Emerging Markets Boom, Iran Burns, ISRO Faces Setback: The Week That Was
The promise of emerging markets contrasted sharply with unrest in Iran and a reminder of technological fallibility closer to home.
The Gist
Emerging Markets may benefit from Western challenges
The article discusses how the weakening dollar and rising geopolitical tensions could lead investors to favor Emerging Markets over traditional assets.
- Gold and silver prices are rising due to decreased demand for US dollars.
- Emerging Markets may see a commodities boom driven by demand for critical minerals.
- India's economic prospects remain strong despite foreign investor hesitance.
Can bad news for the rich world spell good news for the rest, in today’s interdependent world? It just might, if you consider Emerging Markets as an asset class to which investors turn as they flee the uncertainties over a weakening dollar and rising Trump hubris that causes him to demolish larger chunks of the global order, supplemented by a global race for critical minerals essential for Artificial Intelligence, the Green Transition in power and high-end electronics that unleashes a commodities boom in the Global South. This is the thesis that Bloomberg columnist Shuli Ren puts forward.
This does ring true. Gold and silver have gained serious ground, thanks essentially to the weakening of the dollar, not as a transient trend but as a structural effect of the 47th US President’s determined moves to wreck the rules-based global order that his predecessors since Franklin Delano Roosevelt had worked hard to create.
Country after country are lowering their holding of US dollars as currency reserves, contributing to the rise in gold and silver prices, besides the rise in demand for alternate assets such as cryptocurrencies.
Trump might not believe in climate change or the need for Green technologies to reduce the impact. However, just the race for ever more powerful artificial intelligence (AI) is creating a major demand for all kinds of innovations in the power sector, including tapping unconventional sources, including geothermal, power electronics to fortify the grid and large-scale battery storage to keep the grid stable.
Batteries create demand for lithium, cobalt, nickel, and zinc, besides for copper. These conventional minerals join rare earths and other critical minerals that are vital for the electric vehicle and electronics industries, of which there is a swingeing shortage. The race to tie up supplies of these minerals could well create a commodities boom in the Global South, where the bulk — even if not all — of these are to be found.
Short point, New Delhi does not need to fret overmuch about the foreign portfolio investors’ seeming distaste for Indian assets. They will return, as the merits of emerging markets as an investment class crystallise in the waters muddied by President Trump.
Labour Reform’s Costly Twist
The government has been getting a lot of flak for notifying the new four labour codes. Unions have been vehemently critical, attacking the codes for entrenching informal work in the guise, they say, of fixed-term contracts.
The labour codes do have many shortcomings, but they have been given a left-handed compliment by information technology majors TCS and Infosys. They claim their profits are taking a hit worth over a thousand crore rupees, on account of the new labour codes’ expansive definition of who is eligible for gratuity payments on retirement, and the size of the gratuity payout.
India’s vaunted space programme suffered a setback, as Tuesday’s PSLV-C62 launch failed at the third stage. This rocket is the Indian space programme’s workhorse for launching satellites. It has carried out 64 launches, 59 of them unqualified successes, five of them partial or total failures.
Space Setback
This week’s failure is the second in a row, and it could not be prevented by divine intervention, which ISRO chief V Narayanan had sought by carrying out special prayers at the Tirumala temple prior to the launch. More focus on science and mission integrity and less reliance on a helping hand from the cosmos might have helped.
India’s advanced Earth Observation Satellite was part of the payload, consisting of 16 satellites, including 8 foreign ones. One foreign satellite, Kestrel Initial Demonstrator from Spanish startup Orbital Paradigm, survived the launch mishap at the third and final stage, and has been sending signals to its handlers.
The handiwork of several Indian space startups was lost, however. These included a space telescope, an AI-enabled camera and a satellite refuelling module. That Indian startups are coming up with such a wide array of space tech is encouraging. It is to be hoped that the startups had insured their products and would not have to handle financial stress on top of heartbreak following the failed rocket launch.
Trade Signals From Europe
German Chancellor Friedrich Merz visited India, his first external visit outside NATO nations, leaving aside South Africa, where he attended a G20 summit. It is significant that Merz has chosen to visit India before China, the most significant trading partner for Germany and the European Union (EU) in Asia. India matters as a geopolitical entity that maintains strategic autonomy and has the potential to grow into a major economic and technological powerhouse.
Germany granted Indian travellers a benefit while in India: they would not need a transit visa for an intermediate stop en route to a third destination. India’s commerce and industry minister, Piyush Goyal, is in Europe, negotiating hard to sew up a trade agreement with the European Union, before Republic Day, for which India has invited the top leadership of the European Union to be the chief guest. If India were to finalise a deal with the EU, even as a deal with the US eludes us, it would indicate that the blame for not being able to finalise trade deals lies not with New Delhi.
Between Sovereignty And Ruin
As President Trump threatens to attack Iran, in case the besieged regime kills more protesters — as many as 2,000 are reported to have died in the current round of protests — it poses a peculiar choice for friends of the Iranian people.
Should they prioritise Iran’s sovereignty and oppose America’s interference in Iran’s internal affairs, or should they welcome the additional external pressure that might well lead to the collapse of the tottering regime in Tehran, and liberate the most sophisticated Muslim nation from the hold of an illiberal theocracy?
The history of regime change has not been edifying. The removal of Saddam Hussein paved the way for the emergence of the Islamic State and protracted anarchy and killings in Iraq and the neighbourhood. In Libya, the removal of Col Gaddafi paved the way for a civil war that continues to this day. Authoritarian rule survives by crushing the Opposition, so that no readymade structure of administrative coherence stands ready to take over control of the state in case of a regime collapse. If removal of the theocracy only leads to anarchy and schism, it is better to side with Iran’s sovereignty and oppose American intervention.
On the other hand, if civil society organisations and the institutional memory of democratic self-governance, brief though that experiment was in Iran before the Americans engineered a coup and installed the Shah as their puppet, a successor regime can be counted on to come up, if the incumbent regime falls.
The Pahlavi regime killed thousands of Communists and democrats, before it itself was overthrown by the Islamic Revolution of 1979. Protests against Mahsa Amini’s death in police custody in 2022, after she had been arrested by the morality police for not covering up to the regime’s satisfaction, had gone on for a year. There have been sporadic protests against economic hardship. A prolonged drought that is driving people out of Tehran adds to disquiet. Whether these protests have created a network of resistance that can take over power from the clergy is the crucial question.
