What good are accurate figures if we have no solution?

It is not just job losses that cause unemployment in India, but, "India has also been suffering from slow creation of jobs, particularly in manufacturing where capital and machines are preferred over humans for greater efficiencies and higher productivity," wrote T Edwin. Even if jobs are created it is difficult to find people with relevant skills. Staffing company Teamlease, for instance, claims that it manages to find people to fill about half the open positions for various employers it works with." However, the Employees Provident Fund's (EPFO) recent payroll report mentions that there were 14.56 million "new" subscribers during September 2017-August 2018, wrote KRS Sunder, but a report by Prof R Kapoor "cites government submission to Lok Sabha to show that of the claimed 171.4 million accounts, only 22% received contributions during 2015-16". False statistics are being used by the government for electoral advantage. That does not matter, wrote R Chakraborty of Teamlease. "All new formal jobs may not be new jobs but they are all new formal jobs. And given India's battle is less about having a job (India has very few poor who are unemployed) but assuring youth a formal job with decent wages and human capital building, needs to be duly measured, acknowledged and celebrated." The formal sector grants job security, minimum wages and regular working hours, which are lacking in the informal sector. "I'd like to make the case that India's official employment rate of about 5% is not a fudge because everybody who wants a job has a job; they just don't have the wages they want or need," wrote M Sabharwal. "India is a nation of enterprise dwarfs; we have 63 million enterprises of which 12 million don't have an address, 12 million work from home, only 6.4 million paid indirect taxes till GST, only 1.2 million pay social security, and only 18,500 companies have a paid-up capital of more than Rs 10 crore." In the heated political debate about the lack of jobs we need high frequency data to see how human labor is being replaced by automation because of an excess of capital in the world, wrote R Jagannathan. Figures for the number of people entering the job market varies from 7.5 million to 10-12 million, while figures for the number of jobs created vary from 6.22 million to 15 million, wrote Chakravarty and Ramesh. "If you go to any industrial belt, you will find an undercurrent of unrest due to three reasons -- first, the jobs or lack of it due to factors including automation; second, the quality of jobs; and third the insecurity in jobs due to over promotion of fixed-term employment," said AK Padmanabhan, President of the Centre for Indian Trade Unions. The problem is even worse in agriculture which employs over 40% of the workforce who are trapped in poverty with no means of escape, wrote R Kishore. Creating formal jobs is good but what if we lose informal ones in the process? Perhaps, it is better not to have accurate figures. Could be depressing.

Blaming the RBI shows that they don't know what to do.

In an alarming escalation of tension between the government and the Reserve Bank of India (RBI), the government has invoked Section 7 of the RBI Act which has never been used before and empowers the government to give instructions to the RBI on what it should do. The government has sent letters to the RBI giving instructions "on issues ranging from liquidity for NBFCs, capital requirement for weak banks and lending to SMEs". Human beings learn from experience which they use to solve problems but politicians seem to wear blinkers, whether because of ignorance or hubris we do not know. If they look a little to the west they will see that President Recep Tayyip Erdogan of Trukey took control of the central bank in July and appointed his son-in-law Berat Albayrak as minister of treasury and finance. The lira fell by 16% and Erdogan was left begging his people to sell dollars and gold to buy the lira. Despite interest rate at 17.75% inflation was running at 16% but Erdogan would not allow the central bank to raise rates, "Because my belief is: interest rates are the mother an father of all evil". The central bank defied Erdogan and raised interest rate to 24% which has strengthened the currency to 5.48 to the dollar. Differences between the government and the RBI have been simmering for sometime. The government earned windfall revenues of over Rs 10 trillion by increasing taxes on fuel, as crude oil prices fell from over $100 per barrel in 2014 to around $30 in 2015, which was used for social schemes. As crude oil prices went up fuel prices in India soared because the rupee fell at the same time. The government is stuck. High prices are causing a lot of anger, which is bad before elections, and it cannot reduce taxes on fuel products without massively increasing fiscal deficit. In its desperation it has vented its fury on the RBI for not stimulating the economy by reducing interest rates, by not paying greater dividend from its reserves, for not preventing public sector banks from accumulating bad loans, for asking banks to clean up their books before resuming lending and for not injecting more liquidity into non banking finance companies (NBFC). The RBI is unhappy with government interference, for appointing stooges to its board and for proposing a separate payments regulator. This prompted the Deputy Governor of the RBI Viral Acharya to draw a comparison with Argentina where former President Cristina Fernandez attempted to raid central bank reserves, resulting in an economic and constitutional crisis. Argentina has just negotiated a loan from the IMF to steady its economy. Prime Minister Modi accused the previous government of "telephone banking", meaning ministers would compel public sector banks to lend to cronies. He should have reduced government stake in banks so that the RBI could strictly monitor them. He didn't. Why? Because he has indulged in his own "telephone banking" by forcing banks to lend for small businesses so that Rs 6.37 trillion could turn bad. Turkey, Argentina, maybe even Venezuela Modi has many choices. Why blame the RBI? 

The Chinese may have everything, we have E-Rickshaws.

"Has the investment cycle turned?" asked N Rajadhyaksha. "There are convincing signs that it has." There is an increase in demand for steel and cement and in import of capital goods. Corporate deleveraging has begun, which means companies are paying of their debts, and, "Seasonally adjusted capacity utilization is now at a 5-year high. It is also above the long term average." The output gap has nearly closed which means that any rise in demand will lead to inflation. A "typical Indian investment cycle lasts for 12 quarters, with an acceleration of seven quarters followed by a slowdown of five quarters. RBI researchers think that "the current investment recovery will peak in 2023" but "A quick calculation based on this estimate suggests that India has lost around 75 basis points of potential growth over the past decade." This being India the same figures lead to diametrically opposite opinion. A Barman thinks that "economic indicators -- especially markets that try to sniff out trends ahead of anything else -- are sagging". Foreign portfolio investors " have sucked out nearly Rs 19,000 crore from India" because "a survey of the annual results of about a tenth of listed companies shows net profits down by a staggering 30%", according to the Centre for Monitoring Indian Economy (CMIE). Overall lending is to fall to 10% in 2018-19 from 16% in 2014, according to Credit Suisse, the value of new projects was Rs 15.8 lakh crores while the value of stalled projects was Rs 10.1 lakh crores. Growth in employment has fallen from 4.2% in Financial Year (FY)17 to 3.8% in FY18. The biggest job losses have been in the telecom sector followed by education and training. The telecom sector may cut over 60,000 jobs. The diamond polishing industry could lose 100,000 jobs because of increased taxes on import of cut and polished diamonds. Businesses are shifting to China and Thailand. Indians spent over Rs 500 billion on smart phones made by Chinese companies in FY18. Our trade deficit with China is already in excess of $50 billion. How much more shall we give to the Chinese? However, we are ahead of the Chinese in one product. There are 1.5 million battery-powered E-Rickshaws and we are adding 11,000 every month. After 71 years of independence we are on our way to becoming a nation of rickshaw pullers. Naturally, all our airlines are facing bankruptcy as fuel costs rise and the rupee falls. We will need an additional $75 billion to fund our current account deficit, wrote Rajadhyaksha. No planes, no cars, only E-Rickshaws. Great.

Capitalism or socialism, the strong will win.

"According to a report in the Financial Times, published about two-and-a-half weeks ago, Nirmal Mulye, the chief executive officer (CEO) of Missouri, US-based Nostrum Laboratories, defended the increase in the price of a bottle of Nitrofurantoin from $474.75 to $2,392," wrote VA Nageswaran. He defended it by saying that it was "moral requirement" to sell the drug at the highest price possible to protect shareholder value. Nitrofurantoin is an off-patent drug used to treat urinary infections and "is listed as an essential medicine by the World Health Organization". Earlier the price of another off-patent drug Pyrimethamine, used to prevent Pneumocystis carinii infections in AIDS patients, was increased by 5,000% in the US. Holding sick people to ransom is unacceptable so what is the answer? In India, the government controls prices of essential drugs which makes manufacture unprofitable. The price of Methyldopa, essential for treating high blood pressure in pregnancy, was controlled so companies simply stopped manufacturing the drug. However, the government did not stop taxing the drug. "The costing and selling price of the drug is not sustainable. The costing is Rs 2.20 per tablet and approved selling price is Rs 2.50. The government expects us to pay taxes from our pocket," said RC Juneja, CEO of Mankind Pharma. Similarly, it is very difficult to find Nitrofurantoin in India because of price control, forcing doctors to prescribe unnecessarily stronger antibiotics. Danske Bank has confessed to laundering $233 billion, tax authorities in Britain did not assist in a French investigation "into Lycamobile on charges of money-laundering and tax fraud because it was a big corporate donor to the Conservative Party" and American companies shift their earnings to tax havens to avoid paying taxes in the US. Companies in the US have to pay a one-time tax on money kept abroad. In India, "In some companies, the CEO compensation to median worker ratio exceeds 1,000 times. In an extreme case, it is more than 25,000 times." Robber barons are back "because political parties of all stripes are in the hock". No one in India gets punished for riots because politicians do everything to protect the guilty. Politicians and civil servants doubled their salaries between 1993 and 2012 while workers saw an improvement of only 44%. They have made themselves into VIPs which means that rules do not apply to them, wrote Prof R Thakur. No wonder India has a 'twin surplus' problem. "Big egos and small minds are in surplus," wrote Nageswaran. "Morality and fair play are the bedrock of capitalism. Without them, it is Kleptocratic Darwinism." Human beings are super predators. They prey on other humans. 

You never know when it will work.

"After decades of 'constructive engagement' -- an approach that has facilitated China's rise, even as the country has violated international rules and norms -- the US is now seeking active and concrete counter-measures," wrote Prof B Chellaney. "Even as China defied world trade rules and flexed its military muscles, the US held onto the naive hope that, as China became increasingly prosperous, it would naturally pursue economic and political liberalization." "In fact, China's dictatorship has become even more entrenched in recent years, as the Communist Party of China has used digital surveillance state." The US has been quick to impose sanctions on Myanmar after the exodus of Rohingyas from the country. The UN has called it 'genocide' and 'ethnic cleansing' and Aung San Suu Kyi has been vilified by the sanctimonious western media for not opposing the military, despite terrorist killings by the Rohingyas. Yet there is a deafening silence on the internment of hundreds of thousands of Uighur Muslims in specially constructed large prison camps in Xinjiang province. China is used to getting away with its economic crimes and military aggression. But, the arrival of Trump has suddenly given it a reality check. "Initially, Xi's government figured the president was bluffing." But Vice President Mike Pence "accused Beijing of trying to 'malign' Trump's credibility, of 'reckless harassment' and of working to engineer 'a different American president'. On both military and economic issues, Pence declared: 'We will not be intimidated; we will not stand down'." Six months back China was planning to lead the world in Artificial Intelligence and robotics by spending trillions of dollars on 'Made in China 2025' but now "China's currency is down 6.4 percent this year. Shanghai stocks are down 22.3 percent this year..." Which has prompted the government to revert to its usual policy of stimulating the economy by asking local governments to spend $195 billion on infrastructure projects. China has embarked on the Belt and Road Initiative (BRI) "to link the economies of 80 countries, covering two-thirds of the world's population, through improved trade and transportation links", wrote YY Ang. "The hallmark of such communist-style mass campaigns is that everyone pitches in with frenzied enthusiasm and little coordination" which often leads to "low-quality and mismatched projects, duplication, and conflicts of interest and corruption". In a first, Sierra Leone is the first African country to cancel a BRI project to build an airport outside its capital Freetown. China maybe "in strong position to withstand US pressure to change its ways" but it is also a pressure cooker nation where dissent is severely suppressed, with violence if necessary A crisis, when it comes, will be from the inside and possibly violent. We really hope so.

It is not just GDP but how you get there.

In a difference of opinion "HSBC has projected that India's gross domestic product (GDP) would reach the size of about $5.9 trillion by 2030 rather than $10 trillion Niti Aayog had projected for 2032," wrote VA Nageswaran. India was ranked at 115 out of 157 in the World Bank's Human Capital Index, which has been rejected by the Indian government. At 55.65% of Gross Value Added the services sector dominates the economy in India, employs 28.6% of the population and exports worth $18.7 billion. Productivity is poor because, "Long-term is most often traded for the short-term and there is far too much emphasis on form over substance. This leads to a control mindset that focuses on inputs than outputs or outcomes." Low productivity is a result of 'high strain jobs'. High strain is caused because "there is responsibility and accountability for outcomes without authority to execute". On the other hand, "there is authority without responsibility or accountability for outcomes and that is what leads to high strain on others". So, we have 'twin surplus' problem: "Big egos and small minds are in surplus". It is because of poor productivity and outcomes that India chronically suffers a twin deficit problem, a budget deficit and a current account deficit. Productivity is poor because there is little investment in technology. 80% of employment is in small enterprises in the unorganized sector and the rise of businesses owned by women is contributing to small enterprises, wrote E Ghani. India is not creating enough jobs despite a scorching growth in GDP, wrote A Nag and V Beniwal. Instead of increasing employment the Goods and Services Tax (GST) may have cost hundreds of thousands of jobs as small businesses have suffered. India is the second most unequal nation in the world and this will impact growth, wrote Prof N Banik. "Things are going to get worse with an escalating cost of living, healthcare and education, and the fact that less than 2% of Indians who apply for jobs each day get one." "India's labour productivity -- economic output per hour of work -- is just 15% of US levels." The only way to improve productivity is to use technology. Trouble is that technology needs capital investment which could be considerable and may need regular updates. Human labor is cheap, because of a large pool of unemployed, and can be replaced easily. Our banks are unable to lend because of rising bad loans and falling credit, wrote A Anand. Pakistan and Botswana are doing better. Given such problems, "HSBC's projection fo India's economic size in 2030 is more realistic than that of Niti Aayog's and still excessively optimistic". "Big egos and small minds" are running the country.

What happened to all the blood?

Turkish President Recep Tayyip Erdogan claimed that Jamal Khashoggi's murder was planned days in advance. He claimed that three teams arrived from Saudi Arabia, some members went to a forest near the consulate and also removed hard drives from the surveillance system inside the consulate. Erdogan also claims to have an audio tape recording the last 7 minutes of Khashoggi's life which has been heard by CIA Director Gina Haspel three days back in a secret visit to Turkey. Jamal Khashoggi visited the consulate on "28 September to obtain a document certifying that he had divorced his ex-wife, so that he could marry his Turkish fiancee". He was received warmly and told to return on 2 October which gave time to the Saudis to arrange his murder. Khashoggi was seen entering the consulate at 2 PM on 2 October and hours later a man identified as Mustafa al-Madani was seen walking around in his clothes. The first mystery is that since all employees of Turkish origin were given a holiday on 2 October who recorded the video of Khashoggi's final minutes. It would have to be a Saudi national working at the consulate, in which case he is in for a very agonising end if he is found. Seems very unlikely. Khashoggi was apparently dismembered while still alive as part of his torture. On the audio tape the consul general is heard saying, "Do this outside. You're going to get me in trouble." Saudi Consul Mohammed al-Otaibi flew back to Saudi Arabia when Turkey announced that it was going to search his residence. Apparently Khashoggi's body parts were found in the home of the Saudi consul which would make him and the Saudi government a bunch of brain-dead idiots. Which brings us to the second and much bigger mystery -- what happened to Khashoggi's blood. An adult man has about 5 liters of blood in his body which is being constantly pumped by the heart. Which means blood is always under pressure, expressed medically in millimeters of mercury. 1 mm of mercury is equivalent to 13.6 mm of water. Khashoggi was 60 years old, so assuming a systolic blood pressure of 140 mm of mercury we get a pressure of 1903.3 mm, or 1.9 meters, of water, which is over 6 feet. If his blood pressure shot up to 200 mm of mercury because of the stress that would be 272 cm, or 2.72 meters of water. If they dismembered his body blood would have spurted out over walls, over all the men and would have soaked the carpet. Erdogan has been shouting about many things but has not mentioned blood even once. Is he bluffing? Was Khashoggi kidnapped and taken back to Saudi Arabia? The Saudis would be in a bind. They cannot say they have him because then there will be an outcry for his release. So they prevaricated and then admitted to his killing, hoping that once they apologised and appeared to  investigate his disappearance the outcry will die down. Erdogan thinks he is too clever and so far seems to have the upper hand against the Saudis but he should beware. Memories are very long in the Middle East. There maybe a reckoning sometime.

They maybe weak, but we are weaker still.

Whoever manages to become prime minister after general elections in May next year will be the weakest ever because "the power of the Indian state -- both administrative and moral -- is in the steepest decline since its birth in 1947", wrote R Saran. Politicians think they are in control but, "They pretend they can tame the rupee value when they can't. They want access to people's encrypted messages (for example on WhatsApp or Telegram) when they know they con't. They claim they can regulate petrol and diesel prices, but they fail to. They think they can threaten economic fugitives into surrender but are unable to." People are breaking the law or taking the law into their own hands because "there is widespread belief, not unjustifiable, among those committing crimes, large and small, that they will not have to pay for their crimes," wrote Prof S Mundle. It is not that laws against crime are lacking in India, if anything, we have too many laws. But, "We can have all the laws and rule we want but they will make no difference if they are not enforced, if those failing to comply with the law get away with impunity." Politicians have no interest in enforcing laws because they or their children may have to pay for their crimes. When 36% of Members of Parliament have serious criminal charges against them why should they encourage enforcement of laws? Despite promises of a clean administration without corruption Prime Minister Modi has not been able to, or perhaps wanted to, stop people taking law in their own hands. All political parties, including Modi's BJP, knowingly put up criminals as candidates in elections because they have the money to bribe voters and the goons to silence opposition. People vote for them because they can deliver services, because of their muscle power, which the state should be providing anyway. "It is the same when politicians undeservingly allot and then illegally occupy taxpayer-paid bungalows or when they grant themselves huge salary hikes with no link to productivity." In 2016, a politician's son shot dead a 19 year old boy for overtaking his car. The shooter was awarded life imprisonment along with his accomplices but may be freed on appeal because all witnesses retracted their testimonies, no doubt due to threats. In a landmark judgement in 2006 the Supreme Court gave "seven comprehensive directions out of which six were for state governments and one for the central government," wrote P Singh. But after all these year, "Seventeen states have passed Acts purportedly in compliance of the court's directions but essentially to circumvent them." The director of the Central Bureau of Investigation, our premier investigative agency, and his deputy have filed charges of corruption against each other. When third rate people grab power and make themselves VVIPs then people become their serfs. That is how they like it.

How can you control the TINA factor?

"There are no viable alternatives to inflation targeting," wrote Prof V Dahejia in response to "recent appointments by the Narendra Modi-led government to the board of the Reserve Bank of India" which maybe construed as being "aimed at watering down, or ditching altogether, the monetary policy framework agreement between RBI and the Union Ministry of Finance". Pen pushing officials of the Finance Ministry had the audacity to ask members of the Monetary Policy Committee (MPC), who are economists, to a meeting before the June meeting of the MPC so as to convince them not to increase interest rate. So now politicians and civil servants are conspiring to make the MPC useless by appointing party ideologues, like S Gurumurthy, as directors of RBI. Mr Gurumurthy is a chartered accountant by profession which means he is trained to count pennies, totally opposite to making sense of trillions of rupees in trade, investments and tariffs that the economists of the MPC are trained to do. There is no alternative to targeting inflation, "Unless one is proposing a return to a gold standard or some other commodity standard" which is a bad idea because it would severely restrict the government's ability to control money supply. Republicans floated the idea of going back to a gold standard, ditched by Richard Nixon in 1971, in the run up the presidential election in 2016 but it was dismissed by virtually all economists. The other alternative would be to link the rupee to the dollar at a rate of, say, 60-65 rupees to the dollar but, "According to the celebrated 'impossible trinity' or 'trilemma' of Nobel economist Robert Mundell, an economy cannot simultaneously fix the exchange rate and control its domestic monetary policy (read: policy interest rate as instrument, or price level as target) in the presence of an open capital market." Which means we will be bound by actions of the US Federal Reserve. "This is perhaps the first time in recent memory when Indian inflation is expected to be muted despite higher global oil prices, a weaker rupee and a poor monsoon. They are usually catalysts for accelerating inflation," wrote N Rajadhyaksha. Perhaps, the reason for low inflation in the face of so many adverse factors lies in low food and commodity prices which have resulted in a sharp drop in earnings of farmers, wrote Prof Himanshu. Popularity for Modi has risen in urban areas, which profit from low food prices, and fallen in rural areas which are suffering, wrote R Kishore. Markets cannot be controlled, but inflation can. This is the TINA factor -- 'There Is No Alternative'.

Women are the solution. But how?

According to a report by Credit Suisse the number of dollar millionaires in India has grown by 7,300 to a total of 343,000. The number is expected to rise to 526,000 by 2023. In 2000 we had just 39,000 millionaires. 18.6% of dollar billionaires are women, second only to Germany with 26%. India has 404,000 in the top 1% of wealth holders in the world. The cumulative wealth of our millionaires is $6 trillion which converts to Rs 438 trillion. 91% of wealth is in physical assets, like real estate. Is that reason to cheer? 91% of adult population have wealth below $10,000 which is around Rs 735,000. Average "wealth per adult is $7,020 (around Rs 515,970) as against $47,810 in China (Rs 35.14 lakhs). Last year's survey found that 92.3% of adults possess wealth below $10,000, so there is an improvement of 1.3%. Another report in February claimed that "India is the second most 'unequal' country in the world, with millionaires controlling 54% of the wealth. In Japan, the most equal country, millionaires control 22% of national wealth," wrote Prof N Banik. "A country that neglects rising income inequality cannot sustain its long-term economic growth." The only way to reduce inequality is to train our people to use technology. "India's labour productivity -- economic output per hour of work -- is just 15% of US levels." Agricultural productivity -- measured by output per hectare -- is less than half of other countries and only widespread use of technology can help our farmers. Income inequality could be a result of inequality in education. The National Family and Health Survey revealed that "three in four men who never went to school marry uneducated women". Studies have repeatedly shown that educating women increases wealth, there are fewer children and children are healthier and better educated. Economic growth in India has been due to a falling birth rate. "India's family size has steadily declined and continues to -- from 5.2 children per family in 1971 to 2.3 in 2016, which means the family size itself has fallen from 7.2 to 4.3." Again, mother's education was an important factor, with illiterate mothers having 3.1 children in 2015-16, while mothers with more than 12 years of education having only 1.7 children. Too many people makes it very difficult to provide enough nutrition for all at affordable prices. India is ranked 100 out of 119 countries in Global Hunger Index rankings. However, inequality is not only among the poor. While Mukesh Ambani's wealth has soared to $43.1 billion, making him the richest man in Asia, his brother Anil has seen his wealth halved to just $1.5 billion. Can we call him a poor billionaire?

If he doesn't care about consequences how far will he go?

After over two weeks of denial Saudi Arabia admitted that journalist Jamal Khashoggi died in its consulate in Istanbul. At first the Saudis said that Khashoggi had left through a back door after concluding his work at the consulate and denied any knowledge of his whereabouts, saying that allegations of his murder were an attempt to malign the kingdom. Now they say that Khashoggi died after he got into an argument with consulate staff and a fistfight broke out. "Khashoggi died after he was placed in a choke hold, a person with knowledge of the Saudi probe said." Khashoggi was living  in self-imposed exile in the US while writing for the Washington Post, so naturally there is enormous coverage in the press. The feeling is that this killing could not have happened without direct orders from Mohammad bin Salman, the Crown Prince, known as MBS, who is ruling Saudi Arabia. Some of his aides have been sacked and 18 Saudis have been arrested, to protect MBS. Strange that all those expressing outrage now were silent all these years when members of the royal family who had fallen out with the family and were living abroad were kidnapped violently and never seen again. There was silence when 200 princes were imprisoned and tortured in the Ritz Carlton Hotel in Riyadh and forced to handover large slices of their fortunes. It is extremely strange that Prince Alwaleed bin Talal, who owns chunks of major US companies, was forced to pay billions of dollars for his release without breaking any US laws. Saudi Arabia regularly carries out public executions designed to instill fear in the people so that they do not break the law. But, Khashoggi was killed in secret and the kingdom strenuously denied his death so it cannot act as a lesson to others. He was apparently dismembered while still alive and was screaming for 7 minutes before being injected with an unknown drug. Khashoggi described MBS as an "old-fashioned tribal leader" in an interview before his death. "I'm not calling for an overthrow of the regime, because I know it's not possible and is too risky, and there is no one to overthrow the regime," he said. "I'm just calling for reform of the regime." This is not enough to kill him so brutally in the kingdom's consulate in a foreign country. It shows that the man who ordered the killing is consumed with rage, is totally confident in his own infallibility, lacks any compassion, and does not think about consequences. In short, a psychopath. Under MBS, Saudi Arabia has been getting friendly with Israel, both countries united in their fear and loathing of Iran. President Trump's son-in-law Jared Kushner has met MBS and Israeli Prime Minister Benjamin Netanyahu many times. As he realises the trouble he is in, will MBS attack Iran? Will Israel join him? Interesting possibilities.

Don't worry about the smoke, douse the fire.

In the 1950s the exchange rate was fixed at Rs 4.76 to the dollar and the government used foreign currency reserves to defend the rate, so that by 1958 "the reserves almost ran out", wrote Prof A Panagariya. The government then resorted to "foreign exchange budgeting" which meant that licenses for new projects depended on allocation of foreign exchange to import machinery and inputs. This resulted in high inflation and export revenues shrank as our goods became more expensive. "It took another three decades to accept that the exchange rate was a key tool of macroeconomic adjustment." From Rs 17.50 in 1990 the rupee has dropped to 74 to the dollar today. After 2008, interest rates in the US fell to near zero, the Indian government relaxed limit of investment in our bonds by foreign funds which suppressed yields and kept interest rate low. Interest rate was not increased for 4 years until June of this year. Companies also went on a borrowing binge. The Federal Reserve has been increasing its Funds rate slowly since 2015, up to 2.25% in September. Foreign currency flow has reversed and yields on benchmark 10 year bonds jumped to over 8%, but have fallen back to just over 7.9%. Companies want the Reserve Bank to use its reserves to defend the rupee because the stronger the dollar the more they have to pay and a weak rupee means higher fuel prices because we buy oil in dollars, wrote I Patnaik. A weak rupee is supposed to increase exports by making our goods cheaper but exports fell 2% in September. Former Chief Economic Adviser A Subramanian also said that the rupee should fall in line with other emerging market economies as this is a necessary adjustment. Defending the rupee will deplete RBI reserves which has fallen to $394.5 billion, after the biggest weekly fall in 7 years. Reserves reached a record high of $426.028 billion in April 2018. As the rupee weakens foreign investors exiting India get fewer dollars in exchange for their rupees. If the RBI supports a stronger rupee foreign investors will get more dollars, increasing their profits. Which would be silly. The government has raised import taxes on a range of goods to restrict outflow of foreign currency and the Finance Minister assured markets of staying within fiscal deficit target but no one believes politicians, wrote P Mehra. The government collected over Rs 10 trillion in the past 3 years by taxing oil products which it used on social schemes. "Using low-cost foreign financial capital may seem attractive but this lunch is not free. Eventually, when the inflows reverse, which they inevitably do, the economy does pay for it and rather heavily." But, they should have the knowledge to understand that or the humility to ask experts. Egomaniacs. 

Are we the most generous nation on earth?

"Over the long term, the return on investment on exploration on average across the world is very poor," wrote P Nichols and R Tongia. "Exploring the earth for economically viable (high-grade) mineral deposits is a high risk improbable activity." "So, what do clever countries do? They don't gamble, they act as the casino and entice gamblers, generally small junior exploration companies, to spend global capital in their country. However, for this to work, the host country has to tolerate a few jackpot winners, who make major finds of tier-1 assets and are able to profit from their luck. But just like a casino, these jackpots are smaller than the total sum of failed exploration projects." What has India done? Our laws stipulate that exploration companies have to hand over their winnings to the government which will then reimburse the company for their expense. After deducting humongous taxes, no doubt. No wonder the government's auction of offshore oil fields for exploration was shunned by all Indian or foreign companies, except Vedanta and state-owned ONGC. So, we paid other countries $87.725 billion to buy oil in the financial year 2017-18. This, despite having a coastline stretching for 7,517 km. The number of offshore drilling rigs in the world is expected to rise from 389 units in 2010 to just under 500 in 2017. Because of stupid laws, "In India, the number of prospecting licenses the government has issued has dropped from 360 a couple of years ago to only 21 in the last 12 months and the number in which the actual work has been undertaken has dropped from 156 to 5 in the same period." What has the government done? It has set up a fund of Rs 4.5 billion to pay for exploration, but, "Fortunately, thanks to the workings (if not inefficiency) of the government, much of the money is yet to be spent." Sadly, no longer. There are 35 rigs working in Indian waters now. In 2016-17 ONGC drilled 501 wells at a cost of Rs 157.47 billion, of which 334 were onshore and the remaining 167 were offshore. Since ONGC is owned by the government it is gambling with taxpayer funds. We are having to beg oil producing countries to accept payment in rupees. The cost of offshore drilling varies from $30-50,000 per day in shallow waters to $300-400,000 per day in deeper waters. Our export of textiles and clothing, considered low tech, is $40 billion compared to China's $269 billion and our productivity is less than that of Bangladesh and Vietnam, wrote R Singh. Because of restrictive labor laws, higher minimum wages and higher taxes on synthetic fibers. We choose to let others win. We choose to remain poor.

Slow and steady better than falling down.

The International Monetary Fund (IMF) has just released its World Economic Outlook and "The good news is that it has lowered the forecast for global economic growth from 3.9% to 3.7% this year and the next." wrote VA Nageswaran. "Why is it good news? Unsustainable economic growth in the years leading to 2008 was one of the causes of the crisis. It was sustained by by fickle and debt-based capital flows into the developing world." And they are suffering till today. Risks are rising as "the Global Financial Stability Report (GFSR) of the IMF highlighted risks in global financial system. Downside risks were also reflected in stock markets around the world last week with a spike in volatility." Years of loose monetary policy by central banks has resulted in high asset prices. "The cyclically adjusted price-to-earnings ratio for S&P 500 is in excess of 31 compared to the historical average of about 17." Non-financial sector debt has gone up to 250% of GDP, tightening of monetary policy by the Federal Reserve will see an outflow of funds from emerging markets, there is not enough policy space to support growth in case there is a downturn and trade tensions are rising. Donald Trump is worried that growth in the US will stall if the Fed keeps raising rates. "My biggest threat is the Fed, because the Fed is raising rates too fast," he said. Some so-called experts predict that a recession will hit the US in the next two years and will be worse than the Great Depression. Companies in Britain have accumulated a total debt of 406 billion pounds to pay for "bumper dividend payouts" and for takeover deals but have not made any preparation to survive a downturn. "Today markets are even larger, 360% of global GDP, a record high. And financial authorities -- trained to focus more on how markets respond to economic risks than on the risks market pose to the economy -- have been inadvertently fueling this new threat," wrote R Sharma. Authorities managed to contain the crisis of 2008, "But with $290 trillion now sloshing around in global markets, new risks are bound to emerge -- in places regulators aren't watching as closely." "China's local governments may have accumulated 40 trillion yuan ($5.8 trillion) of off-balance sheet debt, or even more, suggesting further defaults are in store, according to S&P Global Ratings," wrote Eric Lam. The Indian rupee may fall to 75 against the dollar, wrote A Thapliyal. "It is inevitable. India's dependence on foreign capital flows and its higher inflation rate (despite recent low outturn) make the medium-term case for a weaker rupee." Better to have low growth than to have a recession. That will really hurt emerging markets.

Rising deficit, falling rupee, enough to give us heartburn.

"The gap between exports and imports, or trade deficit, declined to $13.98 billion in September from $17.39 in August following slower growth in imports," wrote K Suneja. Exports were down 2.15%, at $27.95 billion, compared to the same period last year, while imports rose by 10.45% to $41.9 billion. This despite a 15% weakening of the rupee against the dollar this year. Normally exports should rise because a weaker rupee would make our products cheaper. The problem is that India imports 100 tonnes of gold and $5 billion worth of electronics every month. The Real Effective Exchange Rate (REER) for the rupee was at 123 when one dollar bought 66-67 rupees and has now dropped to 110. There can be no control over capital flow or hot money invested in equities and government bonds but speculators should be punished. Renowned economist and former chief statistician of India Pranob Sen said that the "RBI should peg the value of the rupee in the early seventies and support it at that level with its reserves" "so that it sends a signal to speculators". Perhaps he should have a quiet conversation with George Soros who made over one billion dollars in 1992 by betting against the Bank of England. Since we do not have capital account convertibility it would be more prudent to limit the amount that foreigners are allowed to invest in our stocks and bonds. But, we almost always run a current account deficit in India, which means we buy more than we sell, so hot money is useful to plug the holes in our economy. Except when they pull out Rs 266 billion in the first two weeks of October because of rising oil prices and the falling rupee. If we do not allow foreign funds to exit at will they will never invest in India in the first place. Foreigners are clever at gaming the system. Import of mobile phones from China has fallen from $6.3 billion in 2014 to $3.3 billion in 2017, which sounds terrific because it means that we are making them in India, except that import of parts of mobile phones and telecom equipment from China has increased from $1.3 billion in 2014 to $9.4 billion in 2017. So, the Chinese are merely assembling them in India. "The latest reading of the Index of Industrial Production (IIP) finds that the biggest contributor to industrial growth in August 2018 was 'Digestive enzymes and antacids (including PPI drugs)," wrote M Chakravarty. "This seems to suggest that India's industrial development is to a large extent based, both literally and metaphorically, on gas." We jumped 5 places to 58th in the World Economic Forum's global competitive index for 2018. Not bad for gas, is it?

Five eyes alliance could become many more, we hope.

"With little fanfare, Trump signed a bill a little over a week ago that created a new foreign aid agency -- the US International Development Finance Corp -- and gave it authority to provide $60 billion in loans, loan guarantees and insurance companies willing to do business in developing nations." "China's biggest investments are targeted to countries, like Pakistan and Nigeria, with a goal of expanding Beijing's geopolitical power and gaining access to natural resources like minerals and oil." "The investments have raised concerns that poor and emerging nations like Djibouti and Sri Lanka could be increasingly beholden to China, which can seize assets if countries default on loans." Sri Lanka gifted the Hambantota port to China on a 99 year lease which is largely avoided by commercial shipping. Much to India's worry China's long term plan is to convert the port into a naval base for Chinese warships. Pakistan is forced to seek financial support from the International Monetary Fund (IMF), for up to $10 billion, as it has done 10 times since 1990. But it will not be easy because of the enormous costs of the China-Pakistan Economic Corridor. "In fact, it's likely that CPEC's cost to Pakistan are much higher than would make sense for the projects in question. Worse, currently these costs are opaque and some are hidden by the security establishment behind a veil of secrecy," wrote M Sharma. "The IMF doesn't operate like that; it will expect to be told, transparently, what the actual costs are for the CPEC projects. That's the point at which Khan's backers in the military will begin to worry, because if the terms are as ruinous as suspected, support for the CPEC -- and by extension, for China's paramountcy in Pakistan -- will wither." Pakistan has vowed to share all CPEC details with the IMF team which flies in on 7 November. Politicians in the US have asked the IMF to ensure that none of its money is used to pay off Chinese bondholders. In response, China denied that Pakistan's debt problems are due to the CPEC project. Donald Trump has imposed tariffs on Chinese imports worth $250 billion, increased military support for Taiwan, accused China of interfering in US elections and cut China's access to US nuclear technology. Political commentator Hua Po "doubted that the United States would enjoy the support of its allies, especially in Europe..." At least, the US has allies, China has none. A 'Five Eyes' alliance of Australia, Britain, Canada, New Zealand and the United States is sharing classified information on China with Germany and Japan and with each other. All countries are waking up to China's predatory practices and "China's free ride could be coming to an end", wrote Prof B Chellaney. We absolutely hope so.

We Indians panic every few years. We're experts.

"The mood on Dalal Street is funereal. The swagger has gone, replaced by the unmistakable stench of fear. You know a bear market when you see one. It is here," wrote U Mukherjee about the stock markets in India. India is not alone, "the Shanghai index in China is down 28%, the Hang Seng in Hong Kong down 25% and the Kospi in Korea down 18%. But far from comforting us, it should scare us even more. This is looking like an emerging market (EM) bear phase, which spells big trouble for us at a time when our own macro stability is fast spinning out of control. When your own house is on fire, you can hardly derive solace from the fact that the entire neighbourhood is as well." How can we have macroeconomic problems when our economy grew by 8.2% in the first quarter? It may look very high but the compound annual growth rate (CAGR) of gross value added (GVA) has been nearly the same  for every quarter over the last two years, wrote M Chakravarty. Drag from external factors and inflation in agricultural products have been low. India is to be hit by a triple whammy of a falling rupee, rising crude oil prices and rising fiscal and current account deficits, wrote A Ranade. The rupee has fallen 15% this year and oil may hit $100 per barrel this quarter. "Every extra rupee on the exchange rate translates into an additional import burden of nearly Rs 12,000 crore on the current account (on an annualized basis). And every extra dollar per barrel is an additional outgo of Rs 8,000 crore." The current account deficit (CAD) may be over 3% this year and "Additional worries are in financing the balance of payments, which will be negative $30-40 billion." We have total foreign debt of $540 billion, "of which $222 billion is due for repayment by March 2019". To persuade foreign investors not to sell out of our bonds the Reserve Bank will need to raise interest rate to preserve the yield gap with the US. Every 25 basis hike in interest rate increases borrowing costs for the government by Rs 20,000 crore. Which will add to fiscal deficit. "More than $75 billion of foreign savings -- aka capital inflows -- will be needed to fund the estimated current account deficit for the fiscal year that will end March 2019," wrote N Rajadhyaksha. India escapes Argentina's fate because of remittances by Indians living abroad, wrote A Janes. Last year we received $69 billion, almost 3% of GDP. Prime Minister Narendra Modi is facing political pressures before general elections by May next year. He can expect no sympathy because he tore into Congress for the same problems in 2014, and this makes for bad policy decisions. "The government is panicking and when that happens, markets panic even more." We have a crisis every few years. We have a lot of practice in panicking.

Experts know it's coming, but from where?

Another financial crisis is surely going to come, especially after a recovery which has lasted since 2008, wrote U Mukherjee. No one can predict when it will strike or what form it will take but come it will because, "Greed is at least as powerful a force as fear; it plays tricks with our intellect." Currencies of Turkey and Argentina are in trouble, there are financial problems in Sweden, falling house prices in Australia and trade tensions between the US and China. Or social stresses because of rising inequality could be the next trigger. "The biggest worry, whatever the cause of the next crisis turns out to be, is that there are far fewer arrows in the quiver to fight it this time." The global economy is slowing down, as shown by the JP Morgan Global Composite Purchasing Managers' Index (PMI) which came in at its lowest level in two years, wrote M Chakravarty. The US PMI showed solid growth but weaker than previously, but prices are rising which will force the Federal Reserve to tighten their Funds Rate. A report by the Reserve Bank of India on monetary policy noted that global economic activity has been resilient so far but there are signs of volatility in financial markets. "More ominously, global trade growth has begun to slow down. Inflation outlook has deteriorated in many AEs (advanced economies) and EMEs (emerging market economies). These developments taken together will pose a major challenge to global growth prospects in the coming quarters and years." There will be a recession by 2020, wrote N Roubini and B Rosa. The US economy will start to slow, as the present stimulus wears out, and rising prices will force the Fed to raise rates. Add trade wars, tensions with Iran and a lack of liquidity, as central banks tighten monetary policy, then a recession, even a stagflation, in the US becomes a distinct possibility. The crisis in 2008 was due to financialization of the global economy which was based on excessive debt and economic growth being driven by financial markets, wrote VA Nageswaran. So, what about today? "We stand where we stood in 2008. The rise of finance has not been curbed." "Leverage facilitates financial engineering, financial market speculation and unviable mergers and acquisitions." During 2014 to 2016 the global economy declined, inflation fell and markets fell everywhere. However, the S&P 500 remained the same. "There are reasonable grounds to suspect that the US had fudged data from 2014 to 2016 to prevent official data from showing an economic recession and that the stock market too was manipulated," wrote Nageswaran. The world has been riding a tiger for the last 10 years. No one knows how to get off.

We are friendly, so we have cronies.

If there is an index of scams India will surely come first. Last month Nitin Sandesara, said to be a pharma tycoon from Gujarat, fled to Nigeria with family and some Rs 50 billion borrowed from banks. The Life Insurance Corporation of India (LIC) was forced by the government to buy a controlling stake in IDBI Bank which has bad loans of Rs 556 billion. It is probable that LIC will have to write off a sizable portion of IDBI's bad loans, and, although LIC is too big to be affected, it is a blatant case of politicians siphoning policyholders' money to plug holes in budget expenses. LIC will make an open offer to buy IDBI shares from minority shareholders from 3 December. The government is forcing the Bank of Baroda and Vijaya Bank to merge with loss making Dena Bank, with bad loans of Rs 158.66 billion. Shareholders of the Bank of Baroda lost 14% in value and those of Vijaya Bank lost 11%, while shareholders of Dena Bank pocketed a profit of Rs 5.76 billion, wrote Prof A Purnandam. Now there is an even greater panic about a shadow bank, the Infrastructure Leasing & Finance Services (IL&FS) company which has defaulted on interest payments and repayment of loans. IL&FS has total debt of about Rs 910 billion of which about Rs 300 billion could be repaid by selling assets, but that would take at least 18 months. The Institute of Chartered Accountants has issued notices to several accounting firms to explain how they missed the pile up of debt during statutory audits. Actually IL&FS has been hiding its finances for years, wrote G Haldea. "The modus operandi of IL&FS across projects was to get the central and state governments to set up Special Purpose Vehicles (SPVs) and trusts where the checks and balances associated with public funds were grossly undermined. Under the SPV model, IL&FS would typically contribute 50% of the equity while an equal amount came from the government. As a result, they can expend public money as if it were private." A government official of the rank of secretary or above would be made the chairperson. "The objective was to project these SPVs as if they were government entities implementing public infrastructure projects. To make further inroads into the government, IL&FS employed several serving and retired bureaucrats and also distributed largesse such as jobs for their children." Why did institutional shareholders, auditors, regulators and rating agencies, which regularly gave it a triple A rating, miss deliberate misuse of public funds, asked an angry A Dharker. SA Aiyer thinks that crony capitalism has been virtually eradicated from India. Impossible. We Indians are a friendly people. Cronies are inevitable.

When it comes to our economy, size does not matter.

"There are early warning signs that the Narendra Modi-led government is starting to turn the screws on the Reserve Bank of India (RBI) and its governor, Urjit Patel," wrote Prof V Dahejia. Patel trained under the noted macroeconomist Willem Buiter and well-known trade economist TN Srinivasan, "And, latterly, after the dust has settled on demonetization, he has amply demonstrated his independence and refusal to buckle under pressure from the government, whether on interest rate policy or the functioning of the bankruptcy procedure. Clearly, the mandarins in North Block are not happy -- nor are their political masters in South Block." Why? The Modi government did two things right at the start of its term, one was raising excise duties on petrol and diesel and the second was "the signing of the Monetary Policy Framework Agreement between the Finance Ministry and the Reserve Bank on February 20, 2015," wrote H Damodaran. "But far outweighing these 'good' are the many bad or, for that matter, even good things not done at the right time by this government. The fault here lies with not seeking honest professional opinion, and, instead being guided by ideologues and officials who aren't disposed to saying anything what their masters don't want to know or hear." The problem is that the Modi won elections in 2014 by deliberately making outrageous promises which he is not capable of fulfilling. "We were very confident that we can never come to power. So our people suggested us, just to make tall promises," said senior minister Nitin Gadkari. "If we come to power, we won't be responsible anyway! Now the problem is that people have voted us to power. Now people remind us of our promises along with dates. Nowadays we just laugh and move on." Modi inherited the 'twin balance sheet problem' in our public sector banks and initially allocated Rs 1.80 trillion to recapitalize banks and passed the Insolvency and Bankruptcy Code so that banks could take over assets of willful defaulters. Losses could be covered by the windfall gains from taxes on oil. Then, in 2016 Modi suddenly announced the withdrawal of all notes of high denomination, called demonetization, which "no professional economist with spine would have endorsed -- in a country facing no runaway inflation or a run on its currency". Modi thought that most of those notes would not be returned which would allow the RBI to reduce its liability and pay a huge dividend to the government which he would then distribute in handouts. It failed. Oil prices have gone up, as has the current account deficit and the rupee has fallen. The RBI raised interest rate for the first time in four and a half years in June when told not to, but refused to raise rate this month to support the rupee. So what is Modi's answer? He has appointed S Gurumurthy of the Swadeshi Jagran Manch to the board of the RBI, Gurumurthy is a chartered accountant, which is the exact opposite of macroeconomics. When you don't know the difference between micro and macro. 

No one likes to look stupid.

About one week back a Saudi journalist, Jamal Khashoggi walked into the Saudi consulate in Istanbul to get papers to marry his Turkish fiance, and disappeared. When he did not come out after 10 hours his fiance Hatice Cengiz called the police. Turkey has alleged that the Saudis murdered Khashoggi inside the embassy, dismembered his body and took it back to Saudi Arabia. They have released photographs of 15 men who, they say, constituted a hit squad, who arrived by two private planes to Istanbul, booked into hotels near the consulate and flew out within hours of the disappearance of Khashoggi. One plane flew via Dubai and the other via Cairo. Khashoggi had been living in self exile in the US for over a year and used to write for the Washington Post, so Donald Trump has apparently asked the kingdom to get to the bottom of his disappearance. In its delusions of being a world power, Britain has demanded answers of the Saudi government. Naturally, questions are being asked by the US, Europe and Middle-East countries but there is nothing like the level of outrage which exploded when Israeli Mossad agents assassinated the chief weapons negotiator for Hamas Mahmoud al-Mabhouh in a hotel in Dubai in 2010. Now the response seems limited to questions and not outrage. Why? Because they looked the other way for all these years when Crown Prince Mohd bin Salman of Saudi Arabia organized a poorly disguised coup to grab all the power in the kingdom. The official crown prince, Mohammed bin Nayef was summoned to the palace of the king who ordered him to step down and when he refused he was kept confined in the palace until he surrendered. Mohd bin Salman was promoted to crown prince. Earlier he had launched a brutal bombing campaign on Yemen which has failed to defeat the Iran supported Houthi rebels but has caused a massive famine and an epidemic of cholera. Last year around 200 men, including at least 11 princes, were arrested and tortured at the Ritz-Carlton Hotel in Riyadh. They had to buy their freedom by paying billions of dollars. Even after release from the Ritz-Carlton they were kept under house arrest. Earlier this year there were reports of an assassination attempt on Mohd bin Salman. Anyone accusing MBS, as Salman is known, of corruption is sent to prison. Why have all the Western countries been silent till now? Because women have been allowed to drive in Saudi Arabia for the first time. Now that Khashoggi was probably murdered in a foreign country all these governments, which are usually quick lecture other nations on law and order. are mumbling about asking questions. Maybe the Saudis will use female drivers to drive the hearse.

Services instead of baksheesh maybe a better option.

A man in Gujarat has been sentenced to prison for 1545 days for not paying Rs 1,800 per month as maintenance to his elderly parents. The man works as a sweeper and lives with his parents along with his wife and children. India passed a Maintenance and Welfare of Parents and Senior Citizens Act in 2007 which forces children and legal heirs to pay for their monthly expenses, including food, clothes and medicines. That is surely laudable in a country where the vast majority of people do not receive any pension and therefore may not have the means to look after themselves as inflation eats away at their savings. "Children do not give their parents audience. They will not give them adequate food, do not buy them proper clothes, do not provide them with basic medicine. They may have taken away their property. They may send them to sit in a corner of a room alone," said a nameless bureaucrat. Civil servants in India are the elite of the elite with power and perks not available to any other citizen, even those paying taxes at the highest rates. The taxpayer will even pay for treatment abroad for the officer and members of his family, including stay for an attendant. The government is thinking of giving baksheesh to those taxpayers who pay more taxes. Apparently those who pay higher taxes will be allowed to have tea with the governor, although why anyone should pay to have tea with a politician, who is already looting the state, is a mystery. Every year Pakistan rewards the top 100 taxpayers with access to "VIP lounges at airports, fast track clearance at immigration counters, free passports and enhanced baggage allowance". Has that created a rush of Pakistanis bidding against each other to pay higher taxes? Only 1.21 million people, in a population of about 200 million, pay income tax in Pakistan. Trouble is that 82% of male and 92% of female workers earn less than Rs 10,000 per month in India. Only those earning more than Rs 250,000, that is Rs 21,000 per month, need to pay income tax. A 10% growth in GDP increases employment rate by only 1%. Out of a workforce of 467 million in 2015, 46.6% were self-employed, 32.8% were casual workers, 17% were regular salaried employees while the rest were contractual employees. Self employed means those eking out a livelihood selling vegetables, working as electricians or plumbers, or those with small shops. They are no entrepreneurs, working in swank offices and living in gated communities. Of those with regular jobs only 10% had written contracts in manufacturing and 28% in services. Extorting taxes with threats of prison is violence perpetrated by the state against citizens of India, wrote A Varma. Trying to sweeten that violence with baksheesh is not going to fool many. Sending children to prison for not looking after parents just punishes citizens for services which should be delivered by the state. Give us what civil servants and politicians get and we will compete to pay taxes. Till then keep whipping.

A strong dollar or a weak one, we can't seem to handle either.

After the recent collapse of the rupee against the dollar, the most frequent question that experts are having to answer is what is the fair exchange rate for the rupee. Since we buy oil and gold in dollars is the exchange rate against the dollar the best guide, in which case the rupee has fallen from parity at independence down to 74 to the dollar today. The government took several short term risky steps to increase foreign currency inflows, such as removing withholding tax on commercial borrowing in rupees from foreign markets, removing the need for hedging for infrastructure loans and increasing the limit of investment in corporate bonds for foreign investors. "The rupee has moved down from 42.4 to a dollar on 5 October 2008 to 73.8 to a dollar 10 years later. That is a decline of 2.8% a year on a compounded average growth rate (CAGR) basis." Trouble is that inflation in India has grown at 4.2% over the same period while it has remained at zero in the US. So it is overvalued against the dollar. The Reserve Bank uses a Real Effective Exchange Rate (REER) against a basket of 36 currencies reflecting our major trading partners. Using this the rupee has also been overvalued. However, Prof R Chinchwadkar points out that using REER the rupee could be overvalued  by 15% but the weight allotted to each currency leads to hierarchy bias. Using the Balassa-Samuelson effect he concluded that the rupee is undervalued by 10%. The Economist tracked data from "41 major developed and developing economies" every week. "It shows that the rupee is fairly valued if one looks at price levels on the one hand and average PPP income levels on the other." So that's alright then. The RBI kept buying dollars when the rupee was too strong, to bring down its value and to build up currency reserves so that it can sell some dollars to support the rupee if it fell too sharply. The government increased duties on import of certain goods so as to increase prices and reduce demand. "India's exchange rate has depreciated more than 13% so far in 2018, exceeding its earlier fall of 12% during the market turmoil of 2013," wrote A Iyer. At that time foreign investors were selling out, as now, and the price of oil was above $100 a barrel. It is around $80 presently. The difference is that we are not panicking this time. What happens in the US could still cause problems for the rupee, wrote VA Nageswaran. If the stock market in the US falls Indian markets will fall as well. Foreign investors will take more money out, weakening the rupee. Increasing interest rate in the US and a rising dollar will add to the pressure. Most people do not understand economics. They will react to how they are affected. Politicians cannot influence events abroad. Dare not annoy voters with elections round the corner. So, Que Sera Sera?

We Indians are right to believe in fate.

It is a Sunday in Delhi. You are driving home after lunch at a restaurant when you experience an ache in the center of your chest with profuse sweating. You continue driving but start feeling faint. You don't want to faint while the vehicle is moving because that will injure your wife. Then she asks if you feel alright and you say no. You get out to get to the passenger seat but fall down on the road. Your wife screams and two men pick you up and put you in the back seat of the car. There are always people around in India. One advantage of the over-population. Your wife drives straight to the hospital in 10 minutes and tells them to hurry because you are having a heart attack. They take you into Casualty, stick a nasal cannula to deliver oxygen and do a cardiogram. A doctor says it is an inferior wall STEMI, which means ST segment elevated myocardial infarction. Immediately a man starts shaving your right wrist, while another sticks a cannula into a vein in the left arm and injects a bolus of heparin. You feel nauseated and throw up your lunch into a basin. They remove it and pop two tablets into your mouth, one a statin and the other anti-platelet. Then they give you an aspirin to chew. Your clothes are taken off and put into a plastic bad and you slip into hospital pyjamas. In another 5 minutes you are in cath lab and a man is prepping your right wrist as well as keeping your right groin ready, just in case. You feel a sharp prick on your right wrist and then the X Ray arm over you starts moving. The Right Coronary is blocked. The doctor consults with your family and inserts two stents into the artery, presumably after dilating it. Everything takes about an hour and a half after which you are in ICU. The monitor shows atrial fibrillation and your blood pressure is low. A shock is applied to your chest which restores normal rhythm and your blood pressure comes to normal. You feel fine and notice people for the first time. The nurses are efficient and pleasant. Any problem is quickly attended to. You are transferred to the ward the next day and discharged home on the third day. Cardiovascular disease is the biggest killer in the US. About 23% of people die before reaching hospital after first MI. Rates are rising in India while falling in the US. So why did you survive? Was it the fast protocol-led treatment in a fully equipped hospital administered  by expert doctors and nurses? Actually, it was pure blind luck. You could be alone at home and unable to get to the hospital. It could be a weekday and you could be stuck in a traffic jam Delhi is famous for. Or Delhi Police could stop you reaching a hospital to give preference to a VIP thug. Every year Indians die because they are prevented from reaching hospital. You survived because you were lucky. That's why we Indians believe in fate.