If calamities are common?

Prof A Panagariya makes a spirited defence of economic management in the last 3 years during which Mr Modi has been the Prime Minister. In these 3 years GDP at market prices has grown by an average of 7.5%, compared to below 6% during Congress years. It is disingenuous to dismiss these figures by the Central Statistics Office as flawed but accept the latest figure of 5.7% growth as correct. Corporate savings averaged 11.8% of GDP between 2014 and 2016, compared to 7.4% from 2003 to 2912, while corporate investment was 12.95% of GDP from 2014 to 2016, compared to 12.4% from 2003 to 2012. If companies were saving and investing at a higher rate then they must have been making higher profits. Indeed, low commodity prices were contributing to a rise in profits of some sectors, although consumer demand was flat. However, if corporate investment was growing why did Gross Fixed Capital formation, which measures new asset formation through new investment, fall from 34.6% to 31.9% of GDP and, if companies are saving more, why has corporate debt grown to Rs 18 trillion. Total bad loans in banks are in excess of Rs 8 trillion, but could rise higher, which means that banks are unable to lend for new investment. Dismissing these as 'twin balance sheet problem' will not wash. Exports have fallen from $281 billion in 2012 to $229 billion 2016. The professor does not think that the economy needs a stimulus, just lower interest rate and everything will be alright. The government has already resorted to a fiscal stimulus, wrote V Kaul. Till the end of August the government has already spent 96.1% of the fiscal deficit budgeted for the whole financial year. Last year it had spent 76.4% over the same period. In absolute terms the government has spent Rs 5.25 trillion out of the budgeted Rs 5.47 trillion. Yet, it insists that it will meet a deficit target of 3.2% of GDP. How will it perform such a miracle? By extorting as much tax as it can out of hapless citizens. Taxes on fuel have become astronomical. VAT on petrol has risen from Rs 1.43 trillion to Rs 1.66 trillion, while excise duty collection has risen from Rs 1.79 trillion to Rs 2.43 trillion. States suck their share of our blood. The Goods and Services Tax was supposed to simplify indirect taxation and make it easier to pay. Instead it has turned into a nightmare with 8 different rates, large numbers of returns to file and delays in repaying input tax credit. So great is the panic that even BJP fellows, the prime minister's own party, are talking about an impending crash in the economy. Johann Norberg wrote that people "overestimate the likelihood of a calamity. This is because they rely not on data, but on how easy it is to recall an example. And bad things are more memorable." Sadly, 'bad things' are common in India.

Isn't it really a tax by another name?

Prime Minister, Narendra Modi is an ardent believer in digital technology, which, according to him, will make India a developed nation. Digital transactions will make India a cashless society which will apparently get rid of all corruption. Digital transactions need positive identification, so every citizen is being coerced into obtaining a biometric identity card with photograph, prints of all 10 fingers and iris scans. Even new born babies are not exempt, her intimate details possessed by a coterie of politicians and civil servants, to be used to control her for her entire life. How long before Aadhaar numbers are tattooed on skins of babies or Rfid chip inserted under the skin just after birth for easy identification, for life? Will this intrusion on our bodies and the enormous expense result in economic boom so that we become rich? Digital technology is accessible only to those who are able to understand it. A survey showed that 85% of old people in Delhi are unable to use it for personal transactions. These are educated people, probably retired from respectable careers. What hope is there for millions of illiterate people in India? It is no use telling people that it is very easy. Mandarin and Swahili are easy to those familiar with them but completely incomprehensible to us. Digital technology is way more insecure than cash. Hackers cost $4 billion in the first half of 2017 and attacks will continue. It is not a question of if, but when a business or a bank is going to be hacked. Personal data of nearly half of all Americans was compromised earlier this month when Equifax, a credit reporting agency, was hacked. Passwords and pin numbers can be changed but how does any Indian change his fingerprints or iris scans if hacked, which has already happened on several occasions. Banks and businesses need to constantly upgrade their security, which is expensive, and the cost will surely be passed on to consumers in increased charges. In the UK banks are shutting high street branches at the rate of 10 per week. This reduces costs for banks and increases bonuses for managers but imposes risks of online banking on customers and loss of employment for staff. Credit card use is increasing in India. If you use cash you pay the exact cost and the trader receives the full amount for his goods or service. But using a card the trader has to pay the card company. Visa makes billions of dollars in profits. Those unable to restrict their spending get into terrible debts, and have to pay usurious charges to card companies. It is true that cash can be robbed but robbers are seen on CCTV and usually caught by police. Hackers sitting in China or Russia are completely safe. Finally, digital economy will vastly increase inequality, wrote Prof D Trapscott. So blissful to be ignorant.

Why are we going in the opposite direction?

"The Bank for International Settlements (BIS) has always played the role of Cassandra, the daughter of the Trojan king in Greek mythology, whose warnings about the fall of Troy lamentably went unheeded," wrote M Chakravarty. BIS is warning against a "dangerous build-up of global debt and runaway asset rises" due to exceptionally low interest rates across the world. Why are central banks stubbornly keeping interest rates so low? Because there is no inflation. As Claudio Borio, head of BIS's monetary and economic committee put so admirably,"This puts a premium on understanding the 'missing inflation' because inflation is the lodestar for central banks. It feels like Waiting for Godot." Prof N Roubini gives reasons for "The mystery of the missing inflation". Central banks of rich nations have an inflation target of 2%, which was first adopted by New Zealand in 1990, but since the crisis of 2008 inflation has stayed low despite interest rates dropping to zero, and even to negative in 23 countries, including the 19 countries of the Eurozone. Why is inflation stuck? Because "developed economies have been experiencing positive supply shocks", suggested Prof Roubini. Supply of cheap goods from China and other emerging markets, the flattening of the Phillips curve as workers lose their bargaining power, low oil and commodity prices, and technological innovations reducing cost of goods and services. The BIS argues that central banks should accept 0% inflation and start to normalize their monetary policies because "continuing much longer with unconventional monetary policies also carries the risk of undesirable asset price inflation, excessive credit growth, and bubbles". The Indian government has set an inflation target of 4%, plus/minus 2%, which means that the rupee buys less than other currencies every year. That is because the government perpetually runs a budget deficit, spending more than revenue. The stock market in India has been soaring because of money from abroad but now foreign funds seem to be selling out. If foreign money leaves the rupee will fall, which will raise the price of imports, especially oil. As the international cost of crude has fallen the government has raise taxes on fuel, so that now we are paying taxes of over Rs 40 per liter of petrol. Economic growth has fallen steeply. The only way to stimulate growth is to increase expenditure but the government has already spent 92.4% of its fiscal deficit target. If it carries on at this rate the deficit will jump to 4.9%. How about reducing taxes on fuel to stimulate private consumption and bring down inflation. That will drastically reduce revenue. So, while rich countries are growing with low inflation, our growth is stalling with a prospect of high inflation. That takes some expertise.

The foundation is there. Can we build on it?

"In 2015-16, the last year for which data is available, girls comprised 48% of the student population of about 300 million" was an obviously delighted news report. Starting at 25% in 1950-51 the proportion of girls has gradually increased and is expected to reach parity with boys in the next decade. "In the EU nations, 54% of higher education students are women; the corresponding figure in the US is 55% and about 54% in China." Although boys outnumber girls in technical education, such as engineering, girls outnumber boys in post graduate courses. While this is indeed something to celebrate, another survey showed that 13.5% of 15-16 year old children drop out of school. Girls tend to drop out more in certain states because of lack of parental encouragement and lack of facilities, like clean toilets. The official census of 2011 showed that the sex ratio in Indian population is 943 women for every 1000 men. According to the World Health Organization the normal ratio at birth should be 100 girls to 105 boys, the ratio becoming equal in adults because there is a higher death rate in boys. For instance, recessive disorders like hemophilia and muscular dystrophy occur almost exclusively in males, and while patients of hemophilia can be kept alive these days by regular infusion of Factor VIII, there is no treatment for Duchenne Muscular Dystrophy. In India the ratio is skewed because of abortion of female fetuses, although prenatal ultrasound for sex determination has been banned since 1994. Still, in states, such as Punjab, Gujarat and Haryana, there are fewer girls than there should be, so near parity in education means that almost all girls are going to school. Sadly, going to school and learning are not the same as the Annual Status of Education report shows that nearly half the students are unable to read or solve maths problems for students 3 years their junior. Then there is poverty. Studies in the UK show that students from poor families fall 3 years behind their peers from better off families. The difference in achievement starts right after birth as brains of babies whose parents talk to them develop much faster than those whose parents do not. Since this was observed as a difference in class one state in the US started a program where mothers from poorer families were encouraged to talk to their children with very good results. Class difference was proved to continue even in college students in the US In India the difference between illiterate poor and educated professionals is enormous, not only in being able to afford private schools, but also in being able to help children with studies. Even after achieving parity in education only about 27% of women work in India. What a waste.

Who wins in economics versus politics?

"Ten years ago, in August 2007, the French investment bank BNP Paribas SA, which had taken money from investors to buy subprime mortgages in the US, told those investors that it was suspending redemptions because the bank's fund managers were no longer sure what those mortgages were worth," wrote P Bhattacharya. The panic spread, Lehman Brothers collapsed in 2008, and the global economy was suddenly facing a crisis. Since the Great Recession of 2008 economists have been engaged in self examination, even self flagellation, of their profession. Economists are questioning even the basic theory of Economics 101, which taught that increasing minimum wage increases unemployment as businesses cut their workforce to reduce expenses. Milton Friedman's idea of Permanent Income Hypothesis, in which how people spend depends on expectation of future income but not on windfall profits, is correct in only half the number of people, wrote Prof N Smith. Bhattacharya recounts "The seven sins of economics." He accuses economists of expecting rational behavior, of using defective models, of intellectual capture, of obsession with science, of unconditionally accepting textbook Econ 101, of ignoring society and of ignoring history. World Bank economist, Paul Romer has coined the word 'mathiness' to describe mathematical models which are inconsistent with theory. But perhaps, economists are being too hard on themselves. It is not just a question of collecting accurate data and then calculating the policies that will produce maximum benefit for the economy, because policies are in the hands of politicians who have to win elections and will do anything, however harmful it maybe, to stay in power. Despite warnings from the Reserve Bank against demonetization, the government went ahead anyway because the Prime Minister desperately wanted to win assembly elections in UP, which he did with two-third majority. Previous governments signed a series of free trade agreements, hoping to increase exports, but this has only doubled our trade deficit with these countries because, while we have reduced taxes on goods, they have not reduced impediments against services. Naturally, our current account deficit is always under upward pressure. With the highest oil reserves in the world and a minuscule population of 31.57 million, Venezuela is facing total collapse of its economy and its people are facing starvation. No economic theory or calculation can stop a villain from destroying his nation to hang on to power. The US Congress may impose fresh tougher sanctions on Russia because of internal politics but this is infuriating European countries because their energy bills may soar. Politics is extremely dirty. Science tries to be pure.

FDI: Round-tripping by another name?

Analysing the official discussion paper, Industrial Policy -- 2017, Prof R Nagaraj asks,"Is FDI the new engine of growth." "Flagging the boom in foreign direct investment (FDI) inflows, the paper claims it as a badge of of success for the official policy." Since April 2014 total FDI has been $156.53 billion, of which $45.15 billion was in 2014-15, $55.56 billion in 2015-16, and $60.08 billion in 2016-17. These are huge numbers when converted to Indian rupees so the economy must be doing well. In reality, economic growth has fallen sharply, wrote M Chakravarty. GDP growth was 5.7% in the first quarter and growth in Gross Value-Added, or GVA, was 5.6%. Private consumption, gross capital formation, industrial production, and exports were all down. At 7.8%, four-fifths of the growth was in the services sector. Why are private investment and industrial production falling if foreigners have invested so much money? "Currently, FDI does not come from leading global producers of goods and services, but from shadow banking entities such as private equity (PE) funds. In 2014-15, PE accounted for 60% of total foreign inflows, and the top three recipients were Flipcart, Paytm and Snapdeal (Bain & Co,'s 'India Private Equity Report 2016)." "PE funds do not commit to fresh capital formation or invest in technology, as expected of FDI." Instead, they sell out when valuations of their investments increase. "Put simply, inward and outward FDI flows apparently represent channeling of global capital via India to take advantage of tax concessions (called 'treaty shopping')." In short, this is a legal form of 'round-tripping', that we Indians are so used to. Foreign Direct Investment is considered to be better because it is long term investment in business, which creates new jobs, whereas Foreign Portfolio Investment is considered hot money because it is in shares and bonds, which can sell out suddenly. Seems that FPI is masquerading as FDI in India, which is why economic growth is sluggish. What to do? The government should forget about fiscal consolidation and increase spending to stimulate growth, wrote A Ranade. This what politicians are contemplating but officials in the Finance Ministry fear that increased spending may push up inflation and current account deficit. Shares and the rupee are falling because of fears of increasing fiscal deficit. In addition, the Federal Reserve announced selling of bonds to reduce its balance sheet and FPI investors are selling Indian stocks. Where is the money going to come from? "Public expenditure is grounded in taxation, and taxation is considerable use of coercion," said economist V Kelkar. The public is being dazzled by big projects, which are not working, wrote C Kalbag. People do not understand economics. They like being dazzled.

This realisation should have happened before November.

M Yglesias analyses "What really happened in 2016, in 7 charts". Liberals and Democrats still cannot believe that Hillary Clinton lost the presidential election last year. Both candidates were unpopular but Clinton's unpopularity rating was below 40% while Trump's was above 50%. Instead of voting for one candidate, people voted against the one they disliked, voted for third party candidates, or did not vote at all. Libertarian, Gary Johnson got 3.27% of popular votes, while Jill Stein of the Green Party got 1.06%. Trump did a little worse than Mitt Romney did in 2012, but Clinton did a lot worse than Obama. Romney invited a lot of abuse for his comment that only 47% of Americans pay income tax and they will always vote for Obama. This signifies that there is a solid core of Republican voters who will support their candidate whoever he is. Clinton got more votes from blacks and Latinos but less than what Obama did. Hillary Clinton has published her own explanation of her defeat in a book, 'What Happened', which has sold 300,000 copies in the first week. The book has been panned by critics on the left. It is a book about hubris, about entitlement, about blaming everyone except herself, wrote P Conrad of The Guardian. S Kriss was scathing. "Everything she writes feels metallic in the mouth, weightless and inauthentic," he wrote. Clinton probably feels her defeat even more keenly now because of the abuse that Trump receives in the liberal media everyday. Trump's speech at the UN General Assembly, in which he threatened North Korea with annihilation, has been criticised as that of a candidate, rather than a president. Clinton cannot stop campaigning because defeat seems so grotesque against such an unpopular man who apparently made her skin crawl during pre-election debates. Jennifer Palmieri, Clinton campaign's communication director, worried that Trump would not be easy to beat. But, perhaps it is wrong to concentrate solely on what happened last November and on the suitability, or otherwise, of Donald Trump to be president. Hillary Clinton lost the day she accepted the post of Secretary of State during Obama's first term in office. It was terrible luck that Benghazi happened in September 2012 just before Obama's first term ended and she stepped down from her post. The Republicans sensed that she could be the candidate in 2016 and started an investigation on her, just as the Democrats are doing with Trump and Russia. Republicans were preparing for years of investigations had Clinton won the election. Politics is dirty. Trump was able to avoid some of the dirt.

Everything is interconnected.

"Fiscal push is needed now, not later," wrote A Ranade. "India's quarterly GDP (gross domestic product) growth declined for the sixth consecutive quarter in the three months ended 30 June. Since the first quarter of last year, growth rates have been 9.2%, 7.9%, 7.5%, 7.0%, 6.1% and 5.7%." Why is the rate of growth falling? "Private investment spending (as evidenced by fixed capital formation) is growing barely at 1.6%. Exports have grown only about 1.2% last quarter. Consumer spending growth, normally a reliable and consistent driver, has dropped to 6.6% from 8.6% a year ago. Even government spending which grew at 20% last year has slowed down." So, what is to be done? Ranade recommends increased government spending and allowing fiscal deficit to rise beyond the target of 3.2%. That should be easy, just borrow from the market and spend. Sadly, others are watching. "The downside of of this fiscal policy is a possible threat to India's international rating." India's rating is just above junk status and Moody's has warned that government debt at 67.5% of GDP, although better than 84.7% in 2003, is still too high. The Prime Minister wants a BRICS credit rating agency as a counterbalance to western agencies, which will presumably be more sympathetic. Fortunately, other BRICS nations were unenthusiastic. Indian politicians believe that the national exchequer is personal property to do as they wish, and this Prime Minister suddenly withdrew all high value notes on 8 November last year, on a personal whim, so restraints by foreigners is a blessing for hapless Indian citizens. Our foreign exchange reserve is over $400 billion for the first time. Why? Because foreign investors have poured $20 billion into our stocks and bonds this year. If western agencies reduce us to junk they have a mandate to sell out, regardless of what any BRICS agency says. So what? So much forex has made the rupee stronger. The "Strong rupee is hurting Indian industry," wrote Ranade. A strong rupee makes exports too expensive and people prefer to buy cheap imports, thus hurting local manufacturing. So, it should help the economy if the rupee falls? True, but there is a little problem. Our cost of importing oil rose from Rs 4.16 trillion in 2015-16 to Rs 4.70 trillion in 2016-17. The government adds Rs 48 in taxes on every liter of petrol we buy at the pumps. Already the price of fuel is beginning to hurt and if the rupee falls the price will jump. The government will then have to either lower taxes, which will push the deficit too high, or allow fuel price to increase, which will cause food prices to shoot up. Definitely not the way to win elections.

Where have all the women gone?

Why are Indian women dropping out of the workforce. Only 27% of women in India are working, compared to 79.9% in Nepal, and 57.4% in Bangladesh. Of rich countries, 56% of women work in the US, while 64% work in China. It is not a case of young women who are just coming of age, seems that working women are giving up work since 2005, wrote H Stevens. From 1990 to 2005, proportion of women in the workforce rose from 35% to 37%, but it has gradually dropped to 27% in the last decade. "A World Bank paper by Luis Andres and colleagues found that whether married or unmarried, whether Dalit, Adivasi or from the upper caste, whether illiterate or college graduate -- women from all sections were increasingly not working," wrote S Varma. "Predictable social norms are attributed to women quitting work in India: marriage, motherhood, vexed gender relations and biases, and patriarchy," wrote S Biswas. But surely these biases would have been much more in 1990? A Constitutional Amendment passed in 1992 reserves one third of positions in rural governing bodies for women, wrote economist E Ghani. Women have enthusiastically accepted their responsibilities in these bodies and also turn out to vote in larger numbers than men, but their numbers are small in parliament. Blaming gender discrimination seems a little glib, because "in villages, workforce participation rates of married women has been found to be higher than that of unmarried women - whereas in cities, the situation is reversed." Many women have risen to the level of CEOs in companies, so there is no lack of role models. Feminization U hypothesis, wherein the number of working women falls and then rises as household wealth rises and women get more educated, is a possibility, wrote Prof S Klasen. Every household in India now owns a color television, so women would naturally want a better quality of life. "The jobs that are available are marginal, low paying, insecure and backbreaking, like construction in the recent past. Then, there are issues of safety for women or absence of facilities like creches," said economist JJ Thomas. As poorer women stop working, women higher up the social ladder are unable to find maids to do housework and look after children while they work. Not just women, even men are unable to find good jobs, wrote S Ray. A large number of children study engineering only to get a job, preferably any government job. Hence the desperate demands for reservations in government jobs by upper caste communities. Too many people, too many problems.

Difficult to change unless there is a crisis.

There seems no prospect of a correction in share prices in the US, wrote A Nageswaran. There are 3 reasons for this. "The three factors are the monetary policy of the Federal Reserve, an ageing population, and the rising political and monopoly power of corporations," "They have done their job in boosting revenue and profit share of gross domestic product by 30% and expanded PE multiples by 70% in the last 20 years in the US, and these factors look set to continue." But the effects on others have been very bad. "They have boosted worker insecurity, worsened income and wealth inequality and widened the social and economic divide between the top 1% and the rest 99% in America." As pessimism about the future has grown an epidemic in opioid abuse is  killing more people than gun homicides and car crashes combined. Life expectancy in white middle aged people is declining for the first time in decades. So, one the one hand we have enormous asset price bubbles and on the other people are becoming poorer, except for the top 1%. "Such a large bubble typically occurs when three things happen simultaneously," wrote SA Aiyer. "One the arrival of an exciting new 'disruptive' technology that is difficult to value in the short term, but has huge potential. The second is easy market liquidity to help investors roar into markets. The third is cheap credit. All three elements are in evidence today." A bust is sure to come but no one knows when. If the crisis in 2008 was bad, "something scarier is heading your way", warned A Kapoor. Today's economic growth is being driven solely by debt. At the time of the crisis the US needed $4-5 to generate $1 of GDP growth, whereas in the 1950s, it needed $1-2 to generate $1 growth. Currently, China needs $6-8 to generate $1 of GDP growth and its debt has grown from $6 trillion to $28 trillion, which is 260% of GDP. The global debt has reached 325% of GDP. Although low by global standards India's private sector debt has grown to $105 billion from $59 billion in 2008. The reason why debt is growing is because of very low interest rates, and rates are low because inflation, especially in developed nations, remains very low, despite moderate expansion. "One possible explanation for the mysterious combinations of stronger growth and low inflation is that, in addition to stronger aggregate demand, developed economies have been experiencing positive supply shocks," wrote Prof N Roubini. The Bank of International Settlements recommends accepting 0% inflation as the new norm and gradually getting out of unconventional monetary policies. But central banks don't agree and are maintaining a target of 2% inflation. Only another crisis will force them to change. So we wait.

Professors are flummoxed. But we know.

Graduates of IITs, which are elite institutions of India, are looking at other countries for jobs because getting visas to the US has become difficult since Donald Trump was elected president. Sadly, other countries are also erecting hurdles to Indians working in their countries, while asking for a reduction of taxes on imports of goods from these countries. But why should our best engineers want to flee abroad when the economy is expected to grow at over 8% per year for the next 15 years. High growth will apparently be facilitated by changing start of the financial year from 1 April to 1 January because this will coincide with the harvest. Financial year of a lot of countries, including Canada and China, do coincide with the calendar year, but the financial year of the US runs from 1 October to 30 September. India has 2 cropping seasons, kharif and rabi. The kharif crop is based on the southwest monsoon, which comes on 1 June, and is harvested in October- November. The rabi crop is sown in winter and is harvested in March-April. So 1 January is neither nor there. Anyway, if the economy is set to grow at a scorching 8% our engineers should find fantastic job opportunities in India, so why this desire to work anywhere, except in India? Trouble is, how we calculate our GDP is uncertain, explained Professors A Banerjee and E Duflo. For instance, GDP growth was calculated at 4.7% in 2013-14, but suddenly jumped to 6.9% when the present government came to power, to be corrected to 6.5% later. The number of billionaires is rising and the stock market is booming because taxes have been reduced, wrote Prof R Kumar. Indian companies are soon going to face ruin because they are not keeping pace with the disruptive changes of technology, wrote Prof V Wadhwa. Those who started companies are reluctant to give up control to professionals who have succeeded elsewhere. That maybe because our business leaders are used to making easy money from control of natural resources, in partnership with politicians, and are not really interested in the hard work of growing a business. Businesses are built with money borrowed from banks, especially public sector banks, with no intention of repaying the loans. Bad loans now amount to over Rs 8 trillion, but could be more. No one knows the exact figure but about Rs 4 trillion is estimated to be in offshore accounts. About 22% of real estate in central London was bought by Indians last year. Along with that, wealth of some politicians have gone up by over 500% in one term. Others are probably more proficient in hiding their wealth. Political parties received over Rs 200 billion in undocumented donations. We could have told Thomas Piketty.

It's the economy. As always.

A recent report from the United Nations Conference on Trade and Development, or UNCTAD, said that the Indian economy faces "serious downside risks" and growth in 2017 is going to be 6.7%. R Kozul-Wright, UNCTAD economist, was scathing about "rentier capitalism" in many countries. "The rise of financial rents and the proliferation of rent-seeking activities reinforced by austerity economic policies in country after country have led to capture of political processes and continued economic stagnation and rising inequality," he wrote. He recommends public investment and full employment financed by progressive taxation. India has already embarked on aggressive taxation by enforcing demonetization, linking all services with biometric identity cards and the Goods and Services Tax, or GST. Some people blame these for the slowing of economic growth but Prof S Mundle wrote that their effect has been "relatively modest and temporary". "The slide in growth had started well before either of these shocks hit the economy." "Growth today is rather like the flight of a six-engined plane where one engine is going full throttle while the other five are slowing or shutting down. The engine propping up growth is government final consumption expenditure." There are 3 bears to one bull, wrote M Chakravarty. The bull view is that the shocks have been weathered and now the economy will roar ahead. The 3 bears, Baby, Big and Extreme, predict that India is trapped in a middle-income zone and cannot take the way of exploiting cheap labor, as China did, and as prices of commodities rise. The main reason is the inability of Indian businesses to deal with disruptive technologies, that are rampant today, wrote Prof R McGrath and M Muneer. "The tenure of companies on the S&P 500 has declined from 61 years in 1958 to 18 in 2012." "Most Indian companies in India stick to a business model and execute against it repeatedly, although shoddily." They need to innovate and take risks with new business models. Even a hugely diversified company like Tata gets 70% of its profits from TCS. India is not the only one caught in such a trap. The US has also lost its manufacturing, wrote Prof Noah Smith. The only way out is to encourage exports because that is the way to increase competition, leading to innovation and higher productivity. Our exports cannot grow because we import everything, wrote Prof D Gupta. We need snake oil, and quickly. Which in India means cut interest rate. Trouble is that retail inflation went up to 3.36% in August from 2.36% in July, just as industrial production went up 1.2% in July after falling in June. To reduce inflation quickly the government could cut fuel prices by bringing it within GST, but then, deficit will rise. General elections in 2019. Need help badly.

A bullet in the head?

Prime Ministers of India and Japan, Narendra Modi and Shinzo Abe laid the foundation stone for a high speed train, called Shinkansen in Japan, between Sabarmati in Gujarat and Mumbai in Maharashtra, yesterday. The train will have top speeds of 320-350 km per hour and is expected to reduce the traveling time to 2-3 hour from 7-8 hours at present. There will be two versions of the train - the High Speed one will take 2.58 hours to cover the distance, stopping at 12 stations on the way, and a Rapid High Speed one which will take 2.07 hours and stop at fewer stations. We can leave the cost of the project to economists but we would like to know what its average speed is going to be. At present the fastest train between Mumbai and Ahmedabad is a Duronto Express which is able to maintain an average speed of 78 km per hour with no stop. A train running at high speed needs a long time to slow down and get up to full speed after a stop, so its average speed will fall with so many stops. The train is to carry 750 passengers in 10 cars, which means 75 passengers in every car. At present the chair car in Shatabdi has 67 seats, while the Executive car has 46 seats, so the bullet train will be a little cramped. The safety record of the Railways is very poor, with 5 trains derailed last month alone. This despite, or maybe because of, having 1,33 million employees, sucking up most of the earnings of the Railways. Even so the Railways claim to need 217,000 more staff for maintenance work. Imagine the number of deaths if a bullet train, traveling at 350 km, derails. Hence, a dedicated track is going to be built just for this train and 4,000 staff will be trained in Japan. Japan is to offer Master's degrees in running trains. Naturally, these people will expect higher salaries and the present staff will go on strike demanding the same salaries. We can expect a lot of fun. Last year A Minter advised against building a high-speed rail system, citing the example of China which is finding that running and maintenance costs are very high. Researching the history of the Shinkansen network in Japan, S Vadukut wrote that Japan planned the system as far back as 1930 and work began during the war. After the war land became cheap and Japan utilised the unfinished construction work, stopped because of the war, for the first train to start running on 1 October 1964. That is vision. Unfortunately, India has always planned for poverty, so our roads, electricity, railways are all decrepit. To break even, 160,000 people have to travel on these trains everyday. Number of passengers on the Delhi Metro fell by 150,000 per day when the fare was increased from Rs 8 to Rs 10. At ticket costs of Rs 3,000-5,000 wouldn't people prefer to fly? All that is for the future, but at least all this show will help in Gujarat assembly elections at the end of the year. Thanks to Japan.

Smartphones making us unsmart?

For young people, smartphones are as bad as the lack oxygen that killed so many children in hospitals in Gorakhpur and Nashik, wrote B Dominic. Smartphones are making people lonely by cutting off social interaction with other human beings, which is "an oxygen of a different kind". Parents in India are terrified of their children falling prey to the Blue Whale Challenge, which sets a series of tasks for teenagers, leading to suicide. A Russian social network on the internet, Vkontakte, has been blocked in India to stop children accessing Blue Whale. Before that there was a drinking challenge in the West, called Neknominate, which also resulted in quite a few deaths. "Rates of teen depression and suicide have skyrocketed since 2011," wrote JM Twenge. In 2012, possession of smartphones exceeded 50% in the US. On the other hand, "More comfortable in their bedrooms than in a car or at a party, today's teens are physically safer than teens have ever been. They're are markedly less likely to get into a car accident and, having less of a taste for alcohol than their predecessors, are less susceptible to drinking's attendant ills." Paradoxically, even as young people are becoming increasingly isolated due to the internet, all of us losing our anonymity due to the same internet. "It's much harder to be anonymous than it was 20 years ago, at least from the biggest companies and the government," said Prof P Swire. "This is a bad time to be a spy." Big internet firms like Facebook and Google mine data from how we interact and what we search for on the net. Facebook bought up Instagram and WhatsApp, and tried to buy Snapchat, so that it has data on over 2 billion people. While Facebook offered $3 billion to acquire Snapchat, Google offered 10 times more, but both were rebuffed. Algorithms are making us narrow-minded, by trying to predict what we want from our past activity on the net, wrote Prof S Finkelstein. Easy availability of pornography on smartphones maybe responsible for proliferating sexual attacks on children. In the UK, children as young as 5 years of age have been punished at school for sexual misbehavior, including watching pornography. A study found that pornography is desensitising boys to sexual violence. This could have tragic consequences in the future. "As Prime Minister Narendra Modi recently said, we need to wean our children off their Play Stations and get them on to the playgrounds," wrote Dominic. The same Prime Minister wants everyone to shop digitally so that he can snoop on us. Which means smartphones. Can you have your cake and eat it?

Piketty problem for growth.

"Thomas Piketty has thrown a flaming dart into the Indian economic debate," wrote an editorial in the Mint. "In a new paper written in collaboration with Lucas Chancel, the superstar French economist has shown that income inequality in India is now at its highest level since income tax was first levied in 1922." "The two economists show that income inequality has been rising steadily since Rajiv Gandhi became Prime Minister" and according to the International Monetary Fund the Gini coefficient rose from 45 in 1990 to 51 in 2013. The rise in inequality coincided with a rise in the growth of the economy and the middle 40% of India got 23% increase in national income since 1980, compared to 43% in China. The reason why income of the middle 40% in China increased 20% more than in India was because of the boom in manufacturing, while in India the growth has been mainly in the services sector, which constituted 61% of our GDP in 2014-15. Piketty's calculations may not be entirely correct, wrote T Kundu, because he may have underestimated earnings of the lower 90% and overestimated earnings of the upper 10%. Household surveys do not suggest a sharp increase in inequality in India but our Gini coefficient is worse than most of our peers. "Anand and Thampi show that the shares of scheduled castes (SCs), scheduled tribes (STs) and other backward classes (OBCs) in national wealth are not only lower relative to their population shares, but have also deteriorated since 1991." Why, when over 50% of seats in higher education and in government jobs have been reserved for these groups since independence? Surely, this gives enormous opportunities for upward mobility to such castes. "Of the total income growth between 1951 and 1980, the bottom 50% of the population captured 28%, the 'middle 40%' got 49%, while the top 10% had to remain satisfied with appropriating 24% of the growth.," Wrote M Chakravarty. "During 1980-2014, the bottom half of the population got a mere 11% of the growth, the middle 40% captured 23% and the top 10% of people captured two-thirds of growth." Does it mean that growth by any means does not reduce poverty, or does it mean that socialism creates so little wealth that everyone becomes equally poor? The answer is probably politically incorrect. Such inequality has hazards, wrote J Crabtree. The IMF has shown that "unequal nations tend to grow more slowly and are more prone to financial instability". While the rest of the world is beginning to grow and commodity prices are still low, growth in our economy is slowing down. Maybe that will decrease inequality.

Economists know, but dare not tell.

India's economic policies are based on poor advice by our economists, wrote Prof D Gupta. Some advise that the rupee should be weakened to stimulate exports. But what about imports? "About 25% of our imports are petroleum related, but 20% is on account of buying machinery, from abroad, usually China." "These machines are new age ones and they don't commit mistakes." "We talk at length about our oil burden, about our gold fixation, but rarely do we discuss our machinery deficit." Devaluing the rupee may increase exports but will kill local manufacturing. The Chinese currency has weakened by 2% against the rupee so that our trade deficit with China has ballooned to $51 billion. What about imparting skills to young people? Only "about 58% of those with formal vocational training found jobs". This when "India has only 11,000 training institutes while China has 5,00,000." Yet, it is also true that in certain services staff shortages range from 20-50%. New job creation has been falling in recent months, so training people will not increase employment. There is no income tax on the agriculture sector. True, but "the overwhelming bulk of farmers, almost 95%, have earnings too low to be taxed." Survival of farmers depends on state subsidies. "From the US to Europe  to Japan, farmers would perish without these handouts." And, "the highest rate of suicides is among farmers across the world". So what about cheap labor to boost cheap manufacturing? But this will not work because "the West is moving to driverless cars and intelligent automation". The International Monetary Fund has warned that emerging economies will find it tough to grow as consumption falls in developed economies. India needs urgent reforms to reduce regulations to improve the ease of doing business, wrote Prof V Dahejia. Our position on the index of the World Bank's ease of doing business improved from 131 last year to 130 in 2017. A survey by NITI Aayog found that 38% of enterprises found that the regulatory environment has improved, the same number said that nothing had changed, and 21% said that things are worse. Companies are struggling to repay huge loans incurred during the high growth years and banks are unable to lend unless they clear their books. In desperation the government is thinking of spending Rs 10 trillion in infrastructure projects by selling bonds to raise funds. Ruchir Sharma found that there is no direct correlation between good economic policies and getting re-elected. The Prime Minister's popularity ratings remain sky high despite patchy economic performance. Economic growth was dependent on low oil prices and an inflow of foreign capital into our markets but future growth depends on reforms, wrote Mihir Sharma. Since economists are employed no one wants to tell the truth. You will be sacked, as Raghuram Rajan was. This emperor is fond of new clothes, after all.

Cyber security is really cipher security.

Last week Equifax, in the US, revealed that hackers had accessed credit card and personal data of 143 million customers. Customers pay the company $19.95 per month to monitor their personal data to prevent fraudulent use of their credit card accounts. The company has millions of active credit cards on its files, which are valuable because they can be instantly used by thieves. But it may not have been just about money. "Some of the hackers' behavior on Equifax's network suggested that once they were inside, they sought financial and personal information on particular individuals, which is more commonly associated with higher-level forms of identity-theft and espionage." The hackers gained access in mid-May and were merrily accessing data till end of July. Equifax had revenue of $3.1 billion last year. To limit its liability, Equifax is conning its customers to agree to arbitration when they enquire about their status. After the hack was discovered, 3 of its executives sold shares worth $1.8 million during the delay in informing customers. The company says that the executives had not been informed about the hack. The company must believe in the Tooth Fairy. How cute. Surely, it must be very difficult to hack into secure websites? In July someone hacked into the account of the CEO of the largest security firm in Sweden, Securitas, applied for a loan and filed an application for bankruptcy. There have been 12,800 cases of identity theft in Sweden already, this year. Identity theft has reached 'epidemic' proportions in the UK, with 500 people targeted everyday. Surely, biometrics must be safer because fingerprints and iris scans are unique to every individual? Turns out that even these can be hacked by cyber experts. In the West, banks have committed to compensating anyone who loses money through cyber fraud. But, what about India? The RBI has instructed banks to bear losses of customers who lose money through online fraud, if reported within 3 days and if there is no negligence by the customer. Like insurance companies use flimsy excuses to refuse paying for medical costs, banks will harass customers by falsely accusing them of negligence. We will end up having to prove our innocence to allow the guilty to go free. Thousands of people are already losing millions to cyber criminals. The government has been forcing people to provide fingerprints and iris scans for everything from bank accounts to mobile phones. For some reason the government was using American companies to enroll people to the database. Naturally, the CIA has access to all the data, as reported by WikiLeaks. Officials denied the report. Will any Indian believe them?

If you do nothing, others will.

Republicans are stunned by Donald Trump agreeing a 3-month raise of the debt ceiling with Democrats, which will last till December 2017. Debt ceiling is the total debt that the government can incur to finance its spending, and was created by the Second Liberty Bond Act of 1917. At present the total debt of the US government is nearly $20 trillion, or $23.4 trillion if local and state debts are included. If the Congress fails to raise the ceiling it leads to a government shutdown when federal employees cannot be paid and some government services come to a halt. The bill to raise the debt ceiling was combined with $15.25 billion relief fund for victims of Hurricane Harvey, which killed 70 people and caused devastation in Texas and Louisiana. The Republicans wanted to extend the debt ceiling by 18 months which would take them beyond the midterm elections in November 2018. If the Democrats did not agree people would blame them for being unsympathetic to hurricane victims. Now that they have been freed of hurricane relief the Democrats can link debt ceiling to Deferred Action for Childhood Arrivals, or DACA, when the battle resumes in December. These are illegal immigrants who entered the US as children and have grown up there. This is the only home they know and they consider themselves as Americans. To deport them would seem cruel and cost votes. So why did Trump side with Democrats and seemingly undercut his own party? Presumably because Trump has been frustrated by the inability of Republicans to pass any of his campaign promises. such as repeal of Obamacare and tax reform, despite having majorities in both houses of Congress. Republicans have been trying to repeal Obamacare ever since it was passed but have been unsuccessful. In July a repeal bill failed in the Senate when 3 Republicans, including John McCain, voted against it. When asked how he would vote he told reporters "wait for the show". It now appears that even Trump can put on a show. A large section of the bureaucracy, labeled the 'Deep State', has been hostile to Donald Trump since his inauguration, frequently leaking classified information, such as phone conversations with foreign leaders, to embarrass him. Recently, the Attorney General, Jeff Sessions, announced that 'leakers' are being "investigated and will be prosecuted". Hundreds of posts in government remain unfilled because of the Senate's inability to confirm their appointments. The Republicans have sided with Democrats in investigating Trump for colluding with Russia. No wonder that Trump has decided to become 'independent' of his party. Republicans lost to Harry Truman's label of a "Do nothing Congress". They should be wary of repeating that. 

An unhealthy nation with an unhealthy government.

First we heard reports of deaths of 64 children in a hospital in Gorakhpur in UP. At first we heard that the deaths were due to a lack of oxygen but this was denied by the authorities who blamed encephalitis. Then a report ruled out encephalitis as a cause, citing a number of diseases for the deaths. Apparently, 25,000 children have died of encephalitis since 1978, but 50,000 died before reaching the hospital. Is it possible that Gorakhpur is unfortunate in that its geography is such that encephalitis has become endemic? That is untenable because a vaccine made in India has been available since at least 2013, enough time for all children in the region to have been vaccinated. After all, India has eliminated small pox and polio. Then we heard of deaths of 49 children due to lack of oxygen in Farrukhabad, also in UP. In between, 52 deaths were reported in Jamshedpur, where children are more vulnerable due to severe malnutrition. Prof TJ John is incensed that "India abolished the public health wing of the earlier British Raj. To this day it has not been reinstated, in spite of innumerable pleas and recommendations from public health experts." And yet, the ICS, the British stranglehold that subjugated India, morphed into the IAS, which is still subjugating us. As opposed to clinical medicine, which concentrates on diagnosis and treatment, "Public health is what the state does to prevent diseases and to protect health". "Non-communicable diseases are becoming epidemics -- they are not easily prevented, except by huge changes in behaviour. But communicable diseases are preventable; and not preventing all preventable diseases is gross neglect of public welfare by the state." Very true, but there is a question of cost when the population is already 1.3 billion and growing. The central and state governments employ 1 million women health visitors who visit every home to check on maternal and child health. They are paid an inadequate salary of Rs 2,000 per month, costing a total of Rs 24 billion per year, and are demanding Rs 18,000 per month, which will mean Rs 216 billion a year. The government cannot afford so much money because these women are serving the poor, whereas 4.8 million idle government employees will get a minimum salary of Rs 21,000. There is a severe shortage of beds in public hospitals, so patients are forced to share beds, facilitating transfer of infectious organisms. There is a shortage of doctors so quacks proliferate. The WHO reckons that 57% of so called doctors do not have any qualification. The rich are not much better off. Charges at private hospitals are exorbitant which increase tax collections. Input taxes are between 12-18% under GST. Why bother with Indians, better to treat foreigners. Naturally, healthcare is free for politicians. We are born to die anyway.   

The RBI cannot win.

Has the Reserve Bank adopted a wrong strategy regarding the exchange rate of the rupee, asked N Rajadhyaksha. Some people want the RBI to leave the rupee alone while others, especially exporters, want the rupee to weaken so that our goods are cheaper. The rupee is about 7% stronger against the dollar and its Real Effective Exchange Rate against a basket of currencies is up 4.49%. The RBI has been buying dollars from the market so that its foreign exchange reserves have increased to $393.61 billion. However, this is not to keep the rupee weak but to control the large inflows of foreign currency in our stocks and bond markets. Bank of America Merrill Lynch predicts that the RBI will keep on accumulating dollars to shield our economy against an impending global crisis. But this is not without costs. Interest on foreign assets are much lower than in India and buying dollars releases Indian rupees into our banks which the RBI has to mop up by issuing bonds on which it has to pay interest. There is already Rs 3 trillion in excess cash in our banks, so the RBI does not want to add to that. The RBI has committed to buying $16 billion in forward contracts, hoping that liquidity would have reduced when it pays in 6 months time. Has the RBI bought too many dollars? Two important criteria -- "import cover and short term debt cover -- do not suggest that the size of the reserves at this point of time is out of sync with what India has had over the last decade." A strong rupee is fantastic for importers. After rising to over $100 a barrel crude oil prices started falling in 2014 when this government came to power. But the government increased excise duty on oil imports so that retail prices of petrol and diesel did not fall. The high prices were already factored into the economy and so did not affect retail inflation. Currently the price of crude oil is around $50 a barrel. But, the price we are paying is much higher. The ratio of fuel prices to the price of crude oil was around 2 during the previous Congress led government but soared to 5 in early 2016, settling to 3.3 today. If oil prices are steady and if consumer demand is not rising why are imports rising, peaking to nearly 47% in March, asked A Barman. He suggests that there can be only one explanation and that is companies are over invoicing what they import and keeping part of the proceeds abroad. A RBI report said that exporters used to keep 10% of their earnings abroad. Apparently, over Rs 17 trillion is stashed abroad. Now it is the turn of importers. The RBI will be blamed whatever it does. Hope it keeps its nerve.

Asymmetry only at the top, the rest of us are same.

Seventy years after independence India suffers from an "anxiety of asymmetry", wrote V Mahajan in a thoughtful article. There is the asymmetry of aspiration vs attainment. Thus, 95% of children are enrolled in schools but "roughly one out of four children in Standard VIII could not read Std II texts and 57% of Std VIII students could not correctly solve a three-digit by one-digit division problem". That is dire, indeed. But the problem is, even if school education improves so that children actually learn something, then what? There are 33 million students, 18-23 years of age, that is 23.6%, enrolled in 38,000 colleges across India, comprising 767 universities, but most of them are of low standards, wrote N Ramachandran. None of our top universities figure in the top 200 in the world. In an effort to multiply mediocrity politicians have added 18 new IITs to the original five, perhaps in the belief that using the brand will somehow increase standards of our students. At least there is some hope of getting a respectable job with an IIT label, but what about others? The prospect are not very good at all, wrote S Ray. All these people want white collar work and refuse to attend the 8,600 skilling centres in the country. The future apparently lies with a gig economy, such as Uber and Airbnb, wrote C Narayanan, but unfortunately in India gig economy usually means wretched back-breaking labor for very little reward. That is why being a 'mistrie', which means 'artisan', is looked down on in India. Education does not raise economic growth by itself, wrote Prof R Hausmann. Countries with the same level of literacy have widely different GDP per capita. Economic growth depends on policies by politicians and if growth is weak there will not be enough jobs for all our graduates, which will lead to social tensions. The second asymmetry is between rights and responsibilities. "The numeric logic of of universal adult franchise ensures that political leaders feed on the entitlement mentality with pre-election freebies and promises of more, which militate against either fiscal or environmental sustainability. But no political leader dares raise the issue of responsibility, for fear of losing the elections." Exactly. Also, spending vast amounts on handouts means there is not enough for job creation. Redistribution leads to less wealth as at least half of it leaks out, explained Prof N Smith. The government is cracking down on corruption, but that will not decrease poverty, wrote Prof Hausmann. An honest efficient civil service is essential. Civil servants are paid huge salaries without any need to perform. So parents spend on getting their children any sort of degree in the hope of landing a government job. In seventy years India has gone from British Raj to Billionaire Raj. Now, that is asymmetry. 

Every remedy has severe side effects.

There are four scenarios for the Indian economy, one bull and 3 bears, wrote M Chakravarty. After the global financial crisis interest rates were lowered, fiscal deficit went up from 2.5% of GDP in 2007-08 to 6.5% in 2009-10 and bank credit to infrastructure firms grew by 40.7%. Then oil prices soared in international trade, retail inflation rocketed and the current account deficit widened. By 2013 things were improving, helped by a slowing Chinese economy which brought down commodity, including oil, prices. "But growth started falling off from the June 2016 quarter. This was exacerbated by the shock of demonetization and later by the disruption caused by the introduction of goods and services tax (GST). What's more, bad loans from the earlier lending spree came home to roost in bank balance sheets." The bulls are hopeful that GDP growth, which fell to 5.7% in the first quarter, will bounce back as the effects of demonetization wear off and the benefits of GST begin to show themselves. M Pai agreed with the Finance Minister that growth will recover. "I share the optimism of Jaitley's remarks that the economy will grow seven per cent, in spite of lower GDP growth in Q1. Q1 was impacted by GST destocking," he said. R Sriram is especially scathing in his judgement of the "political and intellectual class" who criticise Modi. He thinks that although demonetization has not unearthed any black money, the combination of GST and real estate regulation will cleanse the system of corruption and anyway the political gains for Modi have been immense. Trouble is that more than 70% of employment is in the informal sector which cannot cope with GST. Credit ratings of small industries are being downgraded and they are facing liquidity problems because they cannot wait to seek a refund of taxes paid under GST. Economists want all businesses to become formal so that productivity can increase but if productivity per worker is increased there will be a surplus of workers. Where will all these find work, asked A Maira. It is false to say that informal businesses pay no tax when they have to pay bribes at every step, wrote U Shashikant. Bribes are taxes for services we should be getting from the state. SA Aiyar wrote that the real culprit for slowing growth is a collapse in exports due the strong rupee and the RBI should weaken the currency by reducing interest rate. There is already an extra Rs 3 trillion in cash in our banks due to demonetization so the RBI is facing difficulties in neutralising excess inflows of foreign investment. The government should allow fiscal deficit to increase to stimulate economy, wrote M Bhusnurmath. But, if our debt goes higher we could face a ratings downgrade. Policy paralysis looms. We have seen that before, haven't we?

Modern day Billy Bunter, with very noisy toys.

Videos of Kim Jong Un laughing in delight after every nuclear test or a successful launch of a missile, like a modern day Billy Bunter, have become regular on news channels. The more the world condemns him the more he enjoys giving the finger to everyone. Given the enormous outcry they have created it is hard to believe that North Korea has carried out just 6 nuclear tests since 2006, the latest one being a hydrogen bomb, two days back. Even more worrying, it claims to have mastered the technology of making a thermonuclear weapon small enough to fit a missile. Experts of all shades have opinions on what Kim Jong Un 'really' wants and they are all agreed that, 1. he is not a nutter and knows what he is doing and 2. he wants the US and South Korea to lift sanctions and trade with his nation. But why? From 1961 to his assassination in 1979, Park Chung-hee was a brutal dictator, who apparently beat his wife, but he transformed the economy of South Korea, by making friends with old enemy Japan and encouraging growth of chaebols, which are creating enormous wealth to this day. At that time the US and Europe were the centers of wealth, but now China is the second richest country in the world and North Korea has a long border with China. In fact, clothes labeled 'Made in China' are actually being produced in North Korea because of rising labor costs in China. If it stops wasting money on missiles and nuclear weapons, which it can never use, it can become rich by becoming a cheap manufacturing hub for China, Japan and South Korea. Why does it want a deal with the US? The theory is that Kim Jong Un has seen what happened to Saddam Hussein and Col Gaddafi and wants to make sure that the same does not happen to him. But that is senseless. The US is friends with dictatorships, such as Saudi Arabia, Egypt and Thailand, so would accept a prosperous dictatorship under the Kim dynasty, as long as it does not threaten either Japan or South Korea. So are these tests really directed against China? The nuclear test of 3 September was just as the Brics summit was about to start, in May it tested a missile just as the One Belt, One Road meeting was starting and in March it tested a new type of rocket engine just before Xi Jinping was to meet US Secretary of State, Rex Tillersen. Why would it want to annoy the only source of trade it has? We cannot know, but it could be because China is not allowing North Korea to open its economy, in case it becomes prosperous and unites with the South. It is the same game that China is playing with India, by supporting Pakistan, and Pakistan is playing by supporting the Taliban. Being too clever can rebound.