If it wins elections why change?

India's Gross National Product, which is the total of goods and services produced, has gone up to 7.2% in the third quarter of the financial year, which is from October to December. This makes our growth faster than that of China which grew at 6.8%. Of course, 6.8% of an $11.2 trillion economy is a lot more than 7.2% of a $2.3 trillion, but still it is cause for boasting. Manufacturing grew at 8.1% in the third quarter, although the Purchasing Managers' Index for February for manufacturing fell to 52.1, which is still positive. The real cause for cheer is that Gross Fixed Capital Formation, which indicates new investment, has jumped and is expected to reach 7.6% for the full year. The core sector of cement, electricity, coal, refinery products and steel grew 6.7% in January, compared to 4.2% in December. So, Patiala pegs all round? Current Account Deficit is predicted to go up to 2.7% of GDP in the third quarter. It is hard to understand how the economy can be growing if it is losing around $60 billion to other countries. Trouble is that governments have been suppressing crucial economic data since 2000, wrote Prof Himanshu. While previous governments stopped publishing data on poverty, health and inequality, this government stopped collection of data regarding employment. Apparently, 87,000 jobs were lost in manufacturing from April to June, 64,000 jobs were added in service industries, mainly in health and education. If manufacturing grew so well why are imports of finished goods rising while exports have been falling, despite strong economic growth in the global economy. The World Bank is predicting a slowdown in the global economic growth rate because of a slowdown in investments and output. If our exports have been falling and trade deficit ballooning during strong growth our current account deficit will surely increase when global growth slows. After touching a record of $70.4 billion in 2014, remittances from Indians working abroad fell to $62.7 billion in 2016 but increased to $65.4 billion last year. As the US  and countries in the Middle East tighten immigration rules this is expected to fall in the future, wrote SI Rajan. With an eye on general elections next year the government increased customs duty on a whole range of goods, which will harm exports because of more expensive inputs, wrote R Subramanya. One way of creating jobs is by increasing government spending on various projects, such as highways, but that needs money. The government has asked tax officials to administer a white knuckle squeeze on taxpayers to increase collections by Rs 250 billion. Every year tax burden on the honest is increased while the crooks go free, wrote Pai and Krishnan. They are following the successful strategy of winning elections. Can you blame them?

Surely, speech more disruptive than genes?

"The story of human migration is very expansive and inexact," wrote C Rajghatta. "It is agreed on the basis of reasonable evidence that humankind took its first outbound steps from Africa to Asia." It is now accepted that several types of human species evolved at around the same time and probably reproduced with each other until finally Homo sapiens took over the world. So, "...it would seem Native Americans are of Asian stock, and even before that of African stock, because everything flowed out of the Rift Valley. In that sense, we are all black." True, but if you go back even further we are all bacteria, and further back than that we were just amino acids. Rajghatta is making the point that since we originated from the same genetic stock we must not differentiate between races. "Of course, you can't expect white nationalists in the US and hypernationalists in India -- which is also periodically in the throes of nativism -- to absorb or process all this." In short, nationalists are racists. This has been taken even further by the concept of gender neutrality, in which men and women are the same and any difference that we see is because of the way we are brought up. Problem is that humans are genetically very close to chimpanzees, and, although men are 99.9% similar to each other, we are only 98.5% similar to women. Which means that the difference between men and women is 15 times greater than between two men or two women. Mathematics is racist, wrote R Gutierrez, Professor of maths at the University of Illinois. "School mathematics curricula emphasizing terms like Pythagorean Theorem and pi perpetuate a perception that mathematics was largely developed by Greeks and other Europeans," she wrote, "On many levels, mathematics itself operates as whiteness." The concept of 'zero' arose in Mesopotamia but was first used as 'sunya', or 'nothingness', in India. So are we genetically similar or different? This kind of debate led to an evil social experiment, in which triplets were separated at birth and given to different families to bring up. They found each other as adults and even started a business together, but could not adjust, and one brother committed suicide. So, on the one hand, men are same as women and all races are the same, but, on the other, identical twins are not the same, it's all nurture. This kind of discussion is futile. The difference in human beings is because of culture, which comes from speech, spoken, written and numerical, which lead to music, literature and art. The development of science and the theory of evolution have not been able to eradicate religions, which are held responsible for most of the strife in today's world. Human beings are social animals and like to belong to groups which are culturally similar. It is nothing to do with genetics. 

Who knows when we may need friends.

According to all pundits, Canadian Prime Minister Justin Trudeau's week long visit to India starting on 17 February was an unmitigated disaster. He came with his whole family, visited various tourist attractions, like the Taj Mahal, and met with his Indian counterpart, Narendra Modi, the day before his departure from India. C Malcolm, a journalist with the Toronto Sun, was scathing in her criticism, calling him a "performance artist". "The Canadian prime minister's success to date can be traced more to his talents as a performance artist than to an understanding of statecraft, economics, or diplomacy. When posing in a costume he is at his best. But without a scripted narrative to follow, he lacks the depth and the sophistication to grasp when the show has gone on too long," she wrote. He is said to have received "a royal snub" from the Indian government, which sent a junior minister of agriculture to receive him at the airport, whereas Prime Minister Modi personally received Xi Jinping, Shinzo Abe and Benjamin Netanyahu at the airport with his personal hug, wrote Prof R Mukherjee. The reason for India's displeasure is Trudeau's apparent proximity to Khalistani Sikhs living in Canada. The Modi government believes in the ancient Indian saying of 'atithi devo bhava' which means a 'guest is divine'. Modi personally arranged programs for Abe's visit to India, despite Japan holding up a deal with the Nuclear Suppliers Group because it wanted "parallel safeguards in perpetuity", a demand already dropped by Canada. The government was furious at an invitation to Jaspal Atwal, a convicted terrorist, to a dinner at the Canadian High Commission in honor of Trudeau. If he is such a bad chap how did he receive a visa to come to India and why did this government drop him from the blacklist in the first place? If Atwal is welcome to travel anywhere within India, meet anyone he pleases and invest in businesses then why the sulk? Indian politicians apologized for Operation Blue Star on the Golden Temple in Amritsar which appeased all the Sikhs in India, wrote S Shakhar. Khalistani terrorists now exist only in Canada so Trudeau should not associate with it. Shekhar seems to have completely forgotten the massacre of Sikhs following Indira Gandhi's assassination, and that Khalistanis were wiped out by KPS Gill by 1995, using extreme methods. No one has been punished for the Sikh massacres and Sajjan Kumar, a prime accused, has been granted 'anticipatory bail', a mockery which exists only in India. Besides, when our government is forever 'reaching out' to Pakistan which continually sends terrorists into India the churlish behavior dished out to Trudeau seems completely inexplicable. Hope they know what they are doing. 

Will it be third term unlucky?

China has amended its constitution to allow Xi Jinping to remain president indefinitely. After Mao Zedong two terms in office has been the norm and Jinping's two predecessors appointed a successor during their second term in office. Jinping failed to name a successor during the last party congress in October last year, when his second term was confirmed. Changing constitution to hang on to power is not new. Hugo Chavez won a referendum to stand for a third term in 2009 after having lost a similar attempt in 2007. Elated with his popularity Chavez gradually destroyed the economy with his socialist policies. The currency has become worthless, one dollar fetches 191,000 bolivars. Last year one dollar was 3,100 bolivars. Inflation is over 4,000% and people have to find food in dustbins. More than 600,000 people have fled to Colombia, the largest refugee crisis in the history of South America. Burundi's President Pierre Nkurunziza  cheated his was to a third term, despite being forbidden by the constitution. He is now ruling through violence and is to hold a fraudulent referendum to consolidate his power. Xi Jinping is poised to join a long catalogue of villains who have changed the constitution to hang on the power. "Titles don't matter much in China as they do in the West. Here what matters is whether you are the emperor," said Prof Zhang Ming. "In China, ordinary people already consider Xi Jinping to be the emperor." People have been calling him 'mighty uncle Xi', which is apparently how they used to refer to emperors in the past. Couple of years back the Communist Party anointed him 'core leader', like Mao Zedong, Deng Xiaoping and Jiang Zemin. In 2016 he donned a military uniform and made himself the commander in chief of the armed forces. Not everybody is a fan. China's social media is heavily censored so people resorted to oblique comments to show their opposition. Not content with complete dominance at home Xi Jinping hopes to subordinate the world. China is meddling in the internal affairs of other nations. In the guise of helping poorer nations China is becoming a colonial power in Africa, looting its resources and destroying economies by exporting cheap goods manufactured in China. The One Belt One Road plan is definitely a form of colonialism, feared S Sirohi. The more it flexes its muscle the more other countries plan resistance. The quadrilateral of the US, Australia, Japan and India has been revived. Trump is planning more tariffs on Chinese imports to reduce the trade deficit with that country. North Korea is signalling talks after Trump announced even tougher sanctions. Pressures from outside and enemies inside may puncture the might of the 'mighty uncle'. Third term is usually not lucky.

It's only words.

"Does anyone remember the slogan Prime Minister Narendra Modi once had: 'Minimum government, maximum governance'? We haven't seen any of it. The PM is doing what the UPA did," wrote S Sabhlok, suggesting 5 reforms for the Prime Minister to consider. First, state funding for elections, to stop criminals winning with illicit wealth. India does not have primaries where people choose their candidate, like in the US. Candidates are chosen by party leaders, presumably with full knowledge of their criminal histories. 35% of the 31 Chief Ministers of our states have criminal cases against them. 27% of elected mayors from the BJP, the Prime Minister's own party, in UP are charged with crime. Even in the Prime Minister's home state of Gujarat, 25% of BJP candidates had criminal charges in recent elections. Besides state funding will mean that independents or "small candidates", who are hated as "vote-cutters", will not get any funding. Second, clean up the bureaucracy. India was recently ranked below China at 81st place in corruption index. Civil servants cannot be charged with crime without permission of the government, probably because they know too much. Third, right to property. Our original Constitution guaranteed right to acquire, hold and dispose of property" to citizens, but "Nehru and Indira Gandhi diluted this right, saying that government must 'subordinate the rights of individuals to the urgent needs of society'. The ultra-socialist Janata Party scrapped this right altogether..." The previous government passed a Land Acquisition Act in 2013 to provide adequate compensation to those whose land is forcibly acquired by the government. The present government is trying to amend that act to acquire land for development. While the government and its agencies have enormous powers citizens are routinely coerced and denied basic rights, wrote R Singhal. The Finance Minister condemned the retrograde tax on Vodafone yesterday. The same man vigorously defended it last year. Fourth, freedom of speech, which will include freedom to eat whatever we like, including beef, and practice any religion. Sale of cattle for slaughter was banned in 2017 and vigilante gangs have been killing anyone suspected of cattle smuggling. They justify their violence by saying that if pork is banned in Muslim countries why shouldn't beef be banned in India. Fifth, the government should not be running hotels and airlines. "The PM should repeal the word 'socialist' that pollutes out preamble" because "every Indian deserves the right to rise to a middle class level". True, but then what will 75 ministers do?  

When degrees are just pieces of paper.

"The state of India's higher education is much worse than the state of India's school education," wrote A Behar, CEO of Azim Premji Foundation. There are over 740 universities and 40,000 colleges in the country. Every year his foundation conducts written tests among those with masters degrees in physical and social sciences, humanities and math, and the pass rate among students who qualified from the better universities has been between 5-20%. Which means that about 80% have learnt nothing. Why this state of affairs? "it is quite simple: Students don't want to learn, they only want a degree. At the same time, institutions and teachers are happy to dish out degrees, and not make any effort at education." Students come to college after passing school. "Of the 18-year-olds enrolled in colleges and schools, 60 per cent can read English, though one-fifth cannot tell you what they read," wrote Prof K Basu. This is from the 2017 report by Annual Status of Education Report, or ASER. 57% of children between 14 and 18 years of age cannot divide 999 by 3. According to the government, India has about 800,000 doctors, giving an average of one doctor for every 1,668 people. Of these about 791,000 are available for active service. Of those that claim to be doctors of allopathic medicine, 57% do not have any medical qualification and 31% are educated up to secondary school level, said a report by the WHO. In rural areas only 18.8% of allopathic doctors have medical degrees. It is not surprising considering the state of our school and college education. While it is possible for an illiterate graduate to get a government job and spend a lifetime doing nothing that is not possible in the health service because sick people must be treated. So what is the solution? Create Licentiate Medical Practitioners after training for 3-3.5 years, wrote Dr SD Bhaduri. These people can serve in primary health centers in rural areas. But what if these people resign their jobs after a few years and migrate to cities to set up their own practices? Already India is full of quacks, no one knows how many. Apparently, the High Court in Tamil Nadu has ruled that these people should be called Unregistered Medical Practitioners and not quacks, which is a derogatory term. How is that possible when the Supreme Court defined quacks as those who do not have knowledge of medicine? However, it is not just the rural poor who are deprived of healthcare. Except for the rich, politicians and civil servants healthcare has become too expensive for most people. Just as there are many scholarships for higher studies abroad, but not for the people. Why blame students for wanting a degree without learning when it is official policy? 

The seventh season of India.

"India, according to the Hindu calendar, experiences six seasons," wrote D Mahapatra. " 'Ghotala' (scam) deserves to be added as the seventh season as Indians have perennially experienced it, even before the country gained independence." In 1945 a chest containing donations of personal ornaments to the Indian National Army went missing after the death of Netaji Subhash Chandra Bose. Jawaharlal Nehru's media adviser was a prime suspect. Before India became a republic VK Krishna Menon signed a contract with a foreign firm to supply 200 jeeps, worth Rs 8 million. Only 155 jeeps were supplied but Nehru blocked a probe into the incident. "Menon went on to become the defence minister under Nehru." Since then there have been innumerable scams, from Bofors to cash-for-vote in parliament to Ketan Parekh to Commonwealth Games. Politicians are involved in the biggest scams and therefore have no interest in police reforms to stop political interference in criminal investigations, despite a Supreme Court judgement in 2006, wrote M Sanwal. Naturally, political parties are extremely attractive for criminals because of the protection they afford. People knowingly vote for criminals because they can help obtain services, without having to pay bribes to civil servants, wrote M Vaishnav. Use poison to eliminate poison, as in homeopathy. "The Central Vigilance Commission (CVC) has unearthed a corruption network that allegedly operated at the highest levels of the National Highway Authority of India (NHAI) and Directorate General of Excise Intelligence (DGCEI)," wrote D Singh. Actually, the CVC was forced to unearth the network after CDM Smith confessed to the US Department of Justice that it had paid $1.18 million in bribes to obtain contracts. The DGCEI is not meant to stop corruption but to extort as much tax it can for the government. Like all government departments, it is an instrument against citizens and not for protecting against corruption. Politicians use taxpayer money as they please. The government has been collecting billions in cess for education, road building and so on but using the money for revenue expenditure in a criminal breach of trust, wrote VA Nageswaran. But who is to protect us against these criminals? Judicial tension became farcical "with a three-judge bench questioning the judicial propriety and discipline of another three-judge bench, which had on February 8 overturned yet another three-judge bench's 2014 judgement on land acquisition," wrote Mahapatra and Choudhary. Yesterday, a two-judge bench referred the judgement of the three-judge bench to the Chief Justice. Judges get juicy sinecures after retirement which raises suspicion of bias because the government is the largest litigant with 45-70% of cases, wrote Prof S Rajagopalan. Criminal politicians, controlled police and a infighting judiciary. We observe.

Isn't it better to let off steam? Prevents an explosion.

"If you are active online, you will, at some time or other, have been drawn into an argument you found yourself simply incapable of winning," wrote R Matthan. "Every time we get into an argument online, the facts we present in support of our position seem, paradoxically, to strengthen the hands of our opponents. They frustratingly cherry-pick those parts of our statements that suit them best and use it to their advantage, in the process turning our own arguments against us without appreciating the merits of our propositions taken as a whole." This is the "backfire" effect and leads to fake news aimed at "carefully selected cross-section of people" who already believe in what they are being told. Research by psychologists shows that these are narcissistic people who like to belong to a group to make up for their perceived lack of power, wrote M Hogenboom. This whole discussion about fake news has blown up since Donald Trump was elected president. Main stream media has relentlessly discredited Donald Trump's victory, blaming it on Russian interference, while Trump has labeled them as bearers of fake news. This only polarises people into those who voted for Trump and those who voted against him. Most research blames social media as an 'echo chamber' where like minded people exchange false  information in complete faith. They believe that media companies must have automatic fact-check and delete anything that is not true. Which means they will control what news we get. Trump and Modi win because their supporters believe what they say without checking for truth, wrote A Varma. Till a couple of decades ago there was a broad consensus on truth. "There were gatekeepers to information and knowledge." True, but until recently white people actually believed that blacks are inferior because it was 'scientifically proven'. Mainstream media would have supported that view. Today, it would be completely unacceptable to say that there is any difference between black and white. Only someone who is black can write that a successful black nation does not exist because of "chaos, senseless wars, corrupted religiosity, violence, and economic collapse" and black activists are also responsible, blaming racism for lack of progress of blacks. But whites are no different. Poor whites in southern US vote for whites even though it is against their own interests. The European Union is an example of how the elite have become separated from the people, leading to a vote for Brexit, wrote Prof D Rodrik. This is why liberal democracy is under threat. Maybe liberal democracy was myth propagated by a controlled media. Today everyone can have a say, even if based on false beliefs. Maybe that is the way to prevent world wars.

Wouldn't private be more dangerous than public?

The Nirav Modi scam at the Punjab National Bank can only be stopped if public sector banks are privatized, wrote Prof S Rajagopalan. "In a privately run bank, mispricing loans would lead to losing one's job, and taking sensible and calculated risks would lead to praise, bonuses and promotions." Without reward and punishment there is no incentive for bank employees to work hard or implement "an integrated banking system" that "makes it easier to detect fraudulent transactions or when employees overstep their lending parameters". Privatizing Indian public sector, or PSU, banks is almost impossible. Employees' unions are totally against any talk of privatization or mergers of PSU banks. Unions organized a strike last August to prevent any discussion on privatization. Even a merger of the State Bank of India with its subsidiaries led to strikes. To be fair to the unions, employees at private banks are no angels. Greed for higher bonuses can lead to very bad behavior, with disastrous consequences. "Founded in 1762, Barings was the oldest merchant bank in Britain before its collapse in 1995." Because of one rogue trader, Nick Leeson. In 2012, JP Morgan Chase & co lost $6.2 billion at its London branch because of Bruno Iksil, who was called the 'London Whale' because of the enormous size of his trades. In 2015, one Tom Hayes was jailed for 11 years for manipulating the London Interbank Lending Rate, or Libor, which is used by banks to lend to each other. Value of deals determined by Libor was revised down from $800 trillion to $ 450 trillion, sums too large for the human mind to comprehend. And, who can forget the collapse of Lehman Brothers which nearly crashed the entire global economy? Lehman acquired companies engaged in subprime mortgage business to increase its profits, and possibly bonuses of its managers. Merrill Lynch had to be rescued by the Bank of America. CEO of Merrill Lynch, John Thane had spent $1 million to redecorate his office: $87,000 on an area rug, $25,000 for a mahogany table, $28,000 for curtains and, the crowning piece, $1,400 on a trash can. India is used to great dramas that fizzle out to nothing. Already Modi's lawyer has claimed that the case will "collapse" like those of Bofors, 2G scam and Aarushi murder case. He also said that the total loan amount was only Rs 2.8 billion and not Rs 11.5 billion, as claimed. Indian politicians of all parties will never allow privatization of banks. "Politicians have an immense resource at their disposal -- the ability to arrange cheap credit for risky businesses in exchange for campaign finance. They leverage this resource and pass the bill to the taxpayers," wrote Rajagopalan. Who will bell the politicians? 

Institutions are weak, the state is super strong.

The scam in the Punjab National Bank, where two employees issued Letters of Credit to a jewellery firm to buy rough diamonds overseas and fake Letters of Undertaking to borrow money in dollars from other banks, is creating a lot of excitement in India. R Singhal asked, "How did a diamantaire take out so much money from the banking system, so easily, when ordinary customers are made to jump through several hoops or provide copious documentation for a simple transaction?" Whenever there is a scam citizens are forced to submit know-your-customer (KYC) documents, consisting of photo identity and address proof, despite having submitted them many times before. This unequal relation between the state and citizens extends to everything from paying taxes to utilities to credit history, where citizens are made to prove their innocence. "The tyranny of Aadhaar, unleashed by all financial sector participants, has magnified the state of wariness." The sudden demonetization of high value notes on 8 November 2016 turned 1.3 billion people into crooks, as we stood for hours in queues outside banks to access our own savings. This has been followed by tax terrorism as the government was unable to recover trillions of black money as it had promised. Faced with repression people turn to courts. There are 137,000 pending cases regarding direct taxes and 145,000 regarding indirect taxes, amounting to Rs 7.58 trillion or 4.7% of GDP.  Even the credibility of our elite institutions, the Election Commission, the Reserve Bank and the Supreme Court, is being eroded, wrote M Vaishnav. After questioning transparency of electoral bonds the Election Commission supported it. Anyone can donate money to a political party by buying bonds from banks. The name of the donor and the party will remain secret. But the government will know and can reward, or punish, depending on which party gained. No wonder the governing BJP got 89% of all corporate donations in 2016-17. The Reserve Bank should have openly opposed demonetization but kept quiet even as poor people suffered. In January, four senior judges of the Supreme Court questioned the impartiality of the Chief Justice in a press conference. However, the biggest problem with our courts is the unending delay in deciding cases. In December the Supreme Court apologized for a 13 year delay in deciding a case, the eventual winner having long expired. Undue delays help criminals to threaten witnesses, as in the Sohrabuddin case where 33 of 49 witnesses have turned 'hostile', which means retracted their testimonies. Criminals get away with heinous crimes on a regular basis. Accusing all citizens of being crooked allows criminals to rule us. Safety in numbers.

The tighter the embrace the better for us?

Pakistan has borrowed another $500 million from the Industrial and Commercial Bank of China (ICBC), taking the total to $1 billion in just three months. It is in great difficulty because the US has cut aid to Pakistan from $2.177 billion 2014 to $526 million last year. The US Congress is considering a bill to end non-defence economic aid to Pakistan. This is after US President Donald Trump tweeted, "The United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies and deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more." Pakistan naturally found the comments "completely incomprehensible" and expressed "deep disappointment". The Pakistani government has to walk a tightrope because not listening to the US means losing aid money while listening too much will get it into trouble with its own people, wrote A Siddiqa. "Pakistan is one of the states that America has lost to China." The government has borrowed $6.6 billion in this financial year which will take total borrowings to over $10 billion for the second year running. Money is needed to defend the rupee and finance its trade deficit. In December the central bank allowed the rupee to depreciate 5.2% against the dollar but it is still much stronger than IMF recommendation. A weaker rupee will increase inflation rate, which was 4.42% in January, causing anger among people. The problem with defending the currency is that the central bank holds $12.8 billion in reserves and does not want it to fall below $12.3 billion, which is the minimum required for 2 months' imports. This is why it is falling into China's embrace. Pakistan's central bank succumbed to Chinese pressure to accept the yuan for bilateral trade, instead of the dollar. Chinese goods have swept across all of Pakistan which would mean death for local manufacturers. Counterfeit goods from China are being sold openly and may bring more conflict with the US as Donald Trump considers a big fine for intellectual property theft by China. Pakistan is to send troops to Saudi Arabia to help its war against Houthi rebels in Yemen but insisted that they are only for training purposes and will not cross Saudi border. While it needs aid money from Saudi Arabia it cannot anger neighboring Iran which supports the Houthis. Saudi Arabia was angry at Pakistan's refusal to take sides in its quarrel with Qatar which is friendly with Iran. The Saudis maybe behind the cut in US aid, to punish Pakistan, wrote R Zakaria. China and Pakistan in a deadly embrace. We hope they drown together.

What if Asia and Africa replace Europe and the US?

"The fear generated by Wall Street's sharp fall has been greatly magnified by the calm that preceded it," wrote R Sharma. "Before the 8% decline in Untied States stocks over the past week, the S&P 500 had gone two years without suffering a drop that large." Optimists think that the global economy can still grow at 4%, like after World War II, but that was because of the postwar baby boom. Birth rate is falling. Fewer workers leads to higher wages, which leads to higher inflation because of higher demand. People in the US are spending more. "The United States savings rate has fallen to 2.4%, from the post-crisis peaks well over 6%. Consumer credit card debt is rising." There are warnings of a Minsky moment because central banks have not only poured enormous liquidity into markets but have soothed them into believing that any change will be slow and gentle, wrote M Chakravarty. It is true that population is falling in western countries but the global population is growing at an average of 83 million per year and is forecast to reach around 10 billion by 2050. The economy of Africa is forecast to grow at 4%, with some countries growing at over 8%, wrote Prof K Basu. India is forecast to grow at 7% this financial year and at 7.6% in 2019-20. Of course Asia and Africa cannot replace the US and Europe in the near future. GDP of the US was a $19 trillion in 2017, while that of Europe in 2017 was $17 trillion. China was $12 trillion in 2017, that of Japan was nearly $5 trillion, India was at $2.5 trillion and South Korea at $1.5 trillion. Nominal GDP of Asia was $27 trillion in 2016 while Africa was $3.3 in 2017. A lot of catching up to do but gradual change is better. Then there is Artificial Intelligence, or AI, and robotics. No one knows how many jobs will be gained or lost by AI. Delhi Metro has already started running trains without any human drivers. Despite a shrinking population and an unemployment rate of just 2.8% Japan has increased its manufacturing through technology and retraining. Jobs will be lost in waves and not all at once, a study suggests. "The factory of the future will have two employees a man and a dog. The man's job will be to feed the dog. The dog's job will be to prevent the man from touching any of the automated equipment," said Warren Bennis. It will not be as dire as that, as educated people will command high salaries to keep the machines in order. Automation could increase productivity and economic growth but, with fewer high paid jobs, inequality could rocket. A small population could well be a boon.

MSP is minimum and no support.

"Finance minister Arun Jaitley's grand budget announcement of Minimum Support Prices (MSP) providing assured 50% returns to farmers may not actually mean a 50% return," wrote R Kishore. Why not? Because, "Less than one-fourth of India's total cereal production is procured at MSP." "Of late horticultural production has surpassed food grain production in India. There is no MSP coverage for fruits and vegetables." "More than half of total rice and wheat procurement is done from the traditional green revolution states of Punjab, Haryana and Uttar Pradesh." So it is grossly unfair to the other states. And even in these states "less than half of all farmers were even aware of MSPs". So, it is basically useless. Even worse vast amounts of grains procured by MSP are wasted because of lack of storage space. The cost of wastage is over Rs 440 billion every year. To be fair to the government buffer stocks of food grains were introduced in 1969 to prevent against famine. This was in response to the humiliation of begging the US for help through its PL480 program when faced with famine in the sixties. However, today this is seen as providing a massive subsidy to farmers under WTO rules, especially as India exports billions of dollars worth of agricultural commodities. Providing MSPs distorts agricultural production as farmers produce only those crops on which they get guaranteed returns while neglecting more valuable crops, wrote SA Aiyar. The Public Distribution System, through which the government provides cheap food grains to the poor from a chain of 478,000 'ration shops' across India, is seen as essential to fight malnutrition which affects 38% of children under five. Five million workers move out of agriculture every year, wrote Prof Himanshu, and there are no good jobs for them in the formal sector. The Economic Survey 2017, by the Chief Economic Adviser, suggested a Universal Basic Income, or UBI, instead of various subsidies, which would eliminate waste and provide help to every needy person, so that no one misses out. Trouble is that once a social scheme is started it is impossible to stop. G Sampath saw UBI as a conspiracy to deprive the poor of existing subsidies. He insists that "it must be funded by taxing the wealthy; and the existing entitlements to the poor must not be taken away". UD Choubey recommends government control of capital, which is Marxism by another name. The slowdown in the economy last year was because of a collapse in demand in the rural sector, wrote Prof Himanshu. Farmers are becoming tech savvy and are demanding better opportunities, and not just handouts, wrote S Bera. Opportunities will not win next year's election, handouts will. Taxpayer will pay.

Why kill Mumbai to promote Gujarat?

A few days back Indian stock exchanges resolved to stop feeding data to overseas exchanges dealing in futures of selected Indian stocks. This was apparently done to increase liquidity in Indian markets. Indian markets can stop licensing other exchanges but how they will stop trading of our stock futures by those markets is not explained. Shares of Singapore Exchange Ltd fell in value following this decision. "SGX will develop and launch new India-access risk management solutions to allow global participants in SGX India equity family of derivative products, to execute their investment activities with continuity," said Singapore Exchange. "Whatever the underlying reasons for this extreme step, the move will deal a body blow to India's equity markets," opined M Philipose. "It's an own goal of sorts." Seems that "some investors were staying away from India's financial markets because of high transaction taxes and haphazard regulatory actions". MSCI, which provides indices to various markets, is not best pleased. "The breadth of the restrictions imposed by Indian exchanges is unprecedented in any equity market in the MSCI emerging market series," it said. If it reduces weightage of Indian securities in its portfolio foreign investors may reduce their exposure to Indian markets, resulting in a fall in share prices. So why do it? One reason could be that, by forcing all foreign investors to trade on Indian markets the government will collect more taxes. The other reason is, "By promoting an offshore centre within the country, and now banning overseas exchanges from trading Indian equities, it's a no-brainer that Gift City can end up cannibalising existing markets in Mumbai," wrote Philipose. What is Gift City? It is a financial center at Ahmedabad, promoted by the government of Gujarat, as a tax free zone for a financial center and for multinational businesses. It is no secret that the Prime Minister is from Gujarat, and only the central government can give permission to trade in dollars. To kill off Mumbai as a financial center so as to promote his home state of Gujarat is racist, and detrimental to the whole nation. Singapore Exchange is already discussing transferring its trades to Gift City, with the National Stock Exchange. Meanwhile, trade deficit soared to $16.3 billion in January, the highest in 3 years. To stop the Current Account Deficit from getting out of hand the budget increased customs duty on mobile phones and auto parts. German companies have invested $9.7 billion and created 400,000 jobs, most of it in the automobile industry. Germany has warned of retaliatory action on Indian exports. High taxes, rewarding supporters at the cost of others and banning what they don't like, the BJP is no different from other parties. Aren't we lucky?

Africa showing the way.

"The African Development Bank (AfDB) has just published its African Economic Outlook for 2018," wrote Prof K Basu. "According to the AfDB report, Africa's 54 economies grew by 2.2% in 2016, on average, and 3.6% in 2017. In 2018, the AfDB predicts, average growth will accelerate to 4.1%, while the World Bank expects Ghana to grow by 8.3%, Ethiopia by 8.2%, and Senegal by 6.9%, placing these countries among the fastest-growing economies. And these figures are not wishful thinking: in 2016, Ethiopia's economy grew by 7.6%." Africa has enormous amounts of resources and has been afflicted by 'resource curse', as they have been exploited by rich western nations. African countries suffered from the Gatt deal which lowered prices of commodities, the main exports of African countries, while avaricious western countries tried to patent natural plant life. They learnt. African nations showed their strength by walking out of the Cancun round of WTO talks. But rich countries do not give up. In 2016, African nations refused to discuss rules for e-commerce. Rich nations want no customs duty on digital business and no need for technology transfer or local barriers. Which meant that they wanted their companies to conduct business without the need for paying any taxes. For those of us who are not Africans the continent is synonymous with brutal dictators like Idi Amin, Mobutu Sese Seko and Robert Mugabe. Even today Burundi President Nkurunziza ignored constitutional requirement to stand down after 2 terms, won a third term by vote rigging and is now holding on to power through violence. But, democracy is gradually coming to many countries, with Nelson Mandela an example to the whole world. Three months back Robert Mugabe of Zimbabwe was forced to resign peacefully after 37 years in power, often through extreme violence, as in the Gukurahundi massacres that killed 20,000 civilians. Yesterday President Jacob Zuma of South Africa was forced to resign his post following allegations of corruption. He fought against apartheid and was imprisoned at the Robben Island prison for 10 years along with Mandela. Perhaps Zuma was undone by his friendship with the Gupta brothers who are accused of 'state capture' because of the way they took over various businesses in South Africa. They were following the way business is done in India by bribing politicians and civil servants. The list of scams in India is long and expensive. But, politicians in India seldom go to prison. South Africa and Zimbabwe are showing the way. No wonder Africa is growing.

Bonds indicate fear of the future. RBI soothes.

The Governor of the Reserve Bank had no business criticising the Long Term Capital Gains tax on shares in this year's budget, wrote A Nageswaran. "When asked to comment on whether the investment slowdown in India had ended, he said India faced five different taxes on capital, including the tax on long-term capital gains, and that this state of affairs would certainly affect investment. Thus, the governor made an unacceptable foray into fiscal policy, which is the domain of the elected government." Nageswaran believes that not taxing capital gains on shares is a handout to rich people, and is an easy way to finance the fiscal deficit, 96% of which was used up by the end of October. And therein lies the problem. The Reserve Bank has no say in government spending but has been ordered to target a retail inflation rate of 4% by the government. While the RBI struggles to contain high consumer prices in India, central banks in developed countries are under attack for being unsuccessful in raising inflation to their target of 2%, wrote Prof B Eichengreen. It is easy to criticise the RBI but how do you control the bond market? Bond prices dropped and yields rose by 3% at the conclusion of the budget speech, in expectation of rising fiscal deficit and retail inflation. The State Bank of India reported its first quarterly loss in 17 years, partly to account for its non-performing assets and partly because of the fall in the value of its bond portfolio. High bond yields mean that any fresh government borrowing will have to be at higher interest rates. Banks are required to invest in government securities under the Statutory Liquidity Ratio which is presently set at 19.5%. In the absence of investment opportunities banks hold government securities in excess of SLR. Banks are predicted to lose Rs 305 billion collectively in this financial year, with public sector banks taking a bigger hit. After the RBI meeting bond prices cooled somewhat, showing that markets approved of its policy. Since public sector banks are owned by the government it has to bail them out of their bad loans. Handing out large dollops of cash will add to fiscal deficit and increase borrowing so the government has devised a circular plan, in which it will borrow money from banks in exchange of bonds and then pay the money back in lieu of shares in the same banks. Banks will then use this money to write off their debts. Unfortunately, banks will be forced to return this money to the government in the form of dividends, which will reduce fiscal deficit. Whether banks will be left with any money for lending for new investments after this elaborate flim-flam has not been explained. Politicians engage in trickery. Thankfully the RBI is honest.

NOTA is not a small candidate.

"An increasing number of 'small candidates' -- defined here somewhat arbitrarily as those whose vote shares remain below 2% of the total vote -- compete in assembly elections across India. The numbers of such candidates on the ballot have steadily increased for the past two decades," wrote Prof S Chauchard and H Wanole. From 2102 to 2017, an average of almost 8 candidates received less than 2% of votes in each assembly seat, compared to less than 3 candidates from 1997 to 2001. While this maybe celebrated as a triumph of democracy, major parties see these candidates as 'vote-cutters' whose share of votes may have made the difference when the margin of victory is small. The authors have ignored NOTA, or None Of The Above, option that was introduced 2013 in all elections. NOTA would have qualified as a major candidate in Bihar elections in 2015 where it registered 2.48% of votes. In Gujarat elections last year NOTA may have received only 1.8% of total votes cast, but it came third in 115 out of 182 constituencies. In Godhra the BJP candidate defeated his Congress rival by only 258 votes, while NOTA received 3,050, enough to have made a difference. In Dholka the winning margin was 327 votes, with NOTA getting 2,347, while in Vijapur the winning margin was 1,164, less than 1,280 received by NOTA. After analysing the effect of NOTA on elections, VR Vachana and M Roy conclude that NOTA scores high in seats where caste is a factor, where development is lacking and where there is a straight fight between the BJP and the Congress, showing dissatisfaction with both major parties. What about small candidates, why do they bother standing for elections when defeat is certain? The deposit was raised to Rs 10,000 in 1996 to deter frivolous candidates but today it is of little value. A major party candidate may ask one of her supporters, from the same caste as her opponent, to stand to take away some of his votes, others stand in anger for having been denied a ticket, while others hope to get a ticket in the next election if they do well enough. Getting elected is a guaranteed way to multiply wealth by over 500% in a 5-year term, as the Supreme Court discovered. Getting elected makes a person a VIP and, since the police are controlled by politicians, it brings a certain amount of immunity. Major parties welcome criminals because they have the money and the goons to win. So, we see an average of 3 policemen protecting VIPs while there are few to protect us. Historian Ramachandra Guha found a lot of similarity between Indira Gandhi and the present Prime Minister Modi. Maybe one day NOTA will be largest party in parliament.

We've all seen this movie before, haven't we?

Reversing a 20-year trend the government raised tariffs on a range of imported goods in the budget, wrote Prof V Dahejia and Prof P Krishna. "Thus, on imported mobile phones, the applicable rate jumps from 15% to 20%, in addition to a 15% tariff on certain components of mobile phones and television sets." This was justified as protection for Indian industry from foreign competition so that they will increase production and create jobs. This is known as Import Substituting Industrialization and "was a centrepiece of the failed development paradigm pursued in India, Latin America and elsewhere". The real reason is to generate revenue "when direct and indirect taxes are expected to fall short of expectations". Why the desperation for revenue? Because 500 million people in rural areas are to be given healthcare insurance of up to Rs 500,000 per year. This is expected to cost $1.7 billion, Rs 110 billion, per year. Fiscal deficit is to rise slightly but if increased expenditure is for investment then it is not bad. It is the revenue deficit that is the real worry, wrote M Bhusnurmath, and the government is planning to change the wording of the Fiscal Responsibility and Budget Management Act so that figures can be fudged in future. This government has been no different from the previous Congress led government in its budgets, wrote T Kundu. Spending on capital expenditure, which is for asset creation, has declined as has spending on education and health, but revenue expenditure, which comprises payment of salaries, pensions and interest on debt, has increased. Modi was able to mask his profligacy by raising excise duty on oil as international prices fell from $110 per barrel in 2014 to less than $40 by 2015. Now that prices are rising there is rising clamor for a reduction in excise duty. In a sleight of hand the government reduced excise duty by Rs 2 and additional excise duty by Rs 6 but levied a cess of Rs 8 on fuel, thus keeping prices the same. Cess on income tax was increased from 3% to 4%. Cess goes to the central government and is not shared with states like GST so state governments are being cheated of their share of revenue. By law cess can only be levied for a specific purpose but according to a report by the Comptroller and Auditor General, Modi's government has been pocketing this extra money to the tune of Rs 1.70 trillion in the last financial year. General elections next year and farmers are angry for a fall in earnings, opposite to what Modi had promised in 2014 to win an absolute majority in parliament. Hence the massive increase in spending and taxes. As Prof Dahejia wrote, "...we've seen this movie before, and it doesn't have a happy ending." Sadly we have seen as well. 

Controls beget more controls.

"Rent control needs retirement, not a comeback," wrote M McArdle. With property prices skyrocketing poor people have no choice but to live in rented accommodation, so controlling rents protects the poor from exploitation. "Initially, tenants rejoice, and rent control looks like a victory for the poor over the landlord class." "Rent control starts by producing some sort of redistribution, because the people with low rents at the time that controls are imposed tend to be relatively low income." But, "Deprived of the ability to make a profit, landlords skimp on maintenance and refuse to build new housing." Only few cities in the US have some form of rent control but this has resulted in shortage of housing because of a reduction of new housing and the refusal of tenants to vacate rent-controlled apartments. Some cities in the US ban this practice. The Rent Control Act in India dates back to 1947, and although politicians have talked about modifying the act to make it fair to landlords no party has had the guts to actually do anything. The result is a severe shortage of housing for rent so that only 28% of urban population lives in rented accommodation. 54% of people rented their dwellings in 1961. Without decent and affordable rented housing people cannot migrate to other cities in search of jobs with higher salaries, which means companies may be unable to find suitable workers. In India 12% of housing remains vacant because landlords are afraid to rent them out, 500,000 in Mumbai and 300,000 in Delhi. Most rent agreements are for 11 months, causing enormous inconvenience to families. If rent control was scrapped all these dwellings would be available for rent, making it easier for people to live, and causing a substantial fall in rents. A survey showed that 67% of people live in their own homes in metro cities, while 97% own their homes in undeveloped rural areas. Over half the homes are inherited, and around 30% are bought or constructed by the occupant. With no increase in rents landlords have no incentive to repair old buildings so collapses are common, with fatalities. Indian politicians always respond with violence to any situation, so the landlord is always arrested if a building collapses and heavy taxes are levied on properties lying vacant. Changing the rent act is politically difficult but it is easy to throw taxpayer money at the 'vote bank'. The government is building low cost housing and providing loans to poor people to buy their apartments. This could result in India's subprime crisis, wrote A Iyer, as people in the lowest segment refuse to repay their loans. A Nag wrote a similar article in Bloomberg. If loans to farmers can be forgiven why not loans for housing? The poor may not be educated but they are not stupid. Decontrol all controls.

Enterprising brothers.

Price of shares of Fortis Healthcare jumped yesterday even though the Bombay Stock Exchange index, the Sensex, fell by over 400 points. Why did Fortis share jump by 24% in a falling market? It was because the founders, brothers Shivinder and Malvinder Singh, resigned from the board. The brothers were forced to resign after a Delhi High Court judgement against them, directing them to pay Rs 35 billion to Daiichi Sankyo Co. The case goes back to 2008 when the brothers sold a pharmaceutical firm Ranbaxy to Daiichi without informing them of an investigation by the Food and Drug Administration in the US. In 2016, an arbitration court in Singapore agreed with Daiichi and ordered the brothers to pay a fine of Rs 25.62 billion to the company. In 2013, Ranbaxy agreed to pay a fine of $500 million to the US Department of Justice for misrepresentation of facts. The resignation of the brothers is not the end of the story. It is alleged that the brothers diverted $78 million, or Rs 5 billion, from Fortis to their private accounts, without knowledge of the board. Fortis auditors, Deloitte Haskins & Sells LLP refused to sign off on Fortis second quarter results unless the money was accounted for or returned. Is that it? A US based private equity firm, Sigular Gugg & Co has filed a suit in Delhi High Court accusing the brothers of fraud. They are accused of diverting $300 million from Religare, a publicly traded financial services company, to their own accounts. It is interesting that the brothers readily paid $500 million fine in the US but are continuing to fight in India. That maybe because they are terrified of US justice but know that they can easily game the system here. The joke is best illustrated by the filing of an appeal by the CBI in the Supreme Court in the Bofors case, 12 years after the charges were dismissed by Delhi High Court. The CIA reported in 1988 that Sweden stopped investigation into bribes paid to Indian officials to spare Rajiv Gandhi from embarrassment because he was instrumental in a massive cover-up to protect his friend Ottavio Quattracchi. Quattracchi is dead, so why waste time and money on a ridiculous appeal. Officers of CBI, our highest investigating agency, have been accused of taking bribes in the recent past. Its incompetence in the Aarushi murder case was cited by Mallya's defence lawyer in a London court. While 75% of people do not report crimes to the police because they are unhelpful, the traffic police in Delhi are celebrating a record of Rs 1 billion collection from fining motorists. The Singh brothers should refrain from going abroad. They will be safe within India, no matter how many billions they have diverted. Enjoy the cash. 

Could conspiracies be our strength?

Some conspiracy theories are harmless but others, such as climate change deniers and those who do not vaccinate their children because of mistrust of pharmaceutical companies, do real harm to society, wrote M Hogenboom. Prof K Douglas found that narcissistic people believe that they possess exclusive information while others suffer from anxiety because they feel they are losing control. It is easier to blame other communities for particularly brutal crimes because guilt is hard to bear. Conspiracy theories maybe irrational but there is always some truth behind them. The thalidomide tragedy did happen and, if it wasn't for one FDA inspector, the US would have suffered as well. A deep mistrust of government was born during the Vietnam war when photos from the front line contradicted the government's narrative. More recently NATO misused a UN Security Council resolution to protect civilians in Benghazi in Libya to attack and subsequently kill Gaddafi. President of South Africa, Jacob Zuma openly accused NATO of duplicity. When journalists are embedded with an invading army we are naturally suspicious of the veracity of their reporting. Chelsea Manning, who used to be Bradley Manning, disclosed 750,000 classified documents to WikiLeaks but was pardoned by Obama, most likely because of political correctness. But Julian Assange who merely published them is still holed up in the Ecuadorian Embassy in London and Edward Snowden is still having to hide in Moscow. Because politicians and the main stream media were proved to be lying about Weapons of Mass Destruction in Iraq they are unrelenting in their persecution of the two. There is a huge outcry in the US about Russian hacking of US elections with the Congress setting up committees to look into allegations. But what about the US hacking into the global banking system? It would not take a nutcase to believe that the US is responsible for any money that he loses through hacking. Trying to convince him that the US, an $18 trillion economy, will not waste time stealing a few hundred bucks would be impossible. After all, an ocean is made up of drops of water. As for denying climate change, a study by NASA suggests that there maybe a massive increase in rainfall. Which sounds logical because the surface of the earth being 75% water there is bound to be an enormous increase in evaporation if the temperature goes up. Belief in religion proves that human beings are prone to believing in myths. Myths unite people into groups and has enabled humans conquer the world. There is no doubt that politicians and business people lie to us constantly. Camels using Botox have been banned from a beauty contest in Saudi Arabia. Now, that is a real conspiracy. 

The RBI wanted to help. Did it?

In yesterday's meeting, the Monetary Policy Committee of the Reserve Bank of India kept interest rate unchanged at 6% and its outlook at neutral. It predicted that economic growth will rise to 7.2% from 6.6% at present, retail inflation will fall to 4.5-4.6% in the second half of this year, before rising to 5.1-5.6% in the first half of the next financial year. General elections must be held by May 2019. It is interesting to speculate the effect this decision will have on the elections. RBI may be forced to act by events abroad. The price of oil may jump if there is any tension in the middle east and the Federal Reserve may be forced to raise US interest rates faster because of falling unemployment. If that happens the rupee will fall against the dollar, increasing cost of imports, leading to inflation. US share prices saw huge falls 3 days back on falling unemployment and rising spending among consumers and businesses. If inflation spikes later this year and the RBI raises rates it may not suit the government. Some people in India are convinced that the Prime Minister will bring elections forward to autumn of this year. When in the autumn? That is the time for major Hindu festivals. The Prime Minister's home state of Gujarat and neighboring Maharashtra come to a virtual halt before Ganesh Chaturthi on 13 September. The east of the country will stop from 15-19 October for Durga Puja and the whole nation celebrates Diwali on 7 November. "RBI acknowledged the fiscal slippage, the rising input costs, firming oil prices, hardening inflationary expectations, the impact of house rent allowances and finally guaranteed minimum support farm prices by the government in the Union budget," wrote A Iyer. However, the RBI did not want to "rock the boat" during the recent market turmoil. To pay for increased spending the budget introduced a Long Term Capital Gains Tax of 10% on gains of more than Rs 100,000. The RBI Governor, Urjit Patel said that there are 5 different taxes on capital already -- corporate tax on companies, dividend distribution tax, tax on dividend income above Rs 1 million, a securities transaction tax and tax on short term capital gains. Corporate tax on companies earning up to Rs 2.5 billion has been reduced to 25% from 30% + 3% education cess, as at present. That was unnecessary wrote Nandy and Sur because average tax paid by businesses in India is 25.6%, while the effective tax rate is only 13.6%. The government wants to increase tax collection to pay for increased spending and keeping fiscal deficit under control, while hoping for increased investment and low retail inflation. Did the RBI help?