We never see any change.

So, Julia Gillard had to resign as the Prime Minister after she was stabbed in the back by her own party. She has been replaced by Kevin Rudd who was deposed by her in 2010 after a leadership challenge as Rudd had become extremely unpopular. Rudd is a former diplomat, speaks fluent Mandarin and is a Chinese lickspittle. Since he lost his leadership of the Labour Party and the post of Prime Minster he has been plotting to bring down Gillard, never mind the damage to the party and country. Unfortunately for her Gillard failed to win a majority in general elections in 2010 and was obliged to form a coalition government with the Greens who forced her to levy a carbon tax which made her deeply unpopular because she had ruled out such a tax when campaigning for the elections. This, however, does not excuse the vicious and disgusting personal attacks on her over the last 3 years. She was called a bitch and a witch. Some recommended that she should be killed. They made fun of the shape of her body. In a recent interview on radio she was asked whether her partner was a homosexual. Australians, while claiming to be a developed nation, never accepted the fact that she had never married, did not have children, was an atheist and was living with a former hairdresser. Still that does not excuse the kind of abuse and insults she had to face. Leader of the opposition Liberal Party, Tony Abbott gave speeches while standing in front of banners saying " ditch the bitch ". He attended a dinner where the menu described a quail as having " small breasts, huge thighs and a big red box ". Kevin Rudd talked about honor when his actions were dictated by revenge, vindictiveness and a complete lack of chivalry. Shows how politicians are repulsive everywhere. However, there was one very positive aspect to this story. Julia Gillard has announced that she will not be contesting the parliamentary elections due to be held in the next 3 months which means she is effectively retiring from her career in politics. Here in India our politicians are the most repulsive in the world. Not only are they completely without any morals but there seems to be no way to get rid of the scoundrels. There is no term limit so they continue to hang on to their seats which gives them the opportunity to loot. There is no age bar so we have to see the same ugly old faces forever. And they do not die so nothing changes. Is there any other country more unlucky than us?

A compact of crime.

There is an unwritten compact between the absolute rulers and the ruled in India. You can break minor laws at will as long as long as your misdemeanor does not attract the attention of news media and as long as we are allowed to do whatever we please without any question or protest. You will be allowed to drive on the wrong side of the road, use loudspeakers for weddings or religious ceremonies, burst ear shattering crackers to signal your delight at India winning a cricket match and get your work done by bribing minor government officials provided you do not question us when we use billions of rupees of taxpayer money to win elections, travel abroad with children, grandchildren, son-in-law and sister of son-in law at taxpayer expense, tell lies, slander opponents, suck up to a family and control the CBI so that our crimes remain hidden while harassing opponents with a series of bogus trumped up charges. To see that you, the people, behave yourselves we will use the British law of sedition for any criticism, enact a vicious act 66a to punish internet conversations and set up a Central Monitoring System which will monitor phone conversations, emails and social media without any oversight while allowing Pakistanis to roam around India and China to build dams on the Brahmaputra to divert all its waters to Chinese territory. The result is that the people have lost their sense of humanity and conscience. While thousands of people have died in the floods in Uttarakhand some have been making money by looting dead bodies of their valuables and charging survivors Rs 500 for a plate of rice. Many have died of hunger. One little boy was kidnapped and returned only after the family pooled together everything they had and paid Rs 1500 as ransom. Yesterday 20 Air Force officers died when a helicopter crashed in bad weather. Indian armed forces men and women have performed miracles in rescuing thousands from extreme danger. While these officers were risking their lives for their fellow countrymen the Congress majority government of Uttarakhand did not allow a helicopter carrying Mr Narendra Modi of the BJP to land while allowing the Congress Vice President, Mr Rahul Gandhi complete freedom to waste scarce resources and time for a cosmetic tour of disaster areas. The utter cynicism and dirty immorality of these politicians is nauseating. Will we end up as a nation of unscrupulous criminal beggars?

They have to lie to us.

Experts are predicting that the rupee will fall below 60 to the dollar. In the offshore non-deliverable forwards, the one-month contract was 60.14, while the three month was 60.84. TOI, 25 June. " It is stock taking time for importers and foreign currency borrowers to monitor damage from shift of new normal for USD/INR spot from 44 to 58-63," said Moses Harding, Executive VP and Head of Trading at IndusInd Bank. Standard Chartered is predicting 60.5 at the year end while Ray Farris of Credit Suisse predicts 61.5 or even 62 in 3-4 months. The government and the Reserve Bank say that they will take steps to check excessive volatility. That is all they can do. Sell dollars if the rupee declines precipitately but they cannot, indeed should not, try to reverse the trend because our foreign currency reserve is limited to 6 months imports and shrinking fast. They are trying to restrict the import of gold but they cannot reduce the import of oil or coal on which the economy depends. Trouble is that Foreign Investors are selling out on Indian stocks and debt. Just this month they have sold stocks worth $1.3 billion, about $900 million in the last 3 sessions. They have also sold $4.3 billion worth of debt, for combined outflow of $5.6 billion. These figures illustrate the criminal stupidity of trying to finance massive government spending through hot money. Such as buying 12 luxury helicopters from Augusta-Westland of Italy for Rs 37 billion. Shades of Bofors once again. It also illustrates why forcing the RBI to reduce interest rates instead of controlling inflation, hoping to encourage investments through increased borrowing, was an act of criminal interference in the working of an independent institution. We have said repeatedly that rising costs of goods and services means that the rupee is capable of buying less and less and is bound to lead to a devaluation of the rupee, as has happened in Venezuela. Now that the rupee is catching up to its Purchasing Power Parity, inflation will rise even higher resulting in further fall of the rupee. Ben Bernanke of the US Federal Reserve has hinted that Quantitative Easing maybe reduced by the end of the year and stopped sometime next year. Expect the rupee to fall to around 80 to the dollar before settling somewhere between 70 and 80. Of course fellows cannot say that because there will be a bloodbath on the markets. They are forced to lie. We understand, with anger.

Is it perpetual winter for us?

After 64 years of independence we remain a dirt poor country where hundreds of millions remain illiterate, where over 40% of children are malnourished and where the same family continues to loot and oppress us generation after generation. Why do we put up with it? From time to time people explode with rage as when they supported Anna Hazare in his campaign against corruption or when they came out on the streets after the gang rape of a young woman inside a bus in December last year but then it fades away and the scoundrels continue to enjoy their lives of debauch at our expense. On 17 December 2010 Mohamed Bouzizi, a street vendor in Sidi Bouzid in Tunisia, set himself alight after his cart was confiscated by municipal authorities. This set off a wave of protests forcing the President, Zine el Abidine Ben Ali to flee to Saudi Arabia and starting, what came to be known as, the " Arab Spring ". On 25 January 2011 protesters gathered in Tahrir Square to demand jobs, housing and marriage. This eventually led to the fall of President Hosnni Mubarak who is now on trial for the killing of over 800 protesters. Ruthless dictators could not suppress genuine protests. Perhaps, dictators are not ruthless enough. On 4 June 1989 the Chinese Communist Party sent tanks into Tiananmen Square to crush a student revolt demanding more freedom. Soldiers used live rounds on unarmed students killing thousands. The protests were crushed. In elections held on 12 June 2009 in Iran the sitting President Mahmoud Ahmadinejad lost to opposition candidate, Mir Hossein Mousavi but won by blatant rigging of the results. Protests erupted across Iran but were brutally suppressed by the police and Basij militia thugs. Mousavi and Mehdi Karrobi are still under house arrest. On 26 of last month people in Istanbul began protesting against building a mosque and Ottoman era barracks at Taksim Gezi Park. Protesters were drenched in tear gas and blasted by water cannons. The Prime Minister has said that " development " work will go ahead regardless. In 1989 students in India protested against the adoption of the Mondol Commission report by the VP Singh government. Many were shot dead by police. The pernicious practice of reservation continues to this day. Communism, religious fanatics and democratic governments will kill any number to win. Dictators seem better. There is no hope of spring for us. Sad.

Step by step into the abyss.

Our most revered Commerce and Industry minister wants to increase foreign control of telecom firms to 100% and also increase foreign involvement in defence. " I am strongly in favour of raising the cap in telecom sector. I have discussed this with the telecom and finance ministers and once we have the proposal, we will move the Cabinet for raising the cap to 100%, and also for FDI in defence," he said. TOI, 17 June. The government is also considering " diaspora " bonds presumably to beg for some dollars at extremely high rates of interest from Non Resident Indians. So while it is forcing the Reserve Bank to reduce rates at home, so that savers are suffering, it wants to give tax-free windfall gains to NRIs. Why such desperation? India's trade deficit was $20.1 billion in May, up from $17.8 billion in April and $16.9 billion in May last year. While countries like China, south Korea and Taiwan have surpluses we always seem to have deficits. At the same time Foreign Direct Investment fell by 6% in the January to March quarter to $5.47 billion compared to $5.84 billion in the same period last year while Foreign Institutional Investors withdrew $4.5 billion from our bond market. Why are foreigners so reluctant to invest in India when we have large deposits of coal, iron ore and bauxite when they are investing hundreds of billions in China which has very restrictive rules, whose judicial system is controlled by the Party, regularly steals industrial secrets and has a huge counterfeit industry manufacturing fake products in complete disregard of copyright and patent rules? Because of our punitive and capricious tax laws. The 2011 Budget imposed Minimum Alternative Tax and a Dividend Distribution Tax on companies in Special Economic Zones. When these zones were set up there was no mention of the time limit of tax exemptions. Companies invested vast sums of money setting up production in these zones thinking that exemptions wold be open ended. They went to court but their petition was dismissed by the Karnataka High Court. Now no one will trust what the government says and will not want to invest in India. Indirect Tax collection grew by 3.8% in April and May, the first 2 months of the new financial year, when expectation was for much more. TOI, 18 June. Except for a few, every service, from hospitals to newspaper delivery boys to tutorials, have to collect 12.5% service tax from users. This has added to inflation and reduced spending power, thus restricting usage. So, why is the government resorting to such extortion? Because the Congress wants  money to bribe the voters to win again. One step at a time. Downwards.

Country should come before self.

Our most revered Finance Minister is an unhappy man. TOI, 22 June. " We are not happy, we are unhappy ( over ) what's happening. But that's an impact that every currency in the world ( is facing ) because of certain announcements made by the US Federal Reserve," he said. We appreciate the royal " we ". If we are not mistaken the original observation was " We are not amused " but " happy " will do. It is true that the dollar has appreciated against every currency but whereas countries like China, Korea and Taiwan are pleased because it will increase their exports we in India are facing a grim future of rising inflation, rising Current Account Deficit and a plummeting rupee because we have nothing to export. Instead of spending on infrastructure the Congress has misused taxpayer money as bribes to win elections and instead of controlling inflation has been forcing the Reserve Bank to reduce interest rates hoping that loose monetary policy will somehow create a mirage of growth till the elections next year. The looming disaster has nothing to do with the Fed because it was expected that the Fed will not go on buying bonds and toxic mortgages forever. This is entirely an act of home grown economic terrorism against the people. " We are watching the situation; RBI will take whatever action it has to take. We will do whatever has to be done...My request is you should not react in panic, it is happening around the world," he assured us. That is a most dangerous statement. The reason why history is said to repeat itself is because no one learns from history. In 1992 the British pound, which was linked to the German Deutsch Mark, came under attack from speculators because inflation in Britain was 3 times that in Germany. Britain tried every trick to support the pound. It borrowed 10 billion pounds from the European Union, frantically bought pounds and raised interest rates to 12 and then to 15% but nothing worked. On 16 September, 1992, still remembered as black Wednesday, the British government was forced to withdraw the pound from the European Exchange Rate Mechanism and devalue it. Britain lost 3.3 billion pounds and George Soros gained 1 billion pounds from short selling the pound in currency markets. We only have a paltry $280 billion, just sufficient for 6 months exports, so the RBI must not try to defend the rupee by selling dollars. Daily currency trades total in trillions of dollars so the RBI has no hope of defending the rupee. Increase interest rates, control inflation, spend on infrastructure instead of bribing the electorate and lower taxes. For once in your life think of the country instead of yourself. Please.

Gains of economic failure.

Highway development companies have settled payment disputes with the National Highway Authority of India. A Committee of Chief General Managers has negotiated 9 claims out of which 8 have been resolved. TOI, 17 June. Out of a total claim of Rs 3.54 billion in  the 9 cases companies have settled for Rs 560 million in the 8 cases that have been resolved, which is one sixth of the total. In 2 cases the developer agreed to take nothing, not a paisa.  This is apparently to avoid long legal battles. " In many cases, the claims made by developers have little basis. Once we sit down and discuss the issues, such claims are sorted out," said an NHAI official. What does that mean? Does it mean that these companies were making fraudulent claims? In which case why are they not being prosecuted for trying to cheat the taxpayer? How can any company opt to take nothing for building a road? Does it not have to account to its shareholders? This being India the developers may have thought that they could offer a hefty share of the proceeds to government fellows and keep the rest but with budget conditions being tight and the elections getting ever closer these fellows are having to negotiate a way out. Our previous Finance Minister boasted with unrestrained glee how companies actually paid the government a premium to be awarded contracts to build roads. Companies may have thought that this would allow them to submit inflated or bogus expense claims. After all if the fellows awarded coal mines were allowed to sit on them to rake in windfall profits by selling them once the price went up why should road builders have to build roads. Poor fellows, you have to feel sorry for them. On the other hand our judicial system is almost useless with cases dragging on for decades so that very often a verdict is delivered when the original litigants have already expired. Companies may have decided to at least cut the legal costs of years of litigation and book losses which can be offset against profits from other ventures, thus reducing the tax burden. It is better to get something up front than wait 25 years to get a little more when, if the Congress is still in power, the rupee could be 200 to the dollar and whatever they are awarded would be worth nothing anyway. Finally, what kind of a creature is a chief general manager? Foreign companies have either a general manager or a chief executive officer, sometimes two people to separate responsibilities, but even legendary chief executives like Jack Welsh and Lee Iacocca did not carry such a double barreled moniker. Delusion of grandeur meets flimflam. The failing economy may have some uses after all.

We were born to die.

It is now feared that thousands may have died in flash floods in Uttarakhand due to the recent heavy rains. The sudden early onset of monsoons with torrential rains caught out thousands of pilgrims who visit Hindu holy places at this time because the weather is usually dry and schools are closed. However, mother nature is being blamed when the fault lies with people. Uttarakhand is in the foothills of the Himalayas and the rains come every year in the second week of June anyway so it is wrong to say that they are early. They may have been a little heavier than normal but the real reason for the disaster is the indiscriminate cutting of trees by the land mafia. Since Uttarakhand was carved out of UP land prices have increased by a hundred times. Dehra Dun, the capital, used to be a garden city with beautiful trees, hundreds of years old. Almost all have been cut down to build ugly houses, one on top of the other, so that it now looks like any scruffy town in UP. People are living in unauthorised houses on dry river beds. When a huge volume of water comes down the mountain at high speed either the houses will be washed away or the water will deviate from its usual course to find a new channel. This is what has resulted in collapse of buildings. All politicians in India are corrupt but those in Uttarakhand could take the prize in being especially rapacious. In 2007 Maj Gen BC Khanduri of the BJP became the Chief Minister and proceeded to clean up the administration. He stopped the sale of agricultural land to outsiders, increased the circle rate on houses and clamped down on rampant cheating by construction companies, aided by civil servants, in infrastructure projects. So great was the anger among the thieves that they poured vast sums of money to ensure that Congress won all the 5 seats in the 2009 Lok Sabha elections. The BJP took fright and forced Gen Khanduri to step down in 2009 and allowed rascals to take over. In 2010 a report by the Comptroller and Auditor General warned that large stretches of the Ganga will dry up if proposed hydroelectric power projects were built. HT, 20 June. It also said that projects had been awarded to cycle manufacturers, paan masala firms and garment manufacturers with no experience of building hydropower, especially in earthquake prone zones of the Himalayas. Too many dams, illegal sand mining, blasting of tunnels and illegal houses blocked normal channels for water to flow in while rampant deforestation means the soil cannot hold any water. This is nothing. The weight of concrete on the mountainside could result in half of Mussoorie to collapse into the Dehra Dun valley. After all we were all born to die. The politicians are just making money of our deaths. So what?

Our lot are the most intelligent.

The G8 summit of those who consider themselves to be the greatest concluded in Northern Ireland yesterday. There were 2 main topics for discussion - tax avoidance and Syria. In recent weeks we have been entertained as chiefs of multinational giants like Apple, Google, Starbucks and Amazon have admitted to lawmakers in the US and UK that they pay almost no tax on their earnings of billions of dollars. Apple transferred its intellectual properties to its branch in Ireland so that no tax accrued in the US but because its research division was in the US where these properties originated it had to pay no tax in Ireland either. With economies of the US, UK and Europe in serious difficulties and governments having to cut social welfare this is causing major outrage among people. But as the chairman of one company said, they play by the rules made by the lawmakers. Prime Minister, David Cameron said that companies will now have to declare their incomes in each country. There will be greater transparency on " beneficial ownership " so that companies will not be able to operate out of " shell companies " in tax havens. African countries are losing twice as much in tax evasion as they receive in foreign aid. Bleeding hearts! It was western countries which foisted grossly unfair trade conditions on African countries in the Uruguay round of trade talks under GATT and are blocking any progress on the Doha round of talks under the WTO. However, all this is quite irrelevant to us in India. One year ago our government received 2 CDs from the Czech Republic and France with names of Indians who conducted high value transactions in banks. TOI 17 June. So far India has received information on suspicious banking transactions from Germany, France, the US, Japan, South Korea, Denmark, Czech Republic and Finland but the information has been hidden. Only Tuvalu and Somalia remain. The International Consortium of Investigative Journalists have published the names of 498 Indians with accounts in British Virgin Islands, Cayman Islands and Cook Islands. Should we expect the crooks to go to jail for may years? No. We should be sympathetic. Where will the poor fellows store their cash from the telecom scam, Coalgate scam, Adarsh scam, CWG scam and so on. On Syria the G8 agreed a " transitional government " that can command the " mutual consent " of its people. The statement said that " public services " including the " military forces and security services " will be preserved. This is the old divide and rule hoping someone will kill Assad. How will they stop a settling of scores when Alawis and Christians will be slaughtered? They should be like our lot. Forget about tomorrow, fill your pockets today.

Crisis? What crisis?

The National Council of Applied Economic Research says that India is in an economic crisis. TOI, 17 June.
" The Indian economy is in a crisis. While growth rate has been declining....the issue ( of high CAD ) gets amplified against the backdrop of slowing economy, high fiscal deficit and persistent inflation," it said. Couple of days back the Reserve Bank kept the repo rate unchanged at 7.25% and the Cash Reserve Ratio also at 4%. Defending its decision the RBI said," It is only a durable receding of inflation that will open up space for monetary policy to continue to address risks to growth." The RBI has been talking tough about high inflation for months but keeps wilting under political pressure and reducing rates. Which is neither here nor there. If it was really serious about tackling inflation it would raise interest rate to 12% as Mr Narasimha Rao did in 1994-95 and hold it there till inflation came down. That would immediately bring down property prices, effectively slashing the amount of black money in the economy, drastically reduce the import of gold as people put their savings in fixed income instruments in banks, thus cutting down the Current Account Deficit and helping to stabilise the rupee. Banks would have lots of money to lend, consumption would rocket as people spent more encouraged by falling prices, and industrial production would jump, leading to higher employment. Companies keep whining about interest rates but interest costs on debt are only 5% of net sales while raw materials constitute 40% of net sales. With falling commodity prices profit margins are rising. Livemint, 18 June. If, on the other hand, the RBI wanted to stimulate growth it would have lowered rates much faster, reduced the CRR to increase liquidity in banks and allowed the rupee to depreciate to stimulate exports, which is what the US has been doing and Japan has started under what is known as Abenomics. But it does neither. Its behavior is like a little boy who sticks out his tongue in a show of defiance and then quietly eats his spinach as his mother has ordered. Consequently, inflation remains uncontrolled, the rupee is drifting downwards without direction and the economy remains stuck in doldrums. A 1% fall in the value of the rupee will add about 15-20 basis points to the Wholesale Price Index. Trade deficit in May was $20.1 billion as against $17.8 billion in April. Imports rose 7% in May to $44.65 billion while exports fell by 1.1% to $24.51 billion. Gold and silver imports were up by 89.7% to $8.9 billion. This cannot last. But the response of politicians is to deny any crisis and promise 100% growth in the distant future. We, the people are helpless pawns.

India is sitting on a time bomb.

A UN report says that India will become the most populous country by 2028. What is really shameful is that population growth is the second highest in India after Nigeria. China's population is projected to decline from 2.4 billion today to 1.1 billion in 2100. Due to its one-child policy, started in 1978, China has prevented 400 million births between 1979 and 2011. Fertility rate per woman in China was 5 births per woman in the 1970s, over 3 births per woman in the 1980, around 1.8 births per woman in 2008 and 1.54 in 2011. According a report by the Pew Research Center 76% of Chinese now support the one-child policy in contradiction to western propaganda. Low birth rate allowed millions of women to join the work force, keeping labor costs low, making China the manufacturing center of the world and producing over 10% growth per annum for decades. Fewer children meant better health for women, increased individual savings, less epidemics, less slums, less pressure on the environment, less waste and less abuse of fertile land leading to less stress on the ecosystem. Of course, there are serious problems. Increasing wealth and the Chinese tendency to eat anything that moves has resulted in serious international medical crises, such as SAARS and bird flu, when a virus normally found in animals mutates to infect human beings causing high fatality because we do not have immunity to such viruses. While the falling growth rate caused less pressure on land large factories and unsafe mining practices have caused massive pollution of air, water and land. However, in India we refuse to learn from the Chinese experience. We do not see that population is declining in all rich countries, perhaps expanding slowly in the US because of very high migration of foreigners, and increasing in every poor country. Just a couple of days ago Muhammad Morsi, President of Egypt threatened military attack on Ethiopia if it goes ahead with its plan to build a huge dam on the Blue Nile. Egypt is dependent on the Nile for 90% of its fresh water needs and has to import much of its food. With an exploding population and falling foreign currency reserves it faces the prospect of food shortage. President of Philippines, Benigno Aquino has proposed family planning to reduce population growth, annoying the Catholic church. Yet here politicians are competing with each other to start social schemes to give monetary handouts, free TVs or grain at dirt cheap prices to the poor to get votes. This locks the poor in a state of permanent dependency and causes inflation, ruining the economy. This is unsustainable and when the crisis comes the poor will die in droves from starvation. The present politicians will be directly responsible for a future genocide.

Thank God, Moily refuses to be oily.

Our most revered Oil Minister, Mr Veerappa Moily apparently stunned the nation by revealing that oil import lobbies are stopping oil exploration by threatening ministers. TOI, 15 June. Naughty fellows. That explains why every two penny politician goes around in cars with flashing lights and commandos armed with automatics. Just in case they are threatened by business fellows with sacks full of banknotes. " I am telling you with all sense of responsibility ( that ) we are floating in oil and gas in this country. " We understand now. That is why the rupee is sinking while prices are going up like gas balloons. " And we don't explore it. We put every obstruction not to do it. There is bureaucratic obstructions and delays." And all this while we were so proud that Indians are the best at doing " it ", which is why the population is expanding like gas balloons. Every decision-making process is " obstructed ( and ) aborted " but " Moily cannot be threatened," said the brave man. Sadly, other politicians refused to applaud. One, Mr Gurudas Dasgupta even went so far as to accuse him of lying ( surely terminological inexactitude ) to benefit Reliance Industries by increasing gas prices. " This is a loot and he is a liar if he speaks of any import pressure," he said. As is to be expected the Congress stoutly evaded the issue entirely. " He ( Moily ) will explain what he has said. This is for the concerned minister to explain and not for the party to say anything," said one Mr Ahmed. Quite. The party means The Lady who is not in the habit of saying anything in public but runs the country from a Rs 10 billion fortress in Delhi which has been hers for free for decades. Mr Ahmed also strongly rejected that Mr Jaipal Reddy had been removed from the Petroleum Ministry because of pressure from lobbyists. Walmart must be wondering what it did wrong. " Who told you that Reddy was removed on certain charges? This is the prerogative of the Prime Minister that who will look after what ministry." Wow! A man of steel, no less. And all the while the country has been whispering about " Mr Jo Huzoor " who has to oil The Lady to stick to his slippery chair. " Who told you that he ( Mr Reddy and not the Man of Steel who is still sticking to his oiled chair ) was removed on these reasons. This is not true," said Mr Ahmed. Of course not. Just as it is not true that corruption will be eliminated, wasteful social schemes to win elections will not be implemented, our money will be used gainfully for roads and electricity,  inflation will be controlled, the economy will grow at over 10% and we will live happily ever after. Petrol price went up by Rs 2.40 from today. Enjoy.

The World Bank agrees with us.

We have been writing time and again that loose monetary policies along with handing out vast amounts of money in various social schemes have resulted in very high inflation, fiscal deficit and Current Account Deficit. While only a few people read this blog now the World Bank seems to agree in its report called Global Economic Prospects. In it the Bank calculates the Output Gap of the economy, which is the difference between actual and potential output. A positive number indicates that the economy is operating higher than its capacity to sustain such a level of production. That is why it is also called the inflationary gap. Livemint, 14 June. The report says that the Output Gap for India was 2.5% in 2007, 2.2% in 2010 and 0.9% in 2012. We have said repeatedly that the damage was done in 2007 when tax on petrol should have been reduced, diesel price should have been raised to that of petrol, gas price should have been normalised, interest rate should have been raised to bring inflation to below 2% , thus controlling property price inflation and the RBI should have bought large amounts of dollars from the market to bring the rupee down from 39 to 45 to the dollar, building up foreign currency reserves to around a trillion dollars. " India's steep growth deceleration mostly closed a large positive output gap that had opened up in the post financial crisis period." Meaning the present slowdown in the economy is because of past excesses. " To the extent the current output gaps are relatively small ( or positive ), efforts to increase growth through monetary and fiscal stimulus risk being ( or may have been ) ineffective and might add to debt or inflationary pressures without any sustained progress in increasing output or reducing unemployment." says the report. Which means that reducing interest rates will be counterproductive, which is what we have been writing regularly. There are 2 reasons why politicians and business fellows keep howling for the RBI to reduce rates - 1. The Congress wants something, anything to stimulate the economy for just a few months to win the elections in 2014 and does not mind if it crashes afterwards and 2. Business fellows want to restructure massive debts by borrowing at lower cost to stave off bankruptcy. " The 2012 output gap in Brazil, India and Turkey is either positive or close to zero ( less than 1% ) suggesting limited scope for growth to accelerate in the short run." Which means it will take a long time to start growing again. Question is, why was Mr Kaushik Basu asking for rate cuts as Chief Economic Adviser to India and is now singing a different tune as Chief Economist at the World Bank. Is it a case of playing the tune according to who is paying?

Put a sock in it.

Finance Secretary, Mr Rajiv Takru is an angry man. Very angry, it would seem by the way he tore into bankers the other day. Livemint, 6 June. Referring to Cobrapost exposures of bankers offering to launder black money belonging to politicians he threatened to increase the quantum of penalty from Rs 1 crore to Rs 500 crore or Rs 5 billion. Bankers should have been quaking with fear, instead most of them would have been sniggering with contempt. They know that should he even try to stop banks from laundering black money made by politicians Mr Takru will be transferred instantly to some innocuous department such as the employees' canteen. Ask Mr Ashok Khemka who has been transferred 9 times in 5 years. Referring to Non Performing Assets, as bad loans are called, which have risen from 1.9% a few years ago to 3.9%, to Rs 1.79 trillion from Rs 1.51 trillion last year, he said," There is no point in saying these are minor aberrations here and there. You have very little scope for fooling around with basic banking practice. I am very conservative and have zero tolerance for anybody who steps out of line. My advice to banks and insurance companies is ' get your systems in order '." I think he should talk to his boss instead who forgave all loans to farmers in 2008 to win elections in 2009. The MNREGA scheme which pays villagers Rs 214 a day for 100 days a year for doing nothing and the 80% increase in salaries of useless civil servants, of course Mr Takru is definitely not useless, has caused double digit inflation and loose monetary policy has increased property prices by 1000%. Diesel and gas prices should have been adjusted in 2007 when oil was at $64 a barrel and the rupee was 39 to the dollar. They are being raised now when inflation is already high and will zoom up if the rupee falls further. The previous Finance Minister, now the President, boasted how companies paid premiums to be allotted contracts to build road on completely fanciful projections of traffic flow. Coal mines were given away as Diwali presents to friends and relatives who just sat on them hoping to make windfall profits once prices went up. So now we are having to import expensive coal from abroad.  Is it any wonder that NPAs are concentrated in property, infrastructure and power sectors. Public sector banks are required to lend money to priority sectors regardless of ability to pay. Kissan Credit Cards dish out cheap loans to farmers who use the money to buy luxuries and lavish weddings because they know they will not be asked to pay back. Total loan outstanding on these cards - Rs 2 trillion. Perhaps sir should put a sock in it.

The unmentionable inflation.

There are so many different measures of inflation that it is very confusing and almost incomprehensible for us amateurs to understand. There is the Wholesale Price Index or WPI which measures goods bought in bulk by corporates,  mainly commodities. The US measures Producer Price Index or PPI which is an average of goods and some services offered by companies. Then there is the Consumer Price Index or CPI, also referred to as retail inflation, which measures what customers pay at retail shops. Then there is Core Inflation which is CPI excluding volatile items such as food and energy and Headline Inflation which apparently is the raw inflation data in the CPI, whatever that means. In India the Reserve Bank looks at the WPI to set interest rates. This has been declining in recent months because of falling industrial output which is due to falling consumer demand which, in turn, is due to very high CPI made worse by extortionate taxes. Index of Industrial Production or IIP grew by a paltry 1% in the whole of 2012-13. It grew by 2.2% in April and 3.4% in March.  The WPI fell to 4.89% in April mirroring the fall in industrial production. For us, the people, all this is irrelevant. What matters to us is what we pay at the shops and that is what determines how much money we have left for travel, entertainment and eating out, after having paid for essentials. The CPI was 9.31% in May down from 9.39% in April, which is killing the middle class. However, completely ignoring interests of the people there is a constant cry for lowering interest rates by politicians and business fellows. They say that reducing interest rates will lower borrowing costs and allow them to increase production thus increasing employment and growth. That begs the question - why would business fellows increase capacity when demand is low? But there is another inflation in India which no one mentions. It is mentioned as a news item from time to time but there seems to be an understanding between politicians, journalists and business fellows to keep it in the dark by never focusing on it. And that is the property price inflation which is over 20%. Property prices have increased by 1000% since 2002. In the last 3 years prices in Mumbai increased by 60%, on top of a very high base. Almost every company has moved into construction regardless of their core business. They acquired land at very high prices and are now stuck with unsold stock since people cannot afford stratospheric prices. Unless property prices decline by 80% the rupee will fall, further fueling inflation. But that is where the scoundrels have their black money. Hence the anguished cries for reducing interest rates hoping to entice gullible investors and recoup their money. Great.

Is India an upside down country?

From a constant discussion of whether interest rates should be, would be, could be reduced by the Reserve Bank and by how much newspapers have suddenly woken up to the dangers of inflation and the falling rupee. The rupee has fallen 8% since 1 May 2013. A 10% fall of the rupee increases inflation by 1% and a Re 1 rise in value against the dollar raises the oil import bill by Rs 80 billion. The fall in the value of the rupee is due to 1. An unsustainable Current Account Deficit, 2. Persistently high inflation for several years, 3. A slowdown in growth of total factor productivity and 4. Fears about reversal of capital inflows. Other currencies also in trouble are the Brazilian real, Turkish lira and the South African rand, all because of high CAD. Livemint, 10 June. Massive trade deficits show that India has lost competitiveness because 1. High inflation has pushed up costs of goods manufactured in India, 2. The slowdown in productivity growth means that companies cannot overcome higher costs by increased efficiency and 3. Very poor infrastructure and a deterioration of business climate in the last few years. This is because of enormous corruption and rent seeking by politicians but the first 2 problems can be reduced by a devaluation of the rupee by making exports cheaper. This apparently is the classic response of an economy that has lost competitiveness. Trouble is that India is imports more than it exports and a fall in the rupee will increase prices of imports, such as oil, natural gas, coal and gold, and add to inflation. When countries want to control inflation they increase interest rates but the RBI has cut interest rates by 75 basis points since 1 January. Falling interest earnings with rising prices are lethal for people who depend on savings for survival, such as pensioners. Australia recently cut interest rate to weaken the Aussie dollar because it was hurting exports. China buys huge quantities of dollars to weaken its currency and increase exports. Yet Indranil Sen, India Economist at DSP Merrill Lynch said," In our view the rupee will continue trade weak till the RBI is able to recoup $60 billion of FX ( including forwards ) sold since 2008. Keeping rates high will only defer recovery, deter FII equity inflows and delay re-accumulation of FX reserves." In other words he is advising exactly the opposite of what other countries would do to control inflation and strengthen the currency, which is raise interest rates and sell dollars. Yesterday the RBI sold dollars to support the rupee. Trouble is we only have about $250 of reserves, enough for 6 months of imports. Why the opposite advice? Is India an upside down country?

Only God can save us.

Last week The Guardian in Britain reported that the National Security Agency, helped by the FBI, in the US had been collecting records of phone calls of US citizens for 7 years. Although not listening to conversations intelligence agencies collected numbers of origin, where they ended and duration of calls. Then it was reported that internet giants like Google, Yahoo and Facebook were handing over all IP addresses and their origins, under a program called Prism which is targeted at foreigners. The Guardian suggests that 6.3 billion reports were obtained from India. All this was revealed by 29 year old former CIA computer technician,  Edward Snowden. He was employed by a private company, Booz Allen Hamilton which was working for the NSA in Hawaii. Snowden was enraged by the wholesale clandestine surveillance of US citizens and flew to Hong Kong before blowing the whistle. " I don't see myself as a hero because what I'm doing is self interested. I don't want to live in a world where there is no privacy and therefore no room for intellectual exploration and creativity," Snowden said. " The government has granted itself powers it is not entitled to'" he said. In response Barack Obama said that Prism targets only foreign nationals and that it was worth giving up a little privacy for more security. They all say that don't they? " I think that's a dangerous statement," said Bob Taylor, a computer scientist who played a major role in the 1960s in formulating what would become the internet. " The government should have told us it was doing this. And that suggests a more fundamental problem, that we're not in control of our government." New York Times, 10 June. In 1999, Scott McNealy, CEO of Sun Microsystems said," You have zero privacy. Get over it." Now, however, he said," Should you be afraid if AT&T has your data? Google? They're private entities. AT&T can't hurt me. Jerry Brown ( Governor of California ) and Barack Obama can." Defenders of surveillance say that people reveal all their details on social networking channels anyway. No one objects to CCTV cameras which help in catching criminals. If a pedophile or an unknown terrorist is caught then the agencies can quickly find out his or her contacts and capture them. Trouble is in a police state like India where 163 of 543 MPs are accused of serious crimes such information is dangerous. The Congress went after Anna Hazare when all he wanted was an end to corruption, which should be the sacred duty of elected representatives of the people. It has started a Central Monitoring System and will start National Cyber Coordination Centre to spy on us. With laws on sedition and section 66a everyone will be in grave danger. May God protect us.

Waste of a whole decade.

In a meeting with public sector bankers our most revered Finance Minister said," Based on a discussion with banks, as many as 215 private projects having an estimated capital requirement of Rs 7 trillion, out of which banks have already disbursed Rs 53,000 crores ( 530 billion ), have stalled." Livemint, 7 June. " In the next line, we have 126 projects totalling Rs 3.5 trillion. In total, we have 341 projects where we can invest Rs 10.5 trillion. The numbers of stalled projects are staggering. The first step before this country is to kick-start these projects," he said. Question is what was your government doing for the last 9 years that the Congress has been in power? Why are you staggered 1 year before the elections when the economy is floundering on sky high inflation, uncontrolled Current Account Deficit and a free-falling rupee because of your cynical waste of money? According to data compiled by the Ministry of Statistics and Programme Implementation, 103 Union government infrastructure projects costing more than Rs 150 crores ( 1.5 billion ) each have been delayed between 4 and 20 years, until the end of March 2013. When you have 53 ministries as bribes to various parties to hang on to power nothing will get done because each minister will want to show how powerful he is by blocking others unless he gets a share of black money collected by them. India desperately needs roads and reliable round-the-clock electricity supply before businesses will invest in new projects. You need land to build roads but with a population of 1.2 billion every inch of land is occupied. The only way to prosper is to bring down the numbers of people as China has done with its one child policy. We cannot use force as the Communist dictatorship can but we can encourage people not to breed by linking social schemes to fewer children. But that will mean an end to buying votes to win elections. India is sitting on at least 250 billion tonnes on coal but mines were allotted to friends and family members who had no knowledge of mining and just sat on the allocations hoping to make a killing from rising prices, so we are having to buy expensive coal from abroad for electricity. " These projects will be tracked, followed through, and implemented, and I want banks to work closely with this committee. You have a self-interest in doing so because your money is stuck," said Mr Chidambaram. Correct. Banks are already reeling from bad loans of Rs 1.79 trillion and have been told by the Reserve Bank to stop lending to defaulters. An entire decade has been wasted because of a bunch of scoundrels who put self before country. Traitors.

So who will be the losers?

After heavy fighting for about 2 weeks the town of Qusayr in Syria fell to Hezbollah fighters from Lebanon. This opens up supply routes to Damascus from the port cities of Tartous and Latakia. This is the first time that Hezbollah openly declared its presence in Syria and its intention of protecting fellow Shiite Alawis of Assad's regime. At the same time Russia announced its intention to station a dozen naval vessels in the Mediterranean on a permanent basis. This maybe to withdraw Russian citizens quickly in case the regime falls or it maybe to protect the 2 port cities in case Israel tries to mount a sneak naval attack on them. Israel has already bombed alleged weapons convoys from Iran to Hezbollah in Lebanon thrice, once on 31 January and twice on 3 and 5 May. The Syrian government has vowed to retaliate to further Israeli attacks. Israel is desperate to stop Hezbollah from acquiring advanced anti aircraft weapons systems which will add a sense of hesitation and seriously weaken its power to bomb any target in Lebanon at will. Israel would probably like the status quo to continue indefinitely where the regime, backed by Hezbollah, continues to fight the rebels, backed by Qatar, Turkey and Saudi Arabia thereby weakening both so much that they would not be a threat to Israel. A quick victory by the Sunni rebels, especially the Al Qaeda linked Al Nusra front, who will then gain control of Syria's arms, chemical weapons and heavy artillery will be extremely dangerous for Israel. A couple of days back the rebels seized the Quneitra crossing on the Golan Heights, very close to Israeli territory. The regime won it back after serious fighting involving tanks. Israel maybe the reason why Barack Obama refuses to get involved despite mounting evidence of the use of the nerve gas, Sarin. France has claimed that it has evidence of the regime forces using Sarin and Britain has supported it. However, there are reports that 2 rebel fighters were arrested in Turkey with a 2 kg canister of Sarin gas and Carla Del Ponte, member of the UN Independent Commission of Inquiry on Syria, said last month," Our investigators have been in neighboring countries interviewing victims, doctors and field hospitals and, according to their report of last week which I have seen, there are strong concrete suspicions, but not incontrovertible proof of the use of Sarin gas, from the way victims were treated. This was use on the part of the rebels, not by the government authorities." David Cameron of Britain and Francois Hollande of France are itching to bomb Syria to improve their sagging poll ratings. They may be the first to end up as losers. Delicious irony. 

It is not about gold, it is about trust.

The government has raised tax on gold imports to 8% from 6% in an effort to stop people from buying gold. Will it work? Very unlikely. The international price of gold may fall further cancelling out the price rise but the real reason people buy gold is not because they are stupid or mad but because they have absolutely no trust in politicians. They have seen the current bunch presiding over scam after scam looting trillions from the economy while formulating a suicidal policy of social handouts just to win elections. The rupee has fallen to 57 to the dollar because of uncontrolled inflation, the Consumer Price Index rising at 9.8%. Instead of concentrating on inflation the government has forced the RBI to reduce interest rates because the banks are laden with bad loans and a low interest rate will allow companies to pay back high cost loans by borrowing at a cheaper rate. Trouble is that low interest cost just encourages business fellows to borrow even more so that the day of reckoning is just pushed a little to the future. Just because Fed Chairman, Ben Bernanke hinted that the Fed may slowly start to withdraw monetary easing bond prices have collapsed all over the world, raising yields. Bond prices rise when interest rates are low and fall when they rise so the markets are anticipating a rise in US interest rates sometime soon. The Fed is buying $85 billion worth of bonds every month which is a flood of cheap money. Some of that money is coming into our share market looking for higher yields. In May $4 billion dollars were pumped into our stock markets, the total for 2013 is $15.35 billion or Rs 832.05 billion. This and repatriation by Indians working abroad are holding the rupee up. Once the Fed starts tightening its monetary policy less money will flow into India and the rupee will drop further. If the Foreign Institutional Investors take fright at the weakening rupee and sell out our the fall could be catastrophic. In the last financial year profits of top 1100 companies fell by 5%. TOI, 6 June. Sales of Light Commercial Vehicles have fallen for the first time since April 2010. Livemint, 7 June. Combined sales of Tata and Ashok Leyland, which together command two-thirds of the market, fell by 10.9%. Mahindra and Mahindra, with much smaller sales, fell 19%. Since LCVs cater to urban and semi urban markets this means that demand for agricultural produce and services have fallen. Sales of multi-axle vehicles, which mirror capital expenditure have fallen by 50%. The Congress is determined to pass the Food Security Bill, by ordinance if necessary, which will add another Rs 2.5 trillion to expenditure. It is not about gold. It is about a complete absence of trust.

A meeting of minds.

President of China, Xi Jinping is meeting with Barack Obama in California today. However, Michelle Obama will not be there to meet Peng Liyuan, as Mrs Xi is known, who is famous for singing to Chinese troops. She apparently sang to them in celebration after the Tiananmen Square massacre. On the face of it it is no contest. Obama cannot get any bill through Congress. He has trouble appointing people to key posts lying vacant. Recent revelations that his administration has been engaged in massive spying on US citizens has angered many. Phone lines to 100 Associated Press journalists were being monitored. Phone calls of James Rosen of Fox News were monitored. Now The Guardian of Britain has exposed that the largest phone network, Verizon was forced by a secret court order to reveal records of all phone calls over a 7 year period. Numbers of phones where the call originated, numbers called and duration of calls were all revealed. Internet companies such as Google, Yahoo and Facebook were asked to reveal data under a PRISM program. Apparently, this was legal under the Patriot Act passed by Republicans when Bush was president but there is widespread anger at what is seen as blatant violation of privacy of US citizens. So it would seem that Xi holds all the cards. Or maybe not. Seems that the Chinese economy will slow to 7% or lower. While this is enormous growth compared to other countries the Communist Party needs very high growth rates as a trade off for its repression of the people. Tight labor market is pushing up wages just as the global demand for Chinese products is reducing. Livemint, 5 May. According to Fitch Ratings financial lending by banks was 198% of GDP last year, compared to 125%, 4 years ago. Former Finance Minister, Xiang Huaicheng revealed that local government lending may have reached $3.3 trillion. Banks must stop lending to decrepit state industries. But the biggest drag on the economy is pollution. China has 16 of the 20 dirtiest cities in the world. Its factories are polluting the air, soil and water. Chinese people do not trust the food that they eat. One man was caught mixing rat meat with chicken. There was a shortage of baby food in Australia and the UK because of panic buying by Chinese mothers who refuse to use local brands. A few years ago 6 children died because of melamine in baby milk. Protesting parents were beaten up. True reforms will bring growth down to 5-6% which will be resisted by the party fat cats. To stimulate growth China has been stealing industrial secrets on a massive scale. So, will it be a meeting of minds?

" If " is an illusion.

Like little children are promised ice cream if they eat up their vegetables we are told that the Indian economy will grow again if global demand picks up, if inflation comes down, if monsoon rains are just perfect, without deficiency or floods, if companies invest in new business or if we stop buying gold so that politicians can buy 12 luxury helicopters for Rs 37 billion. As an old song by Roger Whitaker said, " If's an illusion. No you won't believe in if anymore. If's for children." The HSBC Manufacturing Purchasing Managers' Index, which is a gauge of business activity in factories but not utilities, fell to 50.1 in May from 51.0 in April the third straight monthly fall. TOI 4 June. Anything above 50 is growth and below it is contraction. The factory output sub-index fell to 48.6 in May from 50.2 in April. Production is decreasing because demand is falling and demand is falling because of retail inflation and enormous taxes on every kind of goods and service. So difficult has it become for ordinary households that frequency of eating out in restaurants has dropped by 50%. " There is an overall pressure on the purchasing power of people. The service tax implemented since April this year had further impacted sentiments," said Samir Kuckreja, President of the National Restaurant Association of India. High taxes and reduced government spending on infrastructure helped to bring down the fiscal deficit to 4.9% of GDP so that they can increase spending on wasteful social schemes to win the coming elections. It is not just extortionate taxes but sudden changes in tax rules that businesses dread. That is why Foreign Direct Investment fell by 38% to a paltry $22.42 billion in the whole of 2012-13. In 2011-12 FDI was $35.12 billion. At the same time the Current Account Deficit in 2012 was $93 billion, second only to the US is absolute terms. Vladimir Evtoushenkov, Chairman and co-founder of the $34 billion Russian conglomerate, Sistema,  which is a majority shareholder in the telecom company Sistema Sham, said about India," Regulatory climate is not very good. You can put together a business plan but you can't implement  because the rules keep changing." Since 1 June a new tax has come into effect which forces a buyer of any property costing more than Rs 5 million to deduct a 1% tax from the value and submit it to the Income Tax Department. Since we do not work for the government why should we be forced into servitude? These fellows have been elected to serve us, instead we are being treated like servants to raise money for their pleasure. We are being deceived by a big " If ". If only.

Its all in the name of democracy.

Recep Tayyip Erdogan has won 3 elections for Prime Minister of Turkey, each time with increasing mandate.  When he first became prime minister in 2002 Turkey was in deep recession with inflation at 34.9%, debt to the IMF of $23.5 billion and unemployment of over 10%. He engineered 26 successive quarters of growth at an average rate of 7.3% which brought down inflation to 5.7% in 2011, increased central bank reserves from $26.5% to $92.2 billion and brought down IMF debt to just $0.9 billion. Unemployment is down to 8.2%. As his power has grown he has become increasingly autocratic and has been slowly turning Turkey into an Islamic state. He brought in a law allowing women to wear head scarves in offices and university, he wants every woman to have at least 3 children and has made abortion difficult to obtain and has recently banned drinking of alcohol in public places. In May 2010 he encouraged a flotilla of ships to try to break Israeli blockade of Gaza. Israeli commandos were attacked when they boarded the ships and 9 people died. Erdogan broke off relations with Israel and has called Zionism a " crime against humanity ". He has actively encouraged Sunni Syrian rebels against the Alawite Assad regime which has enraged Iran. Hundreds of journalists have been arrested, top army officers have been imprisoned after an alleged coup, there is a nationwide filter on the internet and, when students demonstrated for free education, hundreds were arrested and charged with being members of illicit, extralegal organisations. However it was a park in Istanbul that has brought thousands of people out in protest. Erdogan wants to tear down Taksim Square and build a mosque and rebuild Ottoman era barracks. When people protested police responded with heavy tear gas and water canons. A picture of a young woman wearing a red dress and red shoes with a white bag slung over her right shoulder, her hair billowing as she is tear gassed by a policeman wearing a protective gas mask, looking like a Star Wars storm trooper, has become an icon of the protests. Like all leaders Erdogan has responded with anger. " This is a protest organised by extremist elements," he said. " We will not give away anything to those who live arm-in-arm with terrorism." Exactly what Bashar al-Assad says. What Abhisit Vejjajiva said when Thai soldiers opened fire on Red Shirt protesters killing 25 on 10 April 2010. What the Congress said when the Delhi police brutally beat up sleeping supporters of Baba Ramdev at 2 in the morning killing one woman on 4 June 2011. Death for protesters. All in the name of democracy.

In banks we trust.

The Reserve Bank has announced that it will license new banks in the private sector under strict criteria. But why? India does not lack banks. There are 22 nationalised banks, State bank of India and its 5 associated banks and at least 29 foreign banks operating here. Surely the more banks there are the more difficult they will be to monitor. In 2003 Nedungadi bank had to be taken over by Punjab National Bank and in 2004 the Global Trust Bank had to be rescued by the Oriental Bank of Commerce. The global economic crisis since 2008 started with the collapse of Lehman Brothers which collapsed under the weight of bad loans. Bruno Iksil, nicknamed the London Whale, at the London office of JP Morgan cost the bank $6.2 billion in losses. Royal Bank of Scotland had to be rescued by the British government with 80 billion pounds of taxpayer money. Despite making huge losses and enormous public loathing managers continued, in complete absence of any shame, to give themselves large bonuses. While the government is encouraging companies to open new banks the RBI is trying to control the danger of rising bad loans at existing banks, especially public sector ones. The RBI has laid down stricter guidelines for restructuring of bad loans at banks. Already Rs 2.29 trillion of loans have been restructured. The RBI has ordered banks to increase reserves against restructured loans from 2.75% to 5%. For loans which have already been recast banks will have to increase reserves to 3.5% by March 2014, 4.25% by March 2015 and to 5% by March 2016. In March the RBI reduced the Cash Reserve Ratio by 25 basis points to 4% to improve liquidity and bring down interest rates but is now having to increase reserves for bad loans. Of course bad loans are only 4% of total loans of banks but still it means that banks will have to find extra money to hold in reserve. The RBI has mandated that owners of companies will have to give personal guarantee to have their debt restructured which shows the level of concern. " It has been decided that promoters' personal guarantee should be obtained in all cases of restructuring and corporate guarantee cannot be accepted as a substitute of personal guarantee," the RBI said. Livemint 31 May. The RBI also said that restructured loans cannot be classified as standard accounts unless repayments are regular. " This means restructured loans, unless it meets the criteria, will be classified as substandard, increasing the provision on such loans to 15% from 5% currently," A Krishna, MD of SBI. It is probably a good thing that we do not understand what is going on or we would die of worry.

Black is black.

Our most revered Minister for External Affairs, Mr Salman Khurshid has written a brain washing article in the Hindustan Times today in which he attempts to paint Indian politicians as poor, helpless victims of misunderstanding, He writes," Civil disobedience is a profound moral weapon that has been resorted to in violation of its essential prerequisite." Survival is a daily struggle in India so if the people resort to civil disobedience it means that they can tolerate no more after 65 years of lies, loot and oppression. " No one in his or her senses would question the importance of accountability, but any such questioning must surely be tempered by reality." The reality is that the pedophile Rathore was released after only 6 months in prison, Orissa police chief BB Mohanty who helped his son, Bitti Mohanty abscond for 7 years after being convicted of rape, was allowed to retire with full pension and Sukhram, who was caught red handed is still free after 25 years. There is zero accountability for politicians, police officers and civil servants. " Hard cases make bad law, but bad law extolled as honest virtue can spell disaster." Bad laws are deliberately enacted by politicians to oppress the people. The British law of sedition was used to arrest Aseem Trivedi for drawing cartoons. Section 66a was enacted to censor the internet to prevent any criticism or exposure of crimes of politicians. " As members of Parliament, we serve our country and voters. Our mixture of good and bad is surely similar to that of the people we represent." Absolutely not on both counts. Out of 543 MPs 163 are accused of violent crimes of armed robbery, murder, rape and kidnapping. You, sir, should be ashamed of  accusing 30% of your electorate guilty of such disgusting crimes. Just shows the world you inhabit and what you think of us. Voters are not the same as " vote bank " in whose name your party has wasted gazillions of rupees in wasteful social schemes. If the money had been used for roads and electricity generation the rural poor would have established their own businesses, improved education and sold their produce directly in markets instead of though middlemen. But this was not for India but to win elections, wasn't it sir? ".....we need to first know if the assumption that autonomy equals honesty is sound in itself. The obverse makes more sense." With autonomy comes responsibility and the hated accountability. Without it, it is a game of denial and pass the buck as we can see in all the scams. Finally, it is criminal to use Gandhi against us. Gandhi met King George V in Buckingham Palace in a loincloth on 5 November 1931 while your party wants to spend Rs 37 billion to buy 12 luxury helicopters. As an Oxford educated lawyer you may have a mastery of words but even you cannot turn black into white. Bye, sir.

The rupee will fall more.

The cost of electricity is set to rise exponentially. Apparently electricity companies are buying gas at $20 a unit which will translate to electricity costing Rs 12 per unit. TOI, 30 May. At present domestic customers are charged according to an escalating scale. The first 100 units at Rs 2.50, the next at Rs 4 and so on. The more you consume the higher the charges. The rationale being that poor people, who have fewer gadgets, use less electricity and so should pay at a lower rate while higher use indicates possession of air conditioners which indicate extreme extravagance for our socialist politicians, never mind that their homes, offices and cars are all air conditioned at taxpayer expense. Commercial rates start at around Rs 10 per unit. Increasing cost of electricity will have an immediate effect on prices of everything pushing up the Consumer Price Index which is already at a painful 9.39%. This will decrease consumer spending even further hurting retail sales, forcing companies to postpone investment and job creation. Economic growth fell to 4.8% in the final quarter of the last fiscal and is expected to remain range bound for many years. Unless it falls even more. Nobody seems to have any solution expect hysterical cries for reduction of interest rates which, they say, will help companies to borrow cheaply for further investment and for consumers to spend more. If inflation remains uncontrolled consumers will be forced to spend only on essentials and companies will not need to expand capacity. Just as they were swanning around Davos a few years back, oblivious to the dangers to the economy these idiots seem to be completely unaware of the dangers of inflation. They should look at Venezuela which has the highest oil reserves in the world. With a population of just 30 million, equal to Delhi and Mumbai, its GDP is around $350 billion, 80% of which comes from oil. In 1937 $1 dollar bought 3.18 bolivars. In the 80s inflation began to rise and reached 100% in 1996. The bolivar collapsed so that notes of 20,000 and 50,000 were being printed. On 1 January 2008 the Bolivar Fuerte or the strong bolivar was introduced which was equivalent to 1000 old bolivars. At that time its rate against the dollar was 2.15. On 8 January 2010 it was 2.60, on 8 January 2011 it was 4.30 and on 13 February 2013 the Venezuelan government devalued it to 6.30 to the dollar. Already the black market rate is 6.80 to the dollar. Of course, the inflation rate in Venezuela is 30%, 3 times higher than ours. The rupee has dropped to 56 to the dollar and, if we see property prices, the fair value maybe 80. That will increase inflation to 30%. Cheers.

Our fellows are the new British.

Debt of airlines in India have increased by 8.9% in 2012-13 to an estimated $14.5 billion or around Rs 807.65 billion according to a report by consulting firm, Capa-Centre for Aviation. Livemint, 29 May. Air India has a debt of $8.9 billion, Jet Airways $2.25 billion, Kingfisher $1.8 billion, Spice Jet $336 million, IndiGo $176 million and Go Air has a debt of $147 million. Most airlines are still making losses even though losses are down because they have been able to increase fares due to the grounding of Kingfisher. Jet made a loss of Rs 4.855 billion last year against Rs 12.30 billion the year before. Spice Jet made a loss of Rs 1.91 billion against Rs 6.058 billion the year before and Air India made a loss of Rs 51. 99 billion against Rs 75.60 billion the year before. Most airlines have eroded their net worth. " A negative net worth reflects badly on a company," said Gautam Naik, a chartered accountant. What does it mean? Does it mean that most airlines in India will have to stop operating because they will not have the cash to pay employees and buy fuel? They have either to raise more cash through rights issues to shareholders or start making profits. In a panic the government has allowed foreign investment of up to 49% in domestic airlines but foreign airlines will want to make profits on their investments. That will happen if more people fly instead of going by trains but domestic air traffic fell to 58.82 million from 60.7 million a year earlier even though international traffic grew by 21.8%. This year traffic is expected to increase by 4-6% to just over 60 million. Indians are very price sensitive and the high cost of domestic travel inhibits people from flying. So, apparently to reduce cost of flying, the government decided to " unbundle " services offered by airlines which means that basic fares will be kept low and airlines will be allowed to charge separately for everything from check-in baggage to food to choice of seats, like the Irish airline, Ryanair does. The only trouble with this is that airlines cannot offer low basic fares in India because of huge airport charges, taxes on tickets and on fuel. So the net effect of charging for each item of service will be to increase fares even higher. The easiest remedy is to reduce taxes on air travel as in other countries. This the government cannot do because it wants to retain a price difference between air and train fares so that people are forced to travel by air conditioned and first class. This is because profits on these passengers subsidises masses of people from Bihar, UP and Rajasthan who travel without paying. They are the " vote bank ". Divide and rule said the British. Our politicians follow.