Following $600mn Ambani wedding, India has set the stage for its next growth phase

 

Following $600mn Ambani wedding, India has set the stage for its next growth phase

At last, the global spectacle has come to an end. The last scion of the Ambani family has completed his grand trifecta celebrations spanning 5 months and the planet can return to its regular orbit.

Oh, and around the same time, Spain won the Euro Cup, Spaniard Carlos Alcaraz stole the Wimbledon crown from Novak Djokovic again, and Pakistan contemplated banning former Prime Minister Imran Khan’s political party.

But back to the (very deliberate) spectacle of the century.

Canary, pink and orange diamonds were in tow at Anant Ambani’s celebrations, while Italy’s famed Il Borro and Singapore’s Hutong were transported to Mumbai.

For perspective, just one of Nita Ambani’s necklaces was worth $60 million while another piece, a 52.58-carat diamond ring titled ‘Mirror of Paradise’, can be traced back to the Mughal era in the 1800s.

It was reportedly auctioned by Christie’s in 2019, originating from the famed Golconda mines – home of the Koh-i-Noor.

It is India’s time on the global stage; Pakistan is nowhere near it

And the global media ate it right up.

“Bollywood Stars, Prime Ministers and the Kardashians Attend the Ambani Wedding,” wrote The New York Times, referring to the family’s strategic partnerships with Boris Johnson, Tony Blair, John Kerry and PM Narendra Modi.

The pre-wedding celebrations in Jamnagar drew Bill Gates, Mark Zuckerberg and Bob Iger.

That, paired with the appearances of Rihanna, Katy Perry, Justin Bieber and Andrea Bocelli, the collective global influence was well on display.

The world sat up and took note(s).

The Guardian estimated the cost of the affair at around $600 million.

No doubt an excellent branding technique, the digital footprint that the spectacle created will likely spur a launching pad for the next set of Reliance-backed ventures and a move towards a more cohesive and aggressive global footprint as the next generation of scions are primed to take over Mukesh Ambani’s sprawling $123 billion empire.

India’s Reliance, Bollywood fuel Ambani wedding hype through social media

India’s economic reforms

The Ambani empire – comprising of petrochemicals, oil and gas, telecom, retail and financial services – was in large part a formulaic and strategic rise championed in no small part through reforms by former prime minister Manmohan Singh.

In 1991, Singh, as Finance Minister, abolished the Licence Raj, a source of slow economic growth and adopted a free market policy which led India’s burgeoning middle class see rapid growth, opening up the economy to competition, trade, innovation and enterprise.

This move liberalised the Indian economy and positioned it to become a global player.

During 2004-2012, India’s middle class doubled from 300 million to 600 million, placing considerable wealth and purchasing power into the hands of these newly-minted dollar millionaires.

Then, current Prime Minister Narendra Modi’s ‘India First’ campaign followed, with subsidies and tax breaks for businessmen like Gautam Adani and Mukesh who were tapped to shape India’s global image and drive exponential growth.

Additionally, India’s rules on foreign direct investment protected the national team of moguls from global rivals.

A technological hub was already in progress, which no doubt helped India ride the digital wave of the 2000s seamlessly.

Earlier, in the 1970s, the Indian government had begun investing in Bangalore’s tech sector, attracting foreign giants such as IBM to set up shop.

Now, Asia’s “silicon valley” houses Apple, Google, Facebook among others and its 10,000+ startups raised over $10.8 billion in funding in 2022.

Bill Gates. while attending the celebrations in Jamnagar, had even called India home to “incredible innovators”, in a (now viral) video of him at a local tea shop.

Perhaps, it’s pertinent to note that in the early years following partition, India was quick to invest in engineering and technological schools, no doubt providing the basis for this meteoric rise.

The era of wealth creation

The cultural fabric of India also changed along with the socio-economic milieu as the country embraced the propensity of the wealthy to spend, not unlike China where a penchant for and access to luxury goods and services came to define this era of prosperity.

Euromonitor has estimated the personal luxury market in India to expand almost 12% a year in 2022-2026 to nearly $5 billion in contrast to the slowing demand in China.

All eyes are on India, that’s for sure. The ‘Billionaire Raj’ – led by India’s modern bourgeoisie – is now “more unequal than the British Raj headed by the colonialist forces,” according to a recent study by the World Inequality Lab.

India’s 1.4 billion population, the world’s biggest, has a per capita income of just $2,300, but the country is also home to more than 800,000 dollar millionaires who are eager to splurge on luxury homes and expensive SUVs.

Real estate consultant Knight Frank estimated India will have 1.4 million millionaires by 2026, 77% more than in 2021, as the economy continues to strengthen.

Knight Frank’s 2024 Wealth Report has also projected India’s wealth to grow by 50% by 2028, while the number of Ultra High Net Worth Individuals (UHNWI) – $30 million or more – is expected to reach 19,908 in 2028, from 13,263 in 2023.

Asia’s wealthiest man takes global rich to the zoo

Present day

India is currently the world’s world’s fifth-largest economy set to expand between 6.5% and 7% this fiscal year, with consumer spending expected to reach $5.2 trillion by 2031.

The Ambanis have long remained instrumental in propelling India to the global stage, demonstrated also by the glitzy opening of the Nita Mukesh Ambani Cultural Centre (NMACC).

Isha Ambani – director at Reliance Retail – has been key in bridging the gap between Indian wealth and access to global luxury conglomerates.

This year, Gucci, Cartier and Louis Vuitton were among luxury brands to open stores at Jio World Plaza, as luxury firms and Reliance made a push to profit from strong economic growth and a rapid rise in the number of millionaires.

Jio World Plaza is located inside Reliance’s $1 billion business and cultural hub in Mumbai’s business district.

LVMH, Gucci to expand in India with new outlets in Reliance’s luxury mall

Over the course of the wedding, a staggering number of custom ensembles worn by the Ambani family was crafted by Indian couturier Manish Malhotra – a brand that Reliance owns 40% stake in.

Malhotra, too, is poised for his own global push with his first global flagship in Dubai Mall.

Isha is also set to launch The Wedding Collective in August — a wedding expo bringing together over 100 curated couture and jewellery vendors, such as Manish Malhotra, Abu Jani and Sandeep Khosla.

Following the $8.5 billion merger of Reliance’s media arm with Walt Disney’s television franchise in India – with 750 million viewers across the country – a public offering for the digital platform is set to be in the works worth an estimated $112 billion, according to reports.

This, followed by one for Reliance Retail, will further entrench Ambani’s position in the market.

A new consumer finance and payments unit is also in the works, as are investments in green energy, all set to mark and market the next decade of growth for Reliance.

Despite the criticism the Ambanis’ spending received, it has already been parlayed into multiple investments that will no doubt have bigger payoffs in the long term.

What is Pakistan upto?

While the neighbours make their wealth, influence and business acumen known across the globe, Pakistan is grappling with multiple crises.

Its salaried group is taking to the streets, industrial units are either announcing shutdowns or halting production, while organised sectors are protesting against taxation.

In most cities, people are also protesting against record high energy tariffs, and some are demonstrating against government’s inaction on civil issues.

Foreign exchange reserves, exports and remittances have risen, but many also see piling debt payments weighing down on the inflows.

The brain drain, downplayed by the government, is on the rise, and there is real agony and frustration in the masses. The less said about its sports teams, the better.

Most importantly, Islamabad is now also grappling with terrorism in the country.

The two neighbours definitely took two different routes to get here in 2024. Will the paths ever cross? Will Pakistan ever come to the development and promoting its business road? If so, when?

Time is running out.

IPPs playing major role in destruction of economy

 Chairman of the FPCCI Advisory Board and National Business Group Pakistan, President Pakistan Businessmen and Intellectuals Forum, and All Karachi Industrial Alliance, Mian Zahid Hussain said that IPPs are playing a major role in the destruction of the country economy.

He suggested stopping the establishment of new IPPs and giving state-owned IPPs standard rates for electricity supply.

Mian Zahid Hussain stated that we should start with the power plants of our friendly country, China, in order to balance the agreements with IPPs.

He said that we should stop building new IPPs of all kinds because only those in power need them.

Mian Zahid Hussain stated that different IPPS have received payments ranging from Rs 750 to Rs 350 per unit, which is unacceptable. We need to explain to the public why we are purchasing electricity worth billions from various IPPs and paying trillions of rupees to some IPPs without generating a single unit.

According to Mian Zahid Hussain, IPPs received payment in the form of capacity charges without producing any electricity.

He said that due to heavy payments to IPPs, the government has nothing left to invest in health, education, the environment, and other important sectors, which means that these factories established in the private sector are causing poverty, ignorance, diseases, environmental pollution, and unevenness in the country.

He stated that IPPs have generated hundreds of times the profit from their expenses, and their owners have contributed billions of rupees to their facilitators. Therefore, a review of the contracts is necessary to save billions of rupees and lower taxes for employees and commoners.

Plan for low-cost electricity for export industry

While presiding over a meeting of the National Export Development Board (NEDB) on Tuesday, the prime minister said that the domestic exports were over USD 30 billion dollars last fiscal year with IT exports exceeding USD 3.2 billion. He also directed that the problems identified by the exporters should be resolved and a report submitted in the next two weeks, adding that after every one and a half months, he will preside over the meeting of the NEDB. The meeting was attended by the exporters of various sectors including textiles, information technology, leather and agriculture. The meeting was also briefed about the measures taken by the government for the development of the export industry and a plan was also presented to double the exports in the next five years. The prime minister directed the Ministry of Commerce to finalise the policy proposals in collaboration with the representatives of the sectors that have potential of exports. He also directed that Ministry of National Food Security should work with the provinces for the improvement of extension services to increase agricultural exports. He said that quality seeds and further processing of agricultural commodities exports should be ensured while directing that steps should be speed up to introduce high yields agricultural commodities. The prime minister said that the delivery time of Pakistani goods to Europe and America should be reduced by solving the problems of shipping. He asked the Ministry of Commerce and Board of Investment to ensure cooperation regarding the transfer of Chinese export industries to Pakistan. He continued that research and development, innovation and brand development should be done to increase the exports of Pakistani goods and stated no delay on the part of the Federal Board of Revenue (FBR) for clearance of refunds of exporters. The premier also directed that trade officers in Pakistani embassies posted abroad should play their role in export of Pakistani goods to their respective countries and also provide guidance to Pakistani exporters. The Ministry of Power should present a comprehensive plan to reduce the cost of electricity for industries, he said. The prime minister has given the target of increasing the country’s exports to USD 60 billion annually and directed that the Ministry of Commerce and related institutions should take practical steps to achieve the target in the next three years from over USD 30 billion during the last fiscal year. As the role of the private sector is very important in any country for the, the prime minister directed that private sector should be made part of the policy formulation process in order to solve their problems. The exporters appreciated the prime minister’s initiative to provide timely refunds to the export industry on behalf of the FBR.

Textile exports shall start falling

It seems that our economic planners are living in a fantasy world. Contrary to our budgetary expectations, which portray our exports rising from the current 30 billion dollars a year to 60 billion in a few years; our textile exports shall actually start falling. The effects of all the adverse factors that have developed over the last couple of years should see a decline in our textile exports in the coming few years. This is not simply the result of the current budgetary measures, but the cumulative effect of the economic factors affecting our country. This shall be accentuated by the economic developments in our main competitor countries. The combined effects of all these will be to the detriment of our textile exports. An industry is viable in world trade when it is cost competitive. We have seen how the dominance of the west in consumer durables, cars and trucks, electronics, was eroded first by the Japanese thirty years ago. They supplanted European- and US-made goods. Then the Koreans found their place and now the Chinese are flooding the world markets .The Japanese cars and consumer durables are being outsold by Chinese firms, not only by price but by an equally acceptable quality. The Japanese have moved on to higher technology products. The best price with a reasonable quality sweeps the market. Much the same factors apply to the textile products that we specialize in. Our competitive strength has eroded and the obvious results will follow. Pakistan today is a high-cost country for producing textiles as compared to other South Asian and some Far Eastern countries. It has no specialized skills that the others do not have and so will find it difficult to expand its markets. On the contrary, however, the others have developed skills that we lack and their workers, management and regulatory authorities are far batter skilled and trained than ours. So we are in danger of losing what we have achieved and not expect to expand our exports further. Firstly, let’s examine the relative costs: Cotton: Our current quotes for Punjab Cotton is about Rs19,000 per maund. This is equivalent to about 83 US Cents/Lb. The Indian Punjab cotton is quoted at Indian Rs5,900/maund. This is equivalent to about US 86 cents/lb. On the face of it, the Indian cotton is 3 cents/lb more expensive than ours. However, our cotton has a trash content of 7% to 8%. The Indian cotton’s trash content is guaranteed at below 3.5%. This eliminates the current price differential. Add to this the better uniformity of the staple fiber and the higher percentage of short fiber in our cotton, the Indian cotton is far more suited to produce the base line 20’s cotton yarn. This is the position of the short staple cotton used for coarse yarns. For longer staple cottons, India is way ahead of us. We have not bothered to develop any mid- or long- staple varieties. There are quite a few varieties available in India. MCU 5 from Orissa/Karnataka is available at US 90 cents/lb. Our domestic cotton advantage has vanished. Even if we are allowed to import Indian cotton through Wagah as before, we still have to pay for the transport, packaging, fumigation, border crossing, documentation and remittance fees. All this will cost us a pretty packet, plus the humiliation of restarting trade that we cut off some years ago. Electricity tariffs in Pakistan are higher than any other developing country. This promises to destroy the viability of our industry across the board; here are the rates as reported in US Dollar cents per unit: Pakistan Non-Textile 16.34 Pakistan Textile 13.31 Bangladesh 8.60 China 8.10 India Non-Textile 7.80 India Textile 6.00 Vietnam 7.20 Electricity bills are the second most important costs after cotton in the process of spinning yarn. In effect the Pakistani spinner is paying about double of what an Indian spinner is paying; that for a very low quality of electricity which has frequent shutdowns and voltage surges. In many companies bank interest or financial costs are just as much as power costs. Here we have really gone overboard. As compared to the 6/8% prevailing in India and Bangladesh we are at over 20%. Whilst bankers reap huge profits the manufacturing industry is in ruins. The other most important cost for a spinner and of most of the industry is salaries and wages. Here, admittedly, the Indians and Bangladeshis had lower wages but they are levelling up with our wage levels in terms of wages paid per worker. However, the skill levels available in India especially for engineers, supervisors, fitters, mechanics and managers are far better and cheaper than here. The women workforce was paid well below our levels, yet they had excellent skills and that was the basis of their garments industry. We have very poor skills, and do not encourage our women into the workplace. Here we end up with higher costs as well. There is also a reliability factor, which the Indians and Bangladeshis have developed. Their exporting firms are not only established, they have also acquired subsidiaries and brands abroad. The two main towel brands in the USA, Canon and Fieldcrest, belong to Indian companies. The main towel company in Australia and Australian weaving mills also belong to an Indian mill. Welspun from India has gone and established a towel company in China, supposedly an “enemy” country. Our firms are still at a pygmy stage. Our brands are not known abroad nor do we have any brands or labels that we own.