Good morning! Local authorities in the Japanese town of Fujikawaguchiko are blocking off its most famous tourist attraction, an illusory view of Mount Fuji that appears to float over a convenience store. They are fed up with vacationers littering and inconveniencing residents, reports Bloomberg. Japan is not alone. Something similar played out in Barcelona, where authorities removed a bus route from apps due to overcrowding by tourists. Mallorca residents put up fake danger warning boards to scare away pesky tourists. Venice charges a €5 (~Rs 450) entry fee during peak hours to keep holidaymakers from overwhelming public spaces and transport. But too many visitors is a relatively new trend for Japan. And the country is yet to take drastic steps.

🎧 Bengaluru’s new problem could be beer shortage. Also in today’s episode: Kendrick vs. Drake ft. AI. Tune in on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts.

Anup Semwal, Anjali Palod, and Dinesh Narayanan also contributed to today’s edition.

The Market Signal* 

Stocks & Economy: Markets have begun to worry about elections in the US and India. In the US, it is the currency market that has started to reveal bets on election outcomes. Traders are betting on offshore Chinese yuan to fall if Donald Trump were to win occupation rights to the White Office for the next four years. 

Meanwhile, Fitch Ratings is expecting the Indian rupee to rise to 82 against the US dollar by the end of the year.

Indian equity traders are now uncertain whether Prime Minister Narendra Modi and his party will win as big as earlier expected. The India VIX or volatility index has been rising over the past nine days. It was the longest upward streak since 2020, and is particularly stark because it hit a record low just two weeks ago. Benchmark indices may trend lower, tracking Asian peers, which were subdued in morning trade.

FMCG

How HUL Is Future-proofing Its Distribution Network

Hindustan Unilever (HUL) caused a stir by changing how much money its distributors make. It reduced the guaranteed pay, but offered more if distributors ensured timely delivery, stocked more premium products and used company software.

This upset distributors, especially in rural areas where sales are slow. HUL CEO Rohit Jawa says it's part of making the company’s distribution network “future-fit”, and helps distributors compete with other channels. HUL has also clubbed together talukas and increased distributors’ geographies to ensure better connectivity and reduce lead times. All of this illustrates that HUL is leaning into a tech-savvy, leaner, and more efficient distribution network. Read more in The Core.

PODCAST

Tune in every Monday to Friday as financial journalist and host Govindraj Ethiraj gives you the most important take on the latest in business and economy.

In today’s episode, he speaks to Kunal Pande, partner and national leader for digital trust financial services sector at KPMG, on why bank systems fail.

PHARMACEUTICALS

Fixing Indian Pharma’s Trust Problem

After the WHO linked Indian cough syrups with the deaths of at least 70 children in Gambia last year, the world is eyeing Indian drugs with scepticism. India’s drug regulator has since been trying to clean up its act.

As of August 2023, fewer than a quarter of India’s 8,500 small drug factories met WHO’s manufacturing standards. Months later, India joined the Pharmacopoeial Discussion Group (PDG) last year, the grouping that helps set global drug manufacturing standards.

Now, India is upgrading its Certificate of the Pharmaceutical Product (CoPP) to be at par with WHO’s certification. Both documents will be required for pharma exports, Mint reports. The Centre had recently stripped states of the power to issue licences for new drugs for exports. 

Relief: While regulatory overhaul may rebuild trust with overseas regulators, the Centre may let industry reroute exports if approved importers cancel orders. Existing rules demand destroying unexported drugs.

AVIATION

Broad Interpretation

Airbus confirmed that IndiGo has ordered 30 Airbus A350-900 planes, a development that was first reported in late April. The airline has purchase options for another 70, and order fulfilment will begin in 2027.

This marks IndiGo’s entry into the wide-body segment. Operating international flights from non-metros and flying to new destinations abroad is critical to chief Pieter Elbers’ ambition of having the carrier double in size by 2030. But competition is stiff: Air India, the first Indian airline to order for and operate the A350-900, has already deployed the 316-seater jet on the Delhi-Dubai route.

The Signal

In FY24, the number of outgoing passengers swelled to 70 million, surpassing pre-pandemic levels. Credit ratings agency CRISIL estimates that Indian airlines will account for about 50% of international passenger traffic by 2027-28. Much of this is because Indian carriers have the edge of superior domestic connectivity, especially from Tier-2 and Tier-3 locations, over international counterparts.

It will be interesting to see how low-cost IndiGo competes with full-service Air India—which has a three-class configuration for the A350 family—in the wide-body segment. These jets, typically deployed for long-haul travel, require more fuel, more crew members, and are more expensive to repair and service. Due to this, few low-cost, long-haul operators have seen success.

Will IndiGo bundle frills such as in-flight entertainment, hot meals, and charging points, and charge more for the same? If so, it’ll be a significant departure from the unbundled, low-cost model that’s been its bread and butter.

FYI

Etched in memory: Chinese President Xi Jinping has said that he will never forget the US bombing of its Belgrade embassy in 1999, killing three Chinese journalists. The missile attack, a part of the Nato campaign in Yugoslavia, was described as a mistake. 

Tightfisted: The share of investments by India’s private sector non-financial companies in FY23 fell to a four-year low of 36.2%. Public sector non-financial companies’ share fell to 9.4%, the lowest in 12 years. 

Near collapse: The Haryana government led by Bharatiya Janata Party’s Nayab Singh Saini has slipped to minority status after three independents who were backing it withdrew their support. 

Temporary setback: Disney posted a $20 million loss after taking a $2 billion one-time charge on India deal with Reliance Industries. 

Vroom: For the second month running, Tata’s mini SUV Punch outsold Maruti’s bestselling Wagon R in April, becoming the national bestseller. 

THE DAILY DIGIT

13.3 million square feet

Vacant space in “ghost shopping centres” in 29 Indian cities in 2023. These are malls with 40% or more empty shops. The space has risen by 59% from the previous year. (Business Standard)

FWIW

Chill, Dad Kim: It’s not every day that a propaganda song from North Korea becomes a hit in the West. The very possibility of western audiences jamming to a song calling Kim Jong-un “friendly father” is so deliciously ironic. When Kim Jong-un dropped his latest song last month, he could have never predicted that young Americans would record their own version of the track on TikTok and call it “dystopian in the catchiest way”. To be fair, we also think that the synthy electropop tune is a banger. Kudos to whoever who came up with “(Kim) is holding his 10 million children in his arms.” Cuts quite a friendly father figure 👀.