Just 7%, and everything will be fine.

A decade ago, former World Bank economist Lant Pritchett labeled India, not a failing state, but a "flailing state" because, "while its performance was world class by some measures of governance, it was terrible in other respects, notably in health, education and sanitation", wrote Swaminathan S Anklesaria Aiyar. The Kumbh Mela was run excellently by Uttar Pradesh. Aiyar is mistaken. The Kumbh Mela was held in Haridwar in Uttarakhand state in April, HT. The Kumbh would have been responsible for spreading the coronavirus widely because, "Max Corporate Services, the company accused of conducting nearly one lakh (100,000) fake COVID tests during the recent Kumbh Mela in Haridwar, has links with the ruling Bharatiya Janata Party (BJP) that might have played a role in its selection by the Uttarakhand authorities despite failing to make the grade earlier, an investigation by The Wire has revealed," wrote Kunal Purohit. "Uttar Pradesh now has a chief minister" "who satiates the allure for violence and aggressive fantasies much more directly. He has a commitment to a governance philosophy that is the purest distillation of the authoritarian-communal model that we have ever seen," wrote Pratap Bhanu Mehta. Sanitation has been improved by the Swachch Bharat Abhiyan, which means Clean India Mission, wikipedia. Ayushman Bharat Yojana, which means Longevity India Mission, "aiming to provide secondary and tertiary health care to 500 million poorer people, financed over 10 million hospitalisations before Covid struck". Not everyone agrees with Aiyar's optimism. The official death toll due to the pandemic was 4,33,622, but, "The number of deaths is, by consensus among experts, at least 10 times more, and that means India has the highest death toll among all countries," wrote Congress Leader P Chidambaram, "In the Global Hunger Index, India was placed 94 out of 107 countries." "On April 18, 2021, the Ministry of Health tweeted that out of 163 oxygen plants that were proposed (more were added later) only 33 plants had been installed. Scroll, a media organization, found that only five oxygen plants were operational." "Indians have expressed shock and anger after a junior health minister told parliament that no Covid deaths had been reported due to oxygen shortages," BBC. "Hospitals across the country ran out of oxygen in April and May during a deadly second wave -- there were daily reports of people dying from a lack of oxygen." "India's GDP was decelerating even before Covid, from 8.3% in 2016-17 to 7.1%, 6.1% and 4.2% in the next three years." If only we can somehow increase GDP growth rate to 7% per year, everything will be super fantastic, thinks Aiyar. Sadly, some of our citizens could not wait. "Suicides across India rose by 10% to 1.53 lakh (153,000) from 1.39 lakh in 2019, with the suicide rate -- suicides per lakh of population -- too showing an increase from 10.4 to 11.3," TOI. So many deaths notwithstanding, everything will be fine if GDP growth increases to 7%, says Aiyar. After all, "In the long run we are all dead", aren't we?    

Blah, blah greenhouse gas at COP26.

The 2021 United Nations Climate Change Conference is starting today in Glasgow in the UK and will last till 12 November, wikipedia. Some 25,000 delegates from 200 countries will be attending this massive jamboree named COP26, which stands for the 26th Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change. "Activists from around the world have descended on Glasgow and organisers were expecting up to 100,000 people at a major demonstration on Friday," NDTV. "Joining them was Swedish teen green icon Greta Thunberg, who arrived by train from London." Thunberg is skeptical about what this conference will achieve. In a speech in September she ridiculed world leaders saying, "Build back better. Blah, blah, blah. Green economy. Blah, blah, blah. Net zero by 2050. Blah, blah, blah. This is all we hear from our so-called leaders: words," The Scotsman. Prime Minister Narendra Modi is already there but Chinese President Xi Jinping will not attend. Supporting Thunberg, "Ahead of a critical global climate conference in November, a UN report released Wednesday shows that many of the world's largest fossil fuel producers are still planning to ramp up production in the coming years, and will be burning far more fossil fuels in 2030 than what is consistent with global climate pledges," CNN. "China and the United States are the world's two biggest greenhouse gas emitters," and "China's emissions are more than double those of the US, but historically, the US has emitted more than any other country in the world," CNN. In fact, China is doing the opposite. "Beijing has reportedly ordered China's coal mines to boost output as an energy shortage across the country has seen millions of homes and businesses hit by power cuts in recent weeks," BBC. India is in a sweet spot. "India is seeking payment for the losses caused by climate disasters, its environment ministry said," Bloomberg Quint. "India is the world's third-largest emitter on an annual basis today and among the top ten historical emitters", but "Even if India's pay-in for damages were roughly 4%, the country would stand to get a larger pay-out for the losses it will incur". The US has committed to carbon neutrality by 2050 and China by 2060 but, "In India, we view such pledges with the skepticism they deserve," wrote Mihir Sharma. Western leaders are announcing far-off targets just to satisfy activists, and "They rely on the development of some sort of carbon capture technology in the distant future to make up for rich countries polluting today." "That's why even many countries that have committed to 2050 or 2060 goals are still quietly commissioning new coal plants or restarting old ones." "Developing countries have very few cards left to play", because, "Whatever energy mix replaces coal -- natural gas, renewables, nuclear power -- the transition is going to cost money." And, Indians don't have any. But, even coal is expensive because, "India imports around 300-400 million tonnes of coal, primarily from Indonesia, Australia and South Africa," India Today. Despite having enough coal reserves, "Stockpiles at power plants fell over FY21 by half, to about 30 MT," HT. That's because electricity demand fell last year because of lockdowns due to the Covid-19 epidemic. "The real problem wasn't publicised till the end of September, when we stood at an average of four days supply, and alarm bells ensued." "But no one did enough when in the prior month stocks fell by double, from 13 days to seven days." Global warming is caused by CO2. CO2 is expelled when we talk. Blah, blah, blah causes global warming.     

Shackled by the global supply chain.

"A Harvard Business Review article this summer outlined how it had taken several months for a Massachusetts-based company, Shawmuts, to put up production capacity for N-95 masks because everything, from polypropylene fabric used to the industrial machines needed to make the fabric and assemble a mask with nose clamps etc. had to be imported from Germany and China," wrote Rahul Jacob. For hospital gowns, "The 'coalition' eventually included companies seemingly as different as a high-fashion firm in New York, a maker of climbing suits in Oregon and even a mattress company." Prime Minister Narendra Modi launched a Make in India campaign in 2014 to increase growth in manufacturing by 12-14% per annum. so that manufacturing increases to 25% of GDP and creates 100 million new jobs, wikipedia. In June 2020, 20 Indian soldiers, including their commanding officer, were brutally murdered by Chinese soldiers in an unprovoked attack in Galwan Valley in Ladakh, ET. During the pandemic last year Modi called for 'Atmanirbhar Bharat Abhiyan', which means 'Self-Reliant India Mission' to reduce our dependence on imports, wikipedia. Seems to have had the opposite effect. "According to the data from China's border agency General Administration of Customs" "Imports from China were up 51.5 percent from $45.17 billion during the first nine-month period of 2020 to $68.46 billion during the first nine-month period of 2021 while exports to China increased 21.6 percent from $15.31 billion to $21.91 billion during the January-September of 2020 and 2021 respectively. Over 50 percent growth in imports from China led to the growth in trade deficit with China to $46.55 billion from $29.86 billion during nine months," FE. "Industrialization has been essential to reducing poverty historically," wrote Prof Dani Rodrik. But, "We are now entering a new era in which industrialization will no longer be as potent in spreading the benefits of economy-wide productivity gains. Global trends in innovation have significantly reduced the potential of manufacturing industries to absorb low-skill workers." "All told, more than $700 billion has been pledged over the next decade to expand production capacity for the chips that run smartphones, power data centers, and one day will drive cars," ET.  Samsung Electronics Co. is "joining Taiwan Semiconductor Manufacturing Co., Intel Corp., Micron Technology Inc. and SK Hynix Inc. in a massive gamble that the world's appetite in electronics will continue unabated." Which means that "companies are hugely dependent on China in managing supply chains and thus choose to wish global geopolitical problems away. The second is that from Washington to New Delhi, grand plans for building 'resilient' supply chains and favoring domestic production are mostly made amid ignorance of how dense and complex supply chains are," Jacob. "As of June 2021, 90% of world's countries operated schools in some capacity, while in India schools remained shut," wrote Anu Aga, Vijay Kelkar & Raghunath Mashelkar. "Unesco estimates that our children have lost two months for every month they haven't attended school: that's 30 months of learning loss already." We are totally dependent on China. Forever, unless we educate our children. 

Will someone please come clean?

During the pandemic, "Emerging markets which stimulated most aggressively got no payoff in a faster recovery, owing in part to the downsides of overindulging," wrote Ruchir Sharma. "Dividing top emerging markets into heavy and light spenders, and including both new government spending and central bank asset purchases", Sharma found, "Through the second quarter this year, the median recovery in the 11 biggest spenders amounted to 12% of GDP, compared to 19% in the 11 lightest spenders." India's stimulus package "amounted to 10% of GDP, mid-size compared to its peers. But its payoff for moderation was one of the strongest recoveries in emerging markets." According to others, India's stimulus package was nowhere near 10%. "New stimulus measures unveiled by Finance Minister Nirmala Sitharaman (in May 2020) cost Rs 40,000 crore (Rs 400 billion), taking the actual fiscal impact of all the steps announced over the past few days to Rs 1.50 (Rs 1.50 trillion) or 0.75 percent of GDP, a report said," ET. At the time, global securities research firm Sanford Bernstein said that the stimulus package was a "lost opportunity", HT." "The government, keen to underplay the pain and damage, is pushing optimistic recovery projections, but the economy isn't out of the woods year," wrote Puja Mehra. "Economists across the board are also saying that government must find ways to spend more." In June, Sitharaman announced a "stimulus mini dose, which has become her trademark. The direct stimulus in the package adds up to 0.5% of the gross domestic product (GDP)." It was left to the Reserve Bank (RBI) to rescue the economy. The RBI has kept interest rate at a low of 4% since May last year, despite projecting a Consumer Price Index (CPI) inflation of 5.3% for the present financial year and 5.2% for 2022-23, HT. High inflation would raise yields on government bonds as investors would demand higher returns to compensate for the loss in the value of the rupee. To reduce the cost of government borrowing the RBI conducted 'Operation Twist" in which it sold short term bonds while buying long term ones, Deepthi Mary Mathew. The RBI has also been conducting quantitative easing, under the disguise of 'Government Securities Acquisition Programme (G-SAP)', TIE. In June, the "RBI announced the transfer of Rs 99,122 crore (Rs 991.22 billion) surplus funds to the government for the nine-month period ended March 2021, which is nearly double of what was budgeted earlier", ET. For his sterling service, the government re-appointed Governor of RBI Shaktikanta Das for 3 more years or until further orders, DH. Loyalty may have rich personal rewards but, "Prices of items from tea, coffee and biscuits to toothpaste and electric components have risen 4% to 10% in the last quarter, while construction supplies, such as cement and sanitary ware, have added as much as a fifth", ET. Hence, while CPI inflation fell to 4.35% in September, core inflation is stuck at around 6%. As a remedy, "The RBI should let the rupee rally against the dollar to contain imported inflation coming in mainly from crude prices and help push exports, as the current account risks from rising oil price can be contained at 1.4 percent of GDP, according to a report," TOI. The rupee is already very overvalued. In 2007, one dollar would have bought Rs 40, poundsterling. In the 14 years since then, average rate of inflation in the US  has been below 2%, usinflationcalculator, while that in India would have be above 7%, inflation.eu. Since inflation compounds year on year the dollar/rupee exchange rate should be over 85, but one dollar is trading at Rs 74.78 this morning, xe. We are not as brilliant as the RBI but we will be at the receiving end if the rupee tanks. Will someone please come clean?          

Not much else we can do.

"Among the many challenges confronting Pakistan is the fresh breakdown in civil military relations," "Pakistan's economy is in a tailspin as it struggles to negotiate a stabilisation package with the International Monetary Fund (IMF)," and "The militant religious movement Tehreek-e-Labbaik Pakistan (TLP) has mounted a fresh march against the capital demanding the release of its arrested leader, Saad Rizvi," wrote C Raja Mohan. It has managed to restore the Taliban to power in Afghanistan but "the long-awaited victory is turning sour", it can no longer depend on unqualified support from Arab Gulf states and there are tensions in relations with the US and Europe. Particularly galling, "Pakistan's economy is now 10 times smaller than that of India and is well behind Bangladesh." There is of course "Iron Brother" China which has guaranteed "territorial integrity, sovereignty and independence", Dawn, in return for China's sovereignty over the China-Pakistan Economic corridor (CPEC), which links Xinjiang province to Gwadar port in Balochistan, Britannica. Unfortunately, "Data shared by the Pakistan Institute of Development Economics (PIDE) showed that a whopping 24 percent of people who have at least an undergraduate degree -- are without a job," IN. "Clearly, CPEC has failed to boost employment in Pakistan," because "it is primarily controlled and run by the Chinese," and the "projects have high interest rates and the chunk of the revenue that is generated goes to the Chinese, leaving little for the Pakistanis." According to the International Forum for Rights and Security (IFFRAS), a think tank based in Canada, "the Pakistani military and civil societies have garnished their relations with the Taliban for smuggling and terror training to counter India's rising influence in South Asia", and "52 people died in 35 terror attacks in August indicating the growing instability in the region", ET. "But Pakistan has not yet recognised the Taliban as Afghanistan's legitimate rulers", and "Analysts say that some veteran Taliban commanders are miffed that Islamabad is trying to keep the new Afghan government under control through its backing of the Haqqani network, which is part of the transitional government," TIE. Initially, Taliban's Supreme Leader Mullah Hibatullah Akhundzada was supposed to lead the government, but he was not seen or heard from for a long time, TOI. "The Financial Action Task Force (FATF) has retained Pakistan on its grey list and added its ally Turkey to the list, in a double blow for Islamabad which depended for Ankara's support to avoid entry into the blacklist earlier," ET. Ominously, for Pakistan, "Ties between China and Pakistan, fostered with Beijing supplying a range of modern armaments to Islamabad's defense forces, have come under strain over unreliable Chinese military hardware and poor, substandard servicing and maintenance," ET. But, all is not gloom. Pakistan thrashed India by 10 wickets in the T20 World Cup on Sunday, bringing ecstasy to the nation, TOI. "For India, this is not a moment for schadenfreude," thinks Raja Mohan. But, it's not clear what India can do. Apart from securing our borders from both Iron Brothers. Hopefully, they will fight each other.

Is it safe to ignore an iceberg?

"After a two-day pause, fuel prices are up again on Wednesday (today). In Delhi, petrol and diesel rates were up by 35 paise to cost Rs 107.94 and Rs 96.67 per litre, according to Indian Oil Corporation." ET. In Mumbai they are higher still. According to the list of companies controlled by the Ministry of Petroleum and Natural Gas the entire chain of acquisition of crude oil, its refining and sale to retail customers is controlled by the government. This has to be the most pernicious example of monopoly extortion of consumers. First the government takes a huge chunk through excise duty on oil import, Deccan Herald, and then rakes in windfall dividends from its oil companies through higher retail prices, HT. Since most goods and services need fuel for functioning this should cause prices to rise and Indians are known to be sensitive to prices. "One of the biggest factors that led to the downfall (in 2014 general election) of Manmohan Singh's  government was inflation," Quartz India. "In March, 2016, the Modi government amended the Reserve Bank of India Act to put in place inflation targeting regime for the central bank to follow. The RBI was to steer a monetary policy (which mainly involves controlling money supply via levers such as loan interest rates) that ensured that inflation was limited to 4% with a 2 percentage point band." But, the RBI has kept interest rates unchanged at 4% since May 2020, HT. "The RBI has expanded the list of tools in its armoury to influence interest rates, the exchange rate, liquidity in general and liquidity targeted at specific segments of end-borrowers to be mediated by different financial intermediaries and to prevent the differential between short- and medium-term rates from widening too much," ET. All this blather means that it doesn't give a toss about inflation. Why? The present Governor of the RBI Shaktikanta Das is an ex-IAS officer, wikipedia, and would be loyal to the government. So why the indifference? Because, the rise in prices is due to a jump in commodity prices because of an acceleration in economic growth following relaxation in restrictions induced by the Covid pandemic, ET. "The dramatic surge in demand clogged the system for transporting goods to the factories that needed them. At the same time, finished products -- many of them made in China -- piled up in warehouses and ports throughout Asia because of a profound shortage of shipping containers, the standard-size steel boxes that carry goods on enormous vessels," ET. And, fingers crossed, there will a correction in prices of commodities soon. Unfortunately, oil prices are expected to remain high. "Goldman Sachs, for example, sees Brent hitting $90 a barrel at the end of this year," oilprice.com. "The investment bank also sees sustained higher oil prices in the coming years." The RBI could be gambling on base effect. Since inflation is calculated on last year's prices, if prices soar this year but stay at the same elevated level in 2022 the RBI can claim credit for 0% inflation rate. However, higher prices will lead to higher wage demands. Average salary hike is expected to be 9.4% next year, up form 8.8% in 2021 TOI. Wage costs will be passed on to consumers. Finally, the US Federal Reserve is reluctant to raise interest in the US, CNBC, despite an inflation rate of 5.39% in September, ycharts.com. But, if the Fed is forced to raise rate early the rupee will dive and cost of imports will jump. Markets will tank and the economy will go into a tailspin. Inflation is like an iceberg, 90% of which is unseen, wikipedia. Remember the Titanic? 

When dumb money replaces smart money.

"Domestic equity market benchmarks BSE Sensex and Nifty ended in the green, after oscillating between gains and losses throughout the session on Monday. BSE Sensex recouped all the losses and gained 145 points or 0.24 percent to end at 60,967, while NSE's Nifty closed above 18,100, up 10.50 points," FE. "My view is that surely we will be around 100,000. The question is whether that number is three years away or is it five years away. Otherwise 100,000 looks fairly certain," said Nilesh Shah, MD & CEO, Envision Capital. "The recent technical breakout of the Nifty50 index, which helped it climb over 2,500 points in a matter of months, is fuelling exuberance among option traders in India. Traders are steadily loading up on deep out-of-money Call options of the index in the expectations that the rapid move would continue and enable them to pocket asymmetric gains in the process," ET. "One such bet is that the benchmark Nifty50 will climb above the 20,000 mark by the end of the year, a possibility that seemed outlandish two months ago, but highly probable now." "I had said ... that while I did not think a great bear market was coming simply because 10-year rolling returns show the market is still below the trend line," "But then after this kind of runup, one expects some correction," said Devina Mehra. "A lot of emerging markets have been increasing rates," but, "In India, I do not think we will raise rates in a hurry." In companies, whose shares have fallen sharply recently, "FIIs and DIIs have trimmed their holdings in the past quarter", wrote Jimeet Modi. "This behavior corresponds to the Dow Theory's last phase in which institutional investors (considered smart money) progressively book profits, while retail investors absorb these volumes and sustain the rally." When markets plunged due to the pandemic, institutional investors started buying stocks because central banks released trillions of dollars in liquidity, and "Seeing such a quick rebound in stocks prices, the entranced retail investors entered the market with innate confidence." Most of these are new investors. "The number of investor accounts with Central Depository Services (India) Limited (CDSL) has more than doubled from 2.12 crore (21.2 million) to 4.64 crore (46.4 million) in September 2021. In fact, more than half of the additional 2.52 crore accounts -- 1.3 crore -- have come in the last six months between April and September 2021," TIE. New investors may panic when the market corrects because, "In absolute terms, a 10% fall from levels of 60,000 -- or about 6,000 points -- would appear, to inexperienced investors, to be much bigger than than a 10% fall when the Sensex was at 10,000." "There is an absolute frenzy in the market and a perfect case in point to explain that frenzy is that since April till now, there have been 26 IPOs of which only six are trading below their listing price and 20 are trading very far up! There are so many IPOs which have given 100-120% gains," said Rajat Sharma. "If this is not a frenzy nothing is." Dumb money replacing smart money. How dumb is that?           

25 basis points of doubt.

"Industry chamber PHDCCI on Sunday said it expects strong GDP growth in the coming quarters with the economic recovery gaining momentum. Out of the 12 lead economic and business indicators of QET (Quick Economic Trends), tracked by the industry body, nine have shown an uptick in sequential growth for the month of September 2021 as compared to six showing the uptrend in August 2021," ET. This expectation is supported by, "Engineering goods shipments crossed $9 billion for the third month in a row in September with 22 out of 25 top export destinations such as China, UK and UAE recording positive growth. Out of 33 engineering product categories, 27 witnessed positive growth in exports during September 2021 when compared with the same month last year," ET. Still, we should be realistic. "India should target a 'realistic' goal of $65 billion worth of textile exports in the next five years, industry body CII and global management consulting firm Kearney have said in a report, adding the government's aim of $100 billion of exports is a 'very steep goal'," ET. "India exported textiles worth $36 billion in 2019." "Spending on holidays, equities and white goods may take away the sheen from gold this festive season," ET. This is great news because India has to import gold using precious foreign exchange and this adds to our current account deficit (CAD), whereas spending on holidays within India and on buying white goods, which are large home appliances, MBN, will increase economic growth and create jobs. However, "Gold imports, which have a bearing on the country's current account deficit (CAD), rose by 22.58 percent to USD 34.6 billion (about Rs 2.54 lakh crore, or Rs 2.54 trillion) during 2020-21 due to increased domestic demand, according to the Commerce Ministry data," BS. People buy gold as a hedge against rising prices which means that the rupee buys less and less. "International trade is not a zero-sum game. India can't maximise its interests at the expense of others," wrote Prof Prabhash Ranjan. Tariffs have increased as "the simple average of India's tariffs that stood at 8.9 percent in 2010-11 has increased by almost 25 percent to 11.1 percent in 2020-21". "According to the WTO, from 2015 to 2019, India initiated 233 anti-dumping investigations," the highest in the world. The Customs Act has been changed so that the government can ban import or export of any good to prevent injury to the economy and Prime Minister Narendra Modi has given a "clarion call" to be "vocal for local", showing a disdain for imports and competition. "Increasing capex ratios in India will lift employment prospects, boosting income and consumption growth to create a virtuous cycle, broking firm Morgan Stanley said," Mint. "Sitting on healthy cash reserves and aided by stronger balance-sheets post Covid, India Inc is looking to step up its capital expenditure (capex) and investment plans," ET. "The Indian economy is leaving behind the shadow of the pandemic with consumer demand improving and supply constraints easing due to strong kharif  (monsoon) agricultural production and revival in manufacturing and services, according to the RBI," ET. So, everything is hunky-dory, as they say in India. "The International Monetary Fund (IMF) said it has pared down India's potential growth forecast by 25 basis points to 6% due to the impact of the pandemic which hit investments and labour market badly," Mint. A little doubtful.  

What have we got to do with Phillips Curve?

"Perhaps the greatest scholastic challenge is currently being faced by central banks across the world. They must deal with rising inflation," wrote Soumya Kanti Ghosh and Prof V Anantha Nageswaran. "But, two problems confront them. One, they cannot raise interest rates because they have got everyone addicted to low or no rates. And, two, inflation caused by supply disruption is not amenable to monetary treatment." Inflation can be explained by the Phillips Curve, which states that "inflation and unemployment have a stable and inverse relationship. The theory claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment," Investopedia. Inflation is dependent on output gap and inflation expectation. "The output gap is is an economic measure of the difference between the actual output of an economy and its potential output," IMF. A negative output gap means there is spare capacity in the economy so rising demand can be met by increasing output and will not lead to higher prices. Inflation in India cannot be explained by output gap or inflation expectation, wrote Ghosh and Nageswaran, According to a survey by the Reserve Bank of India (RBI) "Households' median inflation perception for the current period stood at 10.3% in July compared with 10.2% in May," Bloomberg Quint. "The aggregate capacity utilisation level increased to 69.4% in the quarter ended March 2021 from 66.6% in the previous three months," so there is plenty of spare capacity and no need for prices to rise. Consumer confidence is down which would lead to less consumer spending and lower demand. In the last meeting of the Monetary Policy Committee of the RBI "The Consumer Price Index (CPI) inflation for the financial year 2022 (1 April 2021-31 March 2022) was projected at 5.3 percent," HT. "Perhaps, it is possible to hypothesise that inflation in India reflects an economy that is supply-constrained with productivity of enterprises held back by a license-compliance-inspection system." "The pandemic has disrupted nearly every aspect of the global supply chain -- that's the usually invisible pathway of manufacturing, transportation and logistics that get goods from where they are manufactured, mined or grown to where they are going," ET. "Before the pandemic, sending a container from Shanghai to Los Angeles cost perhaps $2,000. By early 2021, the same journey was fetching as much as $25,000." "Companies around the world are about to get socked with even higher prices on everyday items, companies from food giant Unilever Plc to lubricant maker WD-40 Co warned this week as they grapple with supply difficulties," ET. If prices go up workers will demand higher wages. In the US, "Average hourly earnings jumped 0.6% for the month, about double what Wall Street had been expecting, and the increase from a year ago stood at a robust 4.3%, up from 4% rise a year ago," CNBC. In India, "The price of petrol and diesel in Delhi have now jumped to Rs 107.59 per litre and Rs 96.32 per litre respectively," ET. This is because of enormous taxes on fuel. "Over 5.95 crore (59.5 million) income tax returns (ITRs) for the fiscal year ended March 31, 2020 (2019-2020) were filed by January 10, the Income Tax Department said," ET. This was one year before the pandemic. If only 59.5 million, out of a total population of 1,300 million, earn enough to file tax returns, and prices are still rising at 5.3%, it is hard to imagine where prices will reach if more people start earning a respectable living. No wonder, a study by BrokerChoose reveals that 100 million Indians own cryptocurrencies," TOI. If people do not earn enough of our currency, which earns less everyday, they gamble on currencies that don't exist. Phillips Curve is for other countries. We have the cow, News18.   

Has the RBI taken over the government?

"The Union Cabinet on Thursday hiked Dearness Allowance (DA) and Dearness Relief (DR) by 3% to 31% to benefit 47.14 lakh (4.714 million) central government employees and 68.62 lakh (6.862 million) pensioners," The Wire. "This decision to hike the allowance will put an annual burden of Rs 9,488 crore (Rs 94.88 billion) on the exchequer. Earlier in July, the government had restored the Dearness Allowance (DA) and Dearness Relief (DR) and increased the rate of allowance from 17% to 28%." In one fell swoop, as it were. Dearness Allowance is given to government employees to cushion them from rise in prices or inflation. But, "India's retail inflation fell to a five-month low of 4.35% in September from 5.3% in August, as food prices softened, official data showed," ET. "Food inflation eased to 0.68% from 3.11% in August." The RBI has hung on to an interest rate of 4% since May 2020 despite a higher rate of inflation, HT. Since banks calculate interest on fixed deposits based on the rate set by the RBI, savers, especially senior citizens, are receiving negative returns on their fixed deposits in banks, moneylife. While government employees are getting a handout of 31% of basic pay to compensate for inflation. Not just that. When DA reaches to more than 50% of basic pay it is merged with the salary and then DA is calculated on the new pay, wikipedia. DA was 0 in January 1996, in January 2006 and again in January 2016, which was most probably because of merger with basic pay. As if to rub salt into our wounds, Governor of RBI Shaktikanta Das taunted, "The Reserve Bank of India (RBI) remains laser-focused to bring back retail inflation to four percent over a period of time in a non-disruptive manner," NDTV. "The assessment of inflation has been happily overtaken by actual outcomes in the form of a decline in food inflation. Formation of inflation is being buffeted by repeated shocks that have taken fuel inflation to an all-time high and turned core inflation persistent, with risks to the upside," said Deputy Governor Michael Patra. "Petrol and diesel prices were hiked for the fourth straight day on Saturday," ET. "Petrol and diesel in Delhi are now priced at Rs 107.24 per litre and Rs 95.97 per litre respectively," "Domestic petrol prices are up 32% in a year and 46% in two years while diesel prices are up 35% in a year, and 45% in two years." Since fruits and vegetables are transported from farms to markets by trucks, which run on diesel, it is astonishing that vegetable prices are dropping while the cost of transport is going up exponentially. Either farmers or transporters, or both, must be suffering enormous losses. "When the inflation target was accepted, it was assumed that the Monetary Policy Committee of the RBI, with three external members, would set policy rates and that is all there is to monetary policy," ET. But, "The RBI has expanded the list of tools in its armoury to influence interest rates, the exchange rate, liquidity in general and liquidity targeted at specific segments of end-borrowers to be mediated by different financial intermediaries and to prevent the differential between short- and medium-term rates from widening too much." If the RBI can inflict severe repression on citizens according to the price of potatoes, what is the government doing? Frying pakodas?  

An emperor or a communist dictator?

"Ever since Deng Xiaoping opened China to the rest of the world in the late 1970s, many in the West wanted to see the country succeed, because we thought China -- despite its brutal authoritarian political structure -- was on a path to a more open society and economy. Alas, President Xi Jinping has reversed steps in that direction in ways that could pose a real danger to China's future development and a real danger to the rest of the world," wrote Thomas L Friedman. China wants to capture Taiwan because it has "the most sophisticated microchip manufacturer in the world, Taiwan Semiconductor Manufacturing Co., or TSMC". "And if China thinks it can get around that by seizing Taiwan just to get hold of TSMC, that would be a fool's errand," because supply of key machines and chemicals from the US and Europe will be shut down. Because there is no trust in China. China has problems. "Since Beijing started clamping down on corporate debt in 2017, many real estate developers have turned to off-balance-sheet vehicles to borrow money and skirt regulatory scrutiny, analysts and lawyers say," Reuters. China's developers owed 33.5 trillion yuan ($5.24 trillion) through various channels at the end of June, Nomura estimates, and, "Private bonds issued by shell companies in offshore locations have emerged as a new concern." That's more than China's foreign exchange reserves. "China's foreign exchange reserves, the largest in the world, fell to $3.2006 trillion at the end of September, down $31.5 billion from a month earlier, according to official data." NDTV. "Out of 70 Chinese property developers rated by Moody's, 27 have 'significant' exposure to joint ventures, compared with five out of 49 in 2015. Under a typical joint venture, a developer sets up a minority-owned real estate project with an asset manager or private equity fund and promises them fixed returns," Fox. "For China's leader, Xi Jinping, it is all part of a plan. Under Xi, China is reshaping how business works and limiting executives' power. Long in coming but rapid in execution, the policies are driven by a desire for state control and self reliance as well as concerns about debt, inequality and influence by foreign countries, including the United States," wrote Paul Mozur. "Chinese tech companies are reeling from regulation." "Growing number of executives are going to jail." "The Chinese government, under his (Xi Jinping's) leadership, has started putting the Communist back in the Communist Party, at least to some extent," BBC. " "Kids are being lazy, wasting away their youth playing video games? Party to the rescue: three-hour gaming limit. Teenagers having their minds poisoned with silly, idol-worshipping television? Party to the rescue: 'Sissy looking' boys banned from programmes. Demographic time bomb ticking: Again the Party has the solution: Three-child policy for all! Football, cinema, music, philosophy, babies, language, science...the Party has the answers." China is an existential threat to India. "It's not unique to India; we've seen it in other circumstances as well and -- with Australia, with the South China Sea. And we've seen an increase in wolf warrior diplomacy in Europe," said a US official," News18. 'Mighty Uncle' Xi Jinping has gone back to the past and made himself an emperor, Reuters. And, an emperor has no clothes.      

Action plans on 60 new ideas. It's all happening.

"Our mobility-based estimate of GDP suggests the rate of output last fortnight was where it would have been had there been no Covid: 13% above the GDP of the fiscal year ending March 2020 (FY20)," wrote Neelkanth Misra. Though international travel is yet to start, passenger traffic on railways is still restricted, state government spending on infrastructure is restarting only now and car manufacturing is still down. "Sales of jewelry and consumer durables are seeing strong compounded growth over the same months in 2019, hotels and tourist locations have high occupancy, there is chaos and crowding at airports, heavy footfall at restaurants and people are queuing up to buy houses." "FMCG bellwether Hindustan Unilever (HUL) posted 9% growth in standalone net profit of Rs 2,187 crore (Rs 21.87 billion) in the second quarter ended September 30 as compared to Rs 2,009 crore (Rs 20.09 billion) in the corresponding period of the previous fiscal, while sales grew by 11% to Rs 12,516 crore (Rs 11,276 crore last year)," TOI. However, total expenses rose by 12% to Rs 9,883 crore because of inflation, "which the company's CMD Sanjiv Mehta described as something 'not seen in many years'." "The Indian economy is leaving behind the shadow of the pandemic with consumer demand improving and supply constraints easing due to strong kharif (monsoon season, wikipedia) agricultural production and revival in manufacturing and services, according to RBI," ET. "Also, softer food prices are aligning headline inflation closer to the target of 5.3 percent for FY22." "Indian startups haven't had it so good in a long time. They raised nearly $11 billion in the July-September quarter, twice the money that they got during the same period last year, with fintech, edtech and SaaS (software-as-a-service) firms cornering nearly 50% of the funding," TOI. "Over 30 startups have turned unicorns this year so far, including two decacorns (valued at over $10 billion) -- Byju's and Paytm." "The Indian economy is poised for a repeat performance of growth last seen between 2003 and 2010 led by corporate deleveraging and profitability, lower bad assets and demand for housing, Jeffries said. India's growth averaged 8.5% to 9% between 2003 and 2010, up from the 5.5%-to-6% average before that," ET. "The country's foreign exchange reserves rose by $2.039 billion to $639.516 billion in the week ended October 8, according to RBI data," ET. Naturally, the stock markets are sizzling with the S&P BSE Sensex trading at 61,123.74 at this point in time, BSE "My view is that surely we will be around 100,000. The question is whether that number is three years away or is it five years away," asserted Nilesh Shah, MD and CEO of Envision Capital. "Markets are driven by three things -- money flow, sentiments and fundamentals," said Nilesh Shah, MD at Kotak AMC. All the three are positive. "So when there is a combination of three things, the market climbs the wall of worries." "So will there be corrections? Answer is undoubtedly yes. Is there likely to be a big crash like March 20? Most probably not." Not satisfied with this deluge of good news, "The Centre has sought 'action plans' from various ministries on 60 new ideas such as bringing down the 'cost of doing business' in India, replacing multiple environmental legislation with a single Environment Management Act, opening up beach and sand minerals mining to the private sector and indigenous manufacture of low-cost tablets to take education to poor children," ET. Why 60? Is it a sacred number? Why not 50 or 70 or even 100? Anyway, already India is booming. Multiplied 60 times it may zoom past Jupiter. The US and China must be quaking.        

Any agreement is bound to have rules. And, rules are for others.

"The era of most favoured nation (MFN)-based, dispute settlement regulated international trade governed by the World Trade Organization (WTO) may be drawing to a close," wrote Mohan Kumar. "The biggest change required will be in our attitude towards Free Trade Agreements (FTAs). It is also undeniable that, on balance, India has not been able to take full advantage of FTAs signed by it with a variety of partners such as the Association of South East Nations (Asean), Singapore, South Korea and Japan." But, "India will need to enter into FTAs with more trading partners if it is to achieve its goal of a $5 trillion economy". As with the European Union (EU). But, "The history of Indo-EU trade negotiations is a chequered one, and, after extensive back and forth between 2007 to 2013 talks had to be suspended out of sheer frustration by both sides." While India's exports of telephones rose from $0.6 billion in 2014 to $3 billion in 2020, it is nothing compared to Vietnam. "From just $0.9 billion in 2009, its telephone exports rose to $21.5 billion in 2014 and to $31.2 billion in 2020," wrote Prof Arvind Panagariya and Deepak Mishra. How? "Whereas Indian leaders routinely express regret at having signed FTAs even with countries accounting for minuscule proportion of the country's trade, tiny Vietnam has boldly embraced such economic giants as China and the European Union in FTAs. It aslo has FTAs with every single Asian country of any significance." "In 2019-20, Indian exports and imports to the EU $53.8 billion and $51.2 billion respectively, making India a net exporter," wrote Siraj Hussain and Jayant Dasgupta. India levies high duties on dairy products which is why it walked out of the Regional Comprehensive Economic Partnership (RCEP) negotiations. The EU will want reduction in duties on dairy products, cars and alcohol. However, apart from their share of 41% of central taxes granted by the Finance Commission, Business Standard, states in India raise most of their revenue from taxes on alcohol, on petrol and diesel, on vehicles, on property registration and sales, and on aviation turbine fuel (ATF), insightsonindia. In 2011, we learnt that "Imported liquor is likely to get cheaper, with government willing to lower import duty on alcohol from the EU", Economic Times (ET) but, in fact, prices have more than doubled since then because taxes have been jacked up so high, even on Indian brands. As cars are seen as luxury goods, "India's federal goods and services tax (GST) rate on automobiles, including cars, motorbikes and trucks, is as high as 28%, on top of which other taxes are imposed by states," Reuters. The automobile industry contributes 7% to our GDP, constitutes 49% of manufacturing and employs 35 million people, wrote N Chandra Mohan. Taxes need to be lowered to boost sales. Finally, "At the insistence of the EU, we have also agreed to the 'launch of negotiations on a standalone investment protection agreement'," wrote Mohan Kumar. That may open India to litigation as our government is used to changing rules suddenly. After Walmart bought Flipkart for $16 billion in 2018 and paid withholding tax of $2.5 billion, Financial Express, the government changed rules of e-commerce, apparently to help local businesses, NDTV. "Devas Multimedia's investors investors are eyeing several properties owned by the Indian government across the world as they seek to enforce a $1.3 billion arbitral award the satellite company won against Antrix, the commercial arm of India's space agency," ET. Foreigners refuse to be treated like Indians. That's the trouble with FTAs.          

Independence came from blood, not from peaceful words.

"More than five decades after his death, Vinayak Damodar Savarkar's legacy remains fiercely contested," BBC. Although the right-wing leader was exonerated of all charges, his critics allege that Savarkar was connected to the 1948 assassination of Gandhi. They dispute his role in the Indian freedom struggle and condemn his advocacy of a 'Hindu nation'. Savarkar's supporters believe that the leader -- who later led the Hindu Mahasabha party and birthed the idea of Hindutva or Hindu-ness -- was a staunch nationalist and an unwavering patriot." "Hindutva ideologue Vinayak Damodar Savarkar filed mercy petitions before the British during his incarceration in Andaman jail on a suggestion from Mahatma Gandhi, Union Defence Minister Rajnath Singh has said. But the minister said Savarkar's contribution to freedom struggle was maligned by those adhering to a certain ideology, something that would not be tolerated anymore," moneycontrol. Diametrically opposite, Chief of All India Majlis-e-Ittehadul Muslimeen (AIMIM) Asaduddin Owaisi "said that the first petition Savarkar wrote was in 1911, just six months after getting into prison and Gandhi was then in South Africa. Savarkar wrote again in 1913/14 and Gandhi's advice is from 1920". Indian Express (TIE). Trying to apply a soothing balm, Rajiv Tuli of the RSS wrote that both Gandhi and Savarkar "were born in traditional Hindu families. Both were conscious of their Hindu identity and were orthodox Hindus. Gandhi was more assertive -- he described himself as a Sanatani Hindu and a cow worshipper. Savarkar was more progressive in his approach -- he was averse to the ritualistic aspects of the Hindu religion." Refuting Rajnath Singh's assertion, activist GN Devy wrote, "The Indian Council of Historical Research has compiled an exhaustive list of those who were sent there and chose to be martyrs. From the old Bombay Presidency alone, there were over 400 young men transported to the Andamans, who were either shot dead or hanged." This flood of words has buried the real reasons for India's independence. On 8 December 1930, Dinesh, Benoy and Badal, dressed in sophisticated European attire, entered the Writer's Building and...fired shots as soon as they saw Simpson, who died immediately. Other British officers in the building like Twynam, Prentice and Nelson underwent fatal injuries during the shootout," Reflections. Dinesh Gupta shot himself to avoid capture but survived and was later hanged by the British, wikipedia. He did not beg for mercy. Badal Gupta took cyanide after the attack and died on the spot, wikipedia. Benoy Basu shot himself but did not die. He was taken to hospital where he died because he kept aggravating his injuries, wikipedia. Surya Sen, or Masterda, led a raid on the Chittagong armoury in 1930. He was hanged. His nails were pulled out and his teeth were smashed in so that he would be able to say 'Bande Mataram' at his death, wikipedia. Subhash Chandra Bose was arrested many times by the British, escaped in disguise and formed an army, the Azad Hind Fauj (Army for Independent India) with Japanese help and attacked from the east, Britannica. In February 1946 sailors in the Royal Indian Navy (RIN) mutinied and in August 1947 India was independent, TIE. The British did not relinquish the Jewel in the Crown because of outpourings of  words but because of lethal attacks by martyrs. After all 'sticks and stones' is an English saying.    

Can't do without the dirtiest fuel, can we?

"Industry makes up only 25 percent of grid demand in the US, but in China it is fully 59 percent of the total -- more than all the country's homes, offices and retail stores put together," Taipei Times. "Cheap power has been an essential tool of development, and the government has traditionally encouraged major users with electricity tariffs that get cheaper the more you consume." In India, on the other hand, price of electricity per unit rises with the level of consumption, with each state having a different rate for domestic users, ranging from Rs 4 per kwh in Sikkim to Rs 11.82 per kwh in Maharashtra, Bijli Bachao. According to purchasing power parity (PPP),  India had the highest rates for industrial users in 2019 compared to the US, Canada, Russia, China, Japan and Brazil, iea.org.  About two-thirds of electricity comes from coal and flooding in the coal hub of Shanxi Province has driven up coal prices to 1,508 yuan (US$234) a metric tonne. The trouble is that the world is dependent on cheap goods from China, produced with cheap electricity. so any disruption in China will result in higher prices everywhere. "A widening power crisis in China - caused by shortages of coal, record high fuel prices and booming post-pandemic industrial demand as it shifts to greener fuels - has halted production at numerous factories including many supplying big global brands such as Apple Inc. Soaring energy prices helped send producer price index (PPI) its highest in at least 25 years in September, rising 10.7% year-on-year, official Chinese data showed," Economic Times (ET). "As a worsening power shortage ripples through China Inc, with provinces asking high-energy industries to curtail usage, semi-conductor machinery makers and manufacturers along with electric-vehicle supply chain have had to shutter production,' ET. "Prices of lithium compounds and spodumene, battery ingredients, have shot up in recent weeks and made it even more expensive to produce power packs." As a result, "The world's second-largest economy grew 4.9% over a year ago in the three months ending in September, down from the previous quarter's 7.9%, government data showed. Factory output, retail sales and investment in construction and other fixed assets all weakened," ET. China is looking elsewhere to augment its wealth. "China is expanding its digital footprints in Africa as a key element of its post Covid economic strategy for the continent and its companies are reported to invest $8.3 bn in the continent as part of its grand strategy," ET. Naturally, "Millions of internet addresses assigned to Africa have been waylaid, some fraudulently, including through insider machinations linked to a former top employee of the non-profit that assigns the continent's addresses," Business Standard. Pakistan is already subservient and can be disdained. "Ties between China and Pakistan, fostered withe Beijing supplying a range of modern armaments to Islamabad's defense forces, have come under a strain over unreliable Chinese military hardware and poor, substandard servicing and maintenance," ET. The world is having problems because of China, and China is having problems because of coal. So, the world is having problems because of coal. The dirtiest of all fossil fuels.  

Lead us not into temptation.

"The benchmark BSE Sensex reached the 61,000-mark milestone for the first time while the Nifty50 index surpassed 18,300 today, Business Standard. "An across the board rally lifted the 30-share pack 569 points or 0.94 percent on the bourses, helping the index to settle at 61,306 level. The Nifty50, meanwhile shut shop at 18,336 levels, up 174 points or 0.96 percent." "My view is that surely we will be around 100,000. The question is whether that number is three years away or is it five years away. Otherwise, 100,000 looks fairly certain," said Nilesh Shah in an interview. "I do not believe that this market is going to fall because of valuations. I believe that if at all there is a correction it is going to be for some of the other reasons which could be inflation or interest rates going up or liquidity tightening." "I believe that we are at the start of this round of bull market and this is a bull market which is going to last for several years," said Shah. "We are going to see solid business momentum over the next several years which will continue to translate into even a much more vibrant and stronger bull market." While our stock market indices are reaching for the skies we are excelling in another index as well. "India has slipped to 101st position in the Global Hunger Index (GHI) 2021 of 116 countries, from its 2020 position of 94th and is behind its neighbors Pakistan, Bangladesh and Nepal," Economic Times (ET). "Reacting sharply to the Global  Hunger Report 2021, the Women and Child Ministry said that it is 'shocking' that it has lowered the rank of India on the basis of FAO estimate on proportion of undernourished population which is found to be 'devoid of ground reality and facts, and suffers from serious methodological issues'," ET. India is a member of the FAO which is the Food and Agriculture Organization of the United Nations, wikipedia. But, there is an Indian report as well. "The nutritional level among children in India worsened over the last five years, according to health data. Eighteen of the 22 states and Union Territories (UTs) recorded a rise in the percentage of children under five years of age who are stunted, wasted and underweight compared with 2015-16, reversing decades of gains, showed the latest National Family Health Survey," The Wire. This was even before Covid-19 decimated the country. "Gauging who can afford the five assets of a car, an air-conditioner at home, a desktop or laptop computer, a refrigerator, and a television set, has been seen as an important indicator of economic well-being in a fast-growing, aspirational economy," Indian Express (TIE). "An analysis of asset ownership data at the household level collected by Lokniti-CSDS during its National Election Study 2019 indicates that no more than 3% of Indian households -- that is, 1 in every 33 -- own all of these five assets at the same time." "The number of investor accounts with Central Depository Services (India) Limited (CDSL) has more than doubled from 2.12 crore (21.2 million) in March 2020 to 4.64 crore (46.4 million) in September 2021. In fact, more than half of the additional 2.52 crore accounts -- 1.3 crore -- have come in the last six months between April and September 2021," TIE. These people are entering at the top and will be severely hurt if and when markets correct. A Massacre of the Innocents of modern times. They should be warned, not tempted.

They surely do hard work in Harvard.

"A few years back when India's GDP was ranging 8-9%, former Finance Minister Pranab Mukherjee said that the great thing about India is we are a growth hungry country, we are ambitious," Economic Times (ET). He said that "we are dreaming of double-digit growth". The present Finance Minister Nirmala Sitharaman said at Harvard Kennedy School this week, "As regards the growth of India, we are looking at near close to double digit growth this year and this would be the highest in the world." Mukherjee was finance minister from January 2009 to July 2012, wikipedia. "Between 2008 and 2013, inflation averaged 10.1% per annum due the rising global oil and metal prices, wrote Muthukumar K. Average consumer price index (CPI) inflation was 10.83% in 2009, 12.11% in 2010, 8.87% in 2011 and 9.30% in 2012, inflation.eu, during Mukherjee's tenure as finance minsiter. "The economy is expected to grow at 7.5-8.5 percent -- as projected by rating agencies -- in the next financial year, and the growth would sustain at this range for the next decade, she said," Business Standard. "India has clocked record exports in the first half of FY22 at $197.89 billion and is closer than ever to achieve the $400 billion annual exports milestone by the end of the year. However, the soaring global commodity prices including key inputs such as oil, chemical, metals, plastic and cotton, are largely responsible for this rise," ET. "India's merchandise trade deficit widened to a record $22.59 billion in September, the highest in at least about 14 years. official data showed." ET. Exporters say that "Liquidity crunch, high manufacturing cost squeeze profits," and "Energy crisis, high coal imports may worsen commodity inflation, hit exports." "Media reports suggest that India is on the cusp of a multi-year capex cycle reminiscent of the 2003-12 years," wrote Mahesh Vyas, CEO of Centre for Monitoring Indian Economy (CMIE). But, "New investment proposals per quarter averaged Rs 6 trillion in 2014-15 and 2015-16. This fell to Rs 4.8 trillion in 2016-17 and then to Rs 4 trillion in 2017-18." New investment proposals fell 55% to Rs 1.9 trillion in the year of the pandemic and it has been Rs 1.8 trillion in the two quarters of 2021-22. "Data released by IHS Markit....showed purchasing managers' index (PMI) for services stood at 55.2 in September, falling from August's 18 month high of 56.7," Hindustan Times (HT). The Consumer Confidence Survey (CCS) of the Reserve Bank of India showed that "The Current Situation Index (CSI) was at 57.7." These numbers highlight the underlying, perhaps entrenched weakness, on the demand front in the Indian, or urban Indian economy," Roshan Kishore. But, investors in markets are not diffident at all. "The bull run in the stock markets is not just about the formal part of the economy -- whose shares are listed in such markets -- doing better." Sitharaman may say what she likes, but Harvard economists study every detail. They work hard.       

Reverse Robin Hood, inverted welfare state.

The International Monetary Fund (IMF) "expects inflation globally to come back to pre-pandemic levels by the middle of 2022 and highlighted that central banks of countries that are seeing a surge in inflation should not shy away from tightening," wrote Aparna Iyer. "However, India's inflation problem currently stems from a surge in the price of global oil. Here, IMF has said that the impact of oil price shocks on inflation expectations is small but significant." "Central banks are beginning to trim their monetary accommodation, or thinking about doing so, but are starting to trip over their messages," wrote Daniel Moss. "That's what makes the case of Poland so interesting -- and terrifying. The hike of 40 basis points in the benchmark mark to 0.5% not only stunned economists, but appeared to fly in the face of remarks by no lesser person than the bank's governor, Adam Glapinski, who was saying until just a couple days earlier that such a move was some ways off." The Bank of Korea raised policy rates in August and the Reserve Bank of New Zealand did the same last week. "Thirty-nine percent of India's CPI basket is food items," wrote Roshan Kishore. "Food inflation has come down from 5.35% in June 2021 to 0.68% in September 2021." "Non-food inflation has been hovering around the 7% mark during this period." Petrol and diesel prices are at record levels. "Oil marketing companies have once again hiked fuel prices today. This is the 14th time that petrol price has been hiked in two weeks, while diesel rates have gone up 17 times in three weeks," Economic Times (ET). Record fuel prices should affect transport costs on everything, but "A look a the inflation data tends to support the hypothesis of weak demand conditions muting a cascading effect of fuel prices." In its October meeting the Reserve Bank of India (RBI) left policy rate unchanged at 4%, maintaining a negative interest rate, even if retail inflation is lower than it was. The RBI forecast annual inflation for 2021-22 at 5.3%, lower than its earlier forecast of 5.7%, but much higher than its policy rate, ET. "Senior citizens and others depending upon income from bank fixed deposit (FD) schemes will be at the receiving end with retail inflation exceeding the interest rates," The Hindu. Apparently lower borrowing costs are to help businesses to set up new plants, which will increase employment and lead to economic growth. Very laudable. But the biggest borrower by far is the government. "The government's fiscal deficit stood at Rs 4.68 lakh crore (Rs 4.68 trillion) or 31.1 percent of budget estimates at the end of August," ET. "As money printing has driven down rates, the central government's average cost of borrowing in 2020-21 stood at just 5.8%, the lowest in 17 years," wrote Vivek Kaul. "This has helped the government, given that it needs to borrow close to Rs 25 trillion between April 2020 and March 2022." While the US government has been issuing stimulus checks to its taxpayers, usa.gov, our government has been extorting vast amounts of taxes from citizens and the RBI has been busy transferring our savings to the government. This will make the Indian economy grow at 7.5-8.5% for the next 10 years, said Finance Minister Nirmala Sitharaman in the US, Hindustan Times. Rob the poor, give to the government. New definition of welfare state.   

They have problems. We have none.

In the US, "Another surge in consumer prices in September sent inflation to 5.4% from a year ago, matching the highest such rate since 2008 as tangled global supply lines continue to create havoc," Economic Times (ET). "Excluding volatile food and energy categories, core inflation was 0.2% in September and 4% compared with a year ago." "India's retail inflation fell to a five-month low of 4.35% in September from 5.3% in August as food prices softened, official data released Tuesday showed," ET. Food and beverages contribute 45.86% to our consumer price index (CPI) basket, number basket. Cereals and products contribute 9.67% and vegetables contribute 6.04%, while health contributes 5.89% and education 4.46%. In the US, "The unexpected burst of inflation this year reflects sharply higher prices for food and energy, but also new and used cars, hotel rooms, clothing, and furniture, among other goods and services." Food is just 14% of the CPI basket in the US, while housing is 33% and commodities, including medication and autos, contribute 21%, The Balance. The CPI baskets of the US and India reflect the wealth of their citizens. India's per capita income was $1,947.417, lower than that of Bangladesh at $2,227, newindiaexpress, while per capita income in the US is $68,309, according to the IMF, wikipedia. Hence, Indians spend more on items of survival, like food, while Americans spend on more energy, cars and services. "Like toy bricks hurled from the heavens, nearly 80,000 shipping containers are stacked is various configurations at the port of Savannah -- 50% more than usual," ET. "As major ports contend with a staggering pileup of cargo, what seemed like a temporary phenomenon -- a traffic jam that would eventually dissipate -- is increasingly viewed as a new reality that could require a substantial refashioning of the world's shipping infrastructure." "China's Yantian port in Shenzhen suspended pick-up and drop-off of containers as tropical cyclone Kompasu approached the nation's southern coastline. The number of ships waiting outside the port rose to 67, the most since Aug 26, according to shipping data compiled by Bloomberg," ET. "The bad news is that the world's supply chain problems are more persistent and more severe than previously realized. The worse news is that there is no single reason why, and therefore no straightforward fix. And the even worse news is that no one really knows when the situation will improve," ET. "A typical market response might be to produce more containers (it's harder, and slower, to increase the number of ships and ports). But that would require precisely the trade and transport networks that are currently malfunctioning." "One of the biggest US ports will start operating 24 hours a day to try to clear long queues of cargo ships stuck waiting outside," BBC. The port of Los Angeles in California will handle more goods at night after a similar move by nearby Long Beach port." No problems for Indian companies. "The big story about this market really lies in earnings and in a Covid year, if Nifty earning was up 20% and this year consensus earnings for Nifty are likely to be in the range of 27-28%, our bet is that Nifty earnings will surprise on the upside not just for this year but for next three years," said CEO Alchemy Capital Management Hiren Ved. They need cars so they have problems. We need food, which we grow, so we have no problems. We win.    

We should control our own markets. Why allow foreigners?

The 'Great Moderation' in the American Economy started in the 1990s and was characterized by "moderation in both output growth and inflation rates, and in their volatilities", wrote Prof VA Nageswaran. It resulted in "Big asset price bubbles, build-up of leverage and a widening of wealth inequality in the US." Post-covid, it has been followed by the 'Great Reset' with 'globalizing fuel shortages and soaring energy prices". "The price of diesel in India has crested Rs 100." Not true. Average crude oil prices were over $100 a barrel in 2011 and 2012, The Balance, but even then, the retail price of diesel for consumers stayed below Rs 60 per liter, trade brains. The reason for the high pump prices are the exorbitant taxes levied on fuel by both the Central and state governments, the Central taxes being higher, Deccan Herald. "West Texas Intermediate crude briefly changed hands for minus $40.32 a barrel last (in 2020) April," wrote David Fickling. "At present, there is still a near record 9 million daily barrels of spare capacity being held off the market among Opec+ grouping alone." "Oil majors and US independents, which traditionally have accounted for more than one-third of oilfield spending, are holding off for fear that Opec might open spigots and crush their projects again with crude from their low cost wells." "Early October, the government's food department revealed its plans to divert 17 million tonnes of surplus rice from its food stocks of 90 million tonnes to produce ethanol. This is in addition to the 2 million tonnes of sugar which is already being diverted to produce ethanol," wrote Sayantan Bera. "According to Niti Aayog, a successful biofuels programme can can save India $4 billion of about Rs 30,000 crore (Rs 300 billion) every year by lowering import of petroleum products." But, this could encourage farmers to grow more rice and sugar, "which currently use 70% of available irrigation water", leading to degradation of land, and diversion for producing biofuels could raise market prices of rice and sugar. "Astronomical increases in natural gas prices. Skyrocketing coal cost. Predictions of $100 oil," CNN. "The circumstances are causing central banks and investors to worry. Rising energy prices are contributing to inflation, which already was a major concern as the global economy tries to shake off the lingering effects of Covid-19." India's central bank is nonchalant. "The Reserve Bank of India (RBI) Friday kept key policy interest rates and he accommodative monetary stance unchanged as expected," Economic Times (ET). Because inflation helps the government reduce its debt. As wages increase to compensate for rising prices so direct tax collections go up. From 1 April to 22 September, direct tax collections rose to Rs 5,70,568 crore (Rs 5.71 trillion), which was 27% more than the collection in the same period in 2019-20, before Covid, when it was Rs 4,48,976 crore, the Ministry of Finance said, Mint. Higher prices mean higher indirect taxes which are a percent of the sale price. Gross Goods and Services Tax (GST) collections rose to a 5-month high of Rs 1,17,010 crore, The Indian Express. Higher prices means a weaker currency which reduces the value of government debt, Kahler. As the rupee buys less it must fall against the US dollar. It fell to Rs 75.3550 against $1 at close on 11 October. That will increase prices of imports, especially oil, and add to higher prices all round. And, there is taper tantrum still to come, as in 2013. We can control our own markets. Why allow foreigners?