Tuesday, February 11, 2020

Are the shoots really that green?

"Finance Minister Nirmala Sitharaman Tuesday said the economy was set to turn around, citing seven 'green shoots', including higher foreign direct investment and Goods and Services tax (GST) collections." "It's not in trouble -- I'm giving you green shoots," Sitharaman said in the Lok Sabha strongly defending the government's management of the economy and the budget. She is compelled to say that because if she says the economy is on life support, as claimed by former Finance Minister P Chidambaram, the share market will collapse, foreign funds will sell out and the rupee will fall below 100 to the dollar. However, Sitharaman has the US on her side, which "on Monday removed India from its list of developing countries that are exempt from investigations into whether they harm American industry with unfairly subsidised exports". "The US removed India from the list on account of it being a G-20 member and having a share of 0.5% or more of world trade." "India's share in global trade (merchandise and services) was 2.1% (481.74 USD billion out of total 23,044 USD billion) billion for exports and 2.6% (600.62 USD billion out of total 23,112 USD billion) for imports in 2017," said the Ministry of Commerce and Industry. We have a negative trade balance of $ 119 billion. China, on the other hand, has a positive trade balance of over $359 billion and accounts for 19.51% of total world exports and 18.73% of total world imports of goods and services. In 2000, China was granted most favored nation status by the US on a permanent basis. "India's average tariff rate in 2018 was 17.1% -- that is significantly higher than the US, Japan and the EU, all of whom had rates between 3.4% and 5.2%" Tariffs have been hiked substantially in this year's budget. "Green shoots" can't come fast enough because the government is milking the Reserve Bank (RBI) to finance its expenditures. This, despite forcing the RBI to transfer Rs 1.76 trillion from its reserves in this financial year. With constant tinkering of taxes in order to extract revenue, "More Indian startups are incorporating their businesses overseas. Singapore, the United States, the United Kingdom, the Netherlands and the United Arab Emirates are being preferred due to stable regulations, subsidised tax rates." "There is a problem when large hedge funds and blue-chip private equity investors ask where the company is based before getting to the business model," said a startup founder. Top government hospitals, catering mostly to the poor, are to get less money. Green shoots denote health. How, when the sick are to endure? 

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