THE City of London Corporation has honoured eight senior figures from Indian banks based in the Square Mile to mark 75 years of India’s independence.
The award recognises the trade relationship between the UK and India’s financial services sectors.
The leaders who received the Freedom of the City honours on December 13 were: Madhur Kumar (Bank of Baroda), Manish Gupta, (Bank of India), Ashok Kumar Vartia (Export-Import Bank of India), Sharukh T Wadia (IndusInd Bank), Rakesh Kumar (India Infrastructure Finance Company), Loknath Mishra (ICICI Bank), Sudhir Kumar Sharma (State Bank of India) and Arbind Kumar Choudhary (Union Bank of India).
Lord Mayor of the City of London, Michael Mainelli, said: "British and Indian investments support over a million jobs in both India and the UK. The City of London is grateful for the invaluable contribution of Indian bankers to the Square Mile."
Chair of the Freedom Applications Policy & Resources Sub-Committee, Rehana Ameer, said the occasion signalled “a shared commitment to unlocking new opportunities, fostering innovation and deepening ties between the City and India to embark on a journey of mutual prosperity and strengthened financial cooperation.”
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Budget halted economic growth, Bank of England warns
Dec 20, 2024
THE Bank of England has cautioned that the UK economy is stagnating, following measures introduced in chancellor Rachel Reeves’s budget. Businesses are reportedly responding to tax hikes and a higher minimum wage by cutting jobs and raising prices.
Andrew Bailey, the Bank's governor, revealed that growth forecasts for the final quarter of 2024 have been downgraded to "zero." He also stressed a cautious approach to reducing interest rates, which remain at 4.75 per cent, citing economic uncertainty. “We need to ensure we meet the 2 per cent inflation target sustainably,” Bailey said.
The Bank attributed some of the economic slowdown to Reeves’s decision to raise employers’ national insurance contributions and increase the national living wage, the Times reported. A survey of businesses indicated that the £25 billion national insurance hike has led many firms to increase prices and lay off workers.
Labour, which has promised to boost living standards and lead the G7 in economic growth, is facing criticism over the sluggish economy. Prime minister Sir Keir Starmer defended the budget, acknowledging that recovery would take time. “It can’t all be fixed by Christmas,” he told MPs, arguing that the tax measures were essential for economic stability.
However, inflation has risen to 2.6 per cent in November, its highest level in eight months, raising concerns about the balance between stimulating growth and controlling price pressures. Analysts, including Ruth Gregory from Capital Economics, warn that the Bank faces a tough decision on how quickly to lower interest rates without fuelling further inflation.
Starmer remains optimistic, insisting that reforms to planning and regulation will drive growth. “Our ambition is beyond current forecasts,” he said, reiterating Labour’s focus on improving living standards rather than specific growth targets.
Reeves defended her policies, stating, “We want to put more money in the pockets of working people, but that’s only possible if inflation is stable.” She highlighted measures such as freezing fuel duty and increasing the national living wage as efforts to support struggling families.
The Bank also pointed to global challenges, including geopolitical tensions and potential economic impacts from proposed US tariffs under Donald Trump, as factors affecting the UK’s economic outlook.
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‘UK-India trade sees growth as payments rise by 121 per cent’
Dec 19, 2024
BUSINESS activity between the UK and India flourished in 2024, with payments received by clients in Britain from India rising by 121 per cent, according to the latest data from HSBC UK.
The multinational bank highlighted the figures based on its two-way support for businesses within the India-UK corridor this week and said its data on payments and client referrals showed yearon-year growth.
In the nine months to October 2024, the value of payments made by HSBC UK business clients to India reportedly rose by 32 per cent and the bank received 36 per cent more new business client referrals from HSBC India year-on-year.
“Our data shows that business between the UK and India is not only strong, it’s getting even stronger, and the opportunities for expanding businesses in India are huge,” said Cora McLaren, head of international subsidiary banking at HSBC UK.
“India’s population is not only a vast number of potential customers, within it there is a growing middle class, creating opportunities for businesses selling quality products and services. In addition, India is increasingly seen as a hub for Global Capability Centres – from which multinational corporates run multiple strategic functions – due to the level of language and technology skills,” she added.
McLaren said, “HSBC has ties to India which go back more than 100 years. We’re very proud to be able to help ambitious UK businesses expand there and likewise welcome Indian firms operating on these shores.” She described it as a relationship working both ways, as Indian firms are increasingly doing business in the UK, “particularly those in the pharmaceutical sector in which India is a global leader”.
The data comes as India and the UK are preparing to resume Free Trade Agreement negotiations next year after prime ministers Sir Keir Starmer and Narendra Modi agreed to relaunch the process during their meeting on the sidelines of the G20 Summit in Brazil last month.
“We very much welcome the renewed commitment made by both prime ministers at G20 and the intention to restart FTA negotiations early in 2025,” said Richard McCallum, Group CEO of the UK India Business Council (UKIBC).
“As the HSBC data show, UK-India trade is growing rapidly. This will only accelerate further when the FTA is in place... In the UKIBC’s view, sustained business reforms and geopolitical factors make India a highly attractive investment destination, source of goods and services, and strategic supply chain partner for UK business across sectors,” he added.
Statistics from the Department for Business and Trade (DBT) showed the total trade in goods and services between the UK and India was £42 billion in the four quarters to the end of 2024.
This is expected to be significantly enhanced with an FTA, negotiations for which began in January 2022 before being paused in the fourteenth round earlier this year due to general elections in both countries. The talks are scheduled to resume in the new year, with a clear timeline yet to be officially confirmed.
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Bangladesh seeks renegotiation of Adani Power deal: Report
Dec 19, 2024
BANGLADESH's interim government has accused Adani Power, an energy company controlled by Indian billionaire Gautam Adani, of breaching a multi-billion-pound agreement by withholding tax benefits granted to a power plant central to the deal.
The agreement, signed in 2017, enabled Adani Power to supply electricity to Bangladesh from its coal-fired power plant in eastern India.
Dhaka now seeks to renegotiate the deal, which was awarded by then-prime minister Sheikh Hasina without a tender process.
Documents from Bangladesh's power agency and communications between the two parties reviewed by Reuters reveal that the deal costs Bangladesh significantly more than its other coal power agreements.
Since Adani Power began supplying electricity in July 2023, Bangladesh has fallen behind on payments and owes hundreds of millions of pounds for energy already delivered. However, the two sides disagree on the total amount owed.
Bangladesh’s de facto power minister, Muhammad Fouzul Kabir Khan, told Reuters the country could manage without the Adani supply due to increased domestic capacity, although some local power generators remain inactive.
Adani Power has not been accused of any wrongdoing in Bangladesh. The company stated it has adhered to its contractual obligations and denied receiving indications that Dhaka was reviewing the contract. Adani Group dismissed US allegations of bribery against its executives as "baseless."
Tax exemptions dispute
Adani Power’s Godda plant, designed to supply electricity to Bangladesh, operates on imported coal and benefits from tax exemptions under India's special economic zone policy.
According to the 2017 agreement and its implementation terms, Adani Power was obligated to inform Bangladesh of changes in the plant's tax status and pass on associated benefits.
Bangladesh Power Development Board (BPDB) officials said Adani Power did not comply with these terms. Letters sent to the company in September and October 2024 requested the remittance of tax benefits. BPDB estimates that passing on these benefits would save 0.28p per unit of power, potentially reducing costs by approximately £22.7 million for 2024.
The BPDB chairperson, Md Rezaul Karim, stated that savings from the tax benefits would form a crucial part of future discussions with Adani Power.
Review of the deal
Bangladesh’s interim government, led by Nobel laureate Muhammad Yunus, has appointed a panel to review major energy deals signed during Hasina’s tenure. The contract with Adani Power, described as "negotiated hastily" in a government white paper, has come under scrutiny following US bribery charges against Adani executives.
Adani Power halved its electricity supply to Bangladesh in October 2024, citing payment disputes. The company claims it is owed £714m, while BPDB contends the amount is closer to £516m. Payment delays have been exacerbated by Bangladesh's ongoing foreign currency shortage.
Discussions between the two sides are ongoing, with arbitration clauses in the agreement mandating dispute resolution in Singapore. Bangladesh’s next steps depend on the outcome of investigations ordered by its courts, according to Khan.
(With inputs from Reuters)
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Bank of England maintains interest rate amid inflation rise
Dec 19, 2024
THE BANK OF ENGLAND (BoE) on Thursday kept its key interest rate unchanged at 4.75 per cent, opting not to follow the US Federal Reserve's recent rate cut, as inflation in the UK sees an uptick.
"We've held interest rates today following the two cuts since the summer," BoE Governor Andrew Bailey said in a statement.
Bailey emphasised the importance of meeting the two per cent inflation target, saying, "We need to make sure we meet the two-percent inflation target on a sustained basis."
His comments came after UK annual inflation rose to 2.6 per cent, according to data released earlier this week.
The decision to hold rates contrasts with the US Federal Reserve, which cut borrowing costs by a quarter-point on Wednesday while signalling fewer rate reductions for the coming year.
Last week, the European Central Bank also reduced eurozone rates, while the Bank of Japan left its rates unchanged in an announcement on Thursday.
Chancellor Rachel Reeves expressed support for the BoE’s decision, acknowledging the challenges it poses for households.
"I know families are still struggling with high costs," Reeves said. "We want to put more money in the pockets of working people, but that is only possible if inflation is stable, and I fully back the Bank of England to achieve that."
Had the BoE opted to lower its rate, retail banks might have reduced borrowing costs, including on mortgages, potentially easing pressure on consumers.
(With inputs from Reuters)
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Bank of England likely to hold interest rates at 4.75 per cent
Dec 19, 2024
THE BANK OF ENGLAND is expected to maintain its interest rate at 4.75 per cent on Thursday, even as the economy shows signs of slowing. Persistent inflation pressures are likely to prompt the central bank to stick to a "gradual" approach before reducing borrowing costs.
A Reuters poll of 71 economists unanimously predicted no change in rates for now. Most anticipate a quarter-point cut on 6 February, followed by three additional cuts by the end of 2025.
Financial markets, however, are less confident about the extent of rate cuts next year. Data released on Tuesday revealed an unexpected rise in wage growth, leading investors to price in only a 50 per cent chance of a rate cut in February and just two cuts by the end of 2025.
In contrast, the European Central Bank has already reduced rates by 1 percentage point this year and is expected to cut another point in 2025, responding to political and economic challenges in the eurozone.
The divergence in rate policies has widened the gap in yields between British and German 10-year government bonds to its largest since 1990.
The US Federal Reserve, which foresees only two rate cuts in 2024, reduced rates by a cumulative 1 percentage point on Wednesday—twice the pace of the Bank of England.
Bank of England governor Andrew Bailey recently reaffirmed the bank's stance, stating that "a gradual approach to removing policy restraint remains appropriate." The bank’s November forecasts showed inflation staying slightly above its 2 per cent target until 2027, based on expectations of four rate cuts next year.
Despite this, the Bank of England has not explicitly confirmed whether it considers this rate-cutting pace the most likely scenario. Economists expect the December policy statement to reiterate the emphasis on gradualism.
An 8-1 vote by the Monetary Policy Committee to hold rates steady is expected, with Swati Dhingra likely to dissent in favour of faster cuts.
Inflation and wage growth concerns
Inflation in Britain remains a key concern. After peaking at 11.1 per cent in October 2022, consumer price inflation fell below the 2 per cent target in September this year but rose to 2.6 per cent in November. This exceeded the Bank of England's forecast of 2.4 per cent and remains the highest rate among G7 economies.
Services price inflation, a metric closely monitored by the Bank of England for medium-term pressures, stayed at 5 per cent.
Meanwhile, wage growth reached 5.2 per cent in the three months to October, far above the 3 per cent level considered consistent with 2 per cent inflation by most Monetary Policy Committee members.
The Bank of England is also assessing the impact of chancellor Rachel Reeves’ decision to introduce an additional £25 billion in employment taxes. This could either lead to further price increases or result in job and pay cuts.
Business sentiment has declined since the budget announcement on 30 October, with economic output contracting for two consecutive months for the first time since 2020. However, economists say it is too early to determine if this slowdown will significantly ease inflation.
"We don't think there is enough in the data to shift the MPC from its cautious, gradual tone," said Cathal Kennedy, an economist at RBC. He added that new forecasts at the Bank of England’s February meeting would play a critical role.
(With inputs from Reuters)
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