Economy & Market

Global financial contagion: Is India insulated as an economy?

Published

5 years ago

January 4, 2020

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A financial contagion is the negative spillover effects of a financial crisis that is initiated in one part of the country or the world which spreads over to the entire country or various parts of the world (global contagion); there could be positive effects as well, when there is a boom associated with certain markets and the spillover effects drive co-movement of prices across several countries. We have seen a negative contagion happening during the 2008 crisis when the housing crisis in the US found spillover effects in many parts of the world and it worsened in form of a full-fledged financial meltdown when credit markets almost fell off the cliff across large parts of Americas and Europe, impacting business growth severely .

Thankfully the financial contagion that initiated in the housing markets of the US in 2008 did not cross over to India and virtually India was left unaffected in every possible way. In fact when the GDP of the rest of the developed world went through a drop of 2 to 3 per cent, India showed resilience to grow at 7 per cent plus in 2009-2014.

It was a rare event, to find India completely insulated from a global financial contagion; some of the reasons (some could be for the wrong reasons) why this could be explained is that India did not have a large inter-connected financial sector with sophistication and also the dependence on global trade was lower in initiating economic growth; the total size of the Indian banking sector is very low, even now it is $270 billion in assets which is equal to the net income of the banking sector in the US with assets of $17 trillion. The lending standards in 2008 were good, with prudential norms and bank NPAs were far too low even by global standards. The housing sector was also mildly expansionary and chances of toxic assets either in the banks or in the rest of the shadow banking system was low. The growth rates were actually quite high and a drop even up to 2 per cent could have been absorbed by the economy.

If we look at the global contagion driven by the Covid-19 meltdown now, it may not be the same resilient economic system in India that we are standing on. First of all the growth rate itself is closer to 4 than 5 percent, which by Indian standards could be really low to weather any impact of drop in trade, exchange rate, demand and most importantly supply disruption, where alternate supply chains would take years to be developed. The bank balance sheets still need a clean up as NPAs are way too high even after RBI actions, leaving a lot to be desired on credit growth. The biggest issue is that India is already suffering from the low demand that came from a consumption slump it has not seen in many decades.

The other more crucial factor is that the ability of the RBI to lower interest rate is stunted now due to already prevailing inflationary forces that drive agricultural commodity prices to still stay higher than expected.

All these factors limit India’s ability to face a financial contagion now as the need of the hour is to have massive stimulus from fiscal actions which tends to crowd out private investment as it further raises the cost of borrowing for the rest of the financial system.

But India will do what needs to be done, drive infrastructure, manufacturing and agriculture as three fundamental pillars of growth. All this would bode well with the current underlying conditions of global supply chains, which must reconfigure, re-orient from complete end to end chains to a more balanced clustered chains that are bound with enough checks and balances both horizontally and vertically.

ABOUT THE AUTHOR:
Procyon Mukherjee works as Chief Procurement Officer at LafargeHolcim India. The ideas presented are his personal and have no connection to the beliefs of the company where he works.

Economy & Market

Hindalco Buys US Speciality Alumina Firm for $125 Million

Published

33 minutes ago

June 25, 2025

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This strategic acquisition marks a significant investment in speciality alumina, a key step by Aditya Birla Group’s metals flagship towards becoming future-ready by scaling its high-value, technology-led materials portfolio.

Hindalco Industries, the world’s largest aluminium company by revenue and the metals flagship of the $28 billion Aditya Birla Group, has announced the acquisition of a 100 per cent equity stake in US-based AluChem Companies—a prominent manufacturer of speciality alumina—for an enterprise value of $125 million. The transaction will be executed through Aditya Holdings, a wholly owned subsidiary.

This acquisition represents a pivotal investment in speciality alumina and advances Hindalco’s strategy to expand its high-value, technology-led materials portfolio.

Hindalco’s speciality alumina business, a key pillar of its value-added strategy, has delivered consistent double-digit growth in recent years. It has emerged as a high-growth, high-margin vertical within the company’s portfolio. As speciality alumina finds expanding applications across electric mobility, semiconductors, and precision ceramics, the deal positions Hindalco further up the innovation curve, enabling next-generation alumina solutions and value-accretive growth.

Kumar Mangalam Birla, Chairman of Aditya Birla Group, called the acquisition an important step in their global strategy to build a leadership position in value-added, high-tech materials.

“Our strategic foray into the speciality alumina space will not only accelerate the development of future-ready, sustainable solutions but also open new pathways to pursue high-impact growth opportunities. By integrating advanced technologies into our value chain, we are reinforcing our commitment to self-reliance, import substitution, and building scale in innovation-led businesses.”

Ronald P Zapletal, Founder, AluChem Companies, said the partnership with Hindalco would provide AluChem the ability and capital to scale up faster and build scale in North America.

“AluChem will benefit from their world-class sustainability and safety standards and practices, access to integrated operations and a consistent, reliable raw material supply chain. Their ability to leverage R&D capabilities and a talented workforce adds tremendous value to our innovation pipeline, helping drive market expansion beyond North America.”

An Eye on the Future

The global speciality alumina market is projected to grow significantly, with rising demand for tailored solutions in sectors such as ceramics, electronics, aerospace, and medical applications. Hindalco currently operates 500,000 tonnes of speciality alumina capacity and aims to scale this up to 1 million tonnes by FY2030.

Commenting on the development, Satish Pai, Managing Director, Hindalco Industries, said the deal reinforced their commitment to innovation and global expansion.

“As alumina gains increasing relevance in critical and clean-tech sectors, AluChem’s advanced chemistry capabilities will significantly enhance our ability to serve these fast-evolving markets. Importantly, it deepens our high-value-added portfolio with differentiated products that drive profitability and strengthen our global competitiveness.”

AluChem adds a strong North American presence to Hindalco’s portfolio, with an annual capacity of 60,000 tonnes across three advanced manufacturing facilities in Ohio and Arkansas. The company is a long-standing supplier of ultra-low soda calcined and tabular alumina, materials prized for their thermal and mechanical stability and widely used in precision engineering and high-performance refractories.

Saurabh Khedekar, CEO of the Alumina Business at Hindalco Industries, said the acquisition unlocked immediate synergies, including market access and portfolio diversification.

“Hindalco plans to work with AluChem’s high performance technology solutions and scale up production of ultra-low soda alumina products to drive a larger global market share.”

The transaction is expected to close in the upcoming quarter, subject to customary closing conditions and regulatory approvals.

Concrete

Shree Cement reports 2025 financial year results

Published

1 week ago

June 17, 2025

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Shree Cement posted revenue of US$2.38 billion for FY2025, marking a 5.5 per cent decline year-on-year. Operating costs rose 2.9 per cent to US$2.17 billion, resulting in an EBITDA of US$528 million—down 12 per cent from the previous year. Net profit fell 50 per cent to US$141 million. The company reported cement sales of 9.84Mt in Q4 FY2025, a 3.3 per cent increase from 9.53Mt in Q4 FY2024, with premium products making up 16 per cent of total sales.

Image source:https://newsmantra.in/

Concrete

Rekha Onteddu to become director at Sagar Cements

Published

1 week ago

June 17, 2025

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Sagar Cements has announced the appointment of Rekha Onteddu as a non-executive independent director, effective 30 June 2025. According to People in Business News, Rekha Onteddu is currently serving in a similar capacity at Andhra Cements, the parent company of Sagar Cements.

Image source:https://sagarcements.in/