Saturday, June 15, 2019

We cannot force the US to be charitable.

India imposed higher duties on 29 goods imported from the US in retaliation for the withdrawal of duty-free status of $5.6 billion worth of goods imported from India by the US under the Generalized System of Preferences (GSP). The US is the biggest importing nation in the world, spending over $2.4 trillion in 2017 in buying goods from all over the world. In order to help poorer countries the US levies very little tariffs under GSP on a whole list of goods to beneficiary countries. As Indians, we may feel a bit miffed at being singled out by the US which we consider a friend but surely no one can force charity? "Indian officials said the withdrawal of benefits is part of the 94 products on which the US has revoked benefits for all countries and is not a major portion of India's $5.6 exports through duty-free entry 1,937 products to the US under GSP." Which means, we have no case for retaliation. "Higher duties have been proposed on apples, walnuts, chickpeas, lentils, boric acid and diagnostic reagents." The hikes are not even proportionate. While the US has increased tariffs on steel and aluminium from 10% to 25%, we are to increase import duties on chickpeas, Bengal gram and masoor dal from 30% to 70%. This will hurt the millions of poor for whom 'dal' is a vital source of protein and higher taxes on diagnostic reagents will increase medical costs. With such stupidity no wonder we have to resort to cooking our statistics to a higher GDP growth rate. SSA Aiyer vehemently disagrees with former Chief Economic Adviser A Subramanian because, "The technique of deriving estimates from a few economic indicators yields an educated guesstimate of GDP, but no more," and wrote that 4.5% is not "solid" economic growth but "pure disaster". Hiding the disaster with fake statistics is a bigger disaster. Apparently China did the same. "China over-reported its economic growth between 2008 and 2016 by an average of 1.7 percentage points, according to a recent study by researchers at the Chinese University of Hong Kong and the University of Chicago." Maybe, but China always runs a trade surplus which was around $420 billion in 2017, while we had a record trade deficit of $176 billion in the last financial year. Our trade deficit increased to $15.36 billion in May from $15.33 billion in April. So, China is earning new money while we are constantly losing money to other countries we trade with. If the US grows at 3% it is considered huge but a 4.5% growth is a "disaster" for India because we are so poor. "Whether looking at credit growth or vehicle purchases, exports or investment, there is little support for the idea that India is enjoying breakneck growth at the moment," wrote M Sharma. Only accountants support our dubious figures because, "Some of them, as fund managers, have given investors' money to firms that are in deep trouble now," wrote A Mukherjee and "don't want Modi to tell creditors and debtors the truth about growth, especially since they can;t undo their previous bets on 7% expansion without career-limiting, wealth-destroying -- and possibly freedom endangering -- consequences". If we are really growing at over 7% why do we need GSP?.

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