A deficit of good intentions.

"Five years ago, when the 14th Finance Commission (14thFC) recommended an increase in devolution of funds to state governments and a hike in the share of untied funds they received, it was heralded as a new era for fiscal federalism in the country, and one that would significantly empower state governments at a time when they were facing rising development demands." wrote N Kwatra. As everything, it turned out to be a big 'jumla'. Why? "The share of Union transfers to states, as a proportion of gross tax revenues, has actually fallen over the past few years as compared to the earlier era, the period of the 13th Finance Commission." Because, "the Center seems to have simply upped its game in raising revenues through cesses and surcharges once again, diluting the promise of the 14th Finance Commission formula." Why the need for flimflam? "The Comptroller and Auditor General (CAG) has said that the central government's key deficit figures may be considerably higher than those stated in the union budget." The fiscal deficit in 2017-18 was 5.85% of GDP, and not 3.46% that the government reported. Why? "India is facing a silent fiscal crisis owing to a shortfall in tax revenues, and the government's budget suggests it may have grossly underestimated the problem." The Budget estimates tax revenues of Rs 25.5 trillion for this financial year but the Economic Survey showed tax revenues of Rs 20.8 trillion last year instead of the revised estimate of Rs 22.5 trillion. Instead of concentrating on fiscal deficit, which is the difference between expenditure and revenues, the government should concentrate on reducing revenue deficit, wrote Prof P Balakrishnan. "A revenue deficit of the Central government is relatively recent, having been virtually non-existent till the 1980s." This despite Indira Gandhi's "exposure to radical ideas in England, and the inheritance of a socialist state from her father Jawaharlal Nehru". After the 1980s "a rampant populism has taken over all political parties, reflected in revenue deficits accounting for over two-thirds of the fiscal deficit such as the case today." What to do? First, the government hides its borrowing by forcing public sector units to borrow instead, wrote Prof N Kaushal. Second, it raises taxes on fuel because retail inflation was still comfortable at 3.18% in June. Higher inflation reduces government debt, so with inflation staying within limits the government is forced to hide its debt from credit rating agencies. On the other hand, high inflation resulted in a decimation of the Congress. To plug the hole in the budget the government is to borrow Rs 700 billion worth in foreign debt because interest rates are very low abroad. Interest payment maybe low but if the rupee depreciates against the dollar, as it has done since 1947, the repayment amount will jump. So the government has to keep the rupee strong, which will hurt exports. Forget about middle income, we are stuck in poverty, wrote A Chhibber. You can win elections with jumla, but not the economy. One day we will stand naked. 

Suicide takes away power of the state.

"For a government with such a massive mandate, the Narendra Modi government is signalling a financial desperation," wrote R Jagannathan. "The recent budget raised taxes on the well-off (those earning above Rs 2 crore a year, including foreign portfolio investors who had routed their investments through trusts), not to speak of import duties on a range of items." The government wants the Reserve Bank (RBI) to transfer its reserves to it, for which a panel under former Governor of RBI Bimal Jalan has been set up. The government also wants the Securities and Exchange Board of India (SEBI) to transfer 75% of its surplus funds to it which becomes "a kind of additional tax on the market participants". The terrible outcome of extreme tax terrorism was recently exemplified when founder of Cafe Coffee Day VG Siddhartha went missing on the evening of 29 July after telling his driver to wait near a bridge over Netravati River in Karnataka. He left behind a letter which says that he was under tremendous financial pressure from lenders and had been harassed by tax officials. "There was a lot of harassment from the previous DG income tax in the form of attaching our shares on two separate occasions to block our Mindtree deal and then taken possession of our Cafe Coffee Day shares, although the revised returns have been filed by us. This was very unfair and led to a serious liquidity crunch." In a hostile takeover, Larsen and Toubro Ltd (L&T) took over Mindtree in June. VG Siddhartha's death is confirmed. His body was found at 6.50 Wednesday morning from the Netravati River. Politicians of all colors have rushed forward with crocodile tears messages. "According to the 306 section of the Indian Penal Code, a person abetting the suicide of another person shall be punished with imprisonment of up to 10 years and shall also be liable to fine. Abetting a suicide is a non-bailable charge." In India politicians and civil servants are above the law. In UP a rape victim set fire to herself outside the house of the Chief Minister because the police refused to register a case against the rapist who is a Member of the Legislative Assembly (MLA) of the ruling BJP party. Instead of arresting the rapist the police arrested her father who died in police custody in suspicious circumstances. The victim and her lawyer are fighting for their lives after a truck rammed the car she was traveling in. In Goa, Atanasio Monserrate, accused of raping a child, has defected to the BJP. Earlier, he had won election as a Congress candidate. His wife has been made a minister, along with another defector Chandrakant Kavlekar, who is accused of running an illegal betting syndicate. "Despite articulating a whole lot of lofty economic goals and social objectives, the Modi government has no elevating vision on the role of the state promoting growth." Of course, he has. Increase power by bribing voters and defectors. That's why high taxes and the need to loot the RBI and SEBI. Simple really.

Why the sudden honesty? What is their game?

"In 2014, the Pakistani Taliban slaughtered 150 school children at Army Public School. All the political parties signed the National Action Plan and we all decided after that, that we will not allow any militant groups to operate inside Pakistan," said Pakistan Prime Minister Imran Khan. "Until we came into power, the governments did not have the political will, because when you talk about militant groups we still have about 30,000-40,000 armed people who have been trained and fought in some part of Afghanistan or Kashmir." The Indian government was extremely pleased and called this a "glaring admission", hoping that Pakistan will take "credible and irreversible action against terrorists". In an interview with Fox News Khan also said that "Pakistan's military spy agency provided the lead that helped the US find and kill al-Qaeda chief Osama bin Laden". It is accepted that, not only did the Pakistani army provide information on bin Laden, but actually cooperated in the attack by forming a protective cordon around the house he was staying in. So, what's Khan's game? Or more precisely, what's the Pakistani army's game? Because no Pakistani prime minister would dare to make such admissions without the army's permission. Everyone knows that Imran Khan won the elections because of the army's interference with the electoral process, as well as suppression of any criticism by journalists, such that opposition politicians called him a "selected prime minister", which has now been banned by the Speaker of the National Assembly. In a recent three-day visit to the US, Khan was accompanied by the army chief and the chief of the ISI. "In what is being seen as a departure from norms, Pakistan's top military leaders -- army chief, General Qamar Javed Bajwa, and newly appointed head of spy agency, Inter Services Intelligence (ISI), general Faiz Hameed -- are also accompanying Khan," wrote E Roche. Bajwa sat in during Khan's meeting with President Donald Trump, apparently to assure him of Pakistan's help in US talks with the Taliban, so that US troops can be withdrawn from Afghanistan before presidential elections next year. Khan received an enthusiastic welcome on his return home to Pakistan. His visit to the US has been deemed a big success because he managed to avoid any discussion on Pakistan's support of terrorism and got Trump to declare that he would like to mediate in Kashmir. The US also promised $125 million to support F-16 fighter jets in Pakistan. Pakistan is playing a double game, helping China to increase its power in the region while indicating that the US cannot withdraw troops from Afghanistan without its help.Perhaps, it is being too clever. We shall see.

Numbers maybe wrong, people are not.

Economist SS Bhalla scornfully dismissed data collected by the National Sample Survey Office (NSSO). Bhalla was a part-time member of the Economic Advisory Council to the Prime Minister and appears to be an ardent supporter of Prime Minister Narendra Modi. The government has decided to merge the NSSO with the Central Statistics Office (CSO) and create a National Statistical Organisation (NSO). Comparing employment surveys in 2011-12 and 2017-18  show "a log growth in average per capita consumption of 24% between the two years. Consumer prices rose by an average of 36% between the two years. Real growth in consumption -- a minus 12% over six years." "A real consumption decline of anything even close to this magnitude has not been observed at any time in Indian history (or even in pre-historic times).." Strong stuff. The methods of calculating unemployment between these two years are completely different and the higher figures could be wrong, wrote Prof N Kaushal. While ridiculing unemployment figures, Bhalla strongly defends the new method for calculating GDP growth after the base year was changed to 2011-12 from the earlier 2004-05, which increased the growth rate during the current BJP government's tenure, while reducing the rate during the earlier Congress-led government. Bhalla is enraged by a paper by the previous Chief Economic Adviser Arvind Sunramanian (AS) suggesting that the growth rate of GDP was overestimated by 2.5%. "You can search far and wide, in journals and in newspapers, but no one, absolutely no one, has made such a calculation and assertion as AS has done for any non hyper-inflation economy for such a long period of time," Bhalla fulminated. Based on electricity consumption Prof Thomas Rawski found that "growth in China averaged just 3% over the four years 1998-2001 compared to the official estimates of 8%+." Apparently Rawski's estimates were "soon discarded by experts". Strange, an eminent economist like Bhalla has not heard of the Li Keqiang index, who happens to be the current Premier of the State Council of China. Since Bhalla is so unhappy about statistics in India, perhaps it maybe time to construct a Li Keqiang index for India, as suggested by TN Ninan. Which is exactly what Arvind Subramanian has done. The Reserve Bank (RBI) has pointed to a fall in India's consumer confidence and a decline in Private Final Consumption Expenditure. Consumption of articles of daily use (FMCG) has fallen. Sales of passenger vehicles crashed by 20.6% in May. As a result, nearly 1 million jobs have been lost in companies producing parts for automobiles. Perhaps, Bhalla should stop nitpicking about statistics and talk to people who have lost their jobs. Real people. Rather than numbers.

What do you do when your stimulus fails to stimulate?

"The Wall Street Journal recently issued an oxymoron alert that high-yield bonds had gone negative. The report says 14 European companies with junk bonds worth more than 3 billion euros ($3.38 billion) are trading with negative yields," wrote Prof VA Nageswaran. "Globally, about $13 trillion of debt is trading at negative yields." "Greek government 10-year bonds are trading at a yield of less than 2.5%. The yield, a few years ago, was at 44%," he wrote earlier. "The common thread that binds all of these is financialization, and it has been fueled by central banks." What about India? The last budget proposed "borrowing by the sovereign state in foreign currency" and "liberalized foreign financial flows", along with higher import duties and higher taxes on the rich. There is also a proposal for "deepening of the corporate bond market, including the market for credit default swaps." "Credit default swap (CDS) is, in effect, insurance against non-payment. Through a CDS, a buyer can avoid the consequences of a borrower's default by shifting some or all of that risk onto an insurance company or the other CDS seller in exchange for a fee." However, when everyone starts lending to subprime borrowers in return for higher returns it can lead to a crisis, as in 2007-08. "Since the global financial crisis, the total value of outstanding corporate bonds has doubled, from around $37 trillion in 2008 to over $75 trillion today," wrote D Quijones. This is because of very low interest rates which have resulted in "reckless risk-taking in financial markets, more leverage, greater inequality and tremendous stress on savers, bank deposit holders and pensioners". Despite record low interest rates central banks are unable to increase inflation so now they are concentrating on price stability and stability of their currencies. Economists are predicting a recession in the US next year. "The highest proportion of respondents thought the slowdown was likely to hit in the third quarter of 2020." "A full-blown currency war where major central banks and governments, including the US, deliberately weaken their currencies can no longer be ruled out, Pacific Investment Management Co's global economic adviser Joachim Fells wrote in a report." "Gains in global personal wealth ground to a near halt in 2018, rising just 1.6% for the weakest growth in five year." Total private wealth stands at $206 trillion, while the "World economy, comprising 193 economies, in 2019 is projected around of US$88.08 trillion in nominal terms against US$84.84 trillion in 2018, according to IMF." Prof N Roubini predicted a global recession in 2020. Of course, if you keep predicting a recession, someday you will be proved right, but the combination of the trade war, tension in the Gulf, stubbornly low inflation, increasing debt, and ever increasing stock markets is a cause for worry. Politicians do not want to do anything different in case they are blamed. If there is a crisis they can blame the world. We are just helpless pawns.

Only because they cannot think of any other way.

In a scathing article, S Deb writes about "a deep malaise that has been affecting millions of families over the past two decades and more". "This is the widespread insane belief among the India middle class that getting into an Indian Institute of Technology (IIT) is a ticket to paradise on earth." Apparently in the 1980s many students rejected IIT for the joy of studying pure science. That maybe because there were few good jobs for engineers as "industry's performance was the worst during (Indira ) Gandhi's tenure". "In terms of per capita incomes, India started lagging behind China and southeast Asia when Gandhi was at the helm of affairs." In fact, in the 1980s, India was hurtling towards a balance of payments crisis that was averted by pledging 67 tons of our gold reserves to avoid defaulting on our loans. Now there are opportunities of being "hired by Amazon/Facebook/whatever at $200,000 a year, with US postings". Not just Indians, "Nearly 50 people, including actors Felicity Huffman and Lori Loghlin were charged on Tuesday in what Federal authorities say was a $25 million scam to help wealthy Americans get their children into elite universities like Yale and Stanford." In 2015, a study in the UK reported that "wealthier parents were using their resources and influence to give their children an unfair advantage", including "finding them unpaid internships, using their social networks to form advantageous connections and ensuring they are able to access better education". The middle class in the US has been accused of 'hoarding dreams' in a book by Richard Reeves. An IIT professor told Deb how most of his students were unhappy to be there. Perhaps, if you ask people a large number of them will confess to hating their jobs. "What the media does not report is that the median salary of a fresh IIT graduate is around Rs 8-10 lakh a year, and that even in the top IITs, at least 15-20% students do not get jobs on campus," wrote Deb. That is because there were 5 IITs in the 1980s but now there are 23. There is only one Harvard, Yale, Oxford or Cambridge but if you treat IIT as a brand, like washing powder, it will become cheap. In India, unemployment level is highest among graduates. "Graduate+ women face a punishing 35 percent unemployment rate." "The unemployment rate for graduate+ men was much lower at 10 percent," a report said. Those with engineering degree from colleges other than IITs are struggling to earn Rs 5000 per month. It is sad that some students commit suicide because they are unable to cope. More than 20 children committed suicide for failing their board exams in Telengana because of a mistake in marking their papers. Parents push their children because they know how hostile India is and not because they "want to achieve their failed ambitions through their children". Does Deb agree that hard work is better than a degree from Harvard?

Let's finish all the money once and for all.

"The International Monetary Fund (IMF) further cut its annual forecast for India, as it expects weaker domestic demand to limit an economic recovery." "The downward revision of 0.3 percentage point for both years reflects a weaker-than-expected domestic demand," IMF said on Tuesday in its update to the World Economic Outlook (WEO). But, "India may have to revise downwards what is considered its 'potential' rate of growth from 7-8% to bring expectations more in line with reality, former Chief Economic Adviser (CEA) Arvind Subramanian has argued in a paper." "Today's 4.5% is impressive as size of the economy now is five times of 1980 levels." Problem is that China is growing at 6.2% with a GDP of around $14 trillion, about 5 times the size of India. Although our GDP calculation is not obviously wrong, "Subramanian already pointed to the fact that from 2011-12 to 2017-18, India's export growth was zero percent," wrote former CEA Prof K Basu. "Turning to other micro data, India's automobile sector is stalling, and the balance sheets of Indian corporations have worsened." He recommends, "We should be prepared to make a measured increase in fiscal deficit for a year or two." But, "Outgoing RBI (Reserve Bank) deputy governor blamed high government borrowing for the asset-liability mismatches of non-banking finance companies (NBFCs)." "Acharya said that while India is not an exception in terms of having a fiscal deficit, it stands out in terms of the size of its fiscal deficit, which was recorded at 6.68% of GDP in 2018, surpassed only by Brazil at 6.84%." Surely not. "India met its fiscal deficit target of 2018-19, which came in at 3.39 percent of GDP, slightly lower than 3.4 percent estimated in the revised estimates of the Budget, on the back of an increase in non-tax revenue and lower expenditure" official data showed. Higher government borrowing sucks out liquidity from NBFCs, which are India's shadow banks, and increases their cost of borrowing. "The universe of more than 11,000 India's shadow lenders draws its sustenance from formal banks, as well as from companies and individuals looking to deploy short term surpluses," wrote A Mukherjee. NBFCs are essential for lending to companies without which growth will stall and unemployment will grow. "That's why during the crisis of confidence triggered by IL&FS's $12.8 billion bankruptcy, emergency liquidity support for shadow-banking became a contested issue between the government and the central bank, which wasn't keen to deploy its balance sheet to take on private credit risk." That is why the government wants the RBI to transfer Rs 3.6 trillion from its reserves. Having looted public sector banks it wants to loot the central bank. Then what?     

Embryology of a police state.

A committee set up by the government recommended a ban and severe punishment  on the use of cryptocurrencies by Indian citizens. Anyone dealing in cryptocurrencies would be fined Rs 500 million and sent to prison for 10 years, the committee has proposed. This is the same government which is doing its utmost to push India towards a cashless society, all transactions to be done digitally. Why is the government so keen on digital transactions while being paranoid about cryptocurrencies? Because, it wants to monitor every activity of every citizen in the country. That is why it slyly made the biometric identification system Aadhaar, which records photograph, prints of all 10 fingers and iris scans, mandatory for every citizen. Since it can be downloaded online it must be vulnerable to hacking and if anyone manages to get your number they can easily steal your identity. "Connecting bank accounts and voter registration to biometrics is a trend seen only in China, some countries in Africa, Venezuela, Iraq and the Philippines," wrote M Choudhary. The National Crime Records Bureau (NCRB) has called for tenders to set up a centralised Automated Facial Recognition System (AFRS) which can be accessed by police officers through hand-held devices. "The fine print reveals, however, that the information used for AFRS will be obtained from CCTV feeds, and matched against information contained in any other potential existing database (specific examples include passport data, information with ministries and so on)," wrote G Bhatia. Also Aadhaar? Use of facial recognition is wrong 81% of the time, the London Police has found. Campaigners in the UK have alleged that "Black and minority ethnic people could be falsely identified". We Indians are brown and black. Three cities in the US have banned their police from using facial recognition technology. The only nation on earth where this malevolent system is in widespread use is China, an extremely repressive state. "Journalism is now being attacked more aggressively than ever before, with journalists routinely in the crosshairs of all manner of entities,' wrote R Burman. "Earlier this year, India fell two places to 138 in the Press Freedom Index put out by Reporters Without Borders." In addition to using threats and legal notices, there is "the highly condemnable, pernicious practice of government and corporates denying media entitities advertisements, veritably misusing taxpayers' money to pressure or influence those which are critical of them." The DNA Technology (Use and Application) Regulation Bill 2019 empowers the state to collect DNA from anyone, including those charged with "offences under the Indian Penal Code, 1860". Using a British law against citizens 72 years after so-called independence. Another British law the Official Secrets Act of 1923 shrouds the activities of the surveillance state. And if anyone should still find the guts to question the Indian Gestapo there is the Sedition Law of the British to shove you into prison. Can we use the term 'Police State'? 

Instead of goods, we export our money.

Bangladesh is benefiting hugely from the trade war between China and the US. "The South Asian nation, which is the world's second-largest garment exporter, has seen the value of its overseas sales rise to a record $3.81 billion in May, coinciding with Trump boosting tariffs on $200 billion of Chinese goods to 25% from 10%." "For Bangladesh, which aims to double total exports to $72 billion by 2024, snaring part of the $41 billion of the clothing business that goes to China will provide a fillip to an economy that the Asian Development bank forecasts will expand at a record 8% for the next two years." India also has a large textile industry "providing employment opportunities to more than 35 million people in the country". "India's Textile industry contributes to 7 percent to industrial output in terms of value, 2 percent of India's GDP and to 15 percent of country's export earnings. India's overall textile exports during FY 2017-18 stood at US $39.2 billion." Sadly, "India's apparel exports have fallen for two years in a row. Estimated at $16.2 billion in FY19, the country's apparel exports fell by 1.2% from FY18, which in turn was 4% lower than the previous year." This has been partly because of "a sharp decline reported during Q3 FY2018, amid downward revision in export incentives under the GST regime". The government's hunger for taxes is hurting the industry. Not just textiles, India's total exports are also falling. "For the first time in nine months, India's exports shrank 9.71% last month to $25.1 billion, while imports declined 9.06% to $40.29 billion." Which puts our trade deficit for the month of June to $15.19 billion. Not surprising that, "India's current account (CA) balance deficit grew to $68 billion in 2018-19 from $49 billion the previous year, according to the International Monetary Fund (IMF), which said the deficit was justified by development needs." In the last three years, our trade deficit has widened with 25 major countries, including "South Korea, Japan, Germany, Iraq and Saudi Arabia". India needs strong exports if it is to grow at 8-10%, said Prof A Panagariya. "He stressed that there is not a single country which has grown on a sustained basis at rates of 8-10 percent for 2-3 decades without rapid growth in trade." "No country in history has ever grown fast over a number of years, while carrying the twin of a persistent trade deficit with the rest of the world, and a long slump in domestic investment," wrote A Barman. What growth if we keep giving money to other countries? We need not worry about being stuck in a middle-income trap because we will remain stuck in a low-income trap, wrote A Chhibber. It's not about GDP growth, the people must have more money. No chance of that.
   

It's all a confidence trick.

Fifty years back, on 20 July 1969, three men walked on the moon, carried there by Apollo 11. That anniversary of triumph of science is being celebrated throughout the world. One day before that joyful event, in a black day for India, on 19 July 1969, then Prime Minister Indira Gandhi nationalized 14 private banks with deposits of Rs 500 million. "The political situation in our country today demands that banking facilities should be extended in an increasing measure to backward areas, to agriculture, to small-scale industry and so on and perhaps banking operations should be informed by larger social purpose," said Gandhi. That move did have beneficial effects. "In July 1969, at the time of nationalisation of banks, there were just 8,262 bank branches in the country. At the end of June 2018, state-owned banks alone had built a network of branches or franchise of over 90,000 (over 29,000 in rural areas) and over 1.45 lakh ATMs, while private banks had 28,805 branches." There is no evidence that this proliferation is because of nationalisation and not a natural result of increasing wealth and population demand. In 2014, Prime Minister Narendra Modi asked banks to open zero-balance accounts so that poor people can avail of banking services. Banks have opened 355 million such accounts, with cumulative deposits of Rs 998 billion. Nationalisation was Indira Gandhi's means of diverting attention from near famine, which we survived by begging for grains from the US under the PL 480 program, and the devaluation of the rupee. Gandhi promised minimum interference but "The fact that successive governments continue to maintain a tight grip on the banking sector shows the political importance of having control over the credit spigots in the economy," wrote N Rajadhyaksha. Economist Shawn Cole of Harvard Business School found that "a more than doubling of agricultural credit to villages led to no measurable increase in agricultural investment," wrote M Sharma. Modi has continued the practice of using depositors' money for political ends which will increase bad loans. The Congress waived loans to farmers in 2008 at a cost of Rs 716 billion to win elections in 2009. Modi promised loan waiver and pensions to all farmers to win elections this year. "Increasingly, the BJP appears to be mimicking the very political force it has replaced as the dominant party of our time, the Congress," wrote R Sardesai. It is encouraging defections from other parties, including "Atanasio 'Babush' Monserrate, who faces a serious charge of raping a minor in 2016", by offering them ministerial posts. "How many Congressmen does it take to make the BJP more like the Congress?" asked the Indian Express. Instead of a "Congress mukt Bharat (India free of Congress)", as promised by Modi, we have ended up with a "Congress yukt Bharat (India tied to Congress)". Modi has been able to convince people that he is different, when he is exactly the same. That makes him a con artist.

Why are the Europeans playing tricks?

Iran seized a British owned oil tanker Stena Impero, with 23 personnel, in the Strait of Hormuz yesterday. This was in response to the seizure of an Iranian tanker Grace 1 off the coast of Gibraltar earlier this month when British Royal Navy boarded the vessel in the early hours of the morning. Iran saw the "destructive" seizure as an act of "piracy" and vowed revenge. "Spain's acting foreign minister, Josep Borrell, said the United States had asked the UK to intercept the ship." "We have reason to believe that the Grace 1 was carrying its shipment of crude oil to the Baniyas Refinery in Syria," said Fabian Picardo, Gibraltar's chief minister. "That refinery is the property of an entity that is subject to European Union sanctions against Syria."  Iran also seized another British-owned Liberian-flagged tanker Mesdar but this was later released. Last year the US withdrew from the Joint Comprehensive Plan of Action (JCPOA), or the nuclear deal, agreed in 2015 between the US, UK, France, Russia, China and Germany, known as P5+1, with Iran. Following withdrawal, US President Donald Trump imposed escalating sanctions on Iran to cut off its oil exports, banking, insurance and other businesses from international trade. Last month, Trump announced financial sanctions against Iranian Supreme Leader Ayatollah Ali Khamenei and "many others" after Iran shot down a US drone over its waters. The European Union (EU) and Britain have been against withdrawal from the JCPOA, arguing that this was the best way to keep Iran from making nuclear weapons. They set up a special purpose entity INSTEX (Instrument in Support of Trade Exchanges) to break sanctions and continue trading with Iran. "How does INSTEX facilitate trade with Iran without making sanctions-busting cross-border payments? In a word -- barter." wrote F Coppola. INSTEX matches the price of exports to Iran with imports and so avoids payments. Since it is backed by European governments it is seen as protection from US retaliation. When Iran violated the nuclear deal by crossing the threshold of enriched uranium it is allowed under the JCPOA the EU stayed silent. Only a few days back, "European foreign ministers held crisis talks Monday on saving the beleaguered Iran nuclear deal as Britain warned the 'small window' for success is closing and Tehran issued fresh threats of restarting its atomic program." If Britain and the EU are so desperate to protect the nuclear deal, capturing the Iranian tanker Grace 1 for violating some EU sanctions on Syria was pure chicanery. Four crew members, who are Indians, were arrested unnecessarily. Europeans like wars but if they precipitate hostilities in the Middle East with their trickery, their economy, which is not firing at all, will suffer badly. We should tell them to stop.

Are we permanently stuck in this trap?

Consumer inflation (CPI) came in at 3.18% in June, a tad higher than 3.05% in May, but industrial production (IIP) growth was 3.1% in May, compared to 4.3% in April. Inflation level is thus well within the Reserve Bank's (RBI's) target of 4%, set by the government. Food inflation was just 2.17% in June, while core inflation, which excludes volatile food and fuel prices, was steady at 4.54%. Wholesale prices (WPI) rose just 2.02% in June which is the lowest for 23 months. The RBI has cut interest rate three times already this year and changed its stance to accommodative which means it is sure to cut it again at its next meeting. That is of great joy to the government because it lowers its cost of borrowing, yields on the 10-year the benchmark bonds dropped to 6.33%, the lowest since December 2016. Even so, yields on Indian government bonds are much higher than in developed countries, where yields have turned negative on $13 trillion worth of government debt, which means investors are paying to buy these bonds. Normally, businessmen in India are happy with low inflation because, that leads to lower interest rates, which lowers borrowing costs for them, but a few days back Anand Mahindra tweeted, "Low inflation is often a good thing. But like blood pressure, it may not always be a sign of health if it keeps falling. Moderately high inflation signals growing consumption and spurs investment. Some pump-priming via lower interest rates and measure to increase consumption may help." How can consumption increase when the labor force participation rate dropped to 49.7% in 2018 from 55.5% in 2012 and the number of workers actually fell to 461.5 million in 2018 from 467.7 million in 2012. Lower borrowing costs will not be an incentive to set up new businesses if demand is weak because fewer people are working. Governments depended on "unconventional" monetary policies by central banks to rescue the global economy from the 2008 crisis, wrote A Ranade. Recently, Pakistan and Turkey sacked chiefs of their central banks for not following government orders. "India's central bank has to juggle the apparently conflicting task of raising money for the government while keeping interest rates high enough to signal scarcity of savings (and keep inflation in check). Last year, more than 80% of the center's borrowing was eventually funded by RBI, which is dangerously close to monetization of the deficit." Government revenues are lower than estimates. wrote P Mehra, and "To fill the gaping whole on the tax revenue side, significantly higher non-tax revenue has been budgeted than the estimates of the interim budget." Tax rates are too high in India, wrote SS Bhalla. We need not worry about being stuck in a 'middle-income trap' because our policies are trapping us in a low-income one, wrote A Chhibber. We are stuck.

Why borrow when we already have Rs 98.18 trillion?

"The Lok Sabha on Wednesday passed a bill allowing the central government to withdraw Rs 98.18 lakh crore (Rs 98.18 trillion) from consolidated fund to meet its expenditure during 2019-20." The Consolidated Fund is where "All revenues received by the government by way of direct taxes and indirect taxes, money borrowed and receipts from loans given by the government flow into the Consolidated Fund of India" and "All government expenditure is made from this fund, except exceptional items which are made from the Contingency Fund or the Public Account." In the Budget, presented on 5 July, the total expenditure for this financial year is expected to be Rs 27,86,349 crore, which is Rs 27.863 trillion, but the government intends to withdraw more than 3 times the amount from the Consolidate Fund. Why? Where is the money coming from? And, if it has so much money why is it forcing the Reserve Bank (RBI) to hand over its reserves? A committee chaired by former governor of the RBI Bimal Jalan is to present a report on how and how much of the reserves held by the RBI is to be transferred to the government to plug the growing hole in its revenues. "While currency and gold revaluation reserves of RBI have more than tripled to Rs 6.92 trillion in 2017-18 from Rs 1.99 trillion in 2008-09, the contingency fund has grown 50% during the same period to Rs 2.32 trillion." This is small change compared to the humongous Rs 98.18 trillion the government is taking from the Consolidated Fund. While the RBI has $498 billion in documented assets it also has 'invisible' liabilities of $363 billion, wrote A Mukherjee, and it cannot shrink its reserves without shrinking its liabilities. That can cause a "cataclysmic deflationary shock" to the economy. Even raiding the RBI is not enough. "The Indian government has plans to raise as much as 3.25 trillion rupees ($47.4 billion) in the next five years by reducing its stakes in some large state-owned firms to 40 percent, two senior government officers told Reuters, in the nation's biggest privatisation push in two decades." Still not enough. "India plans to raise $10 billion from its first overseas sovereign bond because there is a huge appetite for its debt in the foreign market, according to a top finance ministry official." That is precisely the reason why we should not borrow in dollars, said former governor of the RBI Raghuram Rajan. It is much better to let foreign investors buy government bonds in India, because then our debt is in rupees. Nonsense, wrote R Jagannathan, "RBI data shows that nearly $260 billion of portfolio money is invested in stocks and debt, and if this money decides to flee, it can rock the foreign markets." Which means that since we are already neck deep in ordure a little bit more doesn't matter. Why, when the government has Rs 98.18 trillion? How little we Indians know of our nation.

New India seems a lot like old India.

Prime Minister Narendra Modi announced that India will become a $5 trillion economy in five years, by 2024. "It is a good thing for a nation to aspire to a target. It also suggests that Modi 2.0 has a new mindset -- a happy change from the 'garibi hatao' mindset of giveaways that afflicted Modi 1.0 after Rahul Gandhi's jibe about 'suit boot sarkar' which led to an unhappy race to the bottom during the recent general elections," wrote Gurcharan Das. Not exactly. In the very first cabinet meeting following his election victory, Modi announced Rs 6000 giveaways to all farmers every year at a cost of Rs 870 billion and a monthly pension to 50 million farmers at a cost of Rs 107.75 billion per year. Pension of Rs 3000 per month will also be given to 30 million traders and shopkeepers. To double the economy in size will need reforms. "It is not enough to implement reforms, Modi needs to sell them," thinks Das. For that reason Modi has asked all BJP MPs to go on 150 km 'padyatras' (journeys on foot) to interact with the people, wrote S Shekhar. But, to sell what? The Nehruvian "idea of India" has given way to the "new India" of Modi, wrote Prof V Dahejia. India, like Turkey and Iran, started with secularism but that "has been all but replaced by an (as yet) undeclared Hindu (or Indic) state". "Some observers expect Indira Gandhi's add-ons 'socialist' and 'secular', which were inserted in the Preamble to the Constitution during the Emergency, to be replaced by the term 'Hindu' or 'Indic' at some point." All this will hardly lead to economic growth and increase in employment. "It is almost scandalous that youth unemployment rate (unemployment among those in 15-29 years age category) has reached a high of 17.8%," wrote KP Kannan. The level of unemployment rises as the level of education goes up. The rate of unemployment among secondary school pass is 5.7%, which jumps to 10.3% in those who are higher secondary pass. "The highest rate is among diploma and certificate holders (19.8%); followed by graduates (17.2%); and postgraduates (14.6%)." "Competitiveness is affected by tax rates, interest rates, exchange rates and labor costs," wrote SS Bhalla. Recently released data from the OECD reveals "what has been feared and argued for a long time -- India has one of the highest (actually the highest) corporate tax rate in the world". According to the OECD, India's effective corporate tax rate (ECTR) is at 44%, while "China's ECTR is 20 ppt (percentage points) lower than India at 23.6%". Tariffs on imports were increased in the Budget on 5 July. "The increase in tariffs, which is part of a broader push towards protectionism and promoting Make in India, will have important implications for the industry and economy," wrote T Kundu. Giveaways, higher taxes and 'import substitution' are Nehruvian policies. Nehru had absolute power after independence. Modi wants the same. That is what he has to sell.

Cholesterol for us produces steroids for them.

"Now that India's policymakers have taken on board Richard Thaler's principle of nudge, it is time to get them moving faster on another track he has been advocating recently -- removing sludge," wrote S Kale. What is sludge? "Businesses in India face 58,000-plus possible compliances a year -- there are multiple regulators and government departments at the centre, state and city, and gram panchayat level, each putting in demands." Indian politicians do not believe in nudge, they believe in treating every citizen as criminal and using extreme prejudice. Thus any mistake in filing or calculating the very complex goods and services tax (GST) will invite severe punishment. The GST "is one of the most complex with the second highest tax rate in the world among a sample of 115 countries which have a similar indirect tax system, the World Bank said in a report". Tax inspectors spent days spying on a small shop selling 'kachoris' (fried snacks) in Aligarh and triumphantly arrested the owner for not paying GST on annual sales exceeding Rs 6 million. Turned out that the man is poor and had no knowledge of GST rules. A new transport bill increases fines for traffic violations by 5-20 times, apparently to prevent deaths due to traffic accidents. There is no word on making roads free of potholes which killed 3,597 in 2017. Potholes killed 9,300 from 2015 to 2017 and caused 25,000 injuries. There is no word on improving drainage of roads, of functioning traffic lights and of traffic police regulating traffic to help people instead of using them as collection agents. Rules are changed frequently to trap businesses. "Over the past 12 months, there have been more than 2,400 changes in compliance requirements across 1,100 plus Acts."  When a new company is incorporated it is allotted a "Corporate Identity Number, Permanent Account Number and Tax Deduction and Collection Account Number, and automatically registered for Goods and Services Tax, Employees State Insurance Corp, and Employees' Provident Fund Organization". Being small is no solution. Our 63 million micro, small and medium enterprises (MSMEs) may have to cope with "60,000-plus possible compliances and 3,300-plus possible filings for enterprises". To avoid this enormous burden 92% of businesses stay informal, which means no safety net for workers. It is enormously difficult to open a restaurant in Delhi while many of those in Bengaluru are shutting down. Real estate prices are kept artificially high by politicians and civil servants by limiting supply of land and by "opaque laws" because they have invested their ill-gotten gains in real estate, wrote R Jagannathan. Regulations are seen as 'cholesterol' by economists which blocks the flow of life giving blood in the economy. What they don't know is that cholesterol in the first step in production of steroid hormones. Regulatory cholesterol for us is steroids for politicians and civil servants. Fair exchange?

We may forget, but they won't.

"We will raise a part of our borrowing abroad now in foreign currency," said Finance Secretary SC Garg. "We raise Rs 7 lakh crore as borrowing. We take it all from the domestic market and so much less is left for the private sector. If I raise 10% of that, additional Rs 70,000 crore (Rs 700 billion) would be left for the private sector." So, it is for our good. Thank God. "Sovereign foreign borrowing is a bold move," wrote Prof Ila Patnaik. So is jumping off a plane without a parachute. But, is it wise? "It can help reduce the cost of capital for both governments and corporates. Foreign borrowing is critical if the government is to meet its target of Rs 100 lakh crore (Rs 100 trillion) of infrastructure investment and build a $5 trillion economy." "India has shied away from raising sovereign debt in global money markets to mainly shield itself from being impacted by global financial crises," wrote Zia Haq. At 5%, our external debt-to-gross domestic product (GDP) is the lowest globally and that's why we could quickly recover from the crisis caused by the collapse of Lehman Brothers in 2008. "Our approach to allowing foreign funds to buy Indian debt was also influenced by the 1991 balance of payments crisis when we ran short of dollars to pay an International Monetary Fund (IMF) debt," wrote L Venkatesh. The balance of payment crisis in 1991 is seared in our memory, when the Reserve Bank (RBI) had to pledge 47 tons of gold to the Bank of England and 20 tons of gold to the Bank of Switzerland to raise $600 million. "Foreign bankers often meet finance ministry officials, trying to persuade India to issue a foreign bond," wrote former governor of the RBI Raghuram Rajan. Surely not for our benefit. They say that borrowing in foreign currency is much cheaper because interest rates are much lower. The Federal Funds rate in the US is 2-2.25% and will probably fall further according to hints given by the Chairman of the Federal Reserve Jerome Powell. The European Central Bank held its interest rate at 0% during its recent meeting. In 2013, the rupee dropped to 69 to the dollar when the then Fed Chairman Ben Bernanke hinted at tapering US bond buying program, known as quantitative easing. Foreign bankers also say that it will increase liquidity in India, it would allow our companies to borrow at cheaper rates by setting a sovereign benchmark and foreign investors would be able to trade easily in our bonds without registering in India. Which would mean that bond prices will be controlled by foreigners rather than by our RBI. Finally, in case of default vulture funds buy up the bonds for a few cents to the dollar and force full repayment through US courts. Prof R Hausmann wrote a passionate appeal not to buy, what he called, "hunger bonds" of Venezuela. India is not Venezuela or Argentina, but we should not forget 1991. Or the 'taper tantrum'of 2013.

Can't milk PSUs once they are sold.

"The Indian government has plans to raise as much as 3.25 trillion rupees ($47.4 billion) in the next five years by reducing its stakes in some large state owned firms to 40 percent, two senior government officers told Reuters, in the nation's biggest privatisation push in more than two decades." We are not told if these are going to be genuine sales to private investors or the usual flimflam of taking money from one pocket and putting it into another and showing it as revenue, as it did with the so-called sale of HPCL to ONGC for Rs 369.15 billion and the sale of the Rural Electrification Corporation to Power Finance Corporation for Rs 145 billion. All four are public sector firms. The acquisitions were financed by loans from banks which was shown as revenue. This was called 'prestidigitation' by Chetan Ghate. "Fiscal 'presdigitation' or sleight of hand may contribute to our own version of a 'doom-loop', i.e., by pushing expenditure off budget to meet deficit targets and then recourse to borrowing from the national small savings fund by state entities keeps administrative interest rates high to incentivise such savings. This impedes monetary transmission." "With total public sector borrowing almost 9 percent of GDP, the public sector is eating up virtually all household financial savings," agreed SZ Chinoy. This pushes up interest rate on government bonds "with the 10-year yield stubbornly remaining 120 bps over the policy rate despite a slowing economy and a rate cutting cycle". The government should raise funds through "aggressively targeted asset sales of 1 percent of GDP". "The second Narendra Modi government does not have enough fiscal space to stimulate economic activity," wrote N Rajadhyaksha. "A sharp increase in government spending at this juncture could once again unsettle the bond market. On the other hand, a sharp cut in the fiscal deficit this year will worsen the growth slowdown." So, "the government should go for an aggressive program of asset sales and use the proceeds to build new infrastructure." The Comptroller and Auditor General (CAG) "highlighted the way massive dues to the Food Corporation of India (FCI), kept going up year after year, as well as dues to the National Bank of Agriculture and Rural Development (Nabard) and the fertiliser subsidy account," wrote SSA Aiyer. This means that central government debt is not 45.5% of GDP, as we are told, but 50.5%. The government has to find ways of encouraging long term household savings in pensions and insurance if it is to stimulate growth rate, wrote Prof Ila Patnaik. "The household savings rate declined from 22.4% in 2012 to 17.2% in 2017." If the government's stake in public sector units (PSUs) come down to 40% how will it force them to pay higher dividends at whim? Private companies and individuals will not be easily plundered. Maybe, that's why it is thinking of borrowing from foreign countries. A jump over the financial precipice.

Knock on effect of rural demand.

"India's GDP grew 5.8% in the quarter ending March 2019, the lowest figure since the 5.3% recorded in the quarter ending March 2014," wrote R Kishore. The Ministry of Finance explained the falling growth rate as due to "declining growth in private consumption, slow increase in fixed investment and muted exports". "The real effective exchange rate has appreciated in Q4 of 2018-19 and could pose challenges to the revival of exports in the near future," it said. When the rupee is strong compared to other currencies our goods become more expensive compared to our competitors. According to the World Bank, our economy is too dependent on domestic demand and not enough on exports. "I think, is the understanding that you need export-led growth because that's where you increase productivity when you compete in international markets; that's where you gain knowledge by interacting with competitors and with customers abroad," said Hans Timmer. Too much hard work, it is much easier to sell shoddy stuff to Indians. "India, Timmer said, is exporting 10 percent of its GDP. What they should have exported is 30% percent..." "India cannot survive without exports. In 2017-18, exports of goods and services contributed about 12% of India's GDP," said CEO of NITI Aayog Amitabh Kant. "In 2017, India ranked 146th out of 190 economies on the World Bank's 'trading across borders' component of doing business, which measures the time and cost (excluding tariffs) associated with documentary and border compliance and domestic transport procedures for trading goods." "No nation has sustained growth rates of 9-10% for two decades or more without succeeding in global markets. China's share in global merchandise exports rose from 2% in 1991 to 12.4% in 2012," wrote Prof A Panagariya. If India cannot increase exports it can increase economic growth by allowing foreign companies into multi-brand retail, which will lead to a jump in foreign investment, wrote T Worstall. Food is a larger portion of our Consumer Price Index (CPI) than the US but there is little value addition in food. "If consumption demand, especially for automobiles rather than food, is slowing then it is a double whammy for GDP growth. This is because it affects consumption demand in the current period and investment demand in the future." A survey by the Reserve Bank (RBI) showed a marked drop off in consumer demand for non-essential goods and services. If the government stimulates growth in agriculture, demand for industrial goods will also increase, wrote Prof A Gulati. "China, for example, registered an agri-GDP growth of 4.5 percent per annum during 1978-2016, a very long period indeed." The Minister of Agriculture in the previous government supported multi-brand retail because ti would help agriculture, but this government will not allow multi-brand retail because it will lose votes of small traders. Can be done. But, votes more important than economy.

What if there is very little to cheat?

R Jagannathan thinks that a flat 15% should be the rate for both direct and indirect taxes in India. A flat rate of tax has been discussed in other parts of the world for a long time, with people on low incomes being exempt. The argument is that with a flat rate, say 15%, a person earning Rs 100 will pay Rs 15, while a person earning Rs 1,000 will pay Rs 150 as income tax. So the rich will be paying more anyway. But progressives argue that, not only should the rich pay higher amounts of tax, but also the rate of taxation should rise in tandem with rising incomes. Indian politicians firmly believe in high taxes. A surcharge of 25% has been added to the tax paid by those earning Rs 20-50 million, bringing the effective rate to 39%, while for those earning more than Rs 50 million a surcharge of 37.5% takes their rate to 42.7%. This was justified on the grounds that other countries charge even higher rates on the super rich and, India being a poor country, it is the duty of the rich to help with "nation building". Comparing with other countries is wrong because they spend much more on education, healthcare and old age pensions for their citizens, wrote A Thakur. Not just that, these services are provided to everyone, including the rich, which is why people do not mind paying high taxes. Demonetization, wherein Rs 1,000 and Rs 500 banknotes were suddenly withdrawn to catch people who had large amounts of black money in cash, was inflicted in 2016. The goods and services tax (GST) is supposed to eliminate avoidance of indirect taxes by traders but also to spotlight high spenders who can then be checked to see if they have paid direct taxes. "The key metric to judge whether a policy is revenue enhancing (or not) is tax buoyancy," wrote R Kishore. But, "there has been a big shortfall in indirect tax collections, primarily on account of shortfall in GST collections" and buoyancy of "direct taxes has also suffered a big fall". A survey by the Reserve Bank (RBI) showed a big drop in spending on non-essential goods and services by consumers. Sale of passenger cars is collapsing, even for the market leader Maruti Suzuki. No GST can be collected if people stop buying. A survey by the National Sample Survey Office (NSSO) showed that 286 million men were working last year, "a decline from 304 from 2011-12", of which 82% earn less than Rs 10,000 per year. Another 13% must be earning between Rs 10,000 and Rs 21,000. So only 5% of men, or just 14.3 million, are earning more than Rs 21,000, when one has to pay income tax. For women, the situation is even more dire, as the labor force participation rate (LFPR) for women is only 23.3%, wrote Rukmini S. Around 68.5 million Indians filed tax returns in 2017-18 but only 20.2 million actually paid any income tax. Politicians and civil servants are convinced that vast numbers of people are cheating on taxes. Actually few are working and even fewer are earning enough to reach income tax threshold. That is the real tragedy.

Is it wise to support the rupee by borrowing dollars?

Prime Minister Narendra Modi has dictated that India's gross domestic product (GDP) will grow to $5 trillion by 2024. Last year India's GDP was $2.6 trillion according to the World Bank. "There are many ways to calculate a country's GDP," wrote U Misra. "You could aggregate the total production, or you could add up all the income earned by the people, or you could add up all the expenditure made by the entities (including government) in the economy. For most international comparisons, GDP is calculated via the production method (that is, adding up the value added at each step) and the monetary value is arrived at by using current prices in US $." To reach $5 trillion, from $2.7 today, India needs to grow at a real rate of 8%, which means a nominal growth of 12%, with inflation staying at or below 4%, and, most crucially, the rupee must stay strong against the dollar. "Is there any obvious reason for appreciation between 2018 and 2024? Probably not. The rupee/dollar rate will either be roughly where it is, or the rupee will depreciate," wrote B Debroy, Chairman, Economic Advisory Council - Prime Minister. Recently there has been a lot of debate about the growth rate of the GDP, with the former Chief Economic Adviser calculating that the growth rate is actually 4.5% and not above 7%, as claimed by the government. The government will spend over Rs 3 trillion on subsidies in this financial year. What is the point in handing out taxpayer money to the poor and then counting that in the GDP when they spend it, while cutting expenditure on education, healthcare, defense and capital spending? Since GDP is calculated in dollars the rupee has to retain its value. That can only be done if we earn more dollars. But we always run a trade deficit because we export less than we import. Last year our trade deficit was a record $176 billion which means we were distributing money to other countries. Our trade deficit has widened with 25 major countries in the last 3 years. We cannot earn dollars and we cannot print it. So the government has adopted various strategies to borrow more dollars to support the rupee exchange rate. The Reserve Bank (RBI) conducted swap auctions to buy dollars from banks. After 3 years the banks are committed to buying the dollars back at a premium, predicting a fall in the rupee. Indian companies are raising money overseas with gay abandon after the RBI relaxed its rules. The government will also raise money in foreign currency by selling sovereign bonds overseas. If the rupee drops the government will be tempted to borrow more in foreign currency to pay back the old debt and prevent a big hole in its budget, wrote P Mehta. That will be dangerous. Prof A Nandy thinks this is the best time to borrow abroad with central banks cutting interest rates. "The Modi government speaks of pushing labor and other reforms to attract investment, but it also promotes a full buffet of welfare programs, and its latest budget reflects a commitment to continued welfarism more than new investment," wrote R Sharma. Borrowing from other countries need to be paid back. In dollars.

Will Pakistan have to beg from Bangladesh?

Bangladesh, "which is the world's second largest garment exporter, has seen the value of its overseas sales rise to a record $3.81 billion in May, coinciding with Trump boosting tariffs on $200 billion of Chinese goods to 25% from 10%." "For Bangladesh, which aims to double total exports to $72 billion by 2024, snaring part of the $41 billion of clothing business that goes to China will provide a fillip to an economy that the Asian Development Bank forecasts will expand a record 8% for the next two years." Bangladesh and Pakistan are engaged in a tit-for-tat diplomatic quarrel "since 2013 when Dhaka decided to hang several of the 1971 war criminals". "Five top collaborators of the Pakistani army, four being leaders of fundamentalist Jamaat-e-Islami which opposed the country's 1971 independence from Pakistan, have so far been executed after their trial in Bangladesh's International Crimes Tribunal." Bangladesh has cut its fertility rate to 2.1 from 6.6 in 1960, while Pakistan's fertility rate is 3.65 per woman. "Even if the birth rate slows, some experts estimate that Pakistan's population could double again by the middle of the century, putting catastrophic pressures on water and sanitation systems, swamping health and education services, and leaving tens of millions of people jobless -- prime recruits for criminal networks and violent Islamist groups." "Bangladesh ran very successful vaccination programs", while "Pakistan is one of the only three countries, along with Afghanistan and Nigeria, that suffers from epidemic polio", because vaccinators are regularly shot dead. Since 2006, "Bangladesh's annual gross domestic product (GDP) growth has exceeded Pakistan's by roughly 2.5 percentage points per year" so that it will "overtake Pakistan in terms of per capita GDP in 2020, even with a correction for purchasing power parity". While Bangladesh economy is booming Pakistan had to approach the International Monetary Fund (IMF) for a humiliating bailout. "Last week, the IMF approved the 13th bailout package for Pakistan since the late 1980s." Last month, Pakistan's rupee plunged to "a record low of Rs 162 against one dollar". It may fall to 200 to the dollar. Pakistan "created terrorist groups to be a tool" to be used against India, said former CIA acting director Michael Morell. So Barack Obama sold F16s to Pakistan knowing it to be a terrorist state. "There was a time when Muslims went to the UK and came back 'anglicised', speaking English in an accent unfamiliar in Pakistan. Today, they return transformed into what a medieval Muslim man would have looked like -- bearded and clad midway between Saudi Arabia and India, a total stranger to spoken English," wrote Khaled Ahmed. Another few years, and Pakistan prime minister may have to beg a woman prime minister for a loan. What a fall!