If it's not working why not try voodoo economics?

"India's economy reported its weakest growth in more than six years at 5% in the June quarter and slowed for the sixth straight quarter, prompting the government to unleash a spate of stimulus measures to spur economic activity," wrote AR Misra. Economic growth is a measure of our gross domestic product (GDP) which is measured in rupees but expressed in dollars. While the size of our GDP was fifth in the world in 2017 it has been pushed down to seventh spot in 2018. On 4 July, the day before the Budget, 1 US dollar bought 68.74 rupees, but today, the dollar/rupee exchange rate has fallen to 71.73, a fall of 4%. Which means, the GDP has grown just 1% in dollar terms. "Private consumption expenditure further decelerated to an 18-quarter low of 3.1% in the June quarter, while investment demand picked up slightly at 4% from 3.6% in the preceding 3 months." "The near collapse of manufacturing growth at 0.6% in the June quarter against 3.1% growth in the preceding three months also reveal the dismal state of the industrial sector." With the government panicking "there have been attempts by various industry bodies to extract as much stimulus as possible from the government, and some of them have succeeded in extracting concessions", wrote Prof Himanshu. But, "While the government agreed to open up its purse to buy new four-wheelers for its officers, it did not occur to it that the real crisis is out in the countryside, where most are struggling to maintain essential consumption." Dismissing "professional pessimists" The Prime Minister has promised that India will become a $5 trillion economy by 2024. "The country will need to grow by 9 percent every year for five years continuously and raise aggregate investment rate to 38 percent of GDP to achieve Prime Minister Narandra Modi's target of turning India into a USD 5 trillion economy, EY has said." How to achieve that? Reforms, say economists. "We need a new set of reforms, which energise the private sector to invest. Sops, stimulus of one kind or another are not going to be that useful in the longer-term especially given the very tight fiscal situation that we have." said Prof R Rajan. Had our industries been genuinely competitive they would have compensated for a drop in domestic demand by "diverting sales to the vast export market, which was worth $740 billion in 2017", wrote Prof A Panagariya. Loss making industries should be allowed to fail. That will mean job losses and negative publicity. Votes are precious, taxpayer money is cheap. Prof VA Nageswaran suggests "reform of factor markets -- land and labor, primarily". Rahul Gandhi's jibe of "Suit Boot ki Sarkar" stopped Modi in his tracks the last time he tried such reforms. Blaming the present slowdown on demonetization in 2016, P Chakravarty of the Congress wrote "India's economy now needs some version of 'Nyay', the minimum income guarantee proposal of the Congress". Subsidies mean that spending by the taxpayer is transferred to the poor. How that increases GDP is a mystery. Perhaps, we need a dose of voodoo economics.

Are most people not really corrupt?

"While there may be instances of benign corruption, the truth is that corruption corrodes markets, protects incumbents from competitive challenges by impeding the entry of new actors, destroys the moral fabric of society, and stunts economic development," wrote Prof K Basu. Countries with low corruption are rich while those with high corruption are poor. However, anti-corruption drives are used to gain power, "nurturing cronyism and damaging democracy instead". "What starts as an anti-corruption ends up as an instrument of cronyism and media control. And by creating a safe zone for loyalists, it often ends up exacerbating corruption." President Xi Jinping of China launched a ferocious anti-corruption drive which resulted in prisons filled up with Communist Party leaders. However, China's corruption rating, according to Transparency International, remains the same as in 2012, when Xi came to power, wrote Prof D Hough. The removal of the two-term limit on the presidency for Xi Jinping by the National People's Congress may be construed as extreme cronyism. China banned names, such as Disney and Winnie the Pooh, phrases, such as 'Ascend the Throne', and 'Rule the World', and even the letter 'N' because that meant 'n>2'.  In India the government has made biometric identity card Aadhaar mandatory for every citizen, regardless of evidence of rampant misuse. Aadhaar has been made mandatory even for filing income tax returns. Prime Minister Narendra Modi has won two elections by portraying himself as crusader against corruption. Any twopenny government official can "monitor, seize and look into computers and phones". CCTV cameras will monitor teachers and students in government schools in Delhi, wrote Prof A Pathak. The government intends to force internet companies to store India data on servers located inside the country because "Data is a sovereign asset", according to a minister. No, it absolutely is not. First of all, the government is not our sovereign. Elected politicians are our representatives and not our rulers as they have made themselves out to be. And secondly, our data is our personal property and may not be used without permission, no matter how high and mighty they think they are. The government wants to monitor WhatsApp, which is encrypted end to end, on grounds of security. After terrorising taxpayers and the middle class the government has unearthed some Rs 100 billion, which could be unaccounted wealth. This, when the GDP is $2.7 trillion or Rs 190 trillion. "The rise of Trump and, more recently Boris Johnson, are just some indicators that the rise of the incompetent is not a aberration," wrote VR Ferose. And, "The most incompetent leaders have the highest surviving power." "Why has hope been lost by so many Americans, especially young Americans?" asked J Morris. Because, there is not much to hope for. Anywhere.

5% is not enough. What about 3%?

Quoting Prof A Panagariya, S Chakrabarty wrote, "India's problem is not unemployment as such. Most people here find something or the other to do. The problem is a low productivity-low wage/income equilibrium." "India needs 8% growth sustained for two decades." However, growth rates can never again reach 10% because of "deglobalisation of trade, depopulation as labor forces shrink, declining productivity, and a debt burden as high now as it was on the brink of crisis," wrote Ruchir Sharma. "The benchmark for rapid growth should come down to 1-2% for developed economies, such as the United States, and to 3-4% for middle income countries such as China. For emerging nations such as India, 5% is the new 7%, the appropriate aspirational standard." In an effort to boost growth rate, "The Union cabinet cleared a raft of changes in foreign direct investment (FDI) regulations, including easing rules for overseas single-brand stores and permitting FDI through the automatic route in contract manufacturing and all areas of coal mining." Strangely, even as foreign companies will be allowed a free hand to mine India's coal, "India will be a key destination for coal from Adani's Carmichael mine in Australia's Galilee basin," said CEO of Adani Enterprises Ltd Vinay Prakash. "Coal from the Australia operation, known as the Carmichael project, would be transported to India, where the company is building a new power plant for nearly $2 billion to produce electricity. The power would be sold next door in Bangladesh." "The company also built a close relationship to Narendra Modi, the man who, in 2001, became the top elected official in Gujarat, and, in 2014, the prime minister of India," said an article in the New York Times. No one in India would dare to write such an article. "The beleaguered Indian economy is finally making a sensible bargain with the rest of the world: 'Take our billion plus customers, give us jobs'," wrote A Mukherjee. Modi has been prime minister for over 5 years now, so why weren't these changes made earlier? India can never grow like East Asian economies because, "Contrast those attitudes to India, where government is suspicious of the private sector, and elections are fought on promises of generous welfare benefits for the poor, the elderly, farmers and many others." wrote R Sharma. In East Asian nations, "Helping the young, old and poor was seen as the responsibility of the family, not the state." That means the government is ravenous for taxes. Investors in shares in India "already pay taxes in the highest brackets", wrote V Kedia. The budget massively increased the tax surcharge on foreign portfolio investors (FPIs), following which the stock market crashed. The budget also proposed 3 years in prison for officials if companies did not spend 2% of profits on charity. Both these proposals have been withdrawn. Revenue expenditure gobbles up 87.8% of the entire government spending, which is comprised of "payment of salaries, wages, pensions, subsidies and interest". As long as the government is looking for tricks to extract unreasonable taxes cosmetic changes will not work. Even 5% growth may be difficult.   

Is the EU likely to buy his bluff?

"In a dramatic move on Wednesday morning, Britain's new Prime Minister Boris Johnson set in motion the suspension of the UK Parliament -- which means MPs have much less time to debate Brexit, the process of the UK leaving the European Union." Normally the British Parliament would have taken an autumn recess for 3 weeks around 10 September, which means that they would have reconvened at the beginning of October. Johnson has postponed the reopening to 14 October, leaving less time to debate Brexit. Opposition leaders are furious. Labour leader Jeremy Corbyn described it as "a smash and grab on our democracy". Johnson thinks that by threatening the European Union (EU) with a 'No Deal' Brexit he can blackmail them to get rid of the Irish backstop. The only land border between the EU and the UK is the one between Northern Ireland, a part of Britain, and the Republic of Ireland a member of the Eurozone. As a member of the EU the UK had no customs or immigration check for goods and people traveling to and from the continent. The 'backstop' is a customs union for an indefinite period, till a formal trade deal is negotiated between the UK and the EU. In recent talks with Angela Merkel of Germany and Emmanuel Macron of France Johnson believes that they are ready to concede on the backstop. They did say that they will look at any new proposal the UK brings to the table, wrote K Adler, but Johnson has no new idea, only bluff and bluster. The opposition maybe enraged but they are also responsible for Johnson's gambit. The House of Commons voted overwhelmingly against a Brexit deal negotiated over 2 years by the former Prime Minister Theresa May. They then voted against 8 proposals presented by MPs to resolve differences. US President Donald Trump is a vocal supporter of Johnson and his hard line stance on Brexit. Trump has promised a great trade deal for the UK once it is out of the EU, but Johnson insists that the US has to compromise if it wants a deal with the UK. The UK has a population of 67.5 million and a nominal GDP of $2.9 trillion, while the US has a population of 327 million and a nominal GDP of $20.5 trillion. The EU has a population of 513 million and a nominal GDP of $18.8 trillion, and yet Johnson wants the EU to capitulate to his ultimatum, or else. The UK economy could shrink by 2%, according to the Office for Budget Responsibility (OBR), or by 8%, according to the Bank of England, in the event of a no deal Brexit, yet Johnson thinks that the EU is trembling in fear. We know that Boris Johnson does not use LSD or crystal meth so he is most likely suffering from delusions of grandeur. Which is worse.  

It is our piggy bank. Leave it alone.

The Reserve Bank of India (RBI) is to transfer Rs 1.76 trillion from its reserves to the government, apparently as recommended by the Bimal Jalan Committee, set up to calculate how much money the government could extract from the RBI without it becoming bankrupt and reducing India's credit rating to junk status. Seems that the committee had recommended that the money be transferred in tranches, presumably to hedge against a sudden outflow of funds in case of a global currency war, but capitulated completely after meeting the new Finance Secretary Rajiv Kumar. Even so we can wipe our nervous brow in partial relief because the government denied that it had actually demanded Rs 3.6 trillion. R Jagannathan holds the RBI responsible for the slowing of the economy because it failed to detect the Punjab National Bank scam and because it kept interest rate too high for too long. Although the RBI is the regulator, the government owns the Punjab National Bank and appoints its directors who prepare its balance sheet. Hence, Finance Ministry officials should have been held responsible and not the RBI. As for high interest rates, how has Jagannathan forgotten that the RBI was reducing interest rate to 4.75% in 2009 when the average inflation for the year jumped to 10.83% that year from 8.32% in 2008. Excessively low interest rates led to excessive borrowing by companies which they are unable to repay, leading to a large pile of bad loans at public sector banks. According to a notification from the Ministry of Finance, public sector bank lending zoomed from just over Rs 18 trillion in March 2008 to over Rs 52 trillion in March 2014, while gross non-performing assets (NPAs) at public sector banks soared from Rs 2.79 trillion in March 2015 to Rs 8.95 trillion in March 2018, the famous 'twin balance sheet problem'. NPAs have come down slightly to Rs 8.06 trillion in March 2019. The central bank is coming to the government's rescue "without any risk of exposure to its own credibility", or, "As recently as last month the government was expecting a Rs 90,000 crore payment from the RBI, which was already 80% more than the previous year. For it to end up with double the budgeted amount smacks of pressure," wrote A Mukherjee. As per Section 7(1) of the Constitution the government is empowered to give directions to the RBI but if disaster strikes the RBI will be held responsible. Indian politicians enjoy luxurious benefits which few in the world can dream about. Without any accountability. Civil servants actually asked "whether the central bank, which is owned by the government, can technically have a rating which is above the sovereign's". Intoxicated with power and arrogance politicians and civil servants have forgotten the first words of the Constitution -- "We The People of India". The RBI's reserves are owned by us and not to be squandered for political gain. Leave our piggy bank alone.

Kautilya was right for India in 4th century BC.

"US President Donald Trump said China has asked to restart trade talks, hours after Beijing's top negotiator publicly called for calm in response to a weekend of tit-for-tat tariff increases that sent global stocks plunging." "We are willing to solve the problem through consultation and cooperation with a calm attitude," said Chinese Vice Premier Liu He. "We firmly oppose the escalation of the trade war." Soothing words cannot undo "the problem" so easily when Beijing started the present round of tariffs by "letting the yuan tumble to the weakest level in more than a decade and asking state-owned companies to suspend imports of US agricultural products". A furious Trump "ordered" US companies to get out of China. Trump also increased tariffs on Chinese products. "The White House will raise existing duties on $250 billion in Chinese products to 30% from 25% from October 1, the president tweeted. The tariffs on another $300 billion in Chinese goods, which start to take effect on Sept 1, will now be 15% instead of 10%, he added." So who is under greater pressure? Trump, who is to face re-election on 3 November 2020, or Chinese President Xi Jinping who has built up an image of a strongman. "His name has been added to China's Constitution. No living figure has gotten this treatment since the most famous Chinese Communist Party leader of all: Mao Zedong," wrote Prof J Wasserstrom. "The harder line underlines the growing feeling in Beijing that Trump can't be trusted to cut a deal, and that China would be better off waiting to see if a Democratic presidential candidate -- many of whom have criticized the use of tariffs -- takes office." But, can China afford to wait for 20 January 2021 when the new president, if Trump loses, will be sworn in? "In the first half of the year, Mexico was the top trading partner of the United States, followed by Canada, the latest official data reveals, according to the Wall Street Journal." China's economy showed further signs of strain in July with output at its factories falling to its lowest level in 17 years, while investment and retail sales slowed, official data showed Wednesday." "I think you can say the US is winning because the Chinese are now doing things which smell desperate," said China expert Gordon Chang. By allowing the yuan to weaken they are bearing some of the tariffs on their products. Meanwhile, China's friend Pakistan, with a population of 212 million, is having to adjust the price of roadside rotis and naans, after receiving a loan of $6 billion from the IMF. Argentina, with a population of 44 million, received a loan of $56 billion from the IMF, while Ukraine, with a population of 42.5 million, was promised $17.5 billion. If China's economy tanks, Pakistan will not be able to afford naans, maybe not even rotis. "The enemy of my enemy is my friend," wrote Kautilya in Arthashastra in the 4th century BC. Perfect for India.

We are totally inclusive already.

Speaking on the occasion of Independence Day on 15 August the Prime Minister Narendra Modi "called on the nation to honour wealth creators", wrote A Maira. "The logic of lauding the wealthy is that the country needs them to create more wealth before it is distributed." This is known as 'trickle-down economics'. "Trickle-down economics assumes investors, savers, and company owners are the real drivers of growth. It promises they'll use any extra cash from tax cuts to expand business," wrote K Amadeo. That should create new jobs, creating wealth, and increase tax collection. "Only 20 million Indians out of a population of over one billion invest in mutual funds and stocks." So Maira recommends, "Rather than being driven by numerical goals of its size, policy solutions must be a vision of a reshaped inclusive economy." India is definitely not a 'trickle-down economy' because taxes are very high on businesses and on the middle-class. "In 1946-47, the maximum marginal rate of tax on personal incomes was 96.88%," wrote P Mehra. This was brought down to 30% in 1997-98 but has been raised to 42.7% in this year's budget. "The corporate tax rate was among the highest across 171 countries in 2018. High rates encourage firms to push profits overseas to low-tax jurisdictions." "In 2018, the tax rates in most countries averaged between 23 and 26.4 percent," wrote S Punj. Corporate tax rate in the US was cut from 35% to 21% by President Donald Trump. Government rules and high taxes force businesses to remain small and informal. "The number of informal sector workers increased from 341.28 million in 1999-2000 to 386.02 million in 2011-12" and the "Number of formal workers increased by 81.5% from 20.46 million to 37.15 million in the same time period," wrote P Salve. Even in the formal sector jobs created were mainly informal, "employing workers with low earning and with limited or no social protection". Politicians of all parties have been practicing "inclusive economy" by competing for social schemes to uplift the poor to win elections, wrote TK Arun. Modi won this year's general election, by not only continuing with schemes started by the Congress, but by substantially adding to them, wrote Prof Ila Patnaik. Social schemes need money, which is why India has such high taxes. Taxes are disguised as social schemes to earn support of the 'vote bank'. The Budget proposed to imprison company officials for up to 3 years for not complying with the Company Social Responsibility law, which was passed by the Congress. Private hospitals maybe driven to bankruptcy by the Ayushman scheme to provide tertiary healthcare to the poor. Given constant changes of rules using coercion to extract as much taxes as possible it is no wonder that manufacturing makes up only 15% of GDP. The economy runs on consumer spending and so when sales of even Rs 5 biscuits start to fall it is time to worry, wrote A Mukherjee. What's the remedy? Increase cash handouts to Rs 72,000 per year, wrote P Chakravarty of the Congress. If it's not working, increase it.

Is it there for the asking?

In a speech to Non-Resident Indians (NRIs) in Abu Dhabi, Prime Minister Narendra Modi said that "political stability and predictable policies framework are key driving forces for investors and these factors have made India an attractive investment destination in the world". "We also see to it that investors get good returns on their investment," he said. Behind his back, even as he was speechifying, the Finance Minister was "scrapping surcharge on foreign portfolio  investors (FPIs) and domestic market players". This year's budget proposed to "increase the surcharge levied on top of the applicable income tax rate from 15% to 25% for those with taxable incomes between Rs 2 crore and Rs 5 crore, and to 37% for those earning more than Rs 5 crore, taking the effective tax rate for them to 39% and 42.74% respectively". This was effective also on FPIs. This year's budget was presented on 5 July, so a reversal within 6 weeks is not a sign of "predictable policies". But why the change? Because, "Since July, FPIs have net sold stocks worth about Rs 24,500 crore, translating to about $3.4 billion, official data showed." The stock market index the Sensex closed "up 228 points or 0.6% on the day" to close at 36,701. On 5 July, the Sensex rose 251 points to 39,981 just after opening, but finished the day down 394 points at 39.513. So the Sensex has lost over 10% since the budget. The rupee has dropped to 71.5 to the dollar today from 68.74 on 4 July, the day before the budget on withdrawal of just $3.4. Why when India had foreign exchange reserves in excess of $430 billion on 9 August? "The Centre is finalising a list of essential hygiene products, which is likely to form the basis for expansion of price control from medicines and medical devices to other important health products." Why would anyone invest if they are not allowed to set prices to make profits? Foreign Direct Investment (FDI), which is considered stable and long-term, as opposed to FPIs, was $44.4 billion in the last financial year, the lowest in 6 years. Not just price controls, the government is working on an import substitution policy to support domestic industry. In 1978, China's GDP was $293.6 billion, compared to India's at $293.2 billion. In 2018, China's GDP was $10.8 trillion while we are struggling at $2.85 trillion because we followed import substitution for too long, wrote V Kaul. If there is "political stability", as Modi claimed, then why is his party the BJP encouraging defections of politicians from the Congress, including child rapists? In his quest for absolute power Modi has been aided by the Supreme Court, wrote Gautam Bhatia. Where money is concerned even the most ardent supporter will ask for profits. Can Modi increase investment just by asking?

May seem stronger, but the end can be very abrupt.

"China announced Friday it will hit US imports worth $75 billion with new tariffs as retaliation for Washington's planned tariff hikes, further intensifying the pair's bruising trade war," reported Reuters. "The punitive tariffs of 5 to 10 percent will apply to 5,078 items from the US, starting September 1 and December 15, China's state council office said." This is in response to President Donald Trump's intention to levy 10% tariffs on the remaining $300 billion of Chinese imports into the US. However, after lobbying by retailers, Trump announced that "he is delaying some tariffs on Chinese imports ahead of the Christmas season to stem their potential impact on holiday shopping". Earlier, "China responded to Donald Trump's tariff threat with another escalation of trade war on Monday, letting the yuan tumble to the weakest level in more than a decade and asking state-owned companies to suspend imports of US agricultural products." China calculates that the pressure is on Trump because he has to face re-election next year and, if he loses, the next president maybe more malleable, whereas Xi Jinping was allowed to remain president for life by the National People's Congress. "President Xi, who is a strong man, I call him 'king'," Trump revealed in a speech. There are grim predictions of a looming recession because the US has been enjoying the longest period of economic growth in history. "This month marks the 121st month of the economic expansion arising out of the great financial crisis, making it the longest run on record going back to 1854." Many countries, including Germany, are seeing a slowing down in growth and the trade war is makes a recession more possible. Tessa Stuart lists all the reasons why "The Next Recession Is Going To Be Brutal," in the US. "In the US, the number of companies with increased risk of becoming financially distressed -- companies that either generated negative Ebidta (earnings before interest, tax, depreciation and amortization) or have net debt to Ebidta over 3x -- has grown noticeably this cycle (53% as of 30 June 2019) versus last cycle (32% as of 30 June 2007)," wrote Prof VA Nageswaran. "Globally, about $13 trillion of debt is trading at negative yields." The US is the largest market for Chinese goods, importing $557.9 billion in 2018, so a recession in the US, leading to a severe fall in consumer spending, will surely hit China very hard. One would think that Europe, which has grown rich because of the Marshall Plan after World War II, when the US gave $12 billion for reconstruction, would support the US without hesitation. But, "European leaders remain convinced that they can uphold values and norms they share with Washington while benefiting  from greater engagement with China," wrote Kendall-Taylor and Rizzo. In short, take Chinese money while sheltering under NATO umbrella, financed by the US. In fury at Chinese action Trump has announced higher tariffs of his own and has asked US companies to get out of China. Trump can only lose an election but Xi should remember what happens to dictators. Like Nicolae Ceausescu, a communist.

How to stimulate without stimulant?

"Indian markets fell for a third straight day on Thursday, amid weak global cues, lack of clarity over taxation of foreign portfolio investors (FPI) and the prolonged wait for a fiscal stimulus,"wrote N Sultana. Taxes on the rich in India jumped in this year's Budget. Apparently, FPIs are registered as Association of Persons (AOP) and are treated as individuals for taxation purposes so the new surcharge applies to them as well. Foreign investors have the whole world to invest in, so they will move their money to markets where their profits will be higher. "Having lost the fiscal plot, bureaucrats are trying to marshal resources by squeezing taxpayers, foreign investors, firms planning buybacks and even the central banks. Such overreach never ends well," wrote A Mukherjee. Bureaucrats cannot agree on what needs to be done. Vice Chairman of Niti Aayog Rajiv Kumar wants "extraordinary steps to deal with the unprecedented stress in the country's financial sector, which is the key reason for the growth slowdown", but the Chief Economic Adviser K Subramanian believes that using taxpayer money to bailout industries creates a "moral hazard". Erstwhile finance secretary SC Garg, the man responsible for the mess, thinks that easier credit to the private sector is better than "fiscal stimulus". The reason why a fiscal stimulus, which means increased government spending, is impossible, is because, "India is facing a silent crisis owing to a shortfall in tax revenues, and the government's budget suggests it may have grossly underestimated the problem," wrote A Chaudhary. A report by the Comptroller and Auditor General says that the government disguised the actual fiscal deficit in 2017-18 by borrowing from "off-budget" sources. It was 5.85% and not 3.46% as shown in the budget. "The analysis also shows that the top 5% of effective taxpayers in the country, equivalent to 0.1% of the country's population, contribute nearly three-fifths of India's income tax collections," wrote N Kwatra. If the rich are squeezed too hard they may leave India for other countries where they will enjoy greater peace. Business leaders in India have been optimistic about the economy and their own prospects for years while there were clear signs of slowdown in the economy, wrote S Khanna. Credit growth peaked in 2010-11 and has been falling ever since, while gross fixed capital formation, a sign of new investments, peaked in 2007. Sales of motorbikes, alcohol, underwear and even biscuits are falling which means people are not earning enough. If people don't earn they cannot pay income tax, and if they do not spend the government cannot collect sales tax. If FPIs sell out the rupee will fall which will see a jump in the price of domestic fuel on which the government is collecting huge taxes. The rupee is propped up by carry trades and if the interest rate drops too low this will stop, further weakening the currency. How to stimulate if there is no stimulant?

From a fat midget to a lean giant, is it possible?

The Reserve Bank of India (RBI) "has started worrying about benign inflation, which has remained low for a long time now within RBI's comfort zone, allowing it to bring down policy rates". In its last meeting the Monetary Policy Committee (MPC) "suggested that the significant moderation in retail inflation was actually reflecting softening of demand in the economy". This is bad because it shows that, "India is now in the third growth recession since 2008. Economic growth has already slowed sequentially for four consecutive quarters," wrote N Rajadhyaksha. The economy is still growing, but not as fast as the government would like. The US economy is projected to grow 2% in 2019, "Japan has rarely grown faster than 1%" since the global financial crisis of 2008, and, "Europe has struggled to sustain growth faster than 1.5%," wrote Ruchir Sharma. The reason for lower economic growth is that populations in these countries are not growing any more. "When populations are growing slowly, the economy doesn't need to grow as fast to keep incomes high." "Slower growth in the working age population also means less competition for jobs, which explains why unemployment is at record lows not only in the United States but also in Germany and Japan." It does not apply to India because, "Around 2027, India is projected to overtake China as the world's most populous country, says the latest report released by the United Nations." With such a humongous population "India needs to grow at 9-10 percent for the next three decades for lifting millions of people out of poverty," said Niti Aayog CEO Amitabh Kant. "The country will need to grow by 9 percent every year for five years continuously and raise aggregate investment rate to 38% of GDP to achieve Prime Minister Narendra Modi's vision of turning India into a USD 5 trillion economy, EY has said." Forget 9%, "India's economic growth is set to slow further in the April-June quarter of this year to 5.7% amid contraction in consumption, weak investments and an underperforming service sector, says a Nomura report." Despite low economic growth "confidence surveys suggest Americans are content with record low unemployment, benign inflation and 1.4% growth in GDP per capita". The per capita GDP in the US was $59,484 in 2017, so a 1.4% growth is nearly $8,000, around 4 times India's GDP per capita at $2,041 in March 2019. Like the US, India's economy is dependent on domestic demand, but unlike the US, consumer confidence is falling in India. Without blistering growth unemployment will only rise from record levels today as the population grows. That is why Americans are happy with 2% growth, while there is panic with over 5% in India. Still, Indians die to go to the US.  

Who wants difficult decisions? What if they fail?

"After June quarter results, earnings estimates of a large number companies continue to be downgraded," wrote Jethmalani and Karnat. Why? "Over the last six-nine months, the sharp decline in demand for consumer discretionary spends seen initially has spread to consumer staples too. On top of this comes the deterioration in the government fiscal position that has led to constraints on its ability to increase spends on infrastructure, or provide any other form of fiscal stimulus." "There has been spike in downgrades and ratings suspensions on debt papers of listed companies in the second half of fiscal 2019, indicating a deterioration in corporate health, data from the Reserve Bank of India's (RBI) financial stability report shows." Indian companies are having to "downsize and, in some cases, pull down their shutters" because of "a weakening consumer confidence, an uncertain business environment, and regulatory risks", wrote D Chaki. This all happened after the financial crisis of 2008, when "Lenders, especially public sector banks (PSBs), were encouraged to lend generously to the private sector to boost liquidity and demand," leaving them with bad loans of Rs 10.3 trillion. Contrast that with the US, where the government earned a profit of $15.3 billion from its Troubled Asset Relief Program (TARP) which was a bailout of banks, insurance and car companies worth $426 billion. The RBI cut the growth rate for the Indian economy from 7% to 6.9% while cutting interest rate by 35 basis points. But, according to R Sharma, "For emerging nations such as  India, 5% is the new 7%, the appropriate aspirational standard." "Now, among the world's 200 economies, just eight or one in 25 are on track to grow 7% this year. Most of those are small economies in Africa." Used to government protection, Indian companies are demanding a stimulus package from the government through increased spending, as well as lower interest rate. Apparently, the government is also thinking of a stimulus package by decreasing taxes on certain sectors, such as automobiles, and a relaxation of the fiscal deficit target by 0.5% which will allow extra spending of Rs 1.15 trillion. The fiscal deficit will go up anyway because assumptions on tax collections were wildly optimistic in the budget. The government is already committed to a stimulus through subsidies of Rs 3.02 trillion this year, which does not take into account farmers' loan waiver and MUDRA loans, which alone may total over Rs 3 trillion. Naturally, tax officials are resorting to threats and strong-arm tactics to extract as much money as they can. Biocon founder Kiran Mazumdar Shaw was warned by "a government official" not to speak about issues such as "income tax harassment". The government has managed security and subsidies much better than the economy, wrote S Chakrabarti. That is because it is easy to sacrifice soldiers and taxpayer money. Who wants responsibility for the economy?

Not just in Mississippi, it's everywhere.

"The first question I get when I tell people I live in the Mississippi Delta is, 'Why'?" wrote Jemar Tisby. "Nothing stands between you and the stories you hear about slavery, Jim Crow, and the civil rights movement." Jim Crow laws were enacted by Democrats to enforce segregation of blacks and whites. The original Jim Crow was a deformed black slave whose song was copied by a white man Thomas Dartmouth (TD) 'Daddy' Rice who would blacken his face to perform in front of white audiences. "In our town, the Confederate cemetery, which now sits in the corner of a larger cemetery, was meant only for white people. A completely separate plot of land in another part of town, unkempt and underfunded by comparison, was reserved for deceased black people," wrote Tisby. The initial wealth of the United States came from export of cotton which was built on slavery. "If the Confederacy had been a separate nation, it would have ranked as the fourth richest in the world at the start of the civil war." "By the start of the war, the South was producing 75 percent of the world's cotton and creating more millionaires per capita in the Mississippi River valley than anywhere in the nation. Slaves represented Southern planters' most significant investment -- and the bulk of their wealth." Edward E Baptist has written a book -- 'The half has never been told: Slavery and the Making of American Capitalism'. Slavery was highly productive, he says, "The incentive is if you don't do this you'll get whipped -- or worse." It was this that turned the US "from being a colonial, primarily agricultural economy to being the second biggest industrial power in the world". Slavery may have ended in the US but it continues in other parts of the world. Bonded labor is a form of slavery practiced in India, where entire families are made to work for no wages to pay off loans they took to deal with sudden emergencies, such as severe illness. Particularly, appalling is the use of children as bonded laborers to pay for loans taken by their parents. Kailash Satyarthi received a Nobel Prize in 2014 for his campaign to end this pernicious practice in India and in the world. In India, "Some 174 children go missing everyday. Only about 50% of them are ever found again." Thousands of girls and women are abducted or tricked with promises of well-paid jobs and sold into prostitution. "The United States is again ranked as one of the worst countries in the world for human trafficking," according to a recent report by the State Department. But no nation can beat China which arrests Falun Gong members on fictitious charges and then harvests organs of healthy people for transplants. Tisby is angry that "racism never really goes away" but he should also remember the hundreds of thousands of whites who died in the Civil War to abolish slavery in the US. The story of slavery is the history of human brutality, but also of Lincoln and Satyarthi and the many who died fighting it. Perhaps, we should not lose hope. 

Who knows if it is cyclical or structural?

To alleviate the slowdown in the Indian economy we have to understand that, "The structural versus cyclical distinction is extremely important because this has a direct bearing on the choice of policies to boost economic activity," wrote R Kishore. Those who believe that the problem is cyclical lay the blame on the 'policy paralysis' of the Congress-led government prior to 2014, which led to the 'twin balance sheet problem', wherein companies saddled with huge debt could not invest in new projects while banks refused to lend until all the bad loans had been cleared. Those believing in the structural argument point to continuous fall in intention to invest in new projects, shown by the investment data from the Center for Monitoring Indian Economy (CMIE). Slowdown means a drop in the growth rate of the gross domestic product (GDP) which is "the sum of consumption expenditure, investment, government expenditure and net exports (exports minus imports)," wrote V Kaul. On consumption: Domestic car sales fell by 23.3% during April-June 2019 compared to the same period last year, two-wheeler sales fell 11.7%, tractor sales, an indicator of rural demand, fell 14.1%, unsold housing units increased from 1.2 to 1.28 million units, non-oil, non-gold imports fell 5.3% and growth of fast moving consumer goods (FMCG) fell from 12% to 5%. Announcement of new projects fell by 79.5% and of completed projects by 48%. Naturally, growth in bank lending to industry, rail freight and steel consumption was weak. Government expenditure contributes 10-11% of the economy but growth in tax revenue is weak, so the government cannot stimulate the economy by increasing spending, and net exports were slightly better at minus $46 billion, compared to minus $46.6 billion in 2018. Tax collections grew by 1.4% from April to June 2019 compared to last year and "The shortfall in the Center's GST (goods and services tax) collections was as high as 22% in the last financial year" wrote N Kwatra. The way to judge if revenue is increasing is to measure tax buoyancy which is "calculated by dividing the annual growth in gross taxes by annual growth in nominal GDP", wrote R Kishore. Tax buoyancy is falling, probably because "the official statistics have been overestimating GDP growth". "Taxpayers after all pay taxes on actual incomes rather than what the Central Statistical Office thinks incomes are." "Nationally, only 1.8% of the population reported receiving formal vocational/technical training in 2017-18," wrote Anand and Thampi. "But about 42% of youth who received formal training were not part of the labor force at all (that is they were not working or seeking employment opportunities, they reported)." If people don't work they do not pay income tax and they cannot spend, so GST collections fall. Regular salaried workers comprise just 8% of the workforce, wrote Anand and Thampi, and 45% of those earned less than Rs 10,000 per month and 12% earned less than Rs 5,000 per month. No jobs, no money, no taxes. Cyclical or structural, doesn't matter.

Don't know about others, we'll be fine.

"Corporate investors tracking corporates in the busy earning season are slowly waking up to alarming yield inversions in advanced economies of the US and the UK," wrote A Mudgill. Yields have flattened in Germany, Japan, Singapore and Australia, pointing to a global slowdown. "Inversion of yield is a phenomenon where long-term bond yield drops below short-term yield. It is widely tracked by financial markets to track signs of recession." Not just flat yields, yields have turned negative on government bonds, with German 3-month bond yields at -0.558% while the 10-year bond yield is at -0.593%. Normally, yields on long-term bonds are higher, to reflect financial risks that may arise in the future but returns on long-term German bonds are lower than on short-term ones, known as inversion of yields. Not just that, "Jyske Bank, the third largest bank in Denmark announced it will pay customers to take out mortgages by offering negative interest rates. Jyske Bank will offer homebuyers an interest rate of -0.5%." "It would have been unthinkable even a few years ago to have high-yield/speculative/junk bonds being sold for negative yields," wrote VA Nageswaran. A report by the Wall Street Journal said that "14 European companies with junk bonds worth more than 3 billion euros ($3.38 billion) are trading with negative yields." "Globally, about $13 trillion of debt is trading at negative yields." "King dollar is rising. Other currencies are falling like ninepins,' wrote A Mukherjee. So, governments resort to currency swaps which are usually what "a bank has to pay to borrow dollars by this circuitous route rather than taking an outright Libor loan". "Take India, which owes a net $436 billion to foreigners, and is perched a rung above Italy on the sovereign ratings ladder, according to Moody's Investors Services. The 10-year Indian rupee bonds offer 6.4%, versus 1.5% in euros on the Italian benchmark. However, Japanese investors looking to lock in returns in yen will get 1.6% yield pickup in Italy, while they'll lose money on the Indian bond." The world has become "flat and slow". wrote Ruchir Sharma. After the crisis in 2008, governments erected barriers and central banks provided easy money which "propped up inefficient companies and gave big companies favorable access to cheap credit, encouraging them to grow even bigger". "Zombies now account for 12% of companies listed on stock exchanges in advanced economies and 16% in the United States, up from 2% in the 1980s." So, what about India? "Despite stagnant incomes and increased joblessness, Indians are hopeful about the economy's future," wrote Mahesh Vyas of the Center for Monitoring Indian Economy. We are optimistic and have 17 colleges of astrology. We have the cosmos in our favor.

Rules only for the ruled.

"Amid allegations of 'tax terrorism', finance minister Nirmala Sitharaman has sought a mindset change in tax officials while advocating a technology driven approach." "Tax officials have a delicate role to perform. A mindset change is needed to cater to an informed citizenry," she told a large gathering of tax department officials on Friday. Surely, she is being cute? She is the one who set extremely high and unrealistic tax collection targets on officials in this year's Budget. "While corporation tax mop-up is expected to register a 14 percent growth to Rs 7.7 lakh crore (Rs 7.7 trillion) this fiscal compared with the previous year's revised estimates, personal income tax is expected to grow 7.6 percent over the last year's number." "Net profit fell by 5.23% for the three months ended June 30 from a year earlier, showed a Mint analysis of 1,284 listed companies" despite a fall in prices of crude oil and other commodities. The total number of workers has fallen from 472.5 million in 2011-12 to 457 million in 2017-18, wrote Prof Himanshu. As shown by a fall in household consumption expenditure, there has been a rise in poverty during the first term of Prime Minister Narendra Modi, wrote Himanshu. "In 2018 prices, average consumption expenditure in rural areas declined from Rs 1,587 per person per month (ppm) in 2014 to Rs 1,524 ppm in 2017-18. The decline in urban areas was from Rs 2,926 ppm in 2014 to Rs 2,909 in 2017-18." India has always experienced inability of supply to keep pace with demand, wrote H Damodaran. "All this has changed in the last three years or less. The certainty that producers once enjoyed -- of finding buyers for their wares without doing much beyond minor price adjustments to bring supply and demand into equilibrium -- has ceased to exist." He agrees with Himanshu that this started in agriculture in 2014 and has spread to the rest of the economy. If corporate earning falls because of low demand how is Sitharaman demanding a 14% increase in corporate taxes? A study by Center for Monitoring Indian Economy (CMIE) showed that "unemployment level rises proportionately as education level rises among those studied". At 13.2% unemployment was highest among graduates. If educated people cannot find jobs how does Sitharaman expect a 7.6% rise in personal income tax collections? "Growth in fast-moving (FMCG) consumer goods slumped in the past four quarters in a row since July-September 2018" which means lesser sales tax collection. "The use of technology and faceless assessment is the need of the hour in tax administration today," Sitharaman said. Are threats through emails and text messages any less intimidating for hapless citizens? Indian politicians cannot understand how menacing they are because they are above the law. We, the people, on the other hand, cower in fear. The rulers and the ruled. 

Is it time to be less optimistic?

"Democracies are built to slow you down," wrote R Jagannathan, comparing India with China. "Autocracies are built for speed." Till the 1980s the economies of China and India were about equal but today, at $13 trillion, China's GDP is 5 times that of India's at $2.6 trillion. Why? Because, "China used autocratic methods to ride roughshod over labor and land ownership rights, and indulged in financial repression in order to channel domestic savings and foreign investment into infrastructure and export manufacture." China suffered the 'Great Leap Forward' under Mao Zedong, while India suffered the humiliation of begging for food from the US under the PL 480 program to stave off a famine in the 1960s. While Mao Zedong unleashed the Cultural Revolution to regain total power after the failure of the Great Leap Forward, India suffered a period of Emergency when the media was silenced and opponents imprisoned. If China had "financial repression", Indian banks were nationalised in 1969, which was an "economic disaster but a smashing political success", wrote SA Aiyer. Prime Minister Modi may bang on about a "Congress-mukt Bharat", meaning an India free of the Congress, but he has made no attempt to privatize state-controlled banks because they allow him to use depositors' money for political gifts. "Global investment manager Ruchir Sharma, who has studied both types of states, says that over the long term the two deliver similar levels of economic performance," wrote Jagannathan. "Early on, when these countries were about the same per capita income level as India is today -- the East Asian economies were run by autocrats who favored a powerful but small government focused almost exclusively on export manufacturers, which meant investing in roads and factories, not welfare for the poor and weak," wrote Ruchir Sharma. "Between 1993 and 2005, Chinese state enterprises laid off 73 million people." "Contrast those attitudes to India, where government is suspicious of the private sector, and elections are fought on promises of generous welfare benefits for the poor." Perhaps, the main difference is that autocrats need to keep improving people's lives or they will face rebellion, while in corrupt democracies politicians blithely use taxpayer money to win elections by buying votes of poor people by distributing handouts. Only 68.5 million filed tax returns in 2017-18 out of a population of 1.3 billion, of which 20.2 million earned less than taxable income. The bulk of income tax collection comes from the top 5% of taxpayers, wrote N Kwatra. Modi won re-election because of his social schemes, wrote Prof Ila Patnaik. This means there is an unspoken agreement between politicians and the poor which takes away any accountability from politicians. Forget becoming a rich country, India is probably stuck in a low middle-income trap, according to a member of the economic panel advising Modi. Indians are very optimistic by nature. Time to be realistic. 

Despite her past record de Kirchner is set to win again.

"Argentine stock markets and its currency have both plunged after conservative Argentine President Mauricio Macri suffered a shock defeat in primary elections on Sunday." He lost to left wing challenger Alberto Fernancez who is running with former President Cristina Fernandez de Kirchner. The Argentine peso fell 15% against the US dollar and the stock market Merval index closed down 31%. Why the panic? Because, as president, de Kirchner allowed the country to default on its loans which immediately triggers a rating downgrade and makes it difficult for the government and businesses to borrow. She also forced the central bank to hand over its reserves to allow her to pay off government debts. "The tragedy is that Argentina entered the 20th century as one of the world's richest countries and left it an international pariah. For many, it has now quite simply become invisible or irrelevant," wrote J Webber in 2010. Last year, the IMF agreed a $57 billion deal with Argentina in return for spending cuts by the government, but the country remains in recession, with inflation at 22%. After his defeat in the primary President Macri "promised on Wednesday he would raise the minimum wage, temporarily freeze gasoline prices and income tax bracket floor by 20%". Kirchnerism, is derived from Peronism, a legacy of Juan Domingo Peron who was the only man elected three times to be president of Argentina. Peron's policies included social security, low-income housing and free healthcare for the poor and high taxes on imports to protect local industries. Last year, Deputy Governor of the Reserve Bank of India (RBI) caused great anger in government when he compared India with Argentina. He talked about the resignation of Argentina's central bank chief because of his inability to protect the bank's reserves from the government of Cristina Fernandez de Kirchner. Last December, RBI Governor Urjit Patel resigned because of the government's insistence on transferring Rs 3.6 trillion, more than a third of the total reserves of Rs 9.59 trillion of the RBI. The government is dishing out Rs 6,000 to all farmers and has announced a pension scheme of Rs 3,000 per month for farmers and small traders. A health scheme forces private hospitals to provide tertiary healthcare at government rates to the poor. No wonder, private hospitals are afraid of going bankrupt. Customs duties have been raised on imports to protect domestic industries. Our government's numbers do not add up, wrote O Goswami. "Taking a cue from Acharya's analogy, a better recent comparator for Modi might be former President of Argentina Cristina Fernandez de Kirchner, who served two terms in office from 2007 to 2015," wrote Prof V Dahejia. Ominous words.

Can't spend what you don't have.

"The government is stitching together a set of measures, including tax cuts and targeted sops, to reverse an economic downturn, three people aware of the ongoing discussions said, amid fears of a global slowdown." A panel led by NK Singh had suggested relaxing norms for fiscal deficit, which has been fixed at 3.3% in the budget, by 0.5% which would allow the government to spend an additional Rs 1.5 trillion and the government is committed to spending Rs 100 trillion on infrastructure which will stimulate the economy. The government overshot its spending target by Rs 1.5 trillion in 2018-19 by keeping its borrowing 'off balance sheet'. "According to estimates, about Rs 1.5 lakh crore worth of expenditure may have been pushed off balance sheet as borrowings at Food Corporation of India (FCI), PowerGrid Corporation, and a few other entities." The government just increased surcharge on income tax of people earning over Rs 50 million. The parliament passed an amendment to the Companies Social Responsibility (CSR) Act , which forces large companies to spend 2% of profits on social schemes, making it a criminal offence to fail in spending the full amount, punishable by fines of Rs 50,000 to Rs 2.5 million and up to 3 years in prison for company officials. It is thus a tax on companies. A high level panel has recommended that violating CSR rules should not be a criminal offence and companies should be given tax relief on what they spend, thus reducing tax collections. Meanwhile, "In July, passenger car sales plunged 36% to 122,956 units, while utility vehicles recorded a 15% drop to 67,070 units. Vans suffered 46% decline to 10.804 units." The automobile industry employs vast numbers of people in manufacturing parts, in assembly plants and in dealerships. When sales fall companies respond by cutting their workforce, and unemployed people spend less further reducing tax collections. GST rates on cars varies from 29%-50%, so falling sales means less tax collections. Naturally, companies are clamoring for a cut in tax rates. "The latest data from the Controller General of Accounts (CGA) shows that the gross tax collections of the Union government in the quarter ending June grew 1.4% from the year-ago period, the slowest pace since the slump following the global financial crisis in fiscal 2010," wrote N Kwatra. The government had hoped to increase collections by bringing the unorganized sector, which has been avoiding taxes all these years, into the tax net but that has not happened because the rules are so complicated that many do not file returns while others are able to game the system. People who were not paying taxes could not save the money in banks because they would be caught and so were forced to spend all of it, wrote R Kishore. All avenues for tax avoidance have been closed off so consumer spending has dropped. If revenue is falling how will the government stimulate the economy by increased spending? How to square the circle?

No sir, tax corruption and tax terrorism are not the same.

"Prime Minister Narendra Modi on Sunday said he will leave no stone unturned in making India the best investment destination in the world, a better place to do business..." Stirring words. But how? In 10 easy steps. On tax terrorism he said that the "Govt is aware of some black sheep in the tax department. Govt has compulsorily retired a number of tax officials, and will not tolerate this behaviour." Indeed, it did. The government forced "15 senior indirect tax officials from the Central Board of Indirect Taxes and Customs (CBIC)" to retire on charges of "corruption and improper conduct", after dismissing 12 senior income tax officers from service on charges of "corruption and professional misconduct". This was because the government thought that these people were collecting less taxes in exchange for bribes. 'Tax terrorism' means forcing honest taxpayers to pay extra money as a kind of ransom to avoid harassment. This is because "tax officials, driven by unrealistic targets set in the union budget, are under pressure to boost collections". "A Mumbai-based MNC, which is headquartered in the US, was asked to cough up 60% of the tax demand, and they did pay up fearing harassment," said a tax consultant. "Another pharmaceutical company was levied a tax demand of over Rs 70 crore. Sick of repeated calls from the taxman, the firm decided to pay up a portion of that demand." This is not legitimate tax owed to the government, but pure extortion. This year is going to be worse because the government has set a tax collection target of Rs 24.6 trillion, when there was a shortfall of Rs 1.7 trillion in 2018-19, despite resorting to thuggery, and there is a slump in consumer confidence which came in at 95.7 in July, down from 97.3 in June. When consumers lose confidence they stop spending, which is why sales of real estate, cars and consumer durables, such as refrigerators and televisions, are dropping. "Growth in the fast-moving consumer goods (FMCG) sector has slumped in the last four quarters in a row since July-September 2018, both by value and volume, as consumers shifted to cheaper daily essential brands in the urban markets and rural growth slowed." Lower sales mean lower tax collections. Slowdown in growth is here to stay. "My feeling is that though they (government) claim it is 7 percent, if we can maintain 6.5 percent we will be lucky," said Chairman of Larsen and Toubro AM Naik. One of the reasons why founder of Cafe Coffee Day VG Siddhartha committed suicide was harassment by tax officials, to which they replied that they were protecting revenue, apart from making unproven allegations. Couple of days back a truck driver was beaten to death by toll collectors for not being able to pay 10 times the toll amount. Modi's concern is not being able to extract higher collections because of corruption while people are dying due to tax terrorism. He is conflating tax corruption with tax terrorism. Not on purpose, we hope. 

What use is education without learning?

"For the last three decades economic pundits of all hue, most of whom cited China and its apparent economic miracle, have fed us the line that the only thing that matters is economic growth," wrote A Padmanabhan. This push for growth was financed by reckless borrowing by companies which they are unable to repay, leaving lending banks with a mountain of non-performing assets. Companies cannot borrow unless they clear their debts and banks cannot lend until they clear their books, known as the 'twin balance sheet problem'. "The deterioration in asset quality of Indian banks, especially that of Public Sector Banks (PSBs), can be traced to the credit boom of 2006-11 when bank lending grew at an average rate of over 20 percent," said Governor of the Reserve Bank (RBI) Shaktikanta Das. "Worse this growth left little trickle down for the bottom of the pyramid; the 1% just simply became richer." Padmanabhan recommends "redistribution", with higher taxes on the rich to fund social schemes for the poor, such as MGNREGA, free electricity connections and cheap housing. This will improve rural demand and, hopefully, will stimulate new investment. This is known as 'tax and spend' policy and has been extensively studied by economists. An analysis of direct taxes paid by Indians showed that "the top 5% of effective tax-payers in the country, equivalent to 0.1% of the country's population, contributed nearly three-fifths of India's income-tax collections. And the top 1% of effective tax-payers, equivalent to 0.03% of the country's population, contribute roughly a third of India's income tax collections," wrote N Kwatra. "In fact, India's personal income tax collection as a share of its GDP, at 2.5%, is higher than that of countries such as Vietnam, Bangladesh and Egypt and comparable to that of the Philippines." The government sharply increased surcharge on incomes above Rs 20 million in last month's budget. The stock market index the Sensex fell over 2% as foreign portfolio investors (FPIs) were also included in the surcharge, but jumped over 600 points on rumors of the government having second thoughts on taxing FPIs. The government has the power to increase taxes but cannot stop the rich from fleeing India. Officials claimed that top rates of taxes are higher in the US but the rich are fleeing to the US and Australia. It's not just high rates but the hostile treatment of taxpayers that is driving out the rich. East Asian countries grew rich by supporting their workers while social welfare was left to families, wrote Ruchir Sharma, whereas in India the "government is suspicious of the private sector" and elections are fought by competing on social schemes. China lifted 800 million people out of poverty by growing the economy and not through "redistribution". Maybe the reason we remain poor is because we refuse to learn. What use of education?