What happens when reality catches up?

Share markets in India will be starting the new year at record levels. Foreign portfolio investors (FPI) bought Indian equity worth net Rs 1.70 trillion while they sold debt worth net Rs 1.05 trillion. Possibly because the rate of interest is at 4%, while retail inflation was at 6.93%, lower than 7.61% in October, but higher than the upper tolerance limit of 6% for the Reserve Bank (RBI), compared to 1.2% over twelve months to November 2020 in the US. Negative real interest rates in India allows businesses to borrow cheaply, thus reducing their costs. "In India, the net profits of listed companies grew 25 percent (in real terms) last quarter. This despite revenues shrinking because firms aggressively cut costs, including employee compensation," wrote Sajjid Z Chinoy. Higher profits mean higher dividends which maybe why share prices are skyrocketing. "Equity issues apart, this portends ominously for future demand." "The combined net profit of listed companies reached a record Rs 1.52 trillion -- up two and a half times on year-on-year (YoY) basis." Hindustan Unilever and Infosys joined Reliance Industries, Tata Consultancy Services and HDFC Bank to end the year with a market capitalisation value of Rs 5 trillion. High inflation in India compared to the US means the rupee will have to adjust downwards against the dollar at some point, and this along with negative real interest rates maybe the reason why FPIs are net sellers of debt. More ominously, "With the post-tax return on fixed deposits plummeting to 4%, way below consumer inflation, more and more investors are driven towards equities, notwithstanding the risks," wrote an editorial in The Economic Times. "But a number of market experts say while Indian equities are a dearer bet, they are not in bubble territory," wrote Harsha Jethmalani. Even if the economy returns to prepandemic level next year "profits of listed firms may grow at a much faster pace," because, "The brunt of the slowdown has been borne by much smaller firms, mostly privately held, according to Credit Suisse research." "On 18 December, the price to earnings (PE) ratio of the Nifty 50 stock market index reached an all-time high of 37.84," wrote Vivek Kaul. This is because it is easy to trade online at low cost, because FPIs have "invested $28.66 billion in Indian stocks since April, the highest they ever have during a single financial year, and because of first time investors who are called Robinhood investors. This is the Druesenberry effect in which "individuals who get used to a certain level of income ... find it difficult to reduce their spending when their income level declines". "The large contrarian bet taken by India's Robinhood in April to June 2020 seems to have paid off" because of the huge rise in share prices, wrote Neil Borate. What happens when reality catches up? Poor Indians!          

Should refugees be taxed?

The Chilkur Balaji Temple near Hyderabad has "gained popularity as the Visa Temple because its devotees believe prayers to the deity here for a US visa rarely go unanswered", wrote Sanjaya Baru. "Studies show that Indian students remit anywhere between $10 to $13 billion annually as tuition fee abroad." Remittances into India from Indian expatriates was $83 billion in 2019, highest for any country, but is expected to fall by 23% to $64 billion in 2020 because of the pandemic. A large chunk of this comes from the Gulf, mainly from manual laborers, who send a large portion of their earnings to families back in India. "The out-migration of educated and skilled Indians that is not balanced by a return flow of income, knowledge, investment and talent, constitutes both a drain of cash and brain power," wrote Baru. The Indian Express tracked down "86 men and women who stood first in India, between 1996 and 2015, in their Class 10 and 12 exams conducted by the Central Board of Secondary Education (CBSE) and the Council for the Indian School Certificate Examinations" and found that, "More than half the toppers live overseas today, the US being the destination of choice." Baru found it is much worse. "Data collected by this writer from a couple of high-profile private schools in New Delhi show that while around the turn of the century about 20 percent of their high school students went abroad for graduate studies, the number shot up to close to 50 percent by 2010 and to 70 percent in 2019." Baru strongly recommends a 'brain-drain tax' proposed by economist Jagdish Bhagwati in the 1970s. "In his academic publications as well as in his writings for the popular press, Bhagwati was a forceful advocate for free trade and globalization," wrote the Encyclopedia Britannica. Globalization for the world and ghettoization for India. Patriot. But how will Baru tax those paying Rs 600,000 to Rs 1.2 million to people smugglers to be smuggled into Guatemala and Rs 2.5-3 million for the US. If these people can gamble so much money to pay smugglers they are not the malnourished poor of India. Delhi, Gujarat, Prime Minister Narendra Modi's state, and Mumbai have the highest per capita GDP in the country, so why do people flee these states? This tragedy was a little girl from Punjab. Over 800,000 Indians are desperately waiting for a green card which allow them to live and work in the US. More than a better life, these people will do anything to avoid returning to India. Why? Modi wiped out 86% of India's cash with just 4 hours notice on 8 November 2016, and imposed the strictest lockdown with 4 hours notice on 24 March 2020 when coronavirus cases were just around 500. Videos of policemen sanitizing sticks to beat people with went round the world. Indians escaping abroad are refugees. You shouldn't tax refugees.          

Words coming back to bite.

"Th government has used financial innovation to recapitalise Punjab and Sind Bank by issuing the lender Rs 5,500 crore (Rs 55 billion) worth of non-interest bearing bonds valued at par." "Though these will earn no interest for the subscriber, market participants term it both a 'financial illusion' and 'great innovation' by the government where it is using Rs 100 to create an impact of Rs 200 in the economy." These bonds cannot be traded and will mature in 10-15 years. In 2007, one dollar bought Rs 40, today one dollar buys Rs 73. If these bonds cannot be traded they have no market value, they pay no interest and their value at maturity could be halved if the rupee falls in value, then how do they improve the credit rating of the bank? Mystery. The government maybe resorting to sleight of hand because it has to borrow Rs 12 trillion instead of a budget estimate of Rs 7.8 trillion in the financial year 2020-21, and last week, Cairn Energy announced that "it has won the arbitration against the Indian government over a tax dispute arising from demand of $1.2 billion from tax department on listing of Indian operations back in 2007". Now India has to pay $1.2 billion to Cairn along with interest. The three-member tribunal at the Permanent Court of Arbitration in The Hague, which "consisted of one member appointed by the Indian government", quoted the election manifesto of Prime Minister Narendra Modi's party BJP in the 2014 general election, former Finance Minister Arun Jaitley and Modi himself, who promised that the government "will not resort to retrospective taxation; we are making our tax regime transparent, stable and predictable". Earlier, Vodafone won its arbitration against a retrospective tax demand of $2 billion in the same court and the government was ordered to pay $5.47 million as compensation to cover Vodafone's legal costs. The government refuses to see sense. "India has challenged an international tribunal's verdict in favor of British telecom giant Vodafone Group in a case involving a Rs 20,000 crore demand from the Indian income tax authorities, in Singapore, government sources," even though our own Supreme Court found in favor of Vodafone way back in 2013 when the previous Congress-led UPA government was in power. "For the government, businesses using past bilateral investment protection agreements to seek damages for tax demands infringes on its sovereign right of taxation, can't be allowed to go uncontested," wrote Gireesh Chandra Prasad. The government cannot win. It can renegotiate all the past trade agreements which could result in a fall of investment by foreign companies and retaliatory measures by other countries. At the very least it should respect our Supreme Court judgement and stop wasting taxpayer money on lawyers. Who knew foreigners will use Modi's own words against the government? Words more dangerous than sticks and stones, it seems.         

Who has enough wealth?

"India is one of the worst affected countries due to coronavirus but it'll become the world's fifth largest economy by 2025 and the third largest by 2030 after overtaking the UK in 2025, a UK-based think tank has said. As per the Centre for Economics and Business Research (CEBR), India will surpass Germany in terms of GDP by 2027 and Japan by 2030." Very reassuring indeed. "Abstracting from the inherent flux in high frequency indicators, the underlying trend would reveal that the pick-up in momentum of economic activity that commenced with the second half of 2020-21 is sustained," RBI said. Quite. Though volatile the economy is picking up, says the Reserve Bank (RBI), but future growth depends on whether the government provides a fiscal stimulus and on whether consumer inflation remains under control. After contracting by 23.9% in the first quarter, the Indian economy contracted by 7.5% in the July-September quarter as compared to the same quarter last year. JP Morgan's estimates suggest that on a quarterly basis, India's GDP plunged 25% in the 1st quarter of 2020-21 and recovered by 21% in the second quarter. "India did not suffer two consecutive quarters of negative growth, and, therefore, is not in a recession," wrote Jahangir Aziz. What is required is extensive income support immediately. If the government won't, can the rich get the economy growing faster by spending more? asked Roshan Kishore. "The pain has gone down to the bottom 30%-40% of the enterprises and individuals. While from an inequality perspective that is a disastrous outcome, from an economic momentum perspective that is actually the best possible outcome," said Neelkanth Mishra. This is because "The top 10% of the Indian economy consumes more than the bottom 50%," and these people have seen their savings grow. However, "The top 8% of salary income earners had a share of just 14% of PFCE (private final consumption expenditure) . This is less than even 10% of the overall GDP." The rich cannot stimulate growth, only the government can.  2020 showed the power of the Indian State, wrote Prashant Jha. "The State decided what would be the protocol for testing citizens for Covid-19, who would be prioritised in terms of treatment, what would be the manner of differential treatment, who got admission to hospitals and who had to wait." But it was spectacularly absent when millions of jobless migrants walked hundreds of miles back to their villages because "it was not the sarkar, the government, but their samaj, the community back home which inspired hope". Those who stayed back in cities have suffered. "The urban poor faced the brunt of job losses during the pandemic and saw their incomes plunge the most," wrote Nikita Kwatra and Tauseef Shahidi. "Among whose who earn less than Rs 20,000 a month, 11% of those without a professional degree reported losing their jobs. In the same income bracket, only 5% those with professional university degrees lost their jobs the data shows." Post Brexit Britain wants a trade deal with India so no harm in a bit of old fashioned buttering. CEBR trying to help.         

Payment for karma cannot be avoided.

2021 is going to be electorally tough for the BJP, the party of Prime Minister Narendra Modi, feels SA Aiyar. "The biggest battle will be in West Bengal, where the BJP will lose despite high hopes after a great Lok Sabha performance in 2019. Along with its local ally, the AIADMK, the BJP will be thrashed in Tamil Nadu and Puducherry. It will also, as usual, be drubbed in Kerala. Only in Assam are its re-election prospects good." "The footprint of the BJP over Indian states has been shrinking since 2018." "The BJP's electoral success is largely attributed to Mr Modi's charisma and the politics of religious polarisation and strident nationalism," wrote Soutik Biswas. "In recent years, the BJP has also thrived on generous and 'opaque' funding', and the unwavering support of a wide swathe of uncritical mainstream media." "Till the farmers brought their trolleys, tractors and their protest to the borders of Delhi, Narendra Modi had the image of being the the most powerful Prime Minister of India ever," wrote Tavleen Singh. "For the first time in seven years he is beginning to look weak. Not just because the farmers openly attack him personally on national television but because he seems no longer to know what to do." Farmers, mainly from Punjab and Haryana, have been protesting on the borders of Delhi for 33 days demanding repeal of 3 farm laws. The problem for Modi is that these farmers are rich and he cannot ignore them contemptuously as he did farmers from Tamil Nadu who desperately wanted help after a vicious drought in 2017. This time, farmers have set up a "protest town with a number of langars providing hot meals, makeshift toilet complexes, medical camps run by NGOs, laundry facilities and sleeping accommodation, whether in tents and in tractor trolleys". "The international non-governmental organisation Khalsa Aid has set up a Kisan Mall at Tikri border in Delhi to provide items of daily use to protesting farmers for free. The racks of the mall are stacked with everything from toothbrushes, soaps, oil, shampoo and vaseline to combs, mufflers, healing pads, knee pads, thermal suits, shawls and blankets." Modi wants to stop NGOs receiving money from abroad but he cannot stop these. "India's tougher rules on foreign funding for non-profits will severely crimp their activities, the chiefs of some bodies said" in September "after human rights group Amnesty International suspended its work in the country, citing government harassment", reported Reuters. There have been protests in London against Modi's treatment of farmers. There have been protests against Modi in the US only 4 months after the euphoria of 'Howdy Modi'. Sikhs are not Muslims, and the present protests could be a turning point for the Modi government, whether he stands firm or he gives in, wrote Prof Mohsin Khan. Modi has employed ruthless violence against anyone daring to oppose him, including inhuman treatment of those shoved into prison on charges of sedition. India is the land of karma and rebirth to pay for it. It will be a long reckoning.         

Banks will have more money when people have more. Only natural.

An Internal Working Group (IWG) formed by the Reserve Bank (RBI) released a paper recommending changes to the banking sector with a view to increasing the number of banks in India. The idea being that more banks mean more money which will mean more lending to businesses and more jobs, thus making India a wealthy nation. It does not say where the more money is going to come from seeing that "78% of the adult population have personal wealth below $10,000 or about Rs 7,30,000" according to the Credit Suisse report on global health in 2019. Non-banking financial companies (NBFC) and payment banks will be allowed to apply for banking licenses, but what generated the maximum controversy was the proposal that large businesses will be allowed to open banks. "The problem with banks owned by corporate houses is that they tend to engage in connected lending," wrote Acharya, Kelkar and Subramanian. "This can lead to three main adverse outcomes: Over-financing of risky activities; encouraging inefficiency by delaying or prolonging exit; and entrenching dominance." "Unfortunately, even if one were to be more charitable, the unmistakable feeling one gets from a careful reading of the report is that even as it urges reversal of the established practice of keeping banking out of bounds of corporate houses, it fails to give any convincing reasons why," puzzled Mythili Bhusnurmath. "Even more puzzling is that the recommendation makes the cut even though the report admits the 'prevailing corporate governance culture in corporate houses is not up to the international standard'." Profs Raghuram Rajan and Viral Acharya wondered, "How can the bank make good loans when it is owned by the borrower?" "Currently, India's banking system  as a percentage of gross domestic product (GDP) is just 70%," defended banker KV Kamath. "The only other large nation with rapid growth is China, which has a figure of 170%." "So, by China's benchmark, banking in India must become eight times its current size in the span of a decade." China's GDP is nearly 5 times that of India at over $14 trillion while India's is less than $3 trillion. China's foreign exchange reserve is $3,310 billion, again 5 times India's reserve of $581 billion. China's total exports are $2.49 trillion and total imports are $2.13 trillion, giving it a trade surplus of over $359 billion. In contrast, India's total exports are over $322 billion and our imports are $618 billion, giving us a trade deficit of just under $300 billion. While China's wealth is increasing, ours is leaking out to other countries. It's only natural that China's banks have more money. Kamath is putting cart before horse. First make citizens rich. Banks will be bursting with money.     

Can't blame capitalists for loving cronies. Can we?

"A groundswell of diverse voices seeking to reform capitalism, and radically alter how companies do business, has been growing over the past few years," wrote Rajrishi Singhal. In India, the Bombay Plan "forged a symbiotic, yet turbulent, partnership with government and, even though the association has waxed and waned over the past 75 years with ties periodically reset, the pandemic has now brought it to an interesting intersection". Hospitals and companies are charging usurious prices and large companies are elbowing smaller ones out. Andy Mukherjee warned against crony capitalism. "The worry is that dominance by a handful of capitalists may not leave enough space for others." "Barring some notable exceptions, the Indian business class is overextended, trapped in the debris of assets created with the help of syndicated loans from pliant state-run banks." "There are a few undesirable trends in some sectors where market share is becoming dominant with potential monopolistic trends," wrote VK Vijaykumar. "Another undesirable development is the monopoly trend in some crucial infrastructure segments." "The government has extended the moratorium on insolvencies by another 3 months to the end of March. Recently, Finance Minister Nirmala Sitharaman claimed, "I wouldn't hesitate here to say that we shall be the engine of global growth along with a few other countries," and Telecom Minister Ravi Shankar Prasad said, "Now I am pushing India to surpass China," in manufacturing mobile phones, wrote Rahul Jacob. Meanwhile, the fifth National Family Health Survey (NFHS 5) found that, "The share of children who were stunted (low height for their age) increased in 13 states, while the share of children who had low weight for their height increased in 12 states," reported the Hindustan Times. Improving nutrition in children below the age of 5 years have monetary benefits. "In India, the benefits ranged from anywhere between $45 and $139 for each dollar spent towards reducing child stunting," wrote Udit Misra. Rural India is suffering. "When compared to levels two years ago, too, the real wages of general agriculture laborers and non-agricultural laborers declined 0.2% and 0.8% per annum," wrote Prof Himanshu. Prime Minister Narendra Modi has "on multiple occasions, done his bit to exhort industry to invest", but they have chosen to donate "large sums of money to the PM Cares Fund (PMCF) while simultaneously laying off employees on grounds of revenue loss and inability to pay wages", wrote Singhal. The previous Congress-led government initiated many reforms which led to GDP growth of 6.9% in 2013-14 and 7.4% in 2014-15, wrote Arvind Mayaram. "The sudden negative shocks of demonetisation and hasty introduction of GST started the downward spiral which has led the economy into recession this year." So, resort to bombast. As long as it works.  

Fair or foul, the deed is done.

Britain and the European Union have reached a deal on Brexit, announced British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen, reported CNN. "Johnson claimed that the UK had achieved a 'Canada style' trade deal worth 660 billion pounds (US $893 billion) and addressed the agreement on fisheries -- a key point of contentions in the negotiations --  saying that the UK had taken back full control of its waters." Britain had to agree to customs checks between Northern Ireland and the rest of the UK so that there is no hard border between Northern Ireland and the Republic of Ireland which is a part of the euro zone. The Protestant Democratic Unionist Party (DUP) of Northern Ireland was totally against such an arrangement because it sees this as closer relation with the Catholic Republic than with the rest of the UK. However, Johnson had no choice because Democrat leaders in the US, including Speaker of the House of Representatives Nancy Pelosi and President-elect Joe Biden, warned there would be no trade deal with the US if the Good Friday Agreement, which ended years of civil strife in the North, was not respected. One big sticking point was on the rights of European boats to fish in British territorial waters. Apparently, British boats will have increased quotas from now on but final details are still unknown. "The UK government's Office for Budget Responsibility (OBR) forecast that, with a deal, Britain would see a loss of output of around 4% over 15 years compared to remaining in the EU," reported Reuters. The EU will lose around 0.38% and 280,000 jobs. The financial services industry is the largest business sector in the UK, giving it a trade surplus of $88 billion. "Under a system known as equivalence, access to EU markets will not be granted to banks, insurers and other financial firms based in Britain unless their home rules are deemed by Brussels to be 'equivalent', or as robust as regulations in the block." Britain appeared to negotiate in bad faith because Boris Johnson has always been highly critical of the EU and the dislike is mutual. In order to force the EU to give in, Johnson passed an Internal Market Bill which empowered  his government to change parts of the withdrawal agreement unilaterally. Instead, it was Johnson who got a huge dose of reality when 3,000 trucks piled up at Dover when France closed its border to stop a new mutant coronavius discovered in the UK and "British supermarkets warned of shortage of some goods just days before Christmas". This is a hard Brexit and there is "an avalanche of new trade barriers that is coming", wrote Faisal Islam. What is chastening is that Britain's trade with Europe is $893 billion and it has the liberty to agree deals with the US and the rest of the world, while India's total trade was just over $800 billion in 2019. Britain has a population of just 68 million, while ours 1,300 million. We really are dirt poor.  

Moratorium is just another word for evergreening. Isn't it?

"India's economic activity showed signs of stabilizing in November," as "All eight high-frequency indicators tracked by Bloomberg News were steady last month, keeping the needle on a dial measuring the so called 'Animal Spirits' unchanged at 5." "Animal spirits was a term coined by the famous British economist, John Maynard Keynes, to describe how people arrive at financial decisions, including buying and selling securities, in times of economic stress or uncertainty." Indian share markets are certainly showing signs of ferocious animal spirits by scaling record heights. "The contrast between the euphoric Indian equity market and anemic underlying economic growth is getting sharper by the day," wrote Harsha Jethmalani. "But a number of market experts say while Indian equities are a dearer bet, they are not in bubble territory." "The tally of newly incorporated companies, as well as electronic permits raised for transporting goods, declined on a sequential basis in November for the first time since April," reported the Hindustan Times. "In an in-house 'economic comeback indicator' that ranges between -2 and 10, Care Ratings has assigned a score of 2.62 for November." A case of glass half full. "With the post-tax return on fixed deposits plummeting to 4%, way below consumer inflation, more and more investors are driven towards equities, notwithstanding the risks," wrote an editorial in The Economic Times. "The story is playing out in a market that has run ahead of fundamentals: the Sensex is trading at 31-32 times its earnings against an average price-to-earnings multiple of 20 in the last two decades." The Sensex reached price/earnings ratio over 28 in 2008 and over 30 in 2018 and sharp corrections followed on both occasions. This time is much more hazardous as many people are playing with their savings after losing their jobs, so we can expect a wave of suicides if the market crashes. "A new study by economists at Denmark's central bank finds that the unusual monetary policy tool (negative interest rate) can encourage more investment and employment in an economy," wrote Nikita Kwatra. Negative interest rates are supposed to combat falling prices, or deflation, so if Danish companies are increasing production during falling prices that will only add to downward pressure on prices, though increasing employment may mitigate some of this pressure by increasing demand. The Federal Reserve in the US has rejected adopting negative interest rates. Chairman of the Insolvency and Bankruptcy Board of India (IBBI) MS Sahoo warned recently that India will witness a spike in insolvencies in coming days. In response the government has extended the suspension of the bankruptcy code till 31 March. That's when the proverbial will hit the fan and thousands will become paupers. Unless they extend it again. Good old evergreening is back. Officially.    

Another trilemma to deal with?

An analysis by Prof VA Nageswaran found that "countries that enjoyed a capital inflow, domestic credit and investment boom along with currency appreciation in the first decade of the millennium experienced a reversal in the next decade". Measured in dollars at current prices, growth of India's per capita annual GDP "dropped off from 11.8% in the decade 2000-2010 to 3.1% in 2010-2020". "It might be happening already. On current trends, this year could see India's highest foreign institutional investor inflows (debt and equity) since 2014-15." Foreign portfolio investors (FPIs) brought in Rs 603.58 billion in November and Rs 527.22 billion till 23 December. "In the coming decade, India will have big opportunities and face big risks," he wrote. "So, what should India do to effectively deploy the abundance of capital flows that India is going to receive this decade? Governments, state and central, should get out of the way. Simplify and reduce rates of both the goods and services tax (GST) and income tax, remove restrictions on startups and simplify categories of micro, small and medium enterprises (MSMEs). India has 63.4 million MSMEs employing 111 million people, contributing 29% to India's GDP and 49% to its exports. Trouble is, the government has an enormous hunger for revenue and so is always looking to increase taxes. "India plans to set tough financial targets for state-run firms" because the government "is trying to rein in its fiscal deficit, wants state-run firms to focus on improving market capitalisation and dividend payouts from 2021/22 fiscal year, starting April," reported Reuters. As the majority owner, if the government sucks out all the profits from public sector firms they will have nothing left for new investments and new jobs will not be created. "India's unemployment rate jumped to 9.90 percent in the week ending December 13, recording a 23-week high, latest weekly data from CMIE said." However, the labor force participation rate, which measures people working and actively looking for work, may be increasing, showing that some of those who had dropped out of the workforce are beginning to return, wrote Prashant K Nanda. "Between March and December, Brent crude prices have fallen more than 3%, but petrol and diesel prices have climbed 17% and 15% respectively. Since "fuel prices are not under GST, tax increases cascade into higher prices of everything". A third of tax revenues goes in paying interest on past debt and adding salaries, pensions and subsidies means there is almost nothing left for capital expenditure, wrote Ajit Ranade. To attract new investments the government needs to keep tariffs low. But high tariffs on imports gives protection to domestic industries to increase prices which increases tax collection. As growth returns, following the virus-induced global recession, commodity prices will cause inflation, interest rates will rise and FPI flows may turn negative. The rupee will adjust lower against the dollar, raising inflation in India. You cannot have high taxes, low inflation and high growth. Another impossible trilemma.            

Wouldn't it be better to let them keep what they have?

In May 2020, Prime Minister Narendra Modi said, "The Covid-19 pandemic has brought an opportunity for India to be self-reliant for which we have announced a Rs 20 lakh crore (Rs 20 trillion) package which is 10% of India's GDP." Despite this, "total expenditure till October this year increased by only Rs 6,550 crore (Rs 65.50 billion) when compared to the same period last year", wrote Avani Kapur and Sharad Pandey. Ministry data show "a staggering  41 out of a total 55 ministries spent less this year till October, compared to last year", and though distribution of free food through the public distribution system (PDS) was increased to cover 80 million migrants, the responsible department of consumer affairs and public distribution "spent 9% less this year than in the same period last year". This can only mean that the government has not paid the Food Corporation of India or state governments their due. Naturally, capital expenditure also declined. The government sanctioned Rs 3 trillion as loans to small businesses but till October disbursed only Rs 1.20 trillion, an inquiry under the Right to Information (RTI) Act discovered. According to the findings of the fifth National Family Health Survey (NFHS 5), "The share of children who were stunted (low height for their age) increased in 13 states, while the share of children who had low weight for their height increased in 12 states. "In other words, children born between 2014 and 2019 (that is, 0 to 5 years of age) are more malnourished than the previous generation." It is irrelevant that Modi was elected prime minister with absolute majority in 2014. When asked, "If you had $75 billion for worthwhile causes, where should you start," a group of scientists and economists answered the same way in 2004, 2008 and 2012, and that was, "Interventions to Reduce Chronic Undernutrition in Preschoolers," wrote Udit Misra. "According to 2012 results, each dollar spent towards reducing child stunting results in benefits of 30 dollar." "In India, the benefits ranged from anywhere between $45 and $139." Poor children are missing out on schooling. A study by Azim Premji Foundation found, "Almost 60% of children were unable to access online learning methods, and 70% of parents found online classes to be ineffective for learning," wrote Sayantan Bera. "With classrooms shut and parents losing their jobs in the pandemic, thousands of families are putting their children to work to get by," reported Associated Press. Demonetization hit the poor very hard because they work for daily wages and are the most dependent on cash transactions. Now an expert advised the government to raid people's gold investments. Even the poorest Indian buys gold because she does not trust the government for support. At least the poor can borrow against their gold when all doors are closed. What is the point of taking money away from the poor to pay for helping them? Let them keep what they have.      

Who will bear the cost of the emperor's new clothes?

In an effusive article Sunil Sanghai lauds the two years in office of Reserve bank (RBI) Governor Shaktikanta Das. When Das came into office the non-banking finance company (NBFC) IL&FS had collapsed with losses of Rs 8.48 trillion. The Yes Bank crisis was beginning to emerge. Interest rates were too high though inflation was under control, depressing credit growth. "In contrast, we are in a happy space today with robust post-Covid economic recovery, lowest interest rates in 20 years, a system plush with liquidity, a stable currency, a higher foreign exchange reserve, a more stable banking system with resolution of some of the financially stressed institutions, a relieved non-banking financial sector and credit and economic growth taking the centerstage for the central bank." Retail inflation has never been under control in India. Except in 2016 when average inflation rate was 2.23% and in 2017 when it was at 4%, because of sudden demonetization of high value banknotes on 8 November 2016, retail inflation has always been higher than the government target of 4% set in 2015, although there is a range of 2-6%. The Monetary Policy Committee (MPC) which sets interest rates warned of financial instability if real interest rates fall too low. Former Governor Prof Raghuram Rajan recently put operative real interest rate at -4% in India . "If this results in persistence of negative real interest rates for too long, it can adversely affect savings, lend support to mispricing of financial asset prices and encourage excessive leveraging," said Mridul K Saggar. High prices and low interest on their savings have hit middle class Indians very hard, yet no one is talking about them, wrote Shayan Ghosh. On the other hand, "India's billionaires reported a rise in their combined net worth by more than a third during the first four months of the coronavirus-induced nationwide lockdown, i.e. between April and July, defying the impact of the global economic fallout of the pandemic. According to the Billionaires Insight Report 2020 published by UBS and PwC, the net worth of Indian billionaires between April and July increased by 35% to $423 billion." Naturally, super-luxury real estate, costing in excess of Rs 250 million (Rs 25 crore) are selling fast. "What is encouraging is that nearly 40 percent of the inventory that we sold was priced between 25 crore and 40 crore," said Akash Ohri. "Insolvency cases in India are expected to spike in the coming days, as they did world over after the 2008 financial crisis," according to MS Sahoo, chairman of the Insolvency and Bankruptcy Board of India (IBBI). Gross non-performing assets (NPAs) stood at 8.5% in March 2020 and is expected to rise to 14% by March 2021, wrote Sushil Prasad. "In India, the net profits of listed companies grew 25 percent (in real terms) last quarter. This despite revenues shrinking because firms aggressively cut costs, including employee compensation," wrote Sjjid Z Chinoy. The government owns the RBI so the governor is doing its bidding as he was appointed to do. But, serving the government is not the same as serving the taxpaying citizens of India. At some point accounts will have to be settled. The governor has stitched some new clothes for the emperor.         

Farmers may not be as foolish as made out to be.

Taking aim at Profs Kaushik Basu and Raghuram Rajan, Prof Arvind Panagariya wrote, "Both CEAs had thus endorsed the entry of not just private companies but also foreign multi-brand retailers in agricultural marketing. Yet, both have now argued that the new laws open the door to the exploitation of farmers by private companies." New farm laws allow farmers to sell their produce to private companies bypassing government controlled wholesale markets, known as Agricultural Produce Market Committee (APMC), Since the government procures produce at a minimum support price (MSP) only through APMCs the farmers fear they will lose this assured price. "Government figures show that Food Corporation of India procurement has far exceeded the buffer stock limit and by January 1, 2021, India will have foodgrain reserves 2.7 times more than what is required, reflecting sustained procurement but also a massive problem of plenty." According to former Union Minister for Consumer Affairs, Ram Vilas Paswan 1,930 tonnes of food grains were wasted in 2019-20, which was 0.002 percent of total procurement of 7.52 million metric tonnes. Wastage is due to rotting and being eaten by rodents and MSP makes grains too expensive to export. Panagariya reminds us that "private corporations such as Nestle and Hatsun have been buying milk from hundreds of thousands of small milk producers side-by-side with government cooperatives for years". Indeed, but a private cooperative for milk Amul was set up in 1946 and set the basis for buying milk at fair prices. "Both of us have argued in the past that India's farm laws are antiquated, that the APMC Acts need reform," agreed Prof Kaushik Basu and Nirvikar Singh, but, the "new regulatory system seems to ignore the fact that, farmers, the world over, receive subsidies and protection". A few days back, a group of economists wrote to Agriculture Minister Narendra Singh Tomar "requesting the government to repeal the central farm laws which, they claimed, were not in the best interests of small and marginal farmers". The state of the rural economy can be judged by wages of agricultural laborers, which "increased in both real and nominal terms in May and June" just after the lockdown was lifted, but have been "declining thereafter until September, by when real wages of general agricultural labor were down 0.3% from year earlier, while those of non-agricultural workers were down 1.3%", wrote Prof Himanshu. Farm-gate prices have been declining as shown by the wholesale price index (WPI). "Increasing government support to the agriculture sector is the real reform needed at this hour." Farmers have given a point-by-point rebuttal of the government's arguments that these Acts will only benefit farmers, wrote AA Chaba. "India is going through an erosion of trust in recent times. I just hope we have the sense to come together," said Prof Basu. And, trust cannot be rammed down the throats of citizens. Or, obtained through mendacity.   
  

Do we really want a repeat of the Roaring Twenties?

The Spanish flu in 1918-19 "led to the decade of the Roaring Twenties, the 1920s", wrote BJP Lok Sabha MP Jayant Sinha. "Entertainment, art and music flourished", "the adoption of new life-altering technologies accelerated", spending on construction increased "to rebuild the cities, roads, and bridges devastated by World War I". As the Covid-19 pandemic comes under control, "we are likely to see another such decade: the Roaring Twenties of the 21st century," as "Cooped up consumers are ready to spend", new technologies like 5G and AI are taking off and "central banks unleashed a tidal wave of liquidity". This is going to be India's Roaring Twenties. We hope so, but "The household consumption is going to be negatively impacted over 2020 and 2021," said the Boston Consulting Group. Household expenditure is expected to rise by 40% by 2030 but it will be 7-8% lower than pre-Covid estimate. "Experts believe retail inflation is likely to average around 6.3 percent this fiscal and mostly will remain sticky going forward owing to pick-up in demand across sectors." Lower food inflation, muted demand and base effect will drive retail inflation to 4.5-5% in 2021, said Nomura, but "core inflation will remain sticky at 5 percent, in 2021 as rising commodity input cost pressure amid firming demand lead to a gradual return of firm pricing power". The Monetary Policy Committee (MPC) of the Reserve Bank (RBI) warned that "short-term interest rates falling below the desired levels raising the risk of financial instability", and "rising pricing power of oligopolistic businesses and commodity prices" will result in inflation. A few companies controlling entire sectors will form cartels and raise prices. "The worry is that dominance by a handful of capitalists may not leave enough space for others," wrote Andy Mukherjee. "But then, who's is even ready or willing to compete, especially in sectors where state policy has a big role in determining winners?" Without increased government support India will lose $300 billion dollars of income in two years, wrote Jehangir Aziz. "The Indian economy was in one of its worst ever deceleration phases even before the pandemic," wrote Roshan Kishore. "It was 8.2% in March 2018 and fell to 3.1% in March 2020." Sudipto Mundle suggests an easy way to increase government expenditure while reducing fiscal deficit at the same time. Assuming nominal GDP growth of 15% in 2021-2022 and inflation rate of 5%, revenue will grow by 15%, so government expenditure can grow at 12% which will stimulate the economy and reduce fiscal deficit. The Budget has a habit of presuming ridiculously high GDP growth on which it calculates tax collections and then encourages tax terrorism. Hundred years ago the Roaring Twenties ended with the Wall Street crash on 29 October 1929 which led to the Great Depression and World War II. Is Mr Sinha indirectly hinting that is what lies in store for us? He wouldn't dare upset Dear Leader, of course. Would he?     

Wouldn't it be wise to be thrifty at this time?

"Nearly a year into a pandemic that has ravaged the global economy like no time since the Great Depression", "Calculating the prospects of a vigorous economic recovery entails wrestling with questions of human nature," wrote Peter S Goodwin. "The Depression imprinted a generation with a tendency towards thriftiness and aversion to risk." If people don't spend companies will not expand capacity and employment levels will fall, suppressing economic growth. The Indian government must spend more on infrastructure projects to revive growth, wrote Shobhana Subramanian. "Without a near-term spend of Rs 4-5 lakh crore (Rs 4-5 trillion), it is going to be difficult to reboot the economy; thousands of small units will simply perish, sectors such as restaurants, aviation, tourism and hospitality, which employ large numbers will be battered, and there will be a spillover effect on other sections of the economy." Problem is, "Cumulative debt levels now exceed GDP in many developed countries; and, on average, debt as a share of GDP is approaching post World War II levels," wrote Prof Raghuram Rajan. Modern Monetary Theory (MMT) posits that any government can print any amount of its own currency to create full employment and taxes should be used only to control inflation. However, a lot of the money handed out by the government will return to banks as savings and banks will park the excess money with the central bank through the reverse repo window. In May, banks in India parked over Rs 8 trillion with the Reserve Bank (RBI) at 3.75% interest. Yields on government bonds are zero or even negative in developed countries so the governments there might as well lock in very low interest rates by long-term borrowing from commercial banks. However, banks will only lend to a government if they are sure of its ability to repay the old debt so the government could use inflation to reduce its debt load. Emerging economies are restricted by their ability to repay debt and by the risk of inflation. Recently, sovereign bonds worth 4 billion euros issued by China generated orders worth 18 billion euros. Bonds for 750 million euros were priced at -0.15%, wrote Prof VA Nageswaran. "Even as this issue was being priced in the market, news of defaults by many Chinese state-owned enterprises were hitting the wires." "Global debt is expected to soar to a record $277 trillion by the end of the year as governments and companies continue to spend in response to the Covid-19 pandemic, Institute of Finance said in a report," reported Reuters. Global GDP is expected to be just over $87 trillion in 2019. Richard Cookson fears inflation will pick up "both soon and sharply. "As has been the case for many years, global inflation has 'Made in Asia' stamped all over it." "Many erroneously believe gold is some sort of inflation hedge, because of our experience in the 1970s," wrote Jared Dillian. "Gold is a hedge on policy-makers screwing up, and there has been a lot screwing up in the last 20 years." Economists in India do not understand why Indians buy gold. Perhaps, because they have been screwed. Repeatedly. 

She promised vibrancy. Will he allow it?

The coronavirus pandemic was "the biggest disruption of the global economy since the Great Depression of the 1930s and World War II", wrote Sanjeev Sanyal. "Unlike other governments, Indian policy-makers judged that it was inefficient to use limited resources to attempt a grand stimulus during a lockdown." "Let it be clear that there is both monetary and fiscal space to do more when appropriate." Total lockdown was announced by Prime Minister Narendra Modi on 24 March and there was assembly election in only one state, Bihar, after that. In 2021, there are elections in 4 big states, Assam, Kerala, Tamil Nadu and West Bengal. Finance Minister Nirmala Sitharaman has promised that "the forthcoming budget will have the vibrancy required for revival of the economy". "Meanwhile, despite the severity of the economic shock, India's macro-economic conditions remain broadly stable. The rupee is stable, foreign exchange reserves and financial markets are at all-time highs, and the current account is in surplus (albeit reflecting demand compression)." "India's current macroeconomic situation is 'very uncertain' and the country's GDP could contract closer to 10 percent in the current fiscal, former chief statistician Pronab Sen said on Sunday." "I think there is too much optimism going around," he said. India's GDP shrank by 7.5% in the second quarter after shrinking by 23.9% in the April-June quarter. But this is not a technical recession, which is negative growth for two successive quarters, "But the growth rate is measured on a quarter-over-quarter, not a year-ago basis," wrote Jehangir Aziz. "In fact, we expect GDP growth in FY22 to recover to 12 percent from -9 percent in FY21, which implies that six quarters from now it will still be about 7 percent below the pre-pandemic path, or $300-billion-a-year income losses across two years, compared to the pre-pandemic path." "While not avoidable, much of the income loss could have been mitigated by budgetary income support. But the government chose not to provide this." "A collapse in imports during the coronavirus lockdown has left India awash with dollars," wrote Andy Mukherjee. "What the authorities have done so far -- scoop up the dollars by giving banks rupees -- has left the financial system swimming in money and threatens to fuel inflation that's already above the central bank's target." "A stronger rupee might help the central bank tame inflation; a liquidity glut will make it worse." "Hence, there's pressure on the governor to accept a more flexible inflation target: Politicians will want their V-shaped recovery at any cost." India will have "foreign currency reserves of close to $650 billion by 31 March 2022, and foreign exchange reserves totalling $700 billion", wrote Niranjan Rajadhyaksha. But this has fiscal costs. "Most likely, the PMO fears that a fiscal spending spree will send inflation soaring to 9%, the level at which voters have historically rebelled against the ruling party," wrote SA Aiyar. Better be careful about vibrancy of budget. May not stop vibrating.       

Don't criticise, embrace him.

Sanjay Jha, disaffected member of the Congress Party, advised former President of the Congress Party Rahul Gandhi to "take a leaf from Sachin Tendulkar's book. He gave up the thorny crown of leadership of the Men in Blue but remained the team's sheet-anchor and biggest draw throughout his career." "Dynasty has now become unfashionable; a young, aspirational India treats entitled successors as arrivistes." True, but Gandhi cannot get rid of his ancestors so he should study and talk about their successes and failures. As the first prime minister, his great-grandfather Jawaharlal Nehru set up the Constituent Assembly, with a dalit Bhimrao Ramji Ambedkar as chairman, to write the Constitution of India. He set up the Indian Institutes of Technology (IIT) at Kharagpur, Bombay, Madras, Kanpur and Delhi, the first Indian Institutes of Management (IIM) in Calcutta and Ahmedabad and appointed Rajkumari Amrit Kaur as the first health minister who set up the All India Institute of Medical Sciences (AIIMS). Prime Minister Narendra Modi has taken credit for adding to the number of IITs, IIMs  and AIIMS. Modi attacks the Congress and the Gandhi family for the Emergency which was proclaimed by then President Fakhruddin Ali Ahmed and upheld by a majority verdict of then Supreme Court (SC). The Emergency did away with fundamental rights of citizens, not much different from today when anyone can be detained indefinitely by being called a terrorist under Unlawful Activities (Prevention) Act and any criticism of the government invites immediate attack under the British law of sedition. "Why is the independence and integrity of the SC being questioned in the public domain, in a way that it has not been since the Emergency?" asked Gautam Bhatia. Because it is helping the government by postponing hearings of constitutional matters almost indefinitely, it accepts the government's version without question and its allocation of cases is not transparent. Modi is proud of authorising surgical strike against Pakistan, but India gave a bloody nose to Pakistan in 1965 with a much inferior air power. While Modi is proud of the air attack on a terrorist camp in Balakot, it was Indira Gandhi who liberated Bangladesh from Pakistan with the surrender of 93,000 Pakistani troops. Gandhi cannot win by criticising Modi because Modi has been able to persuade people to his vision of India and is by far the best orator in India today. Import substitution resulted in the licence permit raj, wrote Prof Arvind Panagariya, so we should not adopt Atmanirbhar, which means self reliance. Gandhi has to be humble, acknowledge mistakes committed by his ancestors and show that Modi is doing exactly the same, if not worse. For that he has to study, talk to historians and economists and work very hard. If he wants the ultimate prize. 

Headlights on the rupee.

"The covid shock revealed the anachronism of stiff fiscal compression targets set by India's Fiscal Responsibility and Budget Management Act of 2003," wrote the Mint. The government intends to borrow Rs 12 trillion this year instead of Rs 7.8 trillion predicted in the Budget. "Remember, India is endowed with neither the privilege of cheap loans for the asking, nor sufficient slack in productive capacity to keep prices stable." "It is true that economic contraction, as seen in early estimates for the first half of 2020-21, necessitated cheap credit as RBI's top priority in its laudable effort to keep commerce going and contain the pain," wrote the Mint. "It is also true that any over-indebted government could by tempted to inflate some of its debt away by letting prices rise. This should be resisted." After months at over 7%, retail inflation dropped to 6.93% in November due to a fall in vegetable prices. India's consumer basket is heavily weighted in favor of food and beverages, because higher food prices affect the poor disproportionately, with transport, healthcare and education having much lower weights. "Between March and December, Brent crude prices have fallen more than 3%, but petrol and diesel prices have climbed 17% and 15% respectively," wrote the Economic Times. Transport may not contribute much to CPI level directly but "since fuels are not under GST, tax increases cascade into higher prices of everything". Health insurance companies have raised their premiums by up to 200%, especially for senior citizens, forcing some to let their policies lapse, wrote Deepti Bhaskaran. Hundreds of private schools may shut down because the government is not allowing them to charge full fees for the year as teaching switched to online because of the coronavirus. In 2016, the government set a retail inflation target of 4% (+/- 2%) for the Monetary Policy Committee (MPC) at the Reserve Bank (RBI). Some economists argue that "by focusing narrowly on curbing inflation, the MPC lost sight of growth, contributing to India's economic slowdown", wrote Bhattacharya, Kwatra and Devulapalli. However, except in 2017 when the economy was trying to recover from the sudden hit of demonetization, the MPC has always managed to keep average inflation rate above its target of 4%. Central banks cannot control inflation or economic growth, they can only control credit growth and thereby influence money supply, wrote Prof VA Nageswaran. The biggest borrower by far being the government, low borrowing rates may encourage injudicious spending, leading to higher debt and rising interest payments. Then there is the rupee. "In the 12 months through November, the PPI (US Producer Price Index)  advanced 0.8% after increasing 0.5% in October," reported Reuters. This means the buying power of the rupee is decreasing at over 7% compared to 0.8% for the dollar. The rupee is riding high because foreign investors have bought Indian shares worth Rs 629.51 billion in November. The RBI has been buying dollars to stop the rupee strengthening too much and to increase liquidity into the system. One dollar bought Rs 3.30 at Independence in 1947, which has dropped to 73.66 today. At some point the rupee will have to adjust against the dollar and then prices of imports will shoot up, taking inflation to levels last seen in 2010-2011. No wonder, talks of higher fiscal spending is complete hot air. Frozen in fear. Like deer in headlights.  

This is an accumulation of pressures.

"Punjab farmers have huge political clout and extract massive subsidies invisible to the public," wrote SA Aiyar. Farmers have been protesting on the borders of Delhi for 17 days demanding complete repeal of new farm laws which allow farmers to sell their produce directly to private buyers, instead of being forced to sell through government controlled wholesale markets known as Agriculture Produce Market Committee (APMC). These markets are controlled by middle-men who form cartels to fix low prices for farmers while selling at high prices to consumers. The new laws seek to get rid of APMCs. The state of Bihar got rid of APMCs in 2005, and "For 14 years now, experts said, farmers have not had a favorable market for their produce." "Before the scrapping of the APMC Act, farmers would sell their produce to the market committees where minimum price was guaranteed. But after the repeal of this system, they indulged in distress sale lest their produce would go to waste because they had no storage facility," said economist Abdul Qadir. "But these laws are highly sensible," wrote Aiyar. "Modi must stick to all three laws." 'Sensible laws' would not "expressly exclude the jurisdiction of the civil court, leaving the farmers remediless and with no independent medium of dispute redressal mechanism".  "Autocracies like China would smash such agitations. But democracies do not shoot agitators," regrets Aiyar. Aiyar has forgotten the fierce beating of students and teachers of Jawaharlal Nehru University (JNU) in January this year by Delhi Police, as well as the shooting of members of certain community during riots over citizenship bills in Delhi in February, and the death by police shooting of five farmers protesting for better prices for their produce in Mandsaur in Madhya Pradesh in 2017. India is supposed to be a federal republic, but "The real power is with the center, which has all-important 'agencies' and holds the purse-strings in fiscally-challenging times," wrote Harish Damodaran. In May, Prime Minister Narendra Modi announced a stimulus package for the economy, worth Rs 20 trillion. In a recent reply to a query under the Right to Information (RTI) Act the government revealed that Rs 3 trillion was sanctioned for loans, of which just Rs 1.20 trillion has been disbursed. "Many of India's current draconian laws have their ancestry in the British era where they were very frankly instruments of repression," wrote Manoj Joshi. Autocratic governments in China, South Korea and Singapore enriched their people by growing their economies, wrote Diva Jain, whereas the rate of growth in India's economy was falling sharply even before the coronaviurus epidemic, explained Roshan Kishore. No wonder 74% of Indians are suffering from stress and 88% from anxiety. Pressures have been building since 2014. Protests are better than an explosion. Over to Modi.  

Atmanirbhar Britain.

In December 2019, Boris Johnson led the Conservative Party to an absolute majority in elections to the House of Commons in Britain, promising to "get Brexit done" and take the UK out of the EU. "Brexit's true believers celebrated: Their messiah would now be able to finish the job he had started in 2016," wrote Luke McGee. "A scant 12 months later, much of that goodwill has vanished -- despite his party continuing to perform well in opinion polls compared to the opposition Labour Party." In January this year, the British Parliament passed a bill finalising Britain's exit from the EU and set a transition period till 31 December to come to an agreement on future trade relations. "Unless the UK asks for an extensions beyond 2020, trade relations from the start of 2021 will either be governed by whatever agreement can be reached, or World Trade Organization rules." Which will mean tariffs on imports, increasing consumer prices, from, and on exports, losing to cheaper competition, to, the EU. Talks on a trade deal have been fruitless and today has been set as the deadline for coming to an agreement, or else a 'No Deal' Brexit will go ahead from 1 January 2021. After 11 months of chest thumping on how the EU has much more to lose from Britain's exit, "Business leaders were sweating last night as the prospects of a No Deal Brexit increased dramatically," reported the Daily Mail. "It came as bank Morgan Stanley dealt another blow to Britain's post-Brexit prospects, becoming the latest Wall Street lender to shift chunks of its assets out of London." Perhaps, Johnson's trouble in coming to any agreement with the EU is a hangover from the Conservative Party icon Margaret Thatcher who forced a reduction in Britain's contribution to the EU's budget. Her famous "No, no, no" speech against greater integration with Europe in the House of Commons in 1990 was apparently based on an article written by Boris Johnson in the Daily Telegraph. Johnson has repeatedly claimed that Brexit, even a No Deal one, will be good for Britain as it will be able to negotiate separate deals with all the other countries of the world. But, the EU takes 43% of all UK exports and sends in 52% of all UK imports. In panic Johnson rushed over for a dinner with European Commission President Ursula von der Leyen (pronounced Lion) but the "lady is not for turning". There will be last ditch talks today but both sides are pessimistic about a favorable outcome. In a sign of British arrogance and colonial mentality the Mail on Sunday savages Angela Merkel of Germany and Emanuel Macron of France for refusing to surrender. It's not just about fish and cheese. Scotland and Northern Ireland voted overwhelmingly to remain within the EU and First Minister of Scotland Nicola Sturgeon has warned that she may ask for a referendum to leave the UK. Without Scotland and Northern Ireland, Britain cannot claim its seat in the UN Security Council. The 'Little Englander' may pine for 'Atmanirbhar' or 'self reliance' but may become really little. A lesson for us, perhaps.

Surely too little, not too much?

Tough reforms are difficult in India because "we are too much of a democracy", Niti Aayog CEO Amitabh Kant seemed to complain. Naturally, his remark was greeted enthusiastically on social media. To stop the controversy this remark generated, Union Minister Ravi Shankar Prasad said, "We are proud of our democracy." "My statement, with relevant portions, is that India is too much of a democracy to mirror a China model," explained Mr Kant.  Argentina, Brazil, South Korea, Singapore and Malaysia all grew fast economically under authoritarian governments, wrote Diva Jain. Robert J Barro showed that "after controlling for other drivers of growth, the overall effect of democracy on growth is weakly negative on average". "In another observation relevant to India's case, he states that the growth-retarding features of a democracy are redistributive schemes and the enhanced voice of special interest groups." India has always had a plethora of social schemes for redistribution to the poor, and this government has been prolific in adding more schemes. Prime Minister Modi announced waiver of bank loans to farmers to win UP assembly election. Last year, he promised Rs 6,000 to all farmers at a cost of over Rs 870 billion and pension scheme for farmers at a cost of Rs 100 billion. Now farmers are protesting at the borders of Delhi, demanding repeal of new farm laws, and the minimum support price (MSP) to be written into law. In fact, they want a "guaranteed remunerative MSP (GRMSP)" to be made mandatory for the private sector with punishment for anyone offering to purchase farm produce at less than that. "Also, many growth drivers in a democracy, such as accountability, rule of law, enforceability of contracts and enriched information environment, do not require drastic legislative action and can be improved through better administration." Indian politicians see accountability and civil servants see information to citizens as loss of power. Every year, at this time Delhi suffers from hazardous levels of pollution. Stubble burning by farmers in surrounding states, encouraged by subsidies, contribute a large chunk to pollution, wrote Seddon and Prof Gulati. When assets of the insolvent non-banking finance company DHFL was put up for sale, US based Oaktree Capital Management looked like a potential winner but the Adani group submitted a bid slightly higher than that of Oaktree after the deadline, leading to suspicions about confidentiality. No one held accountable for cheating. A US firm admitted to paying $1.1 million in bribes to the National Highway Authority of India (NHAI) in 2017. No one punished in India. Right to Information Act (RTI) has been hamstrung by the government by not appointing commissioners so that queries are piling up. "The SC (Supreme Court) simply refuses to hear constitutional challenges to far-reaching State action, sometimes for years," wrote Gautam Bhatia. "Judicial evasion is accompanied by judicial deference." The SC accepts false assurances from the government. Mr Kant must be living on another planet. Democracy is just a word in India. Opium for the people.