How can we talk big when we are losing to Vietnam?

"High export growth rate is crucial for India's goal of becoming a $5 trillion economy by 2025," wrote Ram Singh. "The current slowdown has made the objective more challenging, with India's exports having shrunk 6.57% in September." Why? "The main culprits are the non-tariff barriers and administrative hurdles faced by Indian exporters such as difficulty in quality and specification certificates, and time consuming customs clearances, just to name a couple." The US-China trade war seems to be in suspended animation as talks go on but US markets and oil prices fell yesterday because of pessimism over resolution of disputes. "Several economists and analysts predicted that India would be primary beneficiary of the biggest trade war of this millennium," wrote Frank F Islam. "More than a year later these predictions have not panned out." "In 2018, the trade in goods between India and the United States was $87.9 billion, up from $74.2 billion in 2017." Vietnam, a small country with a population of just 92 million ruled by its Communist Party, has gained the most from the trade war. India has lost out because our manufacturing infrastructure cannot compete with China, Japan or South Korea and our manufacturing output was $300 billion last year, compared to China's $2 trillion, less than a third of Japan and less than half of Germany. India levied tit-for-tat tariffs on US goods in June this year and last year suddenly changed rules of e-commerce after Walmart bought Flipkart for $16 billion and paid Rs 74.39 billion in taxes on the deal. Naturally, "the US voiced displeasure with two new Indian regulations that affect US credit card companies such as Visa and Mastercard, and e-commerce giants Amazon and Walmart". "Usually, countries keep import duty low on Key Industrial Raw Materials (KRMs) and high on Value Added Products (VAPs). This gives domestic producers the freedom to buy the cheapest KRMs from any country and focus their energy on making VAPs," wrote A Srivastava. "High duty on steel and low duty on equipment made from steel puts equipment manufacturers under strain." This Inverted Duty Structure (IDS) "explains why so many of our large firms are making primary products, but very few large firms making VAPs". Even a high level government panel blamed protectionist policies for our poor exports. CEO of Walmart has written to the Prime Minister requesting a stable business environment, which means no sudden change in tax rules. To add to our misery, the WTO has ruled against India on a complaint on export subsidies by the US. Which will allow the US to increase tariffs on our exports. What is achieved by increasing prices by taxing the hell out of products and then providing subsidies for exports is a complete mystery. No wonder, they need the brutal British sedition law to keep people from holding them criminally responsible. Do we deserve this lot?

Should we be imitating the US, Europe and Japan?

The US central bank's "Federal Open Market Committee (FOMC) lowered its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75%" yesterday, but signaled an end to its policy of easing monetary policy unless there are strong indications in the economy. "The decision comes the same day that the government reported GDP growth of 1.9% that, while reflecting a deceleration, was above Wall Street's estimates for 1.6%." Job gains remain at 109,000 which will keep unemployment rate at 3.5%, according to the Atlanta Fed. The International Monetary Fund (IMF) predicts that global growth this year will be the softest since 2008-09 at 3%. "The IMF's new boss, Kristalina Georgieva, sees a 'serious risk' the slowdown will spread", while "$14 trillion of bonds are yielding negative rates. By contrast, equity investors have sent the MSCI World Index up by 14% this year". "Federal Reserve governors say rate cuts are needed to keep the slowdown from spilling into the United States, and to prevent doggedly low inflation from sliding into outright deflation," wrote Ruchir Sharma. Governments and central banks are terrified of deflation, when people postpone their purchases, expecting prices to fall further and result in a collapse in demand. "Japan has been known globally as an economy struggling to overcome longstanding deflation and deflationary mindsets since the late 1990s," wrote Prof Sayuri Shirai. Strangely, inflation expectations of Japanese households "are always positive and far exceed the rate of change in the consumer price index even in a deflationary phase". Similar to India, where a survey by the Reserve Bank (RBI) showed "inflation expectations of households hardened to 8.0 percent in the September 2019", even when retail inflation for August came in at 3.99%. The RBI has been on a rate cutting spree this year, having cut rates 5 times to its lowest level since 2010 at 5.15%. "But with credit already dirt cheap, more cuts could bring on the kind of debt fueled market collapse that preceded the downturn not only in Japan after 1990, but in Asia after 1998 and across the world after 2008," wrote Sharma. "The side effects and after-effects of unconventional monetary policy post 2008 have been several, and they vastly overshadow the feeble economic recovery," wrote Prof VA Nageswaran. "They include income inequality and wealth concentration in may countries; asset bubbles in stock markets; an unsustainable boom in private equity and valuations of technology startups with no sign of profitability over the horizon." When conventional monetary policy is not working it is time for crackpot Modern Monetary Theory which insists that, "In times of recession, deficit spending should be done until full employment is achieved, and such spending should be paid for by printing currency," wrote Ajit Ranade. With our fiscal deficit already "85% de facto monetized" he warns against a policy response of "Whatever it takes". Trouble is, we don't have what it takes but are deluded that we do. Stock markets are at record highs. But temptation hard to resist.

People love fairy tales. But for how long?

"The state of the Indian economy has been described in rather depressing terms lately," wrote Prof S Rajagopalan. "But there is another way to describe the state of the economy -- that it is in limbo." The limbo has been created because, "Prime Minister Narendra Modi left no stone unturned in going to various Indian and foreign platforms, declaring India open for business and encouraging investors to invest in India. Yet, the rhetoric has not been followed by meaningful reforms." "Prime Minister Narendra Modi is always talking," wrote V Khechar. "Once upon a time, every corner of the country used to hear the legendary voice of Lata Mangeshkar. Today, in a world full of sound pollution, that voice has been replaced by Modi's incessant words." "Once his statements are proved to be deliberate lies, he does no utter a word about it, let alone explain the situation." "In reality the lie is deliberate. He is inventing the big lie." "The Indian economy is facing a perfect storm," wrote Mihir Sharma for Bloomberg, and, "The immediate concern is crashing demand." "One of the central issues in India is the size and inefficiency of the public sector." Instead of dismantling the state sector "the Modi government has backed the companies it owns with renewed fervor". Why? "Coal India, Hindustan Aeronautics, NMDC, RITES, Engineers India, NBCC and MOIL are among the top seven candidates that may utilise 50 percent of the FY18 cash and bank balance to pay dividends to help the government to tide over the revenue shortfall." That was in January. Now, "The government wants the oil companies to pay Rs 34,000 crore in dividend" "15% more than they did last year". On the other hand, repeated government transfusions of cash keep moribund Air India alive and it is looking to spend Rs 690 billion to merge loss making BSNL with loss making MTNL, "rendering it difficult for private players in their sector to survive". So enormous are the charges for spectrum and licensing fees for private telecom companies that they have been asked to pay Rs 925 billion to the government by the Supreme Court. The top three telecom companies have a total debt of Rs 3.9 trillion which was incurred to pay for 4G at auction. Economic indicators, from credit growth to capacity utilization, falling yields on government bonds and rising unemployment indicate a slowing economy. After winning in 2014 Modi tried reforms of land and labor laws but at the slightest hint of criticism "the government developed cold feet and called the whole thing off". Why do tough things when Indians are so ready to lap up his lies? Until they don't. 

Equality between politicians and citizens, that's true equality.

"Sorry Abhijit Banerjee, high taxes and freebies don't create egalitarian utopia," wrote SA Aiyar. Abhijit Banerjee, Esther Duflo and Michael Kremer won this year's Nobel Prize in Economics for their work on randomized controlled trials (RCTs) on measures to alleviate poverty, which is standard practice in medical science in evaluating effects of drugs. "Some of their work on how the poor consume food is fascinating," wrote S Biswas. "It is probably not enough just to provide the poor with more money, and even rising income may not lead to better nutrition in the short run," they observed, because with more money the poor may choose to get "a TV set, something special to eat," rather than nutritious food full of micronutrients. In an interview published by Economic Times, Banerjee was dismissive of the recent corporate tax cuts announced by the Finance Minister. He said states in the US with higher corporate tax rates did not lose out to states with lower taxes and countries, such as Denmark, with higher personal income tax are very rich. Silicon Valley is not going to shift from California nor will Wall Street move away from New York despite higher taxes, "But smaller entrepreneurs have shifted in droves from California to low-tax Texas," wrote Aiyer. Denmark does have higher taxes but free healthcare and education are available to every citizen, poor and rich, but, "Alas Indian politicians claiming to be Robin Hoods have used socialist controls and high taxes to line their pockets and build patronage networks." Professor Thomas Piketty advocates an end to capitalism, a massive handout of 120,000 euros to every French citizen on reaching the age of 25 years, a tax rising with wealth to up to 90%, no right to property and shareholder voting right restricted to 10%. His ideas may seem extreme but Democrats in the US are seriously debating higher taxes on the rich to reduce inequality. The collapse of the Soviet Union in 1991 proved that without private property there is no incentive to conserve resources and there can be no innovation without reward. Economist Edwig von Mises termed this problem as "the impossibility of socialist calculation", wrote Prof S Rajagopalan. As a fact of nature, human beings are born with different abilities and these famous economists do not explain how they can be made equal. The glib answer is education but the same education produces someone who is barely literate and one who becomes an economist. Besides, the poor are very powerful. Argentina has just elected a Peronist as president because the poor want greater social support, despite a long history of sovereign debt defaults because of such policies. Politicians will do anything to win elections because of the enormous rewards that brings. True equality will come when their powers are reduced. But, they will not agree to that. 

Will Baghdadi help Trump as Osama helped Obama?

"The fugitive leader of the Islamic State (IS) group killed himself during a US military operation in north-west Syria, President Donald Trump has said." The Kurdish-led Syrian Democratic Forces (SDF) as well as Iraqi officials claimed to have provided information about "the location of high-level IS members, including Baghdadi". Baghdadi was found in Idlib province which was controlled by Jihadist forces. We don't know if this had anything to do with Trump's sudden withdrawal of US troops from northern Syria allowing Turkey to drive Kurds out of the area and establish a 30 km safe zone. Trump was severely criticised for, what was seen as, a betrayal of the Kurds who assisted the US in fighting IS. A few days back Trump abruptly removed all sanctions on Turkey. This was strange behavior even for Trump. "He was a sick and depraved man," Trump said. "He died like a dog, he died like a coward." No he didn't. That honor goes to Saddam Hussein who was hiding in filthy conditions in a hole in the ground. For a man who was President of Iraq for almost 24 years it was ignominious to be captured in unkempt condition and his mouth examined by an ordinary US soldier. He washed his own clothes in prison and was eventually hanged like a common criminal. The US killed Saddam's sons and 14 year old grandson and released their photos to prove their brutality. All this happened when George Bush was in office. Gaddafi was attacked during Barack Obama's time, in violation of the Untied Nations resolution which asked that civilians should be protected and prohibited any foreign occupation of Libya. Around 30,000 civilians died due to bombing by NATO powers. Even grandchildren under the age of 12 years were not spared US desire for homicide. Gaddafi's convoy was attacked while he was trying to escape. He was found hiding in a pipe, beaten and killed by the rebels who captured him. He was sodomized and his body violated after death. The Pakistan army handed over Osama bin Laden and protected US troops during attack on the house he was living in. This happened in 2011, watched by Obama and his cabinet, like watching a sporting event. Obama won re-election in 2012. Obama rewarded Pakistan with combat aircraft, trainer jets, armored carriers and other advanced weapons. Those jets were used against India after the Balakot attack. Trump is to face re-election on 3 November 2020. Will Baghdadi's death help him as Osama's helped Obama remains to be seen. A frenzy of killing.

Without proteins, vitamins and minerals it's not food.

"India's healthiest children live in its north-eastern states and Kerala, an analysis of a new national survey conducted by the government shows, but children in these states are also at greater risk of 'lifestyle diseases'," wrote Rukmini S. "However, some of the most affluent states -- particularly Gujarat, Maharashtra and Haryana -- perform the worst on both sides of the spectrum; Gujarat is the country's unhealthiest state for children." Gujarat is Prime Minister Narandra Modi's home state. "India was ranked 102nd on the Global Hunger Index (GHI), an index of 117 countries." "The report said only 9.6% of children between 6-23 months in India were fed a minimum acceptable diet (a recent Union health ministry survey had in fact put the figure at an even lower 6.4%)." "On the various parameters that go into the GHI, we have not done all that appallingly on the proportion of children who are too short for their age, and of those who die before their fifth birthday. But this year's GHI findings on children who weigh too little for their height are particularly grim." There is no shortage of food. "In 2013, we had the Food Security Bill, which was designed to assure cheap food to target groups such as pregnant women, lactating mothers and children under 14, as also the destitute, homeless and disaster struck. Under this scheme rice was made available at Rs 3 per kg, wheat at Rs 2 per kg and coarse grain at Rs 1 per kg." "The latest budget pegged its food subsidy bill for 2019-20 at Rs 1.84 trillion, up 7.5% over the previous year." Why the surprise and anguish? Protein calorie malnutrition has been known for a century at least. Uneducated peasants in Africa gave the name 'Kwashiorkor', which means 'the deposed one'. This was a swollen child with red hair whose mother stopped breast-feeding him because she had another baby. While the poor get cheap grains from the government they cannot afford proteins and fats which are expensive. "Spending on bread, protein-rich items fell in 2017-18," so we can expect malnutrition to increase further. In some parts of rural India mother's are giving rotis and fried chillies for lunch to their children. Rural demand is shrinking the most, wrote A Padmanabhan, "and, this, despite the nearly Rs 1.5 trillion sugar high stoked in the rural economy through a combination of the income support scheme PM-Kisan and rural employment guarantee program". Clearly, either the sugar did not reach intended beneficiaries or got so diluted by the massive population that it fell flat. Our children are suffering. Perhaps, we should call time out for a couple of years on having children.

It is neck and neck between criminal investigations.

The Democrats in the House of Representatives launched an impeachment inquiry against President Donald Trump last month. The Democrats have a majority of 234 seats in the House against 197 for the Republicans. Democrat hostility started from the day Trump won the 2016 election, based on a dirty dossier compiled by the Deep State from allegations made by a discredited British secret service agent. The Democrats seemed affronted that Trump beat Hillary Clinton and blamed the loss on Russian interference through stories planted on social media. In fact, Russian interference is much less than what the US has been practicing for decades. The US helped organize a coup against a democratically elected government in Iran which brought the Shah into power and led to the Islamic government of today, that sees the US as the Great Satan. It is believed that the assassination of King Faisal of Saudi Arabia was orchestrated by the CIA for increasing the price of oil which led to a recession in the US.
Democrats discount Trump's victory because Hillary Clinton got nearly 3 million popular votes than him but this was because she got 4.3 million more votes in California alone, which is why the Founding Fathers designed the electoral college system to prevent one state from imposing a president on the rest of the nation. In fact, not only did Trump win the presidential ballot but the Republicans won 4,100 out of 7,383 state legislative seats, the most since the 1920s, they won control of both legislative chambers in 32 states and had 31 governors, compared to 18 for Democrats, thus completely overturning the majorities inherited by Barack Obama in his first year, wrote former Speaker of the House Newt Gingrich. Perhaps, the left wing in the Democratic Party cannot get over the fact that Trump's election was an emphatic rejection of the 8 years of Obama's tenure. In 2016, the earnings gap between median male black and white workers was the same as in the 1950s. A 2-year investigation by Robert Mueller found no evidence of Russian collusion with Trump campaign team but could not rule out obstruction of justice. Trump claimed that allegations of Russian collusion was a criminal conspiracy by Deep State so US Attorney John Durham was asked to investigate the allegations. This has now turned into a criminal investigation. Perhaps, spooked by the criminal investigation new allegations emerged that Trump had asked the President of Ukraine to investigate Hunter Biden, son of Joe Biden who is campaigning to be Democratic candidate against Trump in 2020. This prompted the Democrats to start impeachment investigation which will allow them to ask for all documents from the White House and try to dig up some dirt somehow. As to why Hunter Biden should not be investigated for criminal dealings has not been explained. Lindsey Graham has introduced a resolution in the Senate condemning the House inquiry. It is on a knife edge. Trump has his base so it is for the Democrats to lose. We shall see.

Where is the money to fry pakodas?

In recent years, "self-employment has been touted as an answer to India's employment challenge", wrote Anand and Thampi. Apparently, about 4.75 million people enter the job market every year, which means young people coming of age. But, instead of creating new jobs India lost 10.9 million jobs in 2018, according to a report by the Center for Monitoring the Indian Economy (CMIE). "The number of employed recorded in December 2018 was 397 million, which was 10.9 million less than the figure of 407.9 million seen a year ago in December 2017." "Youth inactivity is highest in India compared to emerging and developing economies and it is about in 30 percent," said IMF senior economist John Bluedorn. Prime Minister Narendra Modi advised people to start their own businesses frying 'pakodas', a snack of vegetables fried in batter, and employ others, creating a lot of comments. However, tax officials, after exhaustive investigation unearthed a 'kachori' (another fried snack) seller who is earning Rs 6 million per year. Even so, the labor force participation rate (LFPR), which counts those working or actively looking for work, dropped to 49.8%, with the unemployment level being highest among graduates at 13.2%. Pakoda fryers must be creating lots of jobs. "As much as 70% of the self-employed were own account workers", which means they are running their own establishment "without hiring any worker", "while 26% were unpaid helpers who assist household members in running their enterprise, but do not receive any regular wage or salary". "Only 4% of the self-employed were employers." The median monthly earnings of street vendors is Rs 7,000, for food processing workers it is Rs 2,500, for textile and garment workers it is Rs 5,500 and, for a people who believe in fate, median monthly income of astrologers and fortune tellers is Rs 8,000. Taxi drivers (including Uber and Ola drivers) came top with Rs 10,000 per month. As during Christmas in the West, the months of September and October are festival months for Hindus in India when retail sales give a boost to the economy. But, this year growth in GDP remained subdued in September, wrote Nikita Kwatra. If profits fall companies will cut or deny bonuses to their workers or, even worse, may sack some to reduce expense. The situation is even worse in villages. "The downturn this Diwali season is so dire that even large landowners (owning 50 to 150 acres of land) are postponing the purchase of a new tractor or the replacement of an old car,' wrote Sayantan Bera. It is so bad that lunch for children is rotis with green chillies, Bera found earlier. You need to buy ingredients to fry pakodas. Where is the money?

Are Indians bribing the government?

"A small portion of India's salaried population pays the bulk of its individual income tax, which gets redistributed to others and doesn't benefit the taxpayers that much," wrote Vivek Kaul. The taxpayer in India feels cheated. "The roads continue to have potholes. The traffic never ends. The public transport system never seems to expand fast enough. The healthcare system is non-existent. The legal system takes years to give a judgement. The police are corrupt and so on." But, even among salaried employees there is a vast difference between government employees who get wages and perks that high-ranking officers in the private sector cannot even dream of. The basic salary of the lowest grade of government employee has been raised to Rs 18,000 under the Sixth Pay Commission and Dearness Allowance has been increased to 17%, taking the minimum pay to Rs 21,060 which puts every government employee over the minimum threshold for paying income tax. They get healthcare for life under the Central Government Health Scheme (CGHS), including dependent family members. Employees are paid pension for life and recently pensions for family members were increased. Taxpayers in the private sector get nothing for the millions they pay in income tax during their working lives. Indian politicians and civil servants are convinced that a large number of people are not declaring their true income and so the tax department has been charged with "widening the tax base". Seems that they have been spectacularly successful because the number of taxpayers has jumped by 13.8% to 84.5 million in the last financial year. We are not told if the rise is exclusively due to the humongous rise in salaries of government workers. So how many Indians should be paying income tax? S Jaiswal calculated that at least 21% of  the population, that is 270 million people, should be paying income tax in India. His calculation is based on the total number of voters in India at 830 million. The labour force participation rate (LFPR) fell to 49.8% in 2018, which means that around 410 million people are working or actively looking for work. For women LFPR fell to 23.3%, while the LFPR for men stood at around 56%. According to the Azim Premji University, 92% of women and 82% of men earn less that Rs 10,000 per month, which would be less than half the minimum threshold for paying income tax. According to these percentages it appears that too many, and not too few, Indians are paying income tax. Are they inflating their incomes because of fear of the taxman? A kind of bribe to the government to stay in peace. Tax terrorism works.

We can learn, but should not copy.

There is a renewed interest in Modern Monetary Theory (MMT) which says that "governments can and ought to simply print their way out of recession", wrote Ajit Ranade. "Fiscal stimulus and deficit spending should be supported by central banks, which should buy government bonds by printing currency if necessary." "The central idea of MMT is that governments with a fiat currency system can and should print (or create with a few keystrokes in today's digital age) as much money as they need to spend because they cannot go broke or be insolvent unless a political decision to do so is taken." "MMT says that a government doesn't need to sell bonds to borrow money, since that is money it can create on its own." Bonds and taxes are tools to reduce money supply if the economy is getting overheated. Left wing Democrats, like Alexandria Occasio-Cortez (D-NY), say that MMT needs to be a "larger part of our conversation", wrote Dylan Matthews. "The rise of MMT could allow Democrats to embrace the de facto fiscal policy of Republican presidents, who tend to explode the deficit to finance pet initiatives like tax cuts and defense spending, leaving Democrats to clean up afterwards." If Democrats accept that taxes are not necessary they will be agreeing with Donald Trump's tax cuts in the run up to elections in November 2020. Taxes maybe necessary to control inflation by reducing demand but are not necessary to finance fiscal deficit and interest rate should be permanently at zero. If income tax is abolished the wealthy will gain much more in absolute terms than the middle class, increasing inequality to astronomical levels. Economists, such as Thomas Piketty, would like to tax billionaires out of existence. This year's Nobel Prize winner Abhijit Banerjee argued for higher taxes on the rich. It is not clear if MMT applies only to the US because the dollar is the reserve currency of the world, which only the US can print. Every country in the world has built up foreign exchange reserves, a large part of it in dollars. "The United States had foreign currency reserves of $123.5 billion as of August 2018", compared to China with $3.210 trillion, whereas the total debt of the US government is nearly $23 trillion. As per the Federal Reserve, the US had a total of $1.70 in circulation on 31 January 2019. Which is Rs 75 trillion at a conversion rate of Rs 70 to one dollar. Total currency in circulation in India was Rs 21.10 as of March 2019. The US dollar is freely available all over the world and some countries use it as their national currency. "MMT calls for fiscal and monetary coordination, and practically opposes monetary policy independence," wrote Ranade. India has partly achieved that by appointing a retired civil servant as governor of the Reserve Bank (RBI) who has repaid his appointment by cutting interest rate five times already and handing a windfall of Rs 1.76 trillion to the government from RBI reserves. However, no government in India is going to cut income tax because it will be open to a taunt of being a "suit-boot ki sarkar", which maybe political suicide. As usual we have taken the bits that suit politicians. Of course, ti won't work.

Will technology make things worse?

Emerging markets (EMs) have gained at the expense of advanced economies (AEs) because of globalisation, wrote Abheek Barua because of "the death of low skilled but employment rich sectors like textile and the support economies that grew round it". Economists Dorn and Hanson "estimate that competition from China caused direct manufacturing job losses of 1.5 million between 1999 and 2007" in the US. Technological change has created a "college premium" between "skilled white collar earnings and blue collar earnings" so that the share of wages to GDP "has dropped by a good 5% from 2000 to 2017". "Middle class families are seeing their incomes stagnating as they are squeezed by the ultra-rich taking a bigger slice, says an international report from the OECD economics think tank." Increasing inequality has given rise to "new forms of nationalism, isolationism, populism and protectionism". Before the Industrial Revolution, "Income gaps between Europe and poorer parts of the world were small," wrote Prof D Rodrik. "But as the West developed in the nineteenth century, the world economy underwent a 'great divergence'." This was largely due to colonialism when the colonial powers freely looted conquered people. Economist Utsa Patnaik has calculated that the British looted $45 trillion from India alone. The US became rich on slave labor. "In 60 years, from 1801 to 1862, the amount of cotton picked daily by an enslaved person increased 400 percent." "The ownership of enslaved people increased wealth for Southern planters so much that by the dawn of the Civil War, the Mississippi River Valley had more millionaires per capita than any other region." At that time women were not allowed to own property or business but white women could own slaves whom the could buy and sell. Since 1980s EMs, led by China, began to grow faster than rich countries. "For the first time in history, the typical developing-country resident was getting richer at a faster pace than his or her counterparts in Europe and North America," wrote Rodrik.  Giving rise to populism in the West. "Even during the Industrial Revolution, in the 19th century, the world economy rarely grew faster than 2.5% a year," wrote Ruchir Sharma. It was the baby boom after World War II that lifted global growth to 4% through a combination of "more workers and more output per worker". With fertility rates dropping growth is never going to reach such levels. No wonder, people like Prof Thomas Piketty are advocating an end to capitalism and redistribution of wealth. That is what is advocated by communism. We thought that the disintegration of the Soviet Union had buried that ism forever. What happens when technology makes more people redundant?

It's all in the name of 'democracy'.

We have been seeing massive protests in Hong Kong for many weeks now. The protests started in June against a law that would allow extradition of Hong Kong citizens to mainland China for trial, but protesters have increased their demands to five, including resignation of Chief Executive Carrie Lam, an independent investigation into police brutality and democracy. The Yellow Vests protests have been going on in France for over a year now. Recent protests have combined with climate protesters to create more problems for the police. In recent days violent protests have erupted in Chile, in Lebanon and in the Catalonia region of Spain. In Chile violence erupted when the government increased the price of tickets on the metro. The President Sebastien Pinera declared an Emergency under laws enacted during the dictatorship era, labeling the protesters as 'delinquents' and saying, "There will be no room for violence in a country with the rule of law at its core." "For many years there has been an abuse of power," said Daniela. Protests erupted in Lebanon against proposals to levy taxes on WhatsApp and other messaging services. "We are here to say to our leaders: 'Leave'," said Hanan Takkouche, "They came to fill their pockets. They're all crooks and thieves." Massive protests in Barcelona and the entire Catalan region in Spain after the Spanish Supreme Court passed draconian sentences on separatist leaders who had organised a referendum on independence of Catalonia from Spain in 2017. They were charged with sedition. Yet the then Prime Minister Mariano Rajoy who unleashed extreme police violence on Spanish citizens to stop them voting has not been charged with anything. Voting to elect a bunch of crooks is democracy, but beating people up to prevent them for voting against the crooks is also democracy. Protests, even peaceful ones, are impossible in India because the police are ordered to shoot to kill. Politicians and civil servants who ordered the killing are never brought to justice. Today's leaders are 'high tech dakus' (bandits) said a retired real life bandit in Madhya Pradesh. "There is no justice for the peasant as the patwaris (government officials in charge of land records) and thana prabharis (heads of police stations) have too much power over them, The mandi adhyaksh (farmers markets' head) is always related to politicians and takes away farmers' incomes." Any criticism invites swift retaliation under laws against sedition, enacted by the British to subjugate and repress Indians. The 'Big Brother' Aadhaar Bill was sneaked through parliament as a Money Bill. Billions of dollars are to be spent on a facial recognition system, the only country other than China to do so. Politicians tell citizens to be peaceful. Through extreme violence, if necessary. In the name of 'democracy'.

The bigger you are the more visible you will be.

"India loves foreign investors, yet it doesn't trust them fully. Foreign investors adore Indian markets, but head for the escape chute at the first sign of trouble," wrote JP Upadhyay. Speaking at the Bloomberg Global Business Forum in New York last month, Prime Minister Narendra Modi "invited foreign investors in sectors such as real estate, defence, infrastructure and food". Modi boasted of "democracy, political stability, predictable policy and an independent judiciary". Democracy in India means winning elections through 'competitive populism', promising handouts to the 'vote bank'. In addition to the numerous social schemes that were already in place, Modi has started dozens of new schemes to win elections. 'Political stability' is ensured by draconian laws that were enacted by the British to subjugate Indians, wrote Meghnad Desai. "The British rulers never understood their subjects -- the mob as they called it." Thomas Babington Macaulay designed the repressive Indian Penal Code (IPC). But, when Indians came to power "they did nothing to remove the IPC or even amend its worst features. When they had the chance, they retained not just the IPC but the entire collection of laws of repression installed by the British." Our judiciary maybe independent but it is of little use to citizens because cases go on forever. More than 3.3 crore (33 million) cases are hanging in our courts of which 28.4 million are in lower courts. 4.3 million cases are pending in High Courts of which over 800,000 are over a decade old. In 2017, the Supreme Court apologized to a woman who died while her case languished in various courts for over 13 years. What use was her postmortem victory? When the courts do decide the government refuses to accept the verdict and passes laws with retrospective effect to nullify awards against it and then tries to get an injunction against companies going for arbitration. The government may not even accept adverse judgement from arbitration panels even though a previous government signed up to do so. Despite his election promises in 2014 Modi has not got rid of tax terrorism, wrote A Mukjerjee. As for "predictable policy" Indian governments are known for policy flip-flops. After levying a surcharge on foreign portfolio investors (FPIs) in this year's budget the government hastily withdrew it after protests. In 2007, the then government tried to curb investments through participatory notes (PNs) but instantly recoiled when the market tanked by 9%. In April 2018, the Securities and Exchange Board of India (Sebi) said that Indian citizens and non-resident Indians cannot be beneficiary of a foreign fund investing in India. Withdrew the order in September. Foreigners are not investing in manufacturing because our laws are too restrictive and infrastructure is poor, wrote C Jaffrelot. Meanwhile, India has slipped 10 places to 68th in the annual global competitive index and to 102nd out of 117 on the global hunger index. The bigger we grow the more eyes will be focused on us. Speechifying will not fool foreigners.

Same policies, different names.

Finance Minister Nirmala Sitharaman has chosen the US to attack former Prime Minister Manmohan Singh and former Reserve Bank (RBI) Governor Raghuram Rajan for the dire state of the Indian economy. To that Singh riposted, "This government has now been in office for five years. It should have learnt from our mistakes and provided a credible solution for the economy." She is incensed by Rajan's speech in which he said that India's fiscal deficit 'conceals' a lot and the economy is on the brink of a 'worrisome' situation. To that Sitharaman said that public sector banks had their worst phase under Singh and Rajan, in a lecture at Columbia University. The economy was indeed in bad shape in 2014 when Narendra Modi was elected prime minister and the rupee plunged to 69 to the dollar in 2013 in, what is known as, the 'taper tantrum'. Rajan forced banks to reveal their bad loans. In reply to a question from a parliamentary panel Rajan said that most bad loans originated between 2006 and 2008 which was the first term of Manmohan Singh as prime minister. True, but, as Singh said, Modi has been prime minister for over 5 years with absolute majority in the Lok Sabha, so excuses sound lame. Moreover, Modi had a huge windfall when the price of crude oil, which had been consistently over $100 a barrel, dropped to $30, so that the government earned over Rs 11 trillion in higher taxes on petroleum products. Instead of recapitalizing banks Modi wasted the windfall to distribute handouts to win elections. This weakened the economy and, "The sequence of demonetisation and GST was essentially the straw that seems to have broken the Indian economy's back because it came at a point when the Indian economy was already relatively weak." The state of the economy is so bad that the government has been suppressing and cooking statistical data, forcing two statisticians to resign in disgust. 311 Indian citizens have just been deported from Mexico where they were apprehended for trying to sneak illegally into the US. These men paid Rs 2-3 million each to people smugglers to be taken by a circuitous route to Mexico from where they would cross the border illegally into the US. If Manmohan Singh's policies were so bad why is Modi copying them by waiving loans to farmers? Sitharaman has just forced state-run banks to throw Rs 817 billion in 'loan melas', where loans are distributed without due diligence. This is exactly what the Congress did in the 1980s, when Manmohan Singh was the RBI Governor, and which was partly responsible for the crisis in 1991. Modi has copied all Congress actions by changing their names. He is renowned as a 'name-changer'. 

Could this be a brilliant strategy?

Couple of weeks back the US announced it was going to withdraw its troops from the border between the northeast of Syria and Turkey. The majority of people living in this area are Kurds  who led the Syrian Democratic Forces (SDF) that fought against Islamic State (IS). "It is time for us to get out of this ridiculous Endless Wars, many of them tribal, and bring our soldiers home," President Donald Trump wrote. "We will fight where it is to our benefit, and only fight to win. Turkey, Europe, Syria, Iran, Iraq and Russia will have to figure the situation out." "The Kurds, an ethnic group numbering around 30  million people, is widely recognized to be the largest stateless national group in the world." The Kurds want an independent state spread over Iraq, Iran, Turkey and Syria which means that they are seen as enemies by all these countries and persecuted by everyone of them. As soon as the US forces started to withdraw Turkey started a bombardment of Kurdish positions in the area and the Turkish army invaded with a view to establish an ethnically cleansed "safe zone" where they will settle millions of Syrian refugees who took shelter in Turkey during the civil war. The Kurds quickly reached a deal with Bashar al-Assad's government allowing Syrian forces, backed by Russia, to occupy deserted US posts in the town of Manbij. If Turkey refrains from attacking areas occupied by Syrian forces the Kurds can concentrate on defending other areas against the Turkish invasion. Yesterday, the US and Turkey agreed to a ceasefire for 5 days, which Turkey says is to allow the Kurds to dismantle the fortifications and vacate the area. There is bipartisan support in the US Congress for strict sanctions on Turkey if it does not stop the offensive. The irony is that Turkey is a member of NATO and can invoke Article 5 of the NATO charter which forces other members to defend it, militarily if necessary, if attacked by Syrian or Russian forces. But, while taking advantage of being in NATO, Turkey bought the S400 advanced missile defence system, capable of taking down the latest US stealth fighters, from Russia. The US has imposed sanctions on both Russia and Iran, both which will, therefore, delight in creating problems for the US. Last month, "Turkish President Recep Tayyip Erdogan hosted Russian President Vladimir Putin and Iranian President Hassan Rouhani at Cankaya Palace". Iran has been a steadfast supporter of Bashar al-Assad throughout the civil war , directly and through its proxy, the Hezbollah which fought alongside Assad's forces. Erdogan has been supporting rebel groups fighting against Assad's army, so what happens now? Will the Turkish army attack Syrian forces in Manbij and take on Assad, Iran and the Hezbollah? Trump wrote a letter to Erdogan advising him not to be a fool but Erdogan threw it into a bin. An all out war between Turkey and Syria, supported by Iran and the Hezbollah, with the Kurds doing their bit will weaken all of them without hurting any US soldier. Brilliant strategy by Trump.

We will know when it hits the fan.

"India should opt for further monetary policy easing and broad-based structural reforms to reverse a cyclical demand slowdown, the International Monetary Fund (IMF) said on Tuesday while slashing its growth projection for the country to 6.1% for the current fiscal from its July forecast." At the same time advising "India to keep the fiscal deficit in check". The Reserve Bank (RBI) has cut interest rate four times this year, so that "The repo rate now stands at 5.15 percent, the lowest sine March 2010." Low interest rate works in "negative output gaps -- those between actual output (aggregate demand) and potential output (aggregate supply)", wrote Prof T Jayakumar. However, since potential output is predicted based on the last 10 years "the true potential output is likely to be lower than the currently accepted one", which means that the potential output is about the same as actual output "albeit at a low level of equilibrium". The figures for the last two months have come in. "Merchandise exports shrank 6.57% to $26 billion while imports dropped 13.9% to $36.9 billion, narrowing India's trade deficit to a seven month low of $10.9 billion". The government is to restrict imports of many items by increasing duties on them in a bid to protect domestic industry and force foreign companies to manufacture them in India. The Index of Industrial Production (IIP) contracted by 1.1% in August, the first time since 2012. IIP compares growth in industrial production with the same period last year and shows "sustained shrinkage in two key groups -- capital goods and consumer durables". The purchasing managers' index (PMI) for September was the same as in August at 51.4. Anything above 50 is positive. "The index of eight core infrastructure industries declined 0.5% during the month (August), according to government data released on Monday. Production in five sectors, including electricity and cement shrank." By cutting interest rate by 25 basis points and not by a larger amount the RBI signaled that while it is ready to encourage lending in a bid to increase growth, the government has to do its bit by spending more, even if it means breaching its fiscal deficit target. The government provided a huge fiscal stimulus by slashing corporate tax rate by 10% in "a textbook response to a cyclical downturn". The questions are "will this revive animal spirits and sputtering GDP growth" and is it going to be "financed by newly printed currency rather than debt. In other words: Is this helicopter money?" asked A Mukherjee. "Animal spirits" remain hushed as indicators showed a weak economy, wrote A Nag. Trouble is, "India's fiscal deficit 'conceals' a lot and is probably pushing Asia's third largest-economy to the brink of a 'worrisome' situation, former RBI governor Raghuram Rajan has warned." First, and most important, we need reliable statistics to know where the sickness is. But the government doesn't. Until the stuff hits the fan.
 

What do professors know?

"The government's decision to ban onion exports and impose stock limits may have arrested the steep rise in prices of the essential vegetable, but experts feel it's more of a knee jerk response that hurts farmers rather than resolving the country's onion mess." "India's onion problem is not so much about managing the shortages as it is about managing the surplus," said Danish Shah, a third-generation onion exporter from Maharashtra. "Tomatoes-onions-potatoes (TOP) are the three basic vegetables that face extreme price volatility and the government often finds itself on the edge in fulfilling its dual objectives of ensuring remunerative prices for farmers and affordable prices for consumers," wrote Prof A Gulati. The government wants a cooperative system, as for milk, for TOP products but milk does not pass through any wholesale market, known as agricultural produce market committee (APMC), "involves no commissions and farmers normally get 75 to 80 percent of the consumer's rupee", whereas "TOP are mostly traded in APMC markets, with layers of mandi fees and commissions, and farmers get less than one-third of the consumer's rupee". The government needs to increase storage space, cut GST on processed foods as on milk products and get rid of the APMCs. While India exported $500 million worth of onions in 2018, "The Dutch knocked up $676 million in onion exports in 2018, accounting for 20% of world onion trade," wrote C Rajghatta. The Netherlands maybe a cold country, but it is "raking it in with high-efficiency, hothouse -driven growth". "The Dutch dominate not only the world's cut flower/bouquet trade (not counting allium, they take in $4.5 billion in revenue, accounting for 50% of the world's flower exports), but they are also among the world's top exporter of tomatoes ($1.9 billion), peppers/chillies ($1.08 billion), cucumbers ($565 million), and pineapples ($265 million)", while "Indian farmers have to jump through American hoops to export their low-yield, inefficiently grown mangoes". "The importance towards the rural economy is not due to ignorance," wrote Prof Himanshu. "As it remains important for political mobilisation, governments only tend to remember it just before elections to patronize voters through loan waivers, cash transfers or increased subsidies." No wonder, "As per the National Accounts Statistics 2019, the private final consumption expenditure (PFCE) on bread, cereals and pulses was Rs 4.8 lakh crore in 2017-18, down form Rs 5 lakh crore in FY 17." "The spends on milk, cheese and eggs fell 12% to Rs 3.7 lakh crore while that on milk and its products declined 14.6%." Handouts work beautifully when people are starving. Professors know nothing. After all, we Indians know that "In fact, hard work is much more powerful than Harvard."   

Movies show our confidence.

Delivering the OP Jindal Lecture at Brown University in the US, former Governor of the Reserve Bank of India (RBI) Prof Raghuram Rajan said that "the government's economic performance is not sustainable and that there is a risk of the country going the Latin American way in terms of populist policies". Rajan does not mention which Latin American country we resemble. There is Argentina where former President Cristina Fernandez de Kirchner nationalized the energy company YPF  by forcibly taking over Repsol's share of the company. In India, fuel for automobiles and domestic cooking gas are exclusively supplied by government companies. Where a foreign firm Cairn Energy PLC of UK discovered and drilled for oil in Rajasthan it has been fighting a demand for retrospective taxes of Rs 102.47 billion since 2015. Cairn has already spent $22.9 million in administrative costs fighting the demand. de Kirchner forced the chief of the central bank Martin Redrado to step down so as to appropriate central bank reserves to pay off government debt. Here, the Governor of RBI Urjit Patel resigned over the government's insistence on using RBI reserves to reduce its fiscal deficit. He was replaced by a retired IAS officer who cheerfully transferred Rs 1.76 trillion from RBI reserves to the government. Deputy Governor of the RBI Viral Acharya did compare India with Argentina. Comparison with Venezuela, where Hugo Chavez nationalized agriculture, controlled the value of the currency and resorted to price control, would be too much. Agriculture is private in India but the government actively interferes in controlling prices when supplies fall and distributes handouts from public money when prices fall due to bumper crops. Prices of medical devices and a list of medicines are controlled. "Even when growth is slowing the government is pushing its welfare program, which gives it a lot of political capital among people," said Rajan. "But you cannot keep spending, something has got to give." Union minister Ravi Shankar Prasad asked how the economy can be slowing when three movies raked in Rs 1.2 billion on 2 October. He withdrew his comments after being trolled online. Rajan said that our fiscal deficit figure 'conceals' a lot and the state of the economy is 'worrisome'. The Comptroller and Auditor General (CAG) has been pointing out the under-reporting the fiscal deficit and S Chinoy wrote that the public sector borrowing requirement (PSBR) is at 8.5-9% of GDP. Movies are fiction, our fiscal deficit is fiction, economic growth is fiction. We are so confident in a world of fiction.

Needs to choose its friends carefully.

"Pakistan Prime Minister Imran Khan is likely to visit Iran and Saudi Arabia on Saturday (yesterday) as part of Islamabad's efforts to defuse the increasing tensions in the Middle East, diplomatic sources said on Friday." "Khan might be accompanied by a senior Pakistan army representative, they said." Why? Doesn't the army trust him to say the right things? Saudi Crown Prince Mohammad bin Salman (MBS) had given his private jet to Imran "to travel to the US on a week long visit and to attend the 74th session of the UN General Assembly (UNGA) in New York last month". However, MBS "was so alienated by some dimensions of the Pakistani prime minister's diplomacy in New York -- he couldn't have been happy at the prospect of Imran Khan, Recep Tayyip Erdogan and Mohathir Mohammad planning to jointly represent the Islamic bloc, nor with Pakistan's interlocution with Iran without his explicit approval -- that he visibly snubbed Imran by ordering his private jet to disembowel the Pakistani delegation", said an editorial in the Friday Times. Good thing only the plane was disembowelled, after what Erdogan's gruesome allegations about Jamal Khashoggi. "Army chief Qamar Javed Bajwa has privately met top business leaders to find ways to bolster the economy, according to people familiar with the matter," wrote Faseeh Mangi for Bloomberg. "Some of the meetings resulted in prompt decisions including sending instructions to top government officials, the people said, without giving any specific examples." Clearly, Imran is irrelevant. This, after Imran extended Bajwa's tenure as army chief for another full term of 3 years. Bajwa was supposed to retire next month. No wonder the deputy speaker of the National Assembly had to bar opposition members from calling him a 'selected' prime minister instead of an elected one. Bajwa and director general of Inter-Services Intelligence (ISI) Faiz Hamid supervised Imran during his meeting with US President Donald Trump in July. "This was also the first time since 2015 that a Pakistani prime minister met with a US president." Imran was snubbed by the US last month when Trump pulled out of talks with the Taliban aimed at ending the 18-year war in Afghanistan. Imran hoped for US support in his stand on Kashmir in return for a facilitating a deal between the US and the Taliban. Especially, after the savage repression of people in Pakistan Occupied Kashmir (POK). In fact, Pakistan's control of the POK region is based on forged signatures of past leaders. Thankfully, the news is not all bad for Imran. "Global investors are piling into Pakistan's local-currency bonds like never before," wrote Mangi. The bad news is that, "Pakistan needs to repay China more than double the amount it owes the International Monetary Fund (IMF) in the next three years, as loans racked up to boost foreign exchange reserves and bridge a financing gap become due." We know what China will do. Good thing Imran Khan has experience of being "disembowelled".

Who should decide 'whatever it takes'?

After S&P cut its forecast for growth in the Indian economy to 6.3% in the financial year ending on 31 March 2020, Moody's Investors Service went a step further and cut it to 5.8%. "The Indian economy is battling a severe demand slowdown and liquidity crunch which resulted in economic growth rate falling to a six-year low of 5% in the June quarter, while private consumption expenditure slumped to an 18-quarter low of 3.1%." "India's slump is deeper and more broad-based than we expected. In the April-June quarter, the economy expanded by 5%, well below potential, which we estimate to be north of 7%," said S&P. Consumers are refusing to spend and rural demand has fallen because of low wage growth and low food inflation so the private sector sees no reason to invest in new capacity. The Reserve Bank (RBI) cut the cost of borrowing by 25 basis points to 5.15%. The RBI has ensured that liquidity will be available when demand goes up but the government has to step up to stimulate the economy, wrote TK Arun. "The only sure way to step up investment is for the Center to step up its own investment activity and give the states additional leeway to step up their investment activity." Such as, cut personal income tax, clear all private sector dues, pay arbitration awards as decided, clear GST/other tax refunds and set up a stressed asset fund to buy all bad debt. All this to be paid for by "fiscal slippage". However, "RBI's annual study of state finances released on Monday shows a reduction in the size of the states' budget from 2017-19," wrote Puja Mehra. "The revised estimates for FY19 (financial year 19) show the fiscal deficit of states was 34 basis points higher than the budget estimates. This was primarily because of lower-than-budgeted receipts and higher expenditure on farm loan waivers and income support schemes." The private sector cannot invest as banks are refusing to lend. "Against Rs 7.36 trillion flowing from banks and non-banks to the commercial sector during April-September 2018, this year has seen only Rs 0.9 trillion flow over the same period," wrote and editorial in the Mint. With politicians and civil servants panicking, A Ranade advises to "Beware of the 'whatever it takes' response to a crisis". The RBI has "already rewarded the Center with a huge unbudgeted dividend". "Household debt, most notably credit card receivables, have grown at a whopping 30%, contributing to the fall in household savings. Lower interest rates may spur credit binges and possibly blow a credit bubble." The trouble is that "the government also sets interest rates on small savings schemes -- directly creating competition for the banks it owns and impeding the effectiveness of the monetary policy decisions that the RBI takes", wrote VA Nageswaran. One policy contradicting another. Also known as headless chickens. 

You should be loyal if you have chosen to live there.

President Donald Trump's policies are pushing the United States to become like Argentina, wrote Prof K Basu. Last year former Deputy Governor of the Reserve Bank of India (RBI) Viral Acharya compared India with Argentina. If both the US and India become like Argentina then the US will become India which means there will be nowhere to escape for educated Indians. In recent years Argentina has been lurching from one financial crisis to another, the recent one being caused by the defeat of the current President Mauricio Macri in the first round of elections. So why is the US becoming like Argentina? Because, in 1930, Lieutenant General Jose Felix Uriburu came to power in a coup and stopped immigration into Argentina and put up tariff barriers. Apparently, Trump seems to "have little interest in kindness, civility, and empathy, and little concern for the marginalized". Trump wants to build a wall along the border with Mexico to stop illegal migrants and people trafficking. A 6 year old girl from India died of thirst on the Arizona desert while illegally entering the US with her mother. Legal immigration and the H1B visa system continues without restriction.  Basu does not think Barack Obama lacks kindness and empathy for having deported over 3 million illegal migrants, more than Bill Clinton or George Bush did. Trump wants to extend the wall along the border with Mexico to keep out illegal immigrants. He did not start the wall, 654 miles (just over 1,000 km) of barrier already existed when he took office. If the wall reduces smuggling of guns, there maybe a reduction in violence in Mexico where a total of 67,295 firearms recovered "between January 1, 2013, and December 31 2018, were determined to have been either manufactured in the US or legally imported into the US, an average of 11,216 per year". Is Trump wrong about tariffs? The World Trade Organization (WTO) has just recently allowed the US to impose tariffs on $7.5 billion of imports from the EU for providing subsidies to Airbus. China has been violating trade agreements blatantly for decades by stealing intellectual property, forcing technology transfer and by subsidising its companies. It protects its home market "from American imports with high tariffs, tricky non-tariff barriers, and costly, constantly changing regulations". Trump is not the first to ask for lower interest rate. Switzerland, Denmark, Sweden, Japan and the 19 countries of the euro area have negative interest rates which would boost their exports by weakening their currencies. Rear Admiral Lou Yuan of China suggested sinking a couple of US aircraft carriers in the South China Sea. China is a danger to the world and especially to India. Prof Basu has migrated from India to the US. He may not agree with Trump's methods but he should be loyal to the US. Refrain from writing one-sided articles. Irresponsible.