The crony capitalists are circling over Ukraine; And, the food inflation problem seems here to stay

Market Watch

• Indian benchmark indices ended the day in red, with the Sensex decreasing 505.19 points at 65,280.45, and Nifty declined 165.50 points at 19,331.80.
• Sectorally, Nifty FMCG (-1.53%) and Realty (-1.18%) shed the most, while Media (3.91%) and PSU Bank (0.98%) gained the most.

Four things to know:

• Drone startup?IdeaForge Technology debuted ?on the NSE at a premium of 93-95% to its issue price of Rs 638- Rs 672 per share.
• Singapore International Arbitration Centre has?directed engine manufacturer Pratt & Whitney to deliver five engines ?to Go First.
• Adani Green Energy?is planning to raise Rs 12,300 crore ?through qualified institutional placement (QIP) to address concerns regarding debt servicing capacity.
• Sensex and Nifty fell from record highs ?after strong US jobs data raised fears about Federal Reserve policy tightening.

The crony capitalists are circling over Ukraine

With a view to “help bring in investments” for the reconstruction of Ukraine, Blackrock and JP Morgan have been roped in to?run the “Ukraine Development Fund, ” with the stated goal of “creating opportunities for both public and private investors to participate,” in the reconstruction and recovery of Ukraine, reports?Thomas Fazi .

• The fund will look for investment in projects potentially worth hundreds of billions of dollars across sectors including tech, natural resources, agriculture and health.

The context: The cost of reconstruction of Ukraine after the war was estimated at $411 billion (twice Ukraine’s pre-war GDP); however, given their failed counteroffensive and the continuing violence, the final cost is now estimated to reach up to $1 trillion.

The details: While Blackrock and JP Morgan are technically acting as “donors”, they will get the first pick of any investment opportunities that emerge in the post-war scenario under the agreement.

• Meanwhile, 500 global businesses from 42 countries have already signed the Ukraine Business Compact “to help realise its huge potential”, or rather to get their slice of the Ukrainian pie.
• The low-hanging fruit industries of construction and materials, agricultural processing and logistics will be the first up for grabs, Fazi writes.

Between the lines: In this scenario, it appears war is indeed good for business — a sentiment expressed by?Blackrock’s CEO who said at Davos ?that after the war, he hopes to turn Ukraine into a “beacon of capitalism”, and Goldman Sachs CEO David Solomon saying “as you rebuild, there will be good economic incentives for real return and real investment.”

• The greater the destruction, the greater the opportunities for reconstruction.
• Fazi argues that the ultimate goal of Western governments is “to open up the country and make it safe for Western capital by transforming it into a special economic zone,” with?public money to cover any potential losses ?for private capital.
• Ukraine’s President Volodymyr Zelenskyy is well aware of this fact and has already instituted legal changes in Ukraine, reducing the power of trade unions, and presenting?investment opportunities ?aimed at appeasing Western governments.

Of note:?Prabhat Patnaik ?also argues that the IMF’s pivotal role cannot be understated in bringing this about - if - the current crisis in Ukraine is to be traced back to 2014.

Hi, I’m Gaurav Jeyaraman, the editor of this newsletter. We’d like to hear some feedback on our newsletter: what works and what doesn’t work??WhatsApp me directly ?and tell me what you think.

Food inflation: After tomatoes, chillies, jeera, rice appears to be next pain point

Food inflation has?sent the costs of vegetarian and non-vegetarian thalis in India spiking , according to a CRISIL report.

• The?cost of a vegetarian thali ?rose from Rs 25.1 in May to Rs 26.3 in June, while that of a non-vegetarian thali increased from Rs 59.3 in May to Rs 60 in June.

The big picture:?The recent?spike in the prices ?of tomato, tur, and chana dal, as well as high prices of wheat atta, rice, and pulses signal trouble ahead for Indian consumers.

• Tomatoes are so expensive, many Mcdonald's outlets in India have now?temporarily dropped them from their menu .
• Green chilli and ginger prices have reached Rs 350 per kg, while cumin costs nearly Rs 850 per kg, and tomatoes have crossed Rs 120 per kg.
• Meanwhile, the planting of summer-sown rice is down 26% from last year, which — combined with the government’s plan to boost payments to farmers — could mean that?rice will be the next pain point .
• Food and beverages inflation is?predicted to remain at around 4.5-5.5% ?for the rest of the year, economists believe.
• This is driven by the El Ni?o heating weather pattern’s effect on monsoon rainfall as well as seasonal factors.

Why this matters:?The rising prices not only impact consumers but also affect the demand faced by agricultural producers, which has implications for farmers’ income and hence the broader economy.

• Furthermore, declining consumption affects GDP growth as well.

ICYMI

• The RSS is now planning to?establish shakhas specifically for Muslims , which will be run by Muslims.
• Twitter has warned it may sue Meta ?over allegations of trade secret theft and intellectual property violation in the development of its recently-launched microblogging platform Threads.
• The Gujarat High Court has refused to stay?Rahul Gandhi’s conviction in a defamation case ?related to the 2019 ‘Modi surname’ remark.
• Russian authorities?raided the office and residence of Evgeny Prigozhin , the chief of Russian private military company Wagner Group.
• Flipkart is facilitating a?$700-million employee stock option (ESOP) buyback ?as part of its separation from payments firm PhonePe.
• After a recruitment scam at Tata Consultancy Services (TCS),?Tata Steel has now taken action against 38 employees ?for breaches of conduct.