Who is the GDP for?

"Chief Economic Adviser (CEA) KV Subramanian on Tuesday exuded confidence that India would achieve double digit growth in the current financial year on the back of policy initiatives and continuing reforms," ET. He also said the country is well poised to meet the fiscal deficit target of 6.8 percent of GDP." "The Economic Survey 2020-21, released in January this year, had projected GDP growth of 11 percent during the current financial year ending March 2022." This optimism is based on the news that "India's GDP grew by 8.4% in the second quarter of current fiscal as economic activity gradually inched towards normalcy after the second virus wave. The growth comes on the back of a low base last year when the economy had contracted by more than seven percent," ET. "With India's GDP expanding by a better-than-expected 8.4 percent in the July to September quarter, industry chamber PHDCCI on Tuesday said the country's economic growth is likely to be in double digits in 2021-22," ET. "The chamber projects the overall GDP growth to be in double-digits at 10.25 percent for 2021-22," said President Pradeep Multani. Output of 8 core sectors, including coal, steel, cement, fertiliser, electricity, natural gas, refinery products and crude oil grew by 7.5% in October compared to 4.5% in September and -0.5% in October 2020, ET. "The government's fiscal deficit has worked out to be Rs 5.47 lakh crore (Rs 5.47 trillion) or 36.3% of the budget estimates at the end of October 2021, as per the data released by the Controller General of Accounts (CGA) on Tuesday," ET. A deluge of good news on the economy according to the government and its stooges. "I feel, K-model is wrong," said former finance minister of West Bengal Amit Mitra. "My question is why did 35,000 high net worth entrepreneurs leave India between 2014 and 2020." "Of late, even the top is narrowing down to just a few. One has to discover a new alphabet to describe India's recovery. At the bottom there is a complete erosion of the informal sector triggered by a national lockdown with four hours notice (March 25, 2020)," ET. But do these claims and counter-claims by the government and the opposition really matter to people? Do people understand what GDP means or are they just concerned with where their next meal is coming from? There was an 8% fall in openings for white-collar jobs in November, at 295,000 compared to 320,000 in October, ET. "Nearly 139,045 cases under crimes against Dalits have been registered in different states between 2018 and 2020 with 50,291 such crimes reported last year alone, the government told parliament on Tuesday," ET. Dalits are our lowest castes, known as untouchables at one time, segregated and banned from entering temples, Britannica. A study by the Centre for New Economics Study, OP Jindal University showed that, in Lucknow, "the mean monthly income from labour work has fallen by 62%, that is, from Rs 9,500 per month in pre-pandemic times to Rs 3,500 now per month. In Pune, the mean monthly income of an average worker fell from Rs 10,000 to Rs 4,500, a 54.5% per month," Scroll.in. It is impossible to afford rent and food with such paltry income. Should they be impressed by the 8.4% GDP growth when they are earning over 50% less? Who is the GDP for?    

It's impossible, Until it is not.

"Until a few months ago, inflation talk was little more than a murmur", but "Now the discussion is urgent, as news of rising price levels comes in from economies around the world, including Argentina, Brazil, Turkey, India, and, most importantly, the US," wrote Prof Kaushik Basu. In the US, consumer inflation has increased from 0.12% on 31 May 2020 to 5.39% on 30 September 2021 to 6.22% on 31 October 2021, YCharts. "As measured by the CPI, the annual rate of inflation from October 2020 to October 2021 was 6.2 percent. As measured by the PCE deflator, the annual inflation from September 2020 to September 2021 (most recent available data) was 4.4 percent," wrote Wendy Edelberg. "But because the factors that are leading to inflation are pandemic-related and therefore temporary, the current trend does not forecast the future." However, "During three months preceding September, the US saw higher  wage increases than any time in the last 20 years. Workers have gained a stronger bargaining position, and have even stayed away from the labour market when their wage demands have been unmet," Basu. Surely, wage inflation will result in higher costs and force companies to pass that on in higher prices? "Turkey has an alarming annual inflation of 19.9%." "Turkey's lira crashed to a record low of 13.44 to the dollar..., a level once unfathomable and well past what was...deemed the 'psychological' barrier of 11 to the dollar," CNBC. "The sell-off was triggered after Turkish President Recep Tayyip Erdogan defended his central bank's continued contentious interest rate cuts amid rising double digit inflation." A Reuters poll of 15 economists forecast inflation at 20.7% last month, ranging from 19.3% to 21.06%. "Overall inflation is being pushed higher by a rise in prices of processed food like bread, rent and fuel as well as the lira depreciation to record low levels as the central bank" has cut the repo rate to 15%, "down from 19% before September's initial cut". In India, retail inflation rose to 4.48% in October from 4.35% in September, NDTV, while "Wholesale inflation in October surged to 12.54% year-on-year from 10.66% a month ago and 1.31% in October 2020," ET. Numbers can be deceptive. "Prices of nearly half the items used to compute India's retail inflation are rising at alarming rates of more than 6% a year, a Mint analysis shows, even as headline retail inflation has slipped close to the Reserve Bank of India's (RBI's) 4% target." "Prices of daily essentials, including tomatoes and milk and along with edible oils and transport fuels have skyrocketed across the country. The price rise has adversely affected the financial health of ordinary middle-class families in India," India.com. Trouble is, inflation was high before the pandemic started and "These price pressures continued to stay elevated during the pandemic despite a complete collapse of demand," TIE. These prices have seeped into core inflation which excludes volatile food and fuel, ET. "So adjusted, core inflation for September 2021 stands at 5.12% (versus 5.89% unadjusted), and has held steady at an average of 5.09% over June to September," Mint. The solution is for the government to reduce taxes on fuel, which constitute 50% of the price, ET, and for the RBI to increase interest rate, which has been clamped at 4% since 22 May 2020, HT. But, neither is going to happen. And, Turkey is not too far from India.   

Only strict term limits can stop dynasty politics.

"Prime Minister Narendra Modi hit out at political dynasts on Friday during Constitution Day celebrations, and said parties controlled by the same family for generations posed a threat to a healthy democracy," HT. Absolutely right. The control of political power by families is a modern form of feudalism. "As defined by scholars in the 17th century, the medieval 'feudal system' was characterized by the absence of public authority and the exercise by local lords of administrative and judicial functions formerly (and later) performed by centralized governments; general disorder and endemic conflict; and the prevalence of bonds between lords and free dependents (vassals), which were forged by the lords' bestowal of property called 'fiefs' and their reception of homage from the vassals," Britannica. Modi's constant barbed comments are mainly towards the Nehru Gandhi family which has provided 3 prime ministers in Jawaharlal Nehru, his daughter Indira Gandhi and his grandson Rajiv Gandhi. Modi is surely aware that Ms Sonia Gandhi refused to become prime minister in 2004 to unite the nation and protect the coalition government from spiteful accusations of allowing a foreigner to rule, India Today. Nehru became prime minister of a bankrupt nation after 1,500 years foreign rule, first by Muslim invaders and then by the British, with no constitution and a literacy rate of just 12%, wrote Shashi Shekhar. Even as Field Marshall Mohammad Ayub Khan seized power in Pakistan through a military coup, wikipedia, Nehru maintained democracy in India, built centers of excellence, like the IITs and AIIMS, and built a professional army under civilian control. Indira Gandhi is criticized for declaring Emergency in 1975, HT, but she made India much stronger by making Sikkim a part of India, conducting the first nuclear test in Pokhran in 1974 and converting East Pakistan to an independent Bangladesh in 1971, wrote Shekhar. It maybe argued that, in a democracy, to pass power on to the next generation present rulers must perform some service so that people develop affection and gratitude towards the family. On the other hand, people with no family pedigree would want to hang on to power any which way even to the detriment of the people and the nation. Joseph Stalin was born in poverty, his mother was a washer-woman and his father was a cobbler, BBC. Stalin sent 3 million people to gulags, of whom 750,000 died, 93 out of 139 Central Committee members were killed and 81 of 103 generals and admirals were executed. Mao Zedong "was born in the village of Shaoshan in Hunan province, son of a former peasant who had become affluent as a farmer and grain dealer", Britannica. Around 65 million Chinese are estimated to have been killed by Mao, "by execution, imprisonment and forced famine", Heritage. Adolf Hitler was born in Braunau am Inn, Austria and failed twice to secure entry to the Academy of Fine Arts in Vienna, Britannica. "For some years he lived a lonely and isolated life, earning a precarious livelihood by painting postcards and advertisements and drifting from one municipal hostel to another." In February, the BJP passed a resolution lauding Modi for passing three farm laws and standing up to China, ET. Modi has absolute, invincible majority in the Lok Sabha, TOI. If he really wants to stop powerful families he should make term limits legally mandatory. This is a golden opportunity.        

Past misdeeds by others will not save us in India.

"Prime Minister Narendra Modi...hit out at the colonial mindset of developed nations, which, he said, is attempting to restrict developing nations like India from using those resources and paths which they themselves took to become developed," TOI. He was referring to the demand that India stop using coal for electricity production. According to the Ministry of Power, 51.9% of our electricity is generated from coal and, taking lignite, gas and diesel, fossil fuels account for 60.2% of our electricity production. India and China have been blamed for blocking a resolution to "phase out" coal. "It was India that laid out their last-minute proposal: The coal 'phase out' would become a 'phase down', said Environment Minister Bhupender Yadav," India Today. The words 'Industrial Revolution' was used by "historian Arnold Toynbee (1852-83) to describe Britain's economic development from 1760 to 1840," Britannica. "The technological changes included the following: (1) the use of basic materials, chiefly iron and steel, (2) the use of new energy sources, including both fuel and motive power, such as coal, the steam engine, electricity, petroleum, and the internal combustion engine." However, in those 80 years (1760-1840) nobody was aware that climate change will become so lethal in just over a century. They were more concerned with food production. In the 18th century, British philosopher Thomas Malthus theorized that "food production will not be able to keep up with growth in the human population, resulting in disease, famine, war and calamity", Investopedia. The population of the world has reached nearly 8 billion, Worldometer, but there is sufficient food because of increased production. Problem is that China and India have over 2.8 billion people, which is almost 35% of the global population, and more than the total number of people in developed nations, including the US, UK, Europe, Canada, Australia and Japan, together. That means that even a small emission of greenhouse gases per head becomes enormous. Already, "China emits more greenhouse gas than the entire developed world combined, a new report has claimed," BBC. China emits 27% of greenhouse gases of the world, the US emits 11% and India 6.6%. So, China and India emit 33.6% of greenhouse gases globally which is roughly in line with their share of global population. "Andhra Pradesh government has said as many as 44 people have lost their lives and 16 are still missing due to floods after the unprecedented rain in the state even as officials said the situation was grim," HT. And 17 people had died in Tamil Nadu by 12 November because of the rains, TOI. We cannot blow our greenhouse gases to developed countries so climate change will affect every human, animal and bird in the world. "More than 750 million people depend on the glacier- and snow-fed Indus, Ganges and Brahmaputra rivers for freshwater," World Bank, and the snow in the glaciers are full of black particles of carbon from pollution which enhance snow melt. Is India prepared to pay for the astronomical costs of loss of crops from droughts, loss of infrastructure from floods and the enormous loss of life lives that would result? India's External Affairs Minister S Jaishankar claimed that the British looted "close to $45 trillion in today's monetary value", ET. But he did not put in a claim for reparations. Why? In fact, the British government will not even bother to acknowledge systematic genocide of Indians over 2 centuries of rule, YS. In 2013, then British Prime Minister David Cameron refused a narrow apology for the Jalianwala Bagh massacre, The Diplomat. If we are talking about past grievances shouldn't PM Modi start with the British? If we don't have the guts why complain? 

It's a start. If we can build on it.

"Going on the back of a sustained family planning programme spanning decades, the Total Fertility Rate (TFR), or the average number of children per woman, has declined further from 2.2 reported in 2015-16 to 2.0 at the all-India level, according to the latest Family Health Survey (NFHS) released by the Union Health Ministry," TIE. "The country has been aiming for a TFR of 2.1," said Prof K Srinath Reddy. "This means we will possibly still become the most populous country in the world -- it was expected somewhere between 2024-2028 -- but it will now be delayed. It essentially means that we need not worry about a very large population being a challenge to our development." States with the highest TFR are Bihar 3.0, Meghalaya 2.9, UP 2.4, Jharkhand 2.3 and Manipur 2.2. The good news is that "India now has 1,020 women for every 1,000 men, is not getting any younger, and no longer faces the threat of population explosion," wrote Roshan Kishore. "To be sure, NFHS is a sample survey, and whether these numbers apply to the larger population can only be said with certainty when the next national census is conducted." The ratio between women and men was equal in 2005-06, it went down to 991 women to 1,000 men in in 2015-16, and this is the first time that women outnumber men. "But campaigners say that numbers just don't add up and describe the government claim as 'absurd' and 'next to impossible'," BBC. If there is no discrimination against girls then the average ratio at birth should be 952 girls to 1,000 boys but the latest survey puts it at 929:1,000. The National Institution for Transforming India, or NITI Aayog, is the government think tank for public policy, wikipedia, replacing the old Planning Commission which was decommissioned in 2014, wikipedia. Roughly in keeping with TFR, "Bihar, Jharkhand, Uttar Pradesh (UP), Madhya Pradesh (MP) and Meghalaya have emerged as the poorest states in India with over 50% of the population in Bihar classified as multi- dimensionally poor, as per NITI Aayog's Multidimensional Poverty Index," ET. The incidence of poverty in India fell from 37.2% in 2004-05  to 21.9% in 2011-12 - a fall of over 15% - but the absolute number of very poor has actually increased from 2011 to 2019, wrote Udit Misra. "As against pulling 140 million out of poverty between 2004 and 2011, India has seen more than 76 million fall back below the poverty line between 2012 and 2020," said Santosh Mehrotra. The reasons are demonetization in 2016, increasing unemployment and the slowdown in GDP growth from 8.2% in 2016-17 to 4.2% in 2019-20. Before the pandemic hit. Of the students studying MSc in Physics at Delhi University, "50 percent came from families where they were the first generation of college-goers; more than a quarter of them belonged to farming families and about 70 percent reported their family income as less than 5 lakh (Rs 500,000) a year", wrote Prof Shobhit Mahajan. "They, and obviously their parents, have high aspirations for their future." But there are no jobs. "Thus what we see is a huge pool of unemployed university graduates with unfufilled aspirations." Better not to let children go to college. "Around 1.1 lakh (110,000) schools in India are single-teacher entities, according to Unesco's '2021 State of the Report for India: No Teachers, No Class'," TOI. A little bit of good news amid so much gloom. Still, at least it's a start. Pray we can build on it.        

Central banks are waiting for something to happen. But, what?

In Europe, "The fear is that high inflation now, even if temporary, will prompt firms to boost wages, perpetuating inflation by increasing demand," Reuters. But, that has not happened despite an inflation rate of 4.1%. "Most wage deals in Germany, arguably the bloc's strongest labour market, so far appear to be in the 1.5% to 2.5% range, economists say." Probably because, "The labour market has also yet to recover from the pandemic." In the US, "Last spring, (US President Joe) Biden's advisers made a forecasting error (on inflation) that helped turn their fears into reality. Administration officials overestimated how quickly Americans would start spending money in restaurants and theme parks, and they underestimated how many people wanted to order new cars and couches," Japan News. "Instead, the emergence of the delta variant of the virus over the summer and fall slowed the return to normalcy. Americans stayed at home, where they continued to buy goods online, straining global supply chains and sending the price of almost everything in the economy skyward." "The annual rate of inflation in the United States hit 6.2%, the highest in more than three decades, as measured by the Consumer Price Index," Pew Research Center. Russell Investments' quarterly survey of investors "found 55% of fund managers expected US inflation at between 2.26% and 2.75% over the next 12 months, well above the Federal Reserve's 2% inflation target. A full 20% expected inflation to move even higher," Reuters. "President Biden...conceded that inflation is at a three-decade high because 'people have more money now' as a result of his $1.9 trillion COVID-19 stimulus legislation, recognizing a central point made by people who are arguing against a nearly $2 trillion sequel," NY Post. Biden nominated Federal Reserve Chair Jerome Powell. who implemented an "unprecedented monetary stimulus" during the pandemic, for a second four-year term, CNBC. In August 2020, Powell announced a "robust updating" of the Fed's policy on interest rate and from now, the Fed will resort to "average inflation targeting", tolerating a period higher prices to make up for a period of low prices, CNBC. Higher inflation helps to shrink the "mountain of debt weighing down the US economy", Bloomberg. "Raising the long- term inflation target from the current 2% to a still-modest 4% would substantially increase the rate at which debt effectively vanishes." Economists Joshua Aizenman and Nancy Marion wrote, "The average inflation rate over this period [from 1946 to 1955] was 4.2%....inflation reduced the 1946 [federal] debt/GDP ratio by 40% within a decade." For us, "India's inflation has stayed high even when demand hasn't recovered. That means more inflation when it does," wrote Udit Misra. A higher interest rate by the US Fed will mean, "One, Indian firms trying to raise money outside India will find it costlier to do so. Two, the RBI will have to align its monetary policy at home by raising interest rates domestically." The problem is, "If money supply is tightened in the US, capital which would be otherwise be destined for India, would get routed to the US. There will be increased demand for the dollar and the rupee, like other currencies, will depreciate," FE. A weaker rupee will raise the cost of imports and add to inflation. Foreign investors have sold Indian equities worth Rs 150 billion in the last four sessions because Indian shares are too expensive, inflation is too high and the RBI seems unconcerned, said Arvind Sanger. The RBI is frozen. Like a rabbit in headlights?       

Invite him to the White House and say "please".

"India has agreed to release 5 million barrels of crude oil from its Strategic Petroleum Reserves. This release will happen in parallel and in consultation with other major global energy consumers including the USA, People's Republic of China, Japan and the Republic of Korea," the oil ministry said. The US will release 50 million barrels. "India has three strategic petroleum reserves with combined storage capacity of 5.33 million tonnes (about 38 million barrels), sufficient to meet country's crude oil requirements for about 9.5 days," HT. "China confirmed on Wednesday that it would join the United States and other major energy-consuming nations in releasing strategic oil reserves to try to cool high prices and tame inflation," CNN. "President Biden's move to tap the US Strategic Petroleum Reserve is expected to supply Chinese and Indian oil needs as gas demands have led to global shortages," Fox News. Biden shutdown development of the Keystone XL pipeline which "was set to carry oil 1,200 miles (1,900km) from the Canadian province of Alberta down to Nebraska", BBC. "Benchmark US crude prices are already trading over $70 a barrel and retail gasoline prices averaging more than $3 a gallon at the pump. And the situation will only get worse as the economy continues to improve in the coming months," predicted Forbes in June. "It means more power over the oil market is shifting towards Saudi Arabia and Russia, the leaders of the OPEC-plus group." "Building on past US leadership, including efforts by states, cities, tribes, and territories, the new target aims at 50-52 percent reduction in US greenhouse gas pollution from 2005 levels in 2030," The White House on April 22, 2021. "The United States has set a goal to reach 100 percent carbon pollution-free electricity by 2035, which can be achieved through multiple cost-effective pathways each resulting in meaningful emissions reductions in this decade." Unfortunately, hubris gets in the way. "What proof that President Biden is just another 'limousine liberal'? Check out his 85-vehicle motorcade through Rome this weekend ahead of Sunday's COP26 UN Climate Change Conference, says Fox News Contributor Lisa Boothe." "First in private and later more publicly, American envoys had spent weeks trying to convince the Saudis to pump more crude -- and quickly according to officials on both sides," NDTV. "But the kingdom's day-to-day ruler (Saudi Crown Prince Mohammed bin Salman) didn't budge despite overtures from American diplomats." "But if Biden wanted cheaper gasoline, the prince had his own wish list, including something he hasn't yet got from the current White House -- access." Biden may want more oil, but OPEC+ can't pump any more than it is doing already, Reuters. "Production by OPEC+ was 700,000 bpd less than planned in both September and October, according to the International Energy Agency (IEA), raising the prospect of a tight market and high oil prices for longer." "As of Wednesday, his (Biden's) aggregated approval rating stands at 42.9%, according to FiveThirtyEight -- down from 53% when he entered the White House in January," Fortune. "History suggests Democrats' chances at midterms rebound have already gone up in smoke," BI. If you want a gift from MBS, invite him and say "please". He is unlikely to respond to a woke 'limousine liberal'.                 

If the US Fed is so bad, why do we follow?

"In the last decade or more, the topic of inequality has occupied centre-stage in America," wrote Prof V Anantha Nageswaran. "In August, its Congressional Budget Office (CBO) published its report on distribution of household income for 2018. "A problem of inequality does come through in the report, but it is vastly overstated." The US government taxes income on a rising scale, with the rate of taxation rising with the total amount earned in a financial year, Bankrate, and then transfers money to poorer households to supplement their after-tax income. Since 1979, the post-tax, post transfer (post-T&T) income of the bottom quintile (20%) increased by 91%. Income for the middle three quintiles (the middle 60%) increased by 53%. The problem is that "incomes in the top 0.01%, grew by a cumulative 538% from $4.9 million to $31 million over the past four decades". Because, "for the top 0.01%, in 2018, nearly 70% of income was capital income or gains". Nageswaran blames the Federal Reserve for its loose monetary policy to support banks hit by the subprime crisis in 2008, Investopedia, which has raised asset prices, leading to enormous capital gains. The Fed has decided to start reducing its bond buying program, in which it has been buying $120 billion worth of treasuries and mortgage-backed securities, by $15 billion every month, Forbes, but retained its Funds Rate at near 0%. Nageswaran was a member of the Prime Minister's Economic Advisory Council, ET, which was reconstituted in October, but has nothing to say about the massive liquidity injected into the Indian economy by our Reserve Bank (RBI). Taking asset price bubbles, the Dow Jones Industrial Average in the US increased from an average of 25,046 in 2018 to 33,882 in 2021, which is an increase of about 33%, macrotrends, while the BSE Sensex in India jumped from 38,000 in 2018 to an all-time high of 60,000 on 24 September 2021, a colossal increase of around 58%, wikipedia. The US has doubled its balance sheet from around $4 trillion in 2018-19 to $8.7 trillion as on 17 November, AAF. The RBI's balance sheet has grown from Rs 41.02 trillion in 2018-19 to Rs 53.34 trillion, BT. "At Rs 200 lakh crore (Rs 200 trillion) GDP size, the balance sheet is now around 26 percent of the GDP." "European Central Bank's balance sheet has grown to over 50 percent of the GDP of euro zone countries. Similarly, the US Federal Reserve's  balance sheet has risen to over 32 percent of the GDP of US." Instead of controlling inflation, "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," ET. Predictably, "With a total wealth of $92 billion, Mukesh Ambani, Chairman of Reliance Industries, topped the rich list for the 14th year in a row -- adding $4 billion to his net worth in 2021, as per Forbes Rich List," BS. "Gautam Adani & family earned Rs 1,002 crore (Rs 10.02 billion) a day in the last one year to quadruple their wealth to Rs 5,05,900 crore (Rs 5.06 trillion) from Rs 1,40,200 crore a year-ago," ET. Many countries, including new Zealand, South Korea, Russia and South Africa, have increased interest rate, Global Rates, to prepare for any change in the US but not the Reserve Bank of India. Hope the RBI is not caught with its pants down. That will be calamitous.       

The invisible threats of virus and cryptocurrencies.

Tens of thousands of people have been marching in the Belgian capital, Brussels, to protest against anti-Covid measures. Some protesters threw fireworks at police officers, who intervened with tear gas and water cannon," BBC. "In the Netherlands, a second night of riots broke out on Saturday in several towns and cities." "Officials announced an emergency order in the city, and at least seven people have been arrested." "Three people were being treated in hospital in Rotterdam on Saturday after they were seriously injured when Dutch police fired shots during a violent protest against COVID-19 measures, authorities said," Reuters. Pro and anti vaccine protests have been taking place across Australia, euronews. "Demonstrations against virus restrictions took place in Switzerland, Croatia, Italy, Northern Ireland and the Netherlands," PBS. According to the Centers for Disease Control and Prevention (CDC) in the US, "Covid-19 vaccines are effective and can reduce the risk of getting and spreading the virus that causes Covid-19, help children and adults from getting seriously ill even if they do get Covid-19, and can help protect families and communities." An explainer article from the World Health Organization (WHO) said, "Covid-19 vaccines have proven to be safe, effective and life-saving." Even if there are 'breakthrough infections' "It is very rare for someone vaccinated to experience severe infection or die." If vaccines are so safe, effective and logical, why is there such resistance that police have to resort to firing live rounds? Maybe because people have lost trust in governments and do not want to be controlled. Yet people happily share personal details on social media sites which hackers are able to scrape together and then sell to whoever is willing to pay, BBC. "In 2021, Facebook re-modelled itself to Meta, in a bid to represent and extend the fantastical idea of a Metaverse" "where you can have different, innumerable, life-like characters and identities", "while you sip your tea on your desk, working a day-job, sitting in some part of India, or even the world, trading in bitcoin or any of your favorite crypto on popular platforms like CoinSwitch Kuber", ET. Cryptocurrencies are notoriously volatile. In February 2018, the price of "Bitcoin fell below $8,000 for the third time in four days" and cryptocurrencies lost over $60 billion in value in 24 hours, CNBC. Today 1 Bitcoin is worth $56,533, Insider, which converts to 4.219 million Indian rupees, Google. And yet, shockingly, "The total number of crypto owners in India now stands at 10.07 crore (100.7 million), which puts it ahead of every country in the world," India Today. "What happens if, over time, cryptos evolve from speculative assets to become viable mediums of exchange?" asked Sajjid Z Chinoy. If large numbers of people start conducting cross-border transactions using cryptocurrencies there will enormous currency flows across borders, which will lead to central banks losing control of monetary policy, there will be loss of seigniorage and governments will lose out on taxes. Indians are investing in risky cryptos because of severe financial repression by the RBI which has stuck to negative interest rate since May 2020, HT. "Democratic nations should work together on cryptocurrency to ensure it does not end up in the wrong hands, Prime Minister Narendra Modi said. Which means citizens.       

Retail Direct could be a direct loss.

"Prime Minister Narendra Modi...in a virtual meet launched the 'RBI Retail Direct Scheme'. The scheme allows retail investors to buy and sell government bonds online," ET. "It is the first time in India when retail investors will have an option of simple and direct channel for investment in government securities. The government securities offer a low risk and low return on the investment in equity and asset." Investing in government bonds is not for ordinary investors because there are other schemes which offer safety with higher interest and tax benefits, BS. These bonds are not completely free of risk. "The interest rate risk assumes significance particularly at a time when interest rates are expected to harden. The yields on government bonds have already started hardening. Yields and bond prices are inversely related," DH. "When bond yields rise and prices fall, investors have to book mark-to-marker loss." Why trap unwary people in an investment which offer low interest, have no tax benefits and may fall in price? Because if lots of people bid for the bonds the prices will rise and lower borrowing costs for the government. A cunning wheeze. Already 32,000 people have registered on the site, maybe without considering that "In a rising interest rate scenario, investors are likely to incur mark-to-market losses if they sell it before scheduled maturity," TN. The RBI has held interest rate at 4% since 22 May 2020 despite higher consumer price index (CPI) inflation, HT. In line with that, the RBI has been buying long term securities, to drive up prices by deliberately creating a shortage, while selling short term ones in Open Market Operations (OMOs), known as Operation Twist, HT. In April, the RBI announced purchase of government securities worth Rs 1 trillion under a new Government Securities Acquisition Programme (G-SAP), somewhat like quantitative easing (QE) but intended to drive bond yields lower, BL. The government borrows money from the market through the RBI which auctions bonds. Till March, the RBI refused to sell bonds on five occasions because traders demanded a higher rate of return than the RBI was willing to offer, ET. The bonds devolved on the under-writers. In July, the RBI offered bonds worth Rs 140 billion at a coupon rate of 6.10% but traders demanded 6.15% and again the RBI chose not to sell, BS. However, retail investors will not be allowed to quote a price when they put in a bid to buy these bonds. "By placing a bid in the primary auctions of dated G-Sec (bonds), T-Bills and SDLs (Non-competitive segment only, i.e., by only entering the desired amount of securities, without entering a price)," CNBC. So retail investors will be forced to buy bonds without knowing the rate of return. In theory, the RBI could sell to retail investors at a coupon rate of 4%, or lower, and these bonds will have no value in the secondary market. Dud bonds or daylight robbery. By our own Reserve Bank and government.    

Dharma is worth dying for.

"Indian PM Narendra Modi has announced the repeal of three controversial farm laws after a year of protests. Thousands of farmers had camped at Delhi's borders since last November and dozens died from heat, cold and Covid," BBC. "And Mr Modi's ministers have been steadfastly insisting that the laws were good for farmers and there was no question of taking them back." "But experts say the upcoming state elections in Punjab and Uttar Pradesh (UP) - both have a huge base of farmers - may have forced the decision." Both Punjab and UP have to elect new governments by March 2022, wikipedia. "As the Assembly polls in five states are nearing, the latest round of ABP-CVoter pre-poll survey shows that the BJP's (Modi's party) road to victory will be a difficult one. Even as the survey predicts victory for the saffron party in UP, it will suffer a huge loss in seat-share while the party and its allies will struggle to win even a single seat in Punjab," FE. "A victory in UP will open the doors to 2024," said Union Home Minister Amit Shah. UP sends 80 Members of Parliament to the lower house, the Lok Sabha, Parliament of India. The BJP got nearly 50% vote share in parliamentary elections in UP in 2019, but "an array of political and economic factors, that have emerged over the last two-and-a-half years, has raised challenges for the saffron camp," Moneycontrol. Apart from the general election in 2024, UP sends the largest number of members - 31 - to the upper house of the parliament, the Rajya Sabha, and these are "elected by the Legislative Assemblies of States and Union territories by means of a single transferable vote through proportional representation", wikipedia. Losing control of UP Assembly could result in losing control of the Rajya Sabha. Even though opinion polls predict a BJP victory in UP, Modi must have some doubts which led him to an unconditional surrender. On 3 October, hundreds of farmers in Tikunia area of Lakhimpur Kheri in UP were returning after staging protests when a SUV was driven at speed into walking protesters, followed by other cars, killing 4 farmers and journalist Raman Kashyap, wikipedia. Ashish Mishra, son of union minister, Ajay Kumar Mishra, was alleged to be driving one of the cars. The UP government, which is BJP, set up an investigation into the incident, but "The Supreme Court...expressed unhappiness over the pace of the probe by the UP police in the Lakhimpur Kheri case and recommended monitoring of SIT investigations by a retired high court judge," TOI. What were the farm laws? The first allowed farmers to engage in contract farming for large companies, the second allowed farmers to sell to private bidders, including outside the state, and the third would allow hoarding of food stocks, NDTV. What made the farmers angry? Farmers suspect that the government intends to get rid of state purchase of produce at a Minimum Support Price which guarantees a minimum income for farmers. Since food inflation hurts the poor, the government tries to keep a lid on food prices which hurts farmers' income. The laws don't stop this. Worst of all, "If a corporation violates a contract with a farmer, the new laws prohibit a farmer from seeking redress in a regular court," wrote Prof Kaushik Basu. The reason and morality were with the farmers. That is Dharma. Worth dying for.  

Neither open nor closed, our economic policy is ajar.

"In view of India's turn to import substitution and protection, it is worth asking why economists view trade openness as one of the most critical elements in a country's development policy," wrote Prof Arvind Panagariya. Duties on imported goods keep changing in every budget and Budget 2021 was no exception, Moneycontrol. Last year, during the lockdown inspired by Covid-19, Prime Minister Narendra Modi announced a policy of 'Atmanirbhar Bharat Abhiyan' which means 'Self Reliant India', wikipedia. "Raising the pitch for a self-reliant India, defence minister Rajnath Singh...asserted that the country was heading towards 'Atmanirbhar Bharat', which not only means eyeing 'Made in India' products, but also aiming to make for the world," TOI. There is a difference between self-reliance and self-sufficiency said Swaminathan Aiyar. "Self-sufficiency is what Nehru and Indira Gandhi tried in the 1960s and 1970s. It was horrible and a terrible flop. We had only a 3.5% Hindu rate of growth. The number of poor people doubled in 30 years after independence." Modi talks about cutting off imports but wants to remain in the global value chain. "Being in a chain means importing as well as exporting." However, "In a break from the recent past, India's average applied import tariff dropped to 15% in 2020 from as high as 17.6% in the previous year, recording the sharpest annual fall in about a decade and a half," FE. "There are at least five sources through which free trade contributes to a country's development," wrote Panagariya. If local cost of production is high, importing a product keeps costs down, competition leads to specialisation in some products, one can choose imports with higher technology which can be accessed by reverse engineering, competition forces local businesses to adopt best practices, and finally, free trade leads to comparison with the best in the world and forces improvements in local infrastructure. India's imports of telephones has fallen from $7.5 billion in 2014 ( year Modi was elected, wikipedia) to $2.2 billion in 2020, while exports have risen from $0.6 billion in 2014 to $3.0 billion in 2020. For Vietnam, less than one-tenth the size of India, exports of telephones have risen from $0.9 billion in 2009 to $31.2 billion in 2020. "Its electronic goods exports stood at $122 billion in 2020 against India's $12.8 billion," wrote Panagariya and Deepak Mishra. "From January 15, 2022, a law giving 75% of reservation for local residents in private sector jobs will come into effect in Haryana," wrote Roshan Kishore and Abhishek Jha. Gurugram, a city in Haryana is the reason. With economic reforms, companies, especially in IT services, finance and new startups, set up offices in Gurugram. This led to a rapid expansion in white collar jobs with high salaries. Most of the locals were not suitable for these jobs so people from outside the state and even outside the country benefited. Builders bought land from locals to build very expensive luxury apartments in gated communities, creating an enormous difference in living standards, leading to opposition to globalisation. "Market access for products, including those which have a geographical indication (GI) tag, is going to be a key issue in India's trade negotiations with the EU, US, UK and Australia," wrote Arpita Mukherjee. "While our trading partners are comfortable giving market access to GI products from from India, Indian policies on import restrictions, access to GI products and government procurement need a review." Our government wants to be closed and open at the same time. Kind of ajar.           

Foreign funds own Rs 54.7 trillion worth of Indian shares.

One 97 Communications Ltd, which launched India's first digital mobile payment platform, Paytm App, in 2009, went public through an Initial Public Offering (IPO) of shares with face value of Re 1, priced at Rs 2080-Rs 2150 per equity share, Chittorgarh. On listing on stock exchanges yesterday, price of shares fell precipitously. "Digital payments start-up Paytm made one of the worst major stock market debuts on Thursday as its shares fell more than 27% after India's largest ever IPO," Reuters. "While some investors had questioned Paytm's lack of profits and its lofty enterprise value of 27 times gross profit, the extent of its price fall shocked many and wiped more than $5 billion off Paytm's valuation." "The company's market cap settled at $13.6 billion, lower than the $16 billion valuation it commanded at its last private fundraising in November 2019. Its early backers, including SoftBank, Ant Group, Alibaba and Elevation Capital still made money from the listing," ET. Encouraged by listings of Zomato and Nykaa, Paytm might have valued its shares at extravagant levels. "India's leading food delivery company Zomato made a stellar debut on Dalal Street on July 23 as the stock opened at Rs 116 on NSE, a 52.63 percent premium to its final offer price of Rs 76. The listing price on the Bombay Stock Exchange was at Rs 115, up 51.32 percent," Moneycontrol. "Nykaa shares started trading at a premium of over 82% at Rs 2,054 per share on the NSE as compared to its IPO issue price of Rs 1,125 apiece. On the BSE, Nykaa shares listed at Rs 2,063," India TV. Ajit Ranade listed 7 reasons for Nykaa's spectacular success. It actually makes some profit, it offers Indian women a wide choice and experience of cosmetics for the first time, it is allowed to hold inventory and has 80 physical stores. Why did the market reward loss-making Zomato but punished Paytm? "Is it because Paytm is largely a Chinese company, with Alibaba, Ant Group and SAIF Partners owning 54% of the shares before the IPO? NDTV. Or it maybe because, "If one believes the estimates made by CMIE's Mahesh Vyas, then just about 23 million households in India earn more than five-lakh-rupees per year (less than Rs 42,000 per month). That is about 7% of all Indian families. This is broadly the size of India's buying classes, of people who can afford various kinds of goods and services." "The lesson is this; if you buy something at a wrong price, that bad decision hounds you for a very long time," said Anurag Singh. "My favorite example is Microsoft. It was a great company in 2000. If you bought it at $60 in 2000, you had to wait 16 years till 2016 to just break even." Even the broader market is overvalued. "Valuations of Indian equities seem stretched by most conventional yardsticks, such as price-to-earnings multiples and yield differentials with benchmark bonds, but the trend among promoters to steadily raise ownership in listed companies reflects the confidence they have in their businesses, central bank economists said in their latest report on the state of the economy," ET. "CLSA has called for booking profits in Indian equities citing rich valuations, margin pressure and a high probability of earnings disappointment," ET. Foreign funds hold Rs 54.7 trillion worth of Indian shares, TOI. If they sell a large chunk of shares the rupee could come under pressure. A definite worry.          

India is not Turkey, but......

"Many people in Turkey are facing increased hardship as prices of food and other goods have soared," AP. "The Turkish government says inflation rose 20% in October compared with a year earlier, but the independent Inflation Research Group, made up of academics and former government officials, put it close to a stunning 50%." Last month, the Turkish central bank cut interest rate to 16% from 18%, Nikkei. The Turkish lira weakened by nearly 3% on the news. Turkey's President Recep Tayyip Erdogan is directly responsible. He has been pressuring the central bank to keep interest rates low. In May 2018, he criticised high interest rates and "described them as the 'mother and father of all evil', triggering a fresh slide in the lira as investors worried about the central bank's ability to rein in high inflation", Reuters. "Erdogan has replaced the central bank chief three times in less than two and a half years and dismissed three members of the bank's monetary policy committee....including two deputy governors." Higher prices mean lower buying power of the currency. "Turkey's currency, as a result, hit an all-time low of 10 against the dollar...and has lost some 25% of its value since the start of the year. That is driving prices higher, making imports, fuel and everyday goods more expensive." "I bought a 5-litre can of (cooking) oil, it was 40 lira. I went back it was 80 lira," said Kadriye Dogru. "We don't deserve this as a nation." In India, retail inflation rate was a comfortable 4.48% in October because if minimal rises in food prices, NDTV. but, "Wholesale inflation climbed to a five- month high of 12.54% in October on the back of a rise in prices of fuel and power, vegetable oils and chemicals, government data showed," ET. Taxes on fuel were raised to finance government deficit. "The total incidence of taxes on petrol has come down to 50 percent and that on diesel to 40 percent following a reduction in excise duty by the central government," ET. However, the Reserve Bank of India (RBI) has kept interest rate below the rate of inflation, at 4%, since 22 May 2020, HT. The rise in the consumer price index (CPI) may have been at 4.48% but, "Prices of nearly half the items used to compute India's retail inflation are rising at alarming rates of more than 6% a year," Mint. For the last 4 months, even as CPI inflation has stayed between 4.39% and 5.59%, prices of 45-48% of items in the CPI basket grew by over 6%. Prof Raghuram Rajan decided not to reapply for extension of his post as governor of RBI in 2016 because of shabby treatment by the government, Insider. Following him then Governor of RBI Urjit Patel resigned prematurely because of 'disagreements' with the government, BBC. Within a few of months of Patel, Deputy Governor Viral Acharya resigned 6 months before his term ended, ET. It is not all gloom, though. The government reappointed present Governor Shaktikanta Das for another 3 years, NDTV. Presumably for his sterling service in keeping interest rate below the rate of inflation. Why are we trying to be like Turkey? Do we think we are immune?

No smoke without fire. Plus other sources.

According to the Central Pollution Board, Ministry of Environment, Forests and Climate Change, air pollution is in the severe range at Anand Vihar in Delhi this morning. People are being advised not to go out, especially in mornings and evenings, schools and colleges are closed, 5 out of 11 thermal power plants around the city are to cease operation, construction activities are banned till 21 November and trucks carrying non-essential goods are banned from entering Delhi, India TV. India's Supreme Court has got involved. "The Supreme Court on Saturday took a serious view of the severe air pollution in Delhi-NCR and suggested that if needed the government can declare a two-day lockdown to bring down the levels, which has been caused by stubble burning, vehicles, firecrackers, industries, dust," BS. Two days back, the court termed the situation an "emergency" and asked "Where are the drastic steps?" Times Now. The state government in Delhi is controlled by the Aam Aadmi Party (AAP) which won the last election with an overwhelming majority of 62 out of 70 seats, wikipedia. Delhi government made the reasonable suggestion that locking down just Delhi may not work because polluting substances can easy drift in from surrounding areas in Haryana and UP. However, "The Centre on Monday informed the Supreme Court that stubble burning by farmers contributes only 4-10% of Delhi's pollution," TOI. The central government, based in Delhi, is in the hands of the Bharatiya Janata Party (BJP) of Prime Minister Narendra Modi which won the last general election with an absolute majority of 303 out of 542 seats in the Lok Sabha, wikipedia. Farmers in Punjab and Haryana set fire to stubble remaining after harvesting rice during this time of the year to prepare their fields quickly for the next crop. "Cumulative fire count for Punjab till November 16 stood at 74,015, higher than 72,373 recorded last year, as per data provided by Pawan Gupta, senior scientist, Earth Sciences at the Universities Space Research Association, NASA Marshall Space Flight Center, USA," TIE. "The fire count from Haryana this year is 8,879, according to the data from VIIRS, provided by Gupta." The BJP rules Haryana in coalition with other parties, wikipedia, and Punjab, which the Congress won with absolute majority in 2017, wikipedia, has to hold election to its assembly before 17 March 2022, which the BJP would dearly love to win, wikipedia. "Between October 20 and November 14 this year, Delhi's Air Quality Index (AQI) has been in the severe zone (401-500) on seven days. On each of these days, the contribution of farm fires to Delhi's PM 2.5 contribution was between 26%-48%," HT. The government is taking an average for the whole year, which gives a false impression. Since 2018, rise in pollution in Delhi has coincided with the number of farm fires. Use of combined harvesters leaves long stubble, wrote Sayantan Bera. To conserve water, farmers have been told to delay planting of rice to take advantage of monsoon rains in July and August which leaves little time to prepare fields for the next crop of wheat. Most important, it costs Rs 6,500 per hectare to use crop residue management machines because of the high price of diesel. Despite recent reduction in excise duty, diesel costs Rs 80.90 in Chandigarh, capital of Punjab and Haryana, ET. A matchstick costs nothing. However, farmers are vote bank, so must be humored. No smoke without fire. Can't be hidden.     

It's a real smorgasbord.

"Wholesale (WPI) inflation climbed to a five-month high of 12.54% in October on the back of a rise in prices of fuel and power, vegetable oils and chemicals, government data showed on Monday," ET. "This is the seventh consecutive month in which wholesale inflation has stayed in double digits. It was 10.66% the previous month and 1.31% in October 2020." WPI inflation rate was so high this year because it is in comparison to the rise in the same month last, which is called base effect. This is opposite of consumer price (CPI) inflation which "rose 4.48 percent in October 2021 from 4.35% in September, mainly due to higher fuel and edible oil price", NDTV. However, CPI inflation rate benefited from base effect because it was 7.61% in October 2020, "while food inflation was at 11 percent in the year-ago period". "Wholesale fuel and power inflation accelerated to 37.18% in October from 24.81% a month earlier, while core inflation moved up to an all-time high of 11.9% and manufacturing inflation came in at 12%," ET. "Activity in the country's manufacturing sector rose at its fastest pace in eight months in October on the back of new orders as demand improved and the economic recovery gathered strength, a survey showed," TOI. "At 55.9 in October, the IHS Markit India Manufacturing Purchasing Managers' Index (PMI) was in expansion territory for the fourth month in a row." Unfortunately, "Industrial growth moderated sharply to a seven-month low of 3.1% in September from over 12% in August, hit by the strong monsoon in the month that dented economic activity, component shortages that hit the automobile sector, and the waning base effect that had boosted growth in recent months," ET. "Production of capital goods grew 1.3% in September while that of consumer durables contracted 2%, reflecting the impact of the chip shortage." "India's exports rose by 43 percent to USD 35.65 billion in October while trade deficit widened to USD 19.73 billion during the month, according to official data," ET. "Imports soared by 62.51 percent to USD 55.37 billion widening the trade deficit." From April to October 2021, exports rose 55.13% to $233.54 billion, while imports rose by 78.16% to $331.39 billion. If it weren't for money sent by Indians living or working abroad to their families in India, our balance of payments would not have been so large. "India received USD 83 billion in remittances in 2020, a drop of just 0.2 percent from the previous year, despite a pandemic that devastated the world economy, according to a World Bank report," BS. "The balance of payments (BoP) transactions consist of imports and export of goods, services, and capital, as well as transfer payments, such as foreign aid and remittances," Investopedia. "In 2020-21, there was an accretion of US$87.3 billion to foreign exchange reserves (on a BoP basis)," Reserve Bank of India (RBI). "India's widening current account deficit, driven by the massive spike in commodity prices led by crude oil, is set to put pressure on the fragile recovery, warns a brokerage report that has revised upwards its CAD (current account deficit) forecast to USD 45 billion or 1.4 percent of GDP by March," BS. Is the economy improving or not? We can call it a smorgasbord. Doesn't matter to most people.         

The power of five. First Panchsheel, now Panchamrit.

"UN Secretary General Antonio Guterres warned of an impending 'climate catastrophe', while environmental campaigner Greta Thunberg dismissed Saturday's COP26 climate conference deal as 'blah, blah, blah'. Even those who welcomed the deal in Glasgow said a huge amount of work remained to be done," ET.  COP26 was the 2021 United Nations Climate Change Conference held in Glasgow, UK from 31 October to 13 November. The United Kingdom held presidency of the conference. "India on Sunday called the COP26 summit a 'success', saying it put across the concerns and ideas of the developing world quite 'succinctly and unequivocally' in front of the world community. Negotiators from nearly 200 countries have accepted a new climate agreement after the COP26 summit in Glasgow concluded its extra time plenary on Saturday with a deal, which recognises India's intervention for the world to 'phase down' rather than 'phase out' fossil fuels," ET. "India was joined by China in pushing for a watering down of this key commitment, insisting on 'phasing down' rather than 'phasing out'," BBC. "Last Wednesday, the Xinhua news agency trumpeted the fact that the country produced more coal than ever before on a single day. Some 12 million tonnes of the black stuff were mined. When consumed for energy, the one day of coal will produce carbon dioxide emissions roughly equivalent to Ireland's output for an entire year." Did we help China out of love or fear? "China and India will need to explain to developing nations why they pushed to water down language on efforts to phase out coal at the COP26 conference, the event's president Alok Sharma said," NDTV. Advanced countries want developing nations to switch from fossil fuels to renewable energy sources, while developing countries want richer nations to finance the transition and transfer technology to make that happen, TIE. Thus, all the resolutions are non-binding and could be ignored. "At one point (John) Kerry grasped Xie's (Zhenhua) shoulder, while China's lead negotiator nodded and smiled as he enumerated points on his fingers," ET. That, apparently, was the "high point" of the summit. "But China's intervention -- via India -- effectively undermined COP26 President Alok Sharma's goal to 'consign coal to history'." "The result was that the world's three biggest polluters -- China, India and the US -- overrode the concerns of the vulnerable nations most at risk of climate change." "While the world expressed disappointment, climate experts in India felt that the first-ever mention of phase down of coal by the country in an international climate agreement is an important indication of the energy transformation underway, and criticised the developed nations for once again failing to deliver the promised climate finance," ET. First, we had 'Panchsheel', meaning 'Five Principles', with China, wikipedia, which was shoved down our throat by China in the 1962 humiliation, India Today. In Glasgow India announced 'Panchamrit', which means 'Five Elixirs for Eternal Life', HT, to help China produce more coal. How will China show its gratitude? Scary. thought.

'Ram Bharose' and 'In God We Trust', mean we are in deep trouble.

"In October, the Consumer Price Index for all Urban Consumers rose 0.9 percent on a seasonally adjusted basis; rising 6.2 percent over the last 12 months, not seasonally adjusted," US Bureau of Labor Statistics. "Inflation across a broad swath of products that consumers buy every day was even worse than expected in October, hitting its highest point in more than 30 years," CNBC. Retail inflation rate in India rose by 4.48% in October compared to 4.35% in September, BS. It may seem that prices in the US are rising faster than in India but there is enormous base effect at play. Consumer price index (CPI) in the US rose over a 1.20% in October 2020, while CPI in India has risen by 4.48% over a scorching 7.61% rise in October 2020, when demand was low because of the pandemic, wrote Udit Misra. "Core inflation rate is the rate of inflation when we ignore the prices of food and fuel." "The worry for India is that core inflation is now over 6%." What is the worry? Higher prices abroad will mean higher cost of imports into India. As central banks raise interest rates to control inflation it will raise the cost of borrowing for Indian companies, and the Reserve Bank (RBI) will have to follow suit which will raise cost of borrowing at home. "Indian companies raised over USD 3.43 billion from foreign markets through external commercial borrowings (ECBs) in July this year, RBI data showed" ET. Indian companies had borrowed USD 2.15 billion in July 2020. In Europe, "Euro area annual inflation is expected to be 4.1% in October 2021, up from 3.4% in September according to a flash estimate from Eurostat, the statistical office of the European Union." In Germany, it was 4.6%. In the US, "Consumer price inflation will likely endure as long as companies struggle to keep up with consumers' prodigious demand for goods and services. A resurgent job market -- employers have added 5.8 million jobs this year -- means that Americans can continue to splurge on lawn furniture to cars. And the supply chain bottlenecks show no sign of clearing," ET. Climate change can make it much worse. "Global crop yields could fall about 30% because of climate change, while food demand is expected to jump 50% in the coming decades, according to United Nations' estimate," ET. "Crisil has estimated that the highest inflation was faced by the upper 20 percent income group in urban areas," BS. This is because fuel and core inflation make up 65% of their commodity basket, while "The lowest inflation was faced by the bottom 20% in rural areas," because of lower food prices. "In a worrying sign of soaring inflation, apples and tomatoes were selling at the same rate in grocery markets of Agra," India Today. "Vegetable sellers are feeling the pinch both ways; on one hand, supply of produce has dipped, while on the other hand, rising prices are forcing customers to buy less." Importing food items to make up any shortfall will likely not help. Globally, "Higher shipping rates and prices of foodstuffs from grains to vegetables are likely to drive the cost of importing food up by 14% to $1.75 trillion, the United Nations said," ET. So, what is the solution? In a shameful article Nobel Prize recipient Paul Krugman makes excuses for the Democrat government of Joe Biden by comparing with Europe, ET. But Europe did not dole out enormous stimulus worth $1.9 trillion like Biden did, CNBC, an infrastructure bill worth $1 trillion, BBC, and is now pushing for a $1.75 trillion social spending bill, CBS. What would happen if the Republicans did not act as a check no one knows. In India, we say 'Ram Bharose', which means 'depend on Lord Ram', Quora. US motto is "In God we trust", wikipedia. We say, "God help us".

Won't India be richer if every Indian has more money?

"In its latest World Economic Outlook report, .... the IMF said that Indian economy is expected to grow by 9.5% in 2021 and 8.5% in the next year," TOI. "Stating that growth impulses and the fast moving economic indicators are strong, Reserve Bank (RBI) Governor Shaktikanta Das on Wednesday exuded confidence in the economy clipping at the projected 9.5 percent growth this fiscal," BS. "Buoyed by an increase in public investment and incentives to boost manufacturing, India's economy is expected to grow by 8.3 percent in the fiscal year 2021-22, less than the previous projection early this year before the country was hit by the second wave of COVID-19 pandemic, the World Bank has said in its latest report," BS. Disagreeing with these institutions, "NITI Aayog vice-chairman Rajiv Kumar said the Indian economy is expected to grow beyond 10% in this fiscal, supported by a record kharif crop, bright rabi prospects and strong rebound in trade," ET. Presumably, they are all talking about Real GDP growth which is calculated by adjusting the Nominal GDP for inflation, Lumen. The adjustment is called GDP Deflator, which is rise in prices over a base year, wikipedia. This means that if the real GDP growth is to be 10% and GDP Deflator is calculated at 5%, then the nominal GDP has to be growing at a scorching 15%. All these prophecies are moot, wrote Ruchir Sharma, GDP growth does not indicate happiness or well being of the people, which depend on how rich individuals are, or by GDP per capita. GDP per capita "is a measure of a country's economic output that accounts for its number of people. It divides the country's gross domestic product by its total population," The Balance. "The latest World Happiness Report ranks just one country with per capita GDP under $15,000 (Costa Rica) in the top 25, and none with per capita GDP over $15,000 in the bottom 70," wrote Sharma. According to World Bank data, India's per capita GDP was a mere $1,900.7 in 2020. No wonder, "India has been ranked 139 out of 149 countries in the list of UN World Happiness Report 2021," India Today. A study in 2010 suggested that people feel happier with more money up till an income of $75,000 per year per person, but "a 2018 study from Purdue University" found "that the ideal income point for individuals is $95,000 for life satisfaction and $60,000 to $75,000 for emotional well-being", CNBC. "Yet among advanced economies, higher income does show clear tie to higher happiness score. The higher income Swiss and Norwegians are happier than the somewhat less rich Germans and French," wrote Sharma. As populations shrink, total GDP will fall and inflation may rise but per capita GDP may remain at the same level. In Japan, "The number of Japanese decreased 428,617 to 123,842,701 in the 12th straight year of decline, with deaths outnumbering births in the greying society," Japan Times. However, per capita GDP has been rising since 2015 to 2019, after falling sharply from its highest point in 2012, macrotrends. Which means, all this blather about GDP growth is to cover up that Indians are miserable. Reduce taxes so we have more money. Bingo, India will be rich.        

Can you have a silver lining without a dark cloud?

"The US dollar gained its highest in a year on Wednesday against sterling and the euro on Thursday, while the yen was smarting from its sharpest drubbing in a month as the highest US inflation since 1990 fanned bets on rate hikes," CNBC. "The US data showed price rises extending into rents, which could drive pressure on wages, both lengthening and broadening the pandemic's inflationary pulse." "America's cost of living is rising faster than it has for three decades, with food and fuel driving the increases. The consumer prices index for October showed prices rose 6.2% over the last twelve months," BBC. Prices rose 5.4% in September. "Almost every sector saw some price inflation, except for airfares and alcoholic beverages." In India, on 1 November, "oil companies increased ATF (air turbine fuel) prices 13.9% over that in October to Rs 82,638 per kilolitre in Delhi. With this increase, jet fuel prices are about 95.8% higher than in November 2020," ET. Yet, according to Jet-A1-Fuel.com the price of ATF in India is $0.504/liter, while in the US it is $0.608/liter today. In the US, "Much of it is the flipside of very good news," TOI. "Economic output plunged at a record shattering 31% annual rate in last year's April-June quarter." "Yet instead of sinking into a prolonged downturn, the economy staged an unexpectedly rousing recovery, fueled by massive government spending and a bevy of emergency moves by the Fed," "Suddenly, businesses had to scramble to meet demand." "Costs rose. And companies found that they could pass along those higher costs in the form of higher prices to consumers, many of whom had managed to sock away a ton of savings during the pandemic." "President Biden will sign the $1.2 trillion infrastructure bill into law during a ceremony at the White House on Monday while Democrats try to muster enough votes to get another social spending bill to his desk," Fox News. He is committing "econo-cide", according to Kevin Hassett. "You know, he's got a demand stimulus that's as big as we've ever seen and then he is whacking the heck out of supply. You know, he's regulating firms, promising big tax hikes -- you know, we have the highest marginal tax rate in the whole developed world if they pass those tax hikes, and all of that is basically creating all this cash chasing supply but supply is going down so you see inflation." Hassett thinks stagflation will be worse than in the 1970s. "Spiking oil prices, rising unemployment and loose monetary policy pushed the core consumer price index up to a high of 13.5% in 1980, prompting the Fed to raise interest rates to nearly 20% that year," Reuters. Inflation will return to about 2% level as supplies ease, and the Federal Reserve will not let it rise to 1970s level, assured Treasury Secretary Janet Yellen, Fox News. The Fed has been buying US Treasuries and mortgage backed securities (MBS) until its balance sheet has ballooned to $8.57 trillion, wrote Vivek Kaul. It is now going to reduce its bond buying by $15 billion per month before it starts to reduce its balance sheet. "Prices of stocks, commodities, real estate and cryptocurrencies will all fall. So too will unicorn valuations." What has all this got to do with India? Lower commodity prices will be good, but a stronger dollar and falling share prices could cause the rupee to fall. Every cloud, they say, has a silver lining. But, does silver lining need a dark cloud?