mission in 2025, which is a joint mission by the Japanese, U.S., Australian, and Indian coast guards, and 5) increased investments in telecommunication infrastructure, 5) $20 million for the Open Radio Access Network, and $7.5 million for AI, and 6) a Quad Investors Network to improve cross-border investments and business partnerships.

Macro

• The next meeting of the Supply Chain Council, part of the Indo-Pacific Economic Framework, will be in December (Economic Times). The IPEF has 14 member countries accounting for 40% of GDP and 28% of total trade.

• JP Morgan CEO Jamie Dimon told CNBC-TV18 he is bullish on India’s future while speaking at an investor conference in Mumbai (Moneycontrol)

• India posts weakest economic activity this year, PMIs show (BBG). Manufacturing dropped to 56.7 from 57.5; services purchasing went from 60.9 to 58.9. Although the state is still above 50, implying growth, the slack in pace is worrisome for Indian desire for 7+% growth each year

Equities

• Reliance Power Board approves new stock issuance worth $190M (Economic Times). The proceeds will be used for debt reduction, CapEx, and general corporate purposes.

• Nifty50 keeps closing at all-time highs (Livemint) amid strong support in financials, auto, and realty stocks. The recent Federal Reserve cut has led to EM around the world rocketing up, India included.

Alts

• Indian makers of solar panels seek tariffs from cheap imports (BBG). Industry groups want trade protections from dumping solar panels from manufacturers in China and Vietnam

• Foreigners’ derivatives bets have hit $116B outstanding (BBG). Indian equities have risen by 18% since a trough in June mostly on options and futures on indices and single-stocks.

Policy

• India invites Myanmar’s anti-junta forces to New Delhi (Economic Times). The invite comes as India’s projects in the country are threatened by violence due to border instability. The meeting, hosted by the Indian Council of World Affairs, is meant to discuss constitutionalism and federalism

• Uttar Pradesh’s chief minister, who leads India’s most populous state, plans $95 million of development projects in Mirzapur (Economic Times). Among the most ambitious local government projects in recent years, the state plans to improve connectivity, healthcare, and general government services.

• Biden and Modi announce a new chip factory (BBG). During the Quad Summit, both world leaders announced a semiconductor fabrication plant via support from the India Semiconductor Mission, Bharat Semi, 3rdiTech Inc, and the U.S. Space Force.

Oh, and the iron pillar of Delhi revealed that 4th century India had an advanced understanding of metallurgy. Built during the reign of Chandragupta II between 375 and 415 CE, the pillar is notable in that it has not collected any rust over 1,500 years. Today, it stands in the Qutub complex in Delhi and is one of India’s three ancient iron pillars.

See you next week.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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