Advantage of nominal over real.

"India's GDP grew by 4.1% in the fourth quarter of FY22. Meanwhile, the overall growth recorded for the financial year 2021-22 is estimated at 8.7% as against a contraction of 6.6% in FY21," ET. "The nominal GDP grew by 19.5% in the financial year 2021-22." Chief Economic Advisor Dr V Anantha Nageswaran said that "India is better placed than many other nations as the financial sector of the country is in better shape to support growth". "In the context of developing countries, recession is rarely on the cards, it is almost always a question of growth slowing down," he said. Reassuring. The difference between the nominal GDP growth at 19.5% and real GDP growth at 8.7% is because of adjustment for inflation, Investopedia. Since taxes are collected on nominal GDP, "India's gross tax collections soared to a record high of Rs 27.07 lakh crore (Rs 27.07 trillion) in the fiscal year ended March 31 as mop-up from income, corporate taxes, customs and GST jumped, taking the tax-to-GDP ratio to the highest in 23 years, Revenue Secretary Tarun Bajaj said," DH. Direct taxes grew by 49% to Rs 14.10 trillion while indirect taxes grew by 20% to Rs 12.90 trillion. Direct taxes are supposed to be 'progressive' because they are linked to income, so that the poor are protected, Investopedia. However, paying high taxes on income, which buys less because of soaring prices, makes people poorer. "India's annual per capita income at constant prices remained below the pre-COVID level at Rs 91,481 in 2021-22, official data showed," ET. The per capita income at constant prices was Rs 94,270 in 2019-20. However, at current prices the per capita income rose by 18.3% to Rs 150,000 in 2021-22. Hence the jump in tax collections. "Current series are influenced by the effect of price inflation. Constant series are used to measure the true growth of a series i.e. adjusting the effects of price inflation," World Bank. It also reflects the value of the currency. "Low interest costs, market consolidation, and tax savings lifted more than 80% of India's top listed companies out of the woods in the last fiscal year, shows a Mint analysis of earnings declared in recent weeks," wrote Niti Kiran. "A comparison of decadal compound annual growth rate (CAGR) of major sub-sectors from 1981-82 onwards shows that the last decade (2011-12 to 2021-22) was the second worst in terms of overall GVA (gross value added) growth," wrote Roshan Kishore. "However, a comparison of GVA numbers by sectors shows that employment intensive non-farm sectors have performed even worse in the last decade." Unemployment. "India has seen a huge expansion in money supply from Rs 13 trillion in 2016 to Rs 30 trillion in 2022," wrote Ajit Ranade. "How much of this money has led to inflation in India is anybody's guess." Seigneurage is what the Reserve Bank (RBI) earns from the difference in the value of the rupee and the cost of printing it, Investopedia. "Seigneurage income and collections of this implicit inflation tax are always a tempting option for governments, since they don't need to announce a politically unpopular increase in tax rates." The government earns more while the people earn less. The RBI is the accessory.   

An amazing people.

"Modi's government has met or exceeded expectations in the second term, according to 67% of 64,000 people polled by LocalCircles. That's a jump from 51% last year when a brutal second wave of Covid-19 infections overwhelmed hospitals and crematoriums and 62% in 2020 when the pandemic started." "The growing approval comes as India's retail inflation is tracking an eight-year high" but, "73% said they were optimistic about their future and that of their families in India." This is despite the fact that 4.7 million people may have died due to Covid infection, according to the WHO, ET. The Indian government says that only 481,000 died of Covid between 1 January 2020 and 31 December 2021 though the government has not supplied figures for excess mortality, BBC. People who have lost loved ones should be aggrieved but they do not seem to care. Amazing. "On March 25, when India had reported only 500 cases, the country went into what was one of the strictest lockdowns in the world. This first set of curbs remained in place till April 14 and was extended four times, each time with gradual relaxations," HT. Millions of migrant workers walked hundreds of kilometers back to their villages with little children and whatever they could carry, TOI. Yet, they have no questions to ask. Amazing. "FMCG and auto companies sensed the heat first. The slow burn of tapering demand from rural India. Now others are flagging something that few are prepared to talk about: rural India is suffering from declining wages, spiraling inflation, high unemployment, and consequent rising inequality," ET. Yet, they are just grateful to be alive. Amazing. "Frustrated at not being able to find the right kind of job, millions of Indians, particularly women, are exiting the labor force entirely, according to new data from the Centre for Monitoring Indian Economy (CMIE)," ET. "Now, more than half of the 900 million Indians of legal working age -- roughly the population of the US and Russia combined -- don't want a job, according to the CMIE." Must be our fault. Amazing. A report from the National Family Health Survey (NFHS-5) "has found that 89 percent of children between the formative ages of 6-23 months do not receive a 'minimum acceptable diet'," TIE. "94.11% registered informal workers' income at Rs 10,000 or below; 74% belong to SC, ST, OBC," ET. Can't afford to lose this pittance, so smile. Amazing. "Jammu and Kashmir has seen a steep rise in terrorism in 2022 compared to the corresponding period of last year," ET. "As many as 62 terrorists have been killed so far this year in Jammu and Kashmir," till April, HT. Yet, 700,000 happy tourists have visited the valley till May this year, Hindu. Amazing. India's press freedom ranking fell from 133 in 2016 to 150 out of 180 countries in 2021, The Wire. Who wants the truth when things are so great? Amazing. Research shows that gratitude makes people happy, Harvard. We Indians are the most grateful. Amazing.

Just a whiff.

"Giving its ruling in the Mohit Minerals case, the Supreme Court held that since the Indian importer is liable to pay IGST on the 'composite supply', comprising of goods and supply of services of transportation, insurance, etc. in a CIF (Cost Insurance Freight) contract, a separate levy on the Indian importer for the 'supply of services' by the shipping line would be in violation of...the CGST Act," ET. This means that those companies which have already paid the tax will be able to claim a refund, while those who are yet to pay can heave a sigh of relief. "The Supreme Court has ruled in the Ocean Freight case that recommendations of the GST Council would have persuasive value but are not binding on the Union and the States," The Quint. "This reminds the states that they have sovereign power to enact or amend the GST law in their respective states." "Till now, the GST Council, which is comprised of the Union Finance Minister and the Finance Ministers of all states, has made recommendations on various matters concerning, rates, procedures, forms, etc.," BT. "We are now back to square one with this judgement. What this means for trade and industry is that the olden days of multiple tax rates and multiple interpretations are back again, which are without a doubt pain for all concerned." "Regardless of the number of percentage points of GDP growth it may entail, no political party or leader would willingly sacrifice their fiscal powers. It was precisely for this reason that Narendra Modi, as chief minister of Gujarat, was vehemently opposed to GST until 2014," The Print. Modi was elected for his first term as Prime Minister in 2014, wikipedia. "In an official event with Prime Minister Modi..., Tamil Nadu Chief Minister MK Stalin demanded an exemption from 'one nation, one exam' NEET policy, treatment of Tamil as an official language on par with Hindi and payment of GST dues owed to the state, all in the same speech. It is obvious that GST has muddied the entire lake of federalism in the country." Under Article 279A "the Centre's vote holds a one-third weightage, while the weightage of the vote of all the states combined is two-thirds," Scroll. "However, for a recommendation to be passed by the council, it needs a three-fourths majority. This means that no recommendation can be passed without the Centre's vote, giving it an effective power of veto, which means the balance of power in the GST Council leans heavily towards the Union government." India loses great opportunities because of unfair taxes. Elon Musk has decided to set up his new factory to manufacture Tesla cars in Indonesia, ET. "Progress toward EVs has been scattered and commitment isn't clear." "Add in policy hoops and punitive taxes, and India has all but ruled itself out by making the cost of investing in its market so high." A whiff of freedom for the states. On the 75th anniversary of Independence, wikipedia.      

Losing control.

The UN World Food Program (WFP) experts estimate that 50 million people could go hungry this year, Fox. "History has repeatedly shown that mass hunger leads to political instability. Rising food prices across Northern Africa and the Middle East directly contributed to social unrest which sparked the start of the 2010 Arab Spring uprisings." US Secretary of State Antony J Blinken said Russia's "flagrant disregard of resolution 2417 (2018) is just the latest example of a Government using the hunger of civilians to advance its objectives", UN. To which Russia responded, "In the context of the active 'proxy war' with the Russian Federation in Ukraine, Western delegations have essentially taken the entire developing world hostage, leading it towards hunger." "Highlighting the situation in South Asia, Shree V Muraleedharan, Minister of State for External Affairs of India, said the global South has been adversely impacted both by the conflict in Ukraine and the measures put in place in response." "Calling out the West, India has said that foodgrains should not go the way of Covid vaccines and voiced concern over hoarding, discrimination and 'unjustified increase' in food prices," TOI. Exactly. Both sides are to blame. Western nations have imposed savage sanctions on Russia with the aim of teaching President Vladimir Putin a lesson by destroying Russia's economy, BBC. To many, Western actions against Russia are evidence of deep-seated Russophobia, wikipedia. "In many Western countries, everyday Russophobia has become of an unprecedented nature, and, to our great regret, in encouraged by government circles in a number of countries," said Russian Foreign Minister Sergei Lavrov. Sanctions are a blunt tool. If the US forces Russia to default on its debts by freezing dollars and by excluding Russia from the Swift system, Reuters, then Russia is not going to export for free. In Britain, "Children are suffering from food poisoning and wearing dirty clothes as parents switch off key household appliances in a desperate attempt to save money amid the cost-of-living crisis, according to campaigners," DM. "The cost of living crisis has sparked a boom in 'first time' shoplifters, according to supermarket bosses. Thefts have soared since the beginning of the year and are continuing to increase in the wake of price rises caused by the war in Ukraine," DM. "A decision by China and Russia to veto new United Nations sanctions on North Korea pushed by the United States, shattered any veneer of global cooperation," Reuters. "Iran's paramilitary Revolutionary Guard seized two Greek oil tankers, just after Athens assisted the US in seizing an Iranian oil tanker over alleged sanctions violations," ET. "If the election were held today, Democrats would not only lose control of the House, but suffer massive losses in their ranks," CNN. Sanctions on Russia have become sanctions on the whole world. Including the West. 

In gold we trust.

"The Reserve Bank of India (RBI)... said its board had approved a dividend payment of Rs 30,307 crore (Rs 303.07 billion) to the government for the financial year ended March 2022," CNBC. Last year the RBI transferred Rs 991.22 billion for a period of just 9 months. In 2021, "The RBI was second only to Turkey in terms of reserves transferred to the government as a percentage of gross domestic product (GDP) for the fiscal year 2020-21," TOI. "Turkey's annual inflation jumped to a two-decade high of 69.97% in April," Reuters. "Turkey's lira slid beyond 16.4 to the dollar... to its weakest level since the depths of a December crisis," as "The lira has weakened more than 9% this month and 19.5% this year," Reuters. Although well behind Turkey, India's consumer price index (CPI) inflation jumped to 7.79% in April, TIE. "After hurtling past the 77/$1 trade today (9 May), the rupee weakened further against the US dollar..., hitting a fresh all-time low of 77.58/$1," ET. The rupee is trading at 77.69 to one dollar this morning, xe.com. "Over the last decade or more, the government has sought higher payouts saying the RBI was maintaining reserves that were much higher than other central banks. But, the central bank has already tapped into the reserve to support the rupee and may be more cautious given the global uncertainty," msn.com. "The size of the Reserve Bank's balance sheet, which is reflective of activities carried out by it in pursuance of currency issue function as well as monetary policy and reserve management, has increased by 8.46 percent during 2021-22, the annual report data showed. While income for the year increased by 20.14 percent, expenditure rose by 280.13 percent, RBI said," ET. Since the RBI has the power to print money the eye-watering jump in expenditure should be no problem. "But, there's a danger, exemplified by Venezuela in the 1980s and 1990s. The central bank, pushed into insolvency by its support of the Latin American government's industrial policy, leaned too heavily on the power of cheap money-printing to earn profits and repair its balance sheet, and lost control of inflation. Thinning out the central bank's capital cushion could introduce a similar vulnerability," wrote Andy Mukherjee in 2018. Rather than risk the nation's economy, the then Governor of the RBI Urjit Patel resigned for "personal reasons", BBC. After giving an example of another Latin American country, Argentina, Deputy Governor of the RBI Viral Acharya soon followed, NDTV. "In the past, the RBI was persistently trying to push growth by keeping monetary policy excessively loose, as a result of which we are in the sorry state we are in. There is almost runaway inflation and growth is not very much better," said Mythili Bhusnurmath. The RBI "nearly doubled its gold purchase 65 tonnes in Fy22 raising its total holding to 760.42 tonnes," ET. That's precisely what ordinary Indians do, DNA. Because they do not trust the government or the RBI. Why pay these fellows?  

It's not about now.

The central government in India cut excise duty on petrol by Rs 8 and by Rs 6 on diesel to reduce fuel prices at the pump, TOI, and try to control the inexorable rise in inflation. Following the Center's action, various states announced cuts in VAT on fuel, news18. States have not actually cut taxes on fuel, wrote Prof KV Subramanian. "Decreases in VAT in these states are an inevitable outcome of the Centre's cut in excise duty. As petrol and diesel are not included in the GST, the consumer pays state taxes even on central tax." While the central government tax on fuel is Rs 24 per liter for all states, taxes in Maharashtra amount to Rs 31.1 per liter, 257% higher than Rs 12.1 per liter in the neighboring state of Gujarat. On the other hand, "The quantum of funds transferred from the Centre to various implementing agencies in Gujarat, including private trusts, academic institutions and individuals, that did not reflect in the state's annual finance accounts, has increased 350 percent since 2015, noted the Comptroller and Auditor General of India (CAG)," TIE. 2015 was the year when the average price of crude oil fell from over $100 per barrel to $58.89 per barrel, The Balance, and the central government increased excise duty on fuel to rake in windfall taxes. "Look at it this way - since 2014, the central government under PM Modi has collected Rs 18.23 lakh crore (Rs 18.23 trillion) by levying excise duty on petroleum products. In the same period, state governments have collected Rs 14.26 lakh crore (Rs 14.26 trillion) from VAT/Sales Tax on the same products," wrote Subodh Varma. As per the 15th Finance Commission, "The share of states in the central taxes for the period of 2021-26 period is recommended to be 41%, same as that for 2020-21. This is less than the 42% share recommended by the 14th Finance Commission for the 2015-20 period," PRS. "The share of cesses and surcharges in the gross tax revenue of the Centre has nearly doubled to 19.9 percent in 2020-21 from 10.4 percent in 2011-12," and "Under the existing Finance Commission framework, the cesses and surcharges are not part of the tax devolution," BS. "As per the XV Finance Commission, states bear more than 62% of expenditure responsibilities but are given only 37% of revenue raising power, while the Union government owns 63% of revenue raising power to spend on 38% on its expenditure responsibilities," TNIE. "Agriculture is a State subject, i.e., it forms part of the State list of our Constitution which essentially means that States are supposed to address all the issues related to agriculture," Telangana Today. However, the central government banned export of wheat so that the domestic price of wheat has dropped from Rs 2,300 per 100 kg of wheat to Rs 2,015, ET. "India's hundreds of millions of small farmers eke out a borderline existence," and "The price fall represents the difference between a bumper payout and heartache, they say." Prof Subramanian used to be the Chief Economic Adviser of the central government. He is focusing on only one set of figures when fuel taxes have been high for 6 years. This affects the economy. And he is supposed to be an economist.    

A story is fiction, after all.

Last month, "Finance Minister Nirmala Sitharaman called on Silicon Valley biggies to be part of the 'India growth story', pointing out how India is set to be the world's fastest-growing major economy for the next few years," The Week. "Our startups are changing the rules of the game. I believe that startups are going to be the backbone of New India," said Prime Minister Narendra Modi. "India, he said, has over 60,000 startups with 42 unicorns," BT. " 'Unicorn' is a term used in the venture capital industry to describe a privately held startup company with a value of over $1 billion," Investopedia. However, "This story is now unravelling with valuations going gradually out of fashion and cash-flows making a comeback," wrote Vivek Kaul. "A few unicorns which had planned initial public offerings (IPOs) have postponed them. A few more have decided to get out of the unviable businesses they were in." "The India growth story that has been sold to us over the years can be summarized in one line: There are lots of Indians and we can sell them something." But, Indians don't earn enough and a salary of just Rs 25,000 (per month) would put an Indian in the "top 10% in terms of total income earned". "of course, this was known all along," but "those selling the idea of 1.4 billion Indians and the huge Indian market were either selling a narrative knowing fully well it was a lie, or they had bought the narrative themselves." "India is what the World Bank describes as a lower middle income country. The average income of an Indian was $1,935 in 2020," wrote Niranjan Rajadhyaksha. The per capita income is expected to double to $4,000 towards the end of the decade, taking India to an upper middle income country. China took just 4 years to double its per capita income, South Korea took 5 years, Taiwan took 6 years, while the Philippines took 16 years. The median is 10 years. Since the income is mentioned in dollars, it depends on the exchange rate of the currency which depends on inflation. It also depends on productivity and global growth. In 2014-15 the economy was growing at 7.4% and per capita income was growing at 6.2%, wrote Prof Himanshu. "The economy continued to accelerate to reach the highest GDP growth of 8.3% in 2016-17 with per capita income growing at 6.9% - the highest level in a decade." "Since then, per capita income has declined at 0.2% per annum between 2017-18 and 2021-22. The last time per capita incomes declined for a five-year period was five decades ago." Consumer price inflation soared to an 8-year high of 7.79% in April, TIE. The rupee is trading at 77.60 to one dollar this morning, xe.com. "At a time when inflation is already so high, any further depreciation in the rupee is going to hit us primarily through the inflation route and that is going to be catastrophic," said Mythili Bhusnurmath. A decade is too optimistic.        

A matter of trust.

"Prime Minister Narendra Modi on Tuesday extended a warm and strong invitation to American companies to participate in co-development, co-design and co-manufacture under the Make in India and the Atmanirbhar Bharat programmes under the rubric of defence," TOI. It was reported by a Western media outlet that the package under consideration would include foreign military financing of as much as $500 million to wean off India from purchasing military equipment from Russia." "For decades, India has tried to establish a local defence industry, building its own battle tanks and jets," wrote Mihir Sharma. But, the Indian built Arjun tank "can't be part of any battle plans on canal-heavy, militarized border with Pakistan," because "It weighs almost 70 tonnes and would collapse most bridges in Punjab. By contrast, Russia's T-90 tank weighs less than 50 tonnes." And, the Tejas fighter jet carries a smaller payload than the F-16 and takes longer to service. However, reducing dependence on Russian arms does not mean that we become puppets of the US. The US imposed sanctions on Turkey because of its purchase of the S-400 air defence system from Russia. "The sanctions put a ban on all US export licenses and authorizations to the Republic of Turkey's Presidency of Defense Industries as well as an asset freeze and visa restrictions on the organization's president, Ismail Demir, and other top officers," CNBC. Turkey is a member of NATO. Turkey decided to buy the S-400 system because the US refused "technology transfer and joint production terms" for the Patriot missiles, Reuters. "Turkey is pushing to co-manufacture of warplanes and missiles with Pakistan, a hook-up that could also give it access to prized war technology from China," ET. India's foreign exchange reserves consist mainly of US Treasuries and US institutional bonds, wikipedia. France has frozen Russian Central Bank assets worth 22 billion euros ($24 billion) because of the war in Ukraine, BS. Russian banks have been banned from the Swift system of international money transfers so as to completely wreck its economy, BBC. "The United States is considering blocking Russia's ability to pay its US bondholders by allowing a key waiver to expire next week, a US administration official said," ET. India has fought many wars with Pakistan, the latest was in Kargil in 1991, wikipedia. In the 1971 war the US assembled naval Task Force 74 in the Bay of Bengal to attack India but was thwarted by the Soviet Union, wikipedia. What if Pakistan attacks India again? The US will be able to block India from Swift, freeze all our dollar assets and disable our defence forces by withholding replacements and spare parts. India will become a slave of the US and we must not forget that the US became rich on slavery, Vox. Russia has been our friend. We must not be bribed by $500 million. Not worth it.

Friend, from a distance.

In January 2021, "The United States has told India it is unlikely to get a waiver on its planned acquisition of Russian S-400 air defence systems, raising the risks of sanctions similar to those imposed on Turkey for buying that equipment, people aware of the matter said," India Today. "The sanctions target Turkey's Defence Industries Directorate president Ismail Demir, and three other employees. They include a ban on US export licenses, as well as a freeze on any assets that are in US jurisdictions," BBC. "According to Bloomberg News, the US is considering a $500 million defence package for India to finance the purchase of US weapons systems," wrote Mihir Sharma. That's less than chicken feed. "India is spending $5.5 billion on Russia's S-400 surface-to-air missile platform. The US made Terminal High-Altitude Area Defense system costs about six times that much and isn't even as versatile." In March 2019, Indian Wing Commander Abhinandan Varthaman shot down a Pakistan Air Force F-16 fighter aircraft, ET. In the process his MiG-21 Bison was also shot down. However, "A US count of the F16s in Pakistan has found that none of them are 'missing' and all the planes were 'present and accounted for', according to a report in a prominent American magazine," BS. The S-400 will eliminate the need for aerial dogfights. As noted by Military Times "the S-400 can react to targets in less than 10 seconds and can hit targets at a range of up to 250 miles while traveling at about 10,000 mph. It says the system can eliminate such US aircraft as the B-52 and B-1 bombers; F-15, F-16 and F-22 fighters; as well as surveillance aircraft and Tomahawk missiles," BI. Which means, as India acquires the S-400 system Pakistan's main fighter aircraft will become useless and it will stop buying them. So the US is threatening sanctions to force India to buy its extremely expensive, but ineffective, air defense system so as to continue to sell to Pakistan. Recently, "India is berated for deviating from 'civilised norms' and then berated once again for having the temerity to remind others of their deviation from 'civilised norms'," because of India's purchase of Russian oil while the West continues to buy gas from Russia, wrote Prof Rahul Sagar. "Ten more European gas buyers have opened accounts in Gazprombank JSC, doubling the total number of clients preparing to pay in rubles for Russian gas as President Vladimir Putin demanded," Bloomberg. Italy has presented a 4-point peace plan for Ukraine to the United Nations which calls for local ceasefire, evacuation of civilians and winding down of sanctions, ET. US sanctions on Russia have become sanctions on all European countries. With a friend like the US who needs enemies? India is wise to keep its distance.

Can't be grateful.

"The Centre on Saturday slashed excise duty by Rs 8 on petrol and Rs 6 on diesel to bring down fuel prices and ease inflation by reducing transportation charges for the Aam-Aadmi's (common man's) daily staples," TOI. "The government also announced a Rs 200 subsidy on LPG for consumers who were given connections free of cost under the Ujjwala programme, one of Narendra Modi government's flagship social welfare schemes launched in 2016." "Price of domestic gas, LPG has doubled to Rs 819 in the last seven years while increase in taxes on petrol and diesel has swelled collections by over 459 percent, Oil Minister Dharmendra Pradhan said" on 9 March 2021 in parliament, BS. In March 2014, when this government took over, the same amount of gas cost just Rs 410.5. The price of domestic gas jumped to Rs 1,003 a few days back, NDTV. The poor were already finding it difficult to refill their gas cylinders and some were returning to using wood or dried cow dung for cooking, ET. "A day after announcing a hefty fuel tax cut, Union Finance minister Nirmala Sitharaman on Sunday said the two rounds of duty reductions - the last one being in November - will cost the exchequer Rs 2.2 lakh crore (Rs 2.2 trillion) annually and the states' share of from the tax pool will not be affected as the Centre had opted to cut cess on petrol and diesel, which are outside the divisible pool," TOI. Is this a sacrifice? In December 2021, Sitharaman said that the government earned nearly Rs 8.02 trillion from taxes on fuel in the last 3 financial years and, of that, Rs 3.7 trillion came in 2020-21, ET. In 202-21, the share of cess and surcharges, which are not shared with states, amounted to 19.9% of the central government's revenue, BS. Do politicians have the right to increase taxes on citizens at their whim and deprive state governments of their share through sleight of hand? Are we supposed to be grateful for a little relief? The average price of petrol in the US is around $4 a gallon, eia.gov, which converts to around Rs 82 per liter at an exchange rate of Rs 77.5 per dollar, ET. The price of petrol in India varies from Rs 96.72 per liter in Delhi to Rs 111.35 in Mumbai, ET. "Tamil Nadu Finance Minister Palanivel Thiaga Rajan said the central government had never consulted states when it increased taxes and that his state was already incurring loss of over Rs 1,000 crore (Rs 10 billion) due to earlier tax cut announced by the government," TOI. "Therefore, it is neither fair nor reasonable to expect states to reduce their taxes," he said. Congress leader P Chidambaram said that states get very little from duties on petrol and diesel and their revenue comes from VAT which they cannot cut unless the central government shares more funds, ET. Seems that people are not grateful for a slight reduction in unfair forceful extraction of taxes. No surprise.

Willing to be conned.

"Foreign institutional investors (FIIs) are exiting Indian markets in large droves. FIIs have sold stocks to the tune of $8 billion in the current year so far," Forbes. However, "The resilience of domestic investors has held the market together in the last few months," as "Household savings, the lack of investable options, and low interest rates have driven retail investors to stock markets like never before." "Finance Minister Nirmala Sitharaman...praised retail investors who have come in hoards on Dalal Street to help the stock market absorb the shock of massive outflows in the last few months," ET. "Continuing their selling spree for the sixth consecutive month, foreign investors pulled out a massive Rs 40,000 crore (Rs 400 billion) from the Indian equity market in March. Foreign investors have pulled out a net Rs 1.48 lakh crore (Rs 1.48 trillion) between October 2021 and March 2022." Is this a good thing? Indians invest in shares through demat or dematerialised accounts. "A demat account helps investors hold shares and securities in an electronic format," Bajaj Finserv. "From the end of December 2020 to March 2022, the latest available, the number of demat accounts went up by 80% to 89.7 million," wrote Vivek Kaul. On 18 October 2021, "After scaling an intra-day high of 61,963, the 30-share BSE index jumped 460 points or 0.75 percent to finish at fresh record of 61,766," TOI. "While, the broader NSE Nifty settled 138 points 0.76 percent higher at a new peak of 18,477." 3.5 million new demat accounts were opened by retail investors dazzled by lurid headlines. "This is largely in line with what happened post 2008, where FIIs buy in years when valuations are low and sell in years when valuations are high. Retail investors do the opposite." This "helped loss-making companies launch and complete their initial public offerings (IPOs). Some IPOs were totally or partly offers for sale, where promoters cashed in on their equity by selling it to the public." "The much-anticipated listing of Paytm, which had raised Rs 18,300 crore (Rs 183 billion) in India's biggest IPO, ended on a bitter note with the stock crashing 27% from its issue price of Rs 2,150, closing at Rs 1,564," TOI. Investors lost Rs 380 billion. FIIs largely ignored IPO of India's largest company, the Life Insurance Corporation of India (LIC), putting in bid for a mere 2% of shares set aside for institutional investors, ET, but it was oversubscribed 1.34 times because of domestic investors, NDTV. LIC shares have fallen 9.8% to Rs 855.80 in 3 days after listing from their IPO price of Rs 949 per share, FE. People are gambling on stock markets, according to investor Vijay Kedia. "They do trading courses and look at charts but no one talks of fundamentals. It is like a drug," he said. He has met a CISF officer who has lost Rs 1.5 million trading in futures and options and a schoolteacher who has lost Rs 4.2 million. Why are Indians gambling with their meager savings? Because they are told that "India's macroeconomic fundamentals remain sound," BS, and "the easy money policy unleashed by the Reserve Bank of India to help the government borrow at low interest rates pushed people to look for higher returns". A 'sucker' is 'a person who is easily tricked or deceived', Britannica. Indians are being conned. They are willing suckers.  

Painful growth.

"Chief Economic Adviser V Anantha Nageswaran...said amid global uncertainties caused by the Russia-Ukraine war, India is still better placed among the large economies because of an improved financial system and a robust corporate health," ET. Gross non-performing assets (NPAs) of public sector banks (PSBs) have declined from Rs 8.96 trillion on 31 March 2018 to Rs 5.60 trillion on 31 December 2021, as banks have recovered over Rs 3 trillion of bad loans, moneylife. Indian companies have trimmed their balance sheet and Finance Minister Nirmala Sitharaman has "raised capital expenditure (capex) by 35.4 percent for 2022-23 to Rs 7.5 lakh crore (Rs 7.5 trillion) to push the public investment-led recovery". "Thus, he said, India is expected to have a growth rate of 7-8 percent depending on the duration of the ongoing conflict." What does economic growth mean? "If you earn a salary of Rs 25,000 (per month) or higher, then your pay ranks in the top 10% of the total wages earned in India," according to a report by the Economic Advisory Council (EAC-PM) to the Prime Minister, The Wire. At Rs 77.8 to one dollar, xe.com, this amounts to $321.3 per month. In 2020, India's average income per month was $160, less than the Philippines, Vietnam and Bangladesh, but higher than that of Pakistan, worlddata. "Extrapolating from the Periodic Labour Force Survey (PLFS 2019-20), the report said that the top 1% in India earns thrice as much as the bottom 10%." "What's more this trend is entrenching itself," as "the growth rate of the bottom 50% has been at 3.9% from 2017-18 to 2019-20, while the top has grown by 8.1%", with the top 1% growing by 15% and the bottom 10% actually falling by 1% in the same period. "Surging inflation is forcing many poor Indians to rein in spending," as "April saw wholesale and consumer prices accelerate at their fastest in years," TOI. Hindustan Unilever Ltd "said late last month that volumes were falling fast, mainly in rural areas." Had the Reserve Bank of India (RBI) paid more attention to Surf Excel it could have stayed ahead of inflation, wrote Andy Mukherjee. "The price of the laundry detergent went up by 20% in January. While that's hardly news when most everyday things are becoming dearer everywhere, the interesting part was the retail price before the change: 10 rupees (13 US cents for a bar)." Rs 5 and 10 are known as "magic price points" which help poor people stay within their tight budgets. To underline the difference between the haves and the have-nots, "Bank loans to purchase consumer durables like televisions, laptops and refrigerators jumped as much as 60% in FY22 compared with a 21% decline in the preceding fiscal," and "Spending on credit cards surged at a faster pace of 13% against an 8% growth in FY21," RBI data showed, ET. "About 250,000 workers employed at Surat's diamond polishing and cutting units have been asked to go on leave for 15 days from May 16" because of sanctions, ET. "The RBI has been behind the curve. Unfortunately, the monetary policy acts with a long lag. We will have to live with this pain until such time as the situation improves," said Mythili Bhusnurmath. Growth of the economy and growth of pain in tandem. Depends on who's paying.

Shakespeare warned of tears and hoisting.

"US Secretary of State Antony Blinken accused Russia on Thursday of weaponizing food and holding grains for millions of people around the world hostage" because, "the war has halted maritime trade in large areas of the Black Sea and made the region unsafe for navigation, trapping Ukrainian agricultural exports and jeopardizing global food supplies," TOI. No crocodile has ever cried such copious tears in the history of the world. The US was the nation that organized a gigantic plunder of Iraq's oil through "Oil for Food Program" resulting in famine and deaths of a large number of innocent civilians, merip.org. Then Secretary of State Madeleine Albright in Bill Clinton's (a Democrat) administration calmly said that the deaths of over 500,000 children in Iraq was, "I think this is a very hard choice, but the price - we think the price is worth it," FAIR. In a repeat of the abominable Oil for Food Program, "The West has responded to Russia's invasion of Ukraine with round after round of punishing sanctions," CNN. "We will provoke the collapse of the Russian economy," French Finance Minister Bruno Le Maire said. To stop Russia from any sort of trade its banks have been expelled from the Swift system of international money transfer, BBC. If the Western hearts are bleeding for the poor of the world they have to ensure that Russia is paid for its exports. "Russia can offer 25 million tonnes of grain for export via the port of Novorossiysk starting from August 1 and until the end of this year, Russian Permanent Representative to the UN Vasily Nebenzya said," ET. "But, if you have no intention to withdraw your sanctions, imposed on your own initiative, then why do you accuse us? Why do the poorest nations and regions have to suffer because of your irresponsible geopolitical games?" Absolutely. But, maybe the crocodiles are not really crying for the poor, they are crying for themselves. Russia doesn't export just food grains. "Although ranked third among oil producing nations, the IEA says that, in terms of all oil products, Russia is the world's largest exporter to global markets and the second- largest crude oil exporter after Saudi Arabia," weforum. Russia is the world's largest exporter of fertilizers without which food production will fall throughout the world, Reuters. Petrol prices in the US have hit $4 per gallon, which would be about Rs 81.58 per liter, in all states of the US for the first time, yahoo. And, "The Consumer Price Index increased 8.5 percent for the year ended March 2022," US Bureau of Labor Statistics. The situation in the UK is much worse. "UK inflation, the rate at which prices rise, jumped to 9% in the 12 months to April, up from 7% in March," BBC. The Bank of England Governor Andrew Bailey said he felt "helpless", asked people not to ask for salary hikes, and the Bank predicted that inflation could rise to 10% by the end of the year, BBC. Home Secretary Priti Patel was told by the police, angry over poor pay, "that some officers are resorting to using food banks", DM. The crocodiles seem to be hoisting themselves with their own petard, wikipedia. Should have read Hamlet before they started sanctions.

If only the RBI did the same.

"Several storms hitting together prompted the Monetary Policy Committee (MPC) to go for an off-cycle hike of 40 basis points in the repo rate on May 4, according to the minutes of the rate setting panel released on Wednesday," FE. "In an unscheduled press briefing..., the Reserve Bank of India (RBI) Governor Shaktikanta Das announced that" "The policy rate has been hiked by 40 bps (basis points) to 4,40% with immediate effect," ET. "As several storms hit together, our monetary policy response should be seen as an important response to steady the ship. The Indian as well as global evidence clearly shows that high inflation persistence hurts savings, investment, competitiveness and growth." Such prescience! Thing is, nothing has changed since 8 April when the MPC kept the repo rate unchanged at 4% and injudiciously "The MPC has voted unanimously to continue with an accommodative stance to continue supporting growth." Showing astonishing lack of awareness, "Governor Das announced that the inflation for the current fiscal is now projected at 5.7%, up from 4.5% forecast in the February meeting." This when the US Bureau of Labor Statistics reported, "The Consumer Price Index increased 8.5 percent for the year ended March 2022, following a rise of 7.9 percent from February 20221 to February 2022." Referring to a hint by US Fed Chair Jerome Powell in March, Goldman Sachs predicted interest rate hikes of 50 basis points in both May and June meetings of the FOMC, BI. This was one month before the US Congress confirmed a second term for Powell, CNBC. Clearly, Powell was acting in the interest of his country even if he lost his position. Two days back Powell emphasized "he will back interest rate increases until prices start falling back toward a healthy level", CNBC. What a contrast to our RBI which said "in its 'State of Economy' report that forex reserves of $596 billion, as on May 6 this year, were equivalent to about 10 months of projected imports for FY23. The central bank also released data showing it sold $20 billion of its reserves in March 2022," TOI. This was in an irresponsible, ultimately futile, effort to put a lid on rising prices of imports, especially oil, by increasing the exchange rate of the rupee. Why? "Raising interest rates makes borrowing dearer for the country's biggest debtor, the government. Tolerating inflation helps the government by lowering the real value of its interest outgo (interest payments adjusted for inflation)," wrote Pramit Bhattacharya. So, why not carry on with high inflation regardless of how many poor people suffer starvation? Because, "The bank currently holds nearly $190 billion worth of Indian government securities on its balance sheet," wrote Karan Mehrishi. This may be because the RBI has been buying government bonds, confusingly called G-SAP, TIE, to increase their value and lower yields, thereby lowering borrowing costs for the government. "Since the beginning of the year, domestic assets have seen about $2-4 billion in revaluation losses amid rising bond yields." Powell put country before self. If only the RBI did the same. 

Why bother?

The National Family Health Survey (NHFS-5) "done between 2019 and 2021, shows improvement in the sex ratio from previous years - for the first time, it says, there are more females than males in India," BBC. "But the data suggests that the historical preference for boys remains. Over 15% people - 16% men and 14% women - told the surveyors that they wanted more sons than daughters." The same survey showed that "India's total fertility rate now stands at 2," wrote Vivek Kaul. NHFS-5 points out that 23% of married women and 26% of married men would like to have another child, which means that over 75% of people are satisfied with only one child. As family size comes down more women enter the workforce, according to a paper by Amlan Roy. But, "As per the NFHS-5, one in four women in the age-group 15-49 are employed. When it comes to men, nearly three in four men are employed." "Also rather disturbingly, the more educated a woman is, the lower the chances of being employed." As for poor children, the two years of lockdown due to the coronavirus epidemic has completely disrupted their education. "According to India's Annual Status of Education Report (Aser), in 2021, only 40% of enrolled children had received any type of learning materials or activities from their school during the week of the report's survey,' BBC. "The situation was most acute for the youngest children, because they tended to have the least access to technology." "With about 30 percent of students not returning to schools as classroom teaching resumed after a gap of two years due to the pandemic, the Odisha government has asked the district collectors to work for bringing them back," ET. "After two years of lost growth, India's economy needs a major structural transformation towards a trajectory of high long-term growth of both output and employment," wrote Sudipto Mundle. Because, "Of the 28 million unemployed persons in 2019-20, young workers in the 15-29 age group accounted for 24 million." "Among those who are employed, 90% are employed in unskilled or low-skill jobs." "Between 2017 and 2022, the overall labor participation rate dropped from 46% to 40%," ET. Among women, "About 21 million disappeared from the workforce, leaving only 9% of the eligible population employed or looking for positions." What a waste of our most abundant resource. "Now, more than half of the 900 million Indians of legal working age -- roughly the population of the US and Russia combined -- don't want a job, according to the CMIE." "India will have to create 90 million non-farm jobs over the next decade which will require an ambitious reform agenda able to deliver 8-8.5 percent annual GDP growth and productivity gains, consulting firm McKinsey said," TIE. The Periodic Labor Force Survey (PLFS) showed that the Labor Force Participation Rate (LFPR) for women before the pandemic (2018-19) had dropped to a disgraceful 18.6%, HT. No jobs and prices are shooting up, ET. The present is bad. The future will be much worse.       

Right to repress.

"The Reserve Bank of India (RBI) is not 'behind the curve' in hiking interest rate to tackle inflation, Monetary Policy Committee (MPC) member Ashima Goyal said...and asserted that it is never wise to overreact to shocks when the recovery is shaky post the coronavirus pandemic," ET. No one likes to admit to failure. "In the US, there was over-stimulus due to large government spending. Labor markets are tight. The Fed may be behind the curve, the RBI is not. The Indian inflation trajectory differs from that of the US," she stressed. Indeed. Personal consumption expenditure in the fourth quarter of 2021 in the US was $16.34 trillion, The Balance. India's private final expenditure for the same period was just $529.530 billion, CEIC. Despite the massive difference in demand, average consumer price inflation in the US has been consistently below 2% after September 2008 till March 2021, usinflationcalculator, whereas average annual inflation in India has been consistently around 5% or higher, except in 2017, inflation.eu. Since inflation compounds year on year, price rises in India must be in multiples of the US. The difference in inflation means that the rupee buys less compared to the dollar so the rupee must depreciate in value against the dollar. In 1947, the year of Independence, one dollar was equivalent to 3.30 rupees, falling to 73.78 to the dollar in December 2020, Thomas Cook. Today one dollar buys 77.70 rupees, xe.com. Thus, the rupee has fallen by nearly 25 times against the dollar, which means a 25 times rise in the cost of imports. No wonder, India is a poor country. The RBI is dead against cryptocurrencies because "Most Indians who buy cryptos, convert rupees into dollars, in order to buy them," BI. Poor Indians are only trying to protect the value of their savings. But converting to dollars will prevent the RBI from financial repression, Investopedia, of Indian citizens by enforcing a negative interest rate on savers, moneylife. "Inflation is high today because underlying pressures have been building up for years, and RBI, despite its legal mandate, has not acted in time to stop them," wrote Prof Rajeswari Sengupta. "Since the start of the pandemic in March 2020, consumer price index (CPI) inflation has averaged 5.8%." This was despite a stringent lockdown, wikipedia, that brought consumer demand almost to a halt.  Wholesale price index (WPI) inflation has been averaging at 13% since April 2021. The glib reason given is that high interest rates will decrease borrowing by businesses and thus hinder growth. Nonsense. In the 15 years, from 2007-08 to 2021-22, the repo rate was raised in 5 years, which saw higher credit uptake than in the 7 years when the repo rate was lowered, wrote Madan Sabnavis. As per Gita Gopinath, deputy managing director of the IMF, "86% of India's imports and exports are invoiced in dollars". With our own central bank trashing the rupee who will want it? Of course, they'll never admit it.

Black swan as diversion.

"Chinese social media is buzzing with speculations that President Xi Jinping might step down from his position following the mismanagement of the stringent Covid-19 lockdowns accompanied by the economic slump in the country," ET. "The rising rumours about Xi Jinping stepping down started after a meeting of the party politburo standing committee, which is the collective leadership group that rules China." This is puzzling because it implies that China is ruled by a committee with powers to fire the top leadership. In 2018, "China has approved the removal of the two-term limit on the presidency, effectively allowing Xi Jinping to remain in power for life," BBC. "The constitutional changes were passed by the annual sitting of parliament, the National People's Congress." In 2016, "In a move that will further strengthen his grasp over the country, China's Communist Party...declared President Xi Jinping as 'core' leader," TIE. "Erstwhile leader Deng Xiaoping had coined the term 'core leader', which means the person concerned has almost absolute authority and should not be questioned at all. Xiaoping had said himself, Mao Zedong and Jiang Zemin were core leaders." In April, "The strictest Covid-19 lockdown in China since the pandemic began has resulted in container goods sitting at Shanghai's port for nearly two weeks, according to supply chain data provider project 44," ET. "China is tied to a zero-Covid strategy, wielding snap lockdowns, mass testing and lengthy quaratines as part of unrelenting efforts to quash virus outbreaks," and "Among its arsenal of virus control in disinfectant spraying." Why? Is China trying to hide a new variant from the world? Next door, "North Korean leader Kim Jong Un said on Saturday the spread of Covid-19 had thrust his country into 'great turmoil' and called for all-out battle to overcome the outbreak, as 21 daily deaths were reported among people with fever," Reuters. Xi Jinping could make himself a hero by taking over Taiwan, especially with the US tied down with Ukraine. "In a recent attempt to provoke Japan and US, the Chinese People's Liberation Army (PLA) Navy" has "reportedly dispatched and increased number of different types of warplanes and additional warships from the Chinese mainland  west of the island of Taiwan, effectively surrounding and enclosing the island," ANI. Nearer to India, "Spreading protests across Iran over a cut in state subsidies on food have turned political with slogans calling for top leaders to step down," Reuters. "Talks between Iran and the EU have stalled after it failed to clarify questions about the presence of nuclear material at undeclared sites in Iran," Mail Online. That will not please Sheikh Mohammed bin Zayed al-Nahyan has been elected President of the United Arab Emirates (UAE), Reuters. Should we expect a black swan event? Not that we can do anything.

Crowns are expensive.

"After lobbying against India's tight manufacturing policies and prohibitive import duties, (Elon) Musk is headed to meet Indonesia's President Joko Widodo and visit parts of the country, which is also the top producer of nickel," wrote Anjani Trivedi. "With a friendly policy bolstering the country's EV goals, companies have started committing billions of dollars." LG Energy Solution is investing $9 billion with others, Hyundai is developing a battery plant, "world's top powerpack maker Contemporary Amperex is investing $6 billion" with Aneka Tambang and Industri Baterai Indonesia and China's Zhejiang Huayou Cobalt and Vale Indonesia will work on a nickel project. "Meanwhile, India continues to hem and haw over import duties." The Budh International Circuit for Formula 1 car racing was built at an estimated cost of Rs 20 billion or $400 million in Greater Noida near Delhi and inaugurated with great fanfare 18 Ocober 2011, wikipedia. "However, the Grand Prix was suspended for 2014 and subsequently canceled due to a tax dispute" with the Uttar Pradesh government. The Supreme Court upheld the tax demand on Formula One World Championship, India Today, leaving Jaypee Infratech, which built the circuit, unable to pay its debts. In 2020, "The Yamuna Expressway industrial development authority...sealed Buddh International Circuit -- India's first and only Formula One track -- as Jaypee Industrial development failed to clear financial dues," HT. In February 2022, "The Indian government has paid Cairn Energy Plc Rs 7,900 crore (Rs 79 billion) to refund taxes it had collected to enforce a retrospective tax demand, ending a seven-year old dispute that had tarred the country's image as an investment destination," TOI. Did the government refund the money because it realised that the tax was unfair and its mistake in forcing it? No. In July 2021, "Britain's Cairn Energy Plc has secured a French order to seize about 20 Indian government properties in France to recover a part of the $1.7 billion arbitration award," TOI. Humiliating! In January 2022, "A French court has granted a plea by shareholders of satellite maker Devas Multimedia claiming rights over a Paris apartment that houses India's Depuy Chief of Mission in a bid to enforce a $1.3 billion award in the decade long battle over a cancelled satellite deal," ET. These tax disputes arose during the previous United Pregressive Alliance (UPA) government led by the Congress but the present government chose to double down on unfair demands and resorted to bluster. And lost. This is because politicians in India have made themselves into  "sovereign" over the people. Which is why the Emergency imposed by the Prime Minister Indira Gandhi was constitutional, TIE. This gives them the right to levy any taxes on people and business they fancy, TIE, even if ruled usurious by foreign judges. "Since 2015, the Union government has used the low crude price environment, extended to 2020 by the pandemic, to substantially increase taxes on petrol and diesel," ORF. Between March 2014 and October 2021, the excise on petrol increased by over 200 percent and the excise on diesel by over 600 percent." Since every goods and service needs fuel to reach the consumer, retail inflation soared to 7.79% in April, ET. Tesla could have created jobs. Perhaps, if they took off their crowns.

If he has eyes to see.

"The World Health Organsation (WHO) recently estimated that approximately 4.7 million Indians died due to covid related causes in the years 2020 and 2021," wrote Prof V Anantha Nageswaran & Diva Jain. The WHO "estimates the expected mortality (monthly) for 2020 and 2021 based on historical data," because "the WHO does not have monthly ACM (actual all-cause mortality) data for 2020-21." Nageswaran and Jain contemptuously dismiss "WHO's estimate based on estimates was drawn from unverified data obtained from using a methodology that makes an assumption for India whose validity is suspect at the very least." Isn't it shameful that we, the citizens of India, do not know how many of our own people died? "India's government rejected the figure, saying methodology is flawed," BBC. "It reported 481,000 covid deaths between 1 January 2020 and 31 December 2022." 'When it became clear to journalists and researchers that not all deaths from Covid-19 were not being counted in India, media organisations, including IndiaSpend, began to access state-level Civil Registration System (CRS) portals that count all deaths in a district every month. In states like Madhya Pradesh and Andhra Pradesh in particular, the CRS data showed large gaps between CRS-registered deaths for preivous years and deaths for pandemic months, as well as a large gap between reported Covid-19 deaths and observed mortality," wrote Rukmini S. Sadly, "The Resgistrar General of India (RGI) which runs the CRS, itself doesn't regard the CRS as the most authentic barometer of mortality," and "uses a randomized large-scale survey, the Sample Registration System (SRS), to estimate death counts," wrote Pramit Bhattacharya. "But the dark secret of India's death recording system is" "that SRS has been under-counting deaths especially in better developed states". As a result, "The CRS fails to capture mortality among the poor, among women and among children. The SRS fails to capture deaths among non-poor and adult men." "At least six such studies compiled by Mint show that the median estimate for excess deaths in India during the pandemic hovers around 4 million," wrote Nandita Venkatesan & Tanay Sukumar. Why is there no debate about deaths in the US? Because President Joe Biden publicly mourned the "1 million empty chairs around the family dinner table," and ordered flags "lowered to half-staff", AP. The US population is one-third of India's. At about 1.4 billion, India's population is about one-sixth of the global population of about 8 billion people, worldometer. About 6.29 million are estimated to have died of Covid in the world, worldometer. It is therefore entirely logical that one-sixth of that, which means over 1 million, must have died in India, calculated Dilip D'Souza. Tax authorities raided offices of Dainik Bhaskar which "shocked India with its reporting of dead bodies in the river Ganges during the brutal second wave of the Covid-19 pandemic", CNN. Nageswaran trashes " endless procession of 'Indian origin' scentists" and "ravenous hordes of 'independent' journalists scouring crematoriums and burial grounds". Nageswaran is the Chief Economic Advisor (CEA) of India, BT. We, the hapless citizens, hope he has more honest economic data. If he has eyes, can he not see?  

The impregnable shield of DA.

"Retail inflation in India surged to 7.79% on an annual basis in the month of April owing to higher edible oil & and fuel prices, data from Ministry of Statistics and Programme Implementation showed on Thursday (12 May)," ET. "Analysts had expected the CPI inflation to be around 7.5%, up from 6.95% in the month of March & 4.23% in April 2021." Right on cue, "India's growth rate is likely to slow if the central bank hikes interest rates, Finance Secretary TV Somanathan told CNBC TV18 on Thursday," ET. He need not worry. The present Governor of the Reserve Bank (RBI) Shaktikanta Das was a brother officer as Union Revenue Secretary and Joint Secretary Department of Expenditure, Ministry of Finance, wikipedia. He was smiling at rising inflation even as he clamped interest rate at 4% for the 11th time in a row as late as 8 April 2022, BT. And looked reluctant as he raised interest rate by a cute 40 basis points on 4 May 2022 in an off-cycle        (emergency) meeting of the Monetary Policy Committee (MPC), ET. "The Federal Reserve on Wednesday (4 May) raised its benchmark interest rate by half a percentage point, the most aggressive step yet in its fight against a 40-year high in inflation," CNBC. Since Washington is about 10 hours behind Mumbai the RBI's action was clearly timed to be as late as possible. However, there is no respite. "The US Senate...confirmed Jerome Powell to a second four-year term as head of the Federal Reserve," and, "Powell signaled at a news conference after that announcement that more rate hikes of that size are likely at the next couple of Fed policy meetings," Reuters. Rising rates in the US strengthen the dollar. "After hurtling past the 77/$1 in trade today (9 May), the rupee weakened further versus the US dollar, hitting fresh all-time low of 77.58/$1," ET. "Weakness in domestic equities also pulled down the rupee, dealers said." "So given that inflation is already very high and the RBI has been quite late to play catch up as far as raising interest rates to tackle inflation is concerned, going forward the outlook is not too good for the Indian rupee," said Mythili Bhusnurmath. Instead of raising rates the RBI is trying to keep the rupee stronger by selling dollars, NDTV, because a stronger rupee lowers cost of imports and thus controls inflation. Why is the RBI gambling with our foreign reserves? Because, "For starters, inflation, in moderate doses, is a great aid to the government expanding fiscal intervention amid economic sluggishness," wrote Somnath Mukherjee. Gobbledygook? It means that the higher the prices the higher the tax collections as GST collection in April hit a record Rs 1.68 trillion, moneycontrol. Who suffers from inflation? The recently released National Family Health Survey (NFHS 5) "has found that 89 percent of children between the formative ages of 6-23 months do not receive a 'minimum acceptable diet'," TIE. Government employees are protected. Dearness (inflation) Allowance (DA) is to be increased to 38% of basic salary, News18. So, who cares?      

An irrational fervor.

"Rising fuel and food prices look set to stoke an 'inevitable' rise in civil unrest, with developing middle-income countries such as Brazil or Egypt particularly at risk, a report by a risk consultancy said," Tribune. "Unlike low-income countries, they were rich enough to offer social protection during the pandemic, but now struggle to maintain high social spending that is vital to the living standards of large sections of their populations," the report found. "Global food prices held near a record as crop trade is disrupted by the war in Ukraine," and "High fertilizer prices and weather worries are adding to the threat for global crop supplies, including drought curbing the US wheat crop," ET "India's wheat output looks likely to fall in 2022 after five consecutive years of record harvests, as a sharp, sudden rise in temperatures in mid-March cut crop yields in the world's second-biggest producer of the grain," Reuters. "The oil ministers of Saudi Arabia and the United Arab Emirates warned that spare capacity is decreasing in all energy sectors, as products from crude to diesel and natural gas trade near record highs in the wake of Russia's invasion of Ukraine," yahoo. "They're spending billions of dollars to raise their crude capacity by 2 million barrels a day between them by the end of this decade." "Vladimir Putin is preparing for a long war in Ukraine, with even victory in the east potentially not ending the conflict, US intelligence has warned," BBC. India is not immune to all that. "We are heading for the worst inflation in a long time," wrote Swaminthan S Anklesaria Aiyar. "Nothing obvious connects the production and prices of oil, cotton, steel, plastics, coal, wheat, polyester, and orange juice. Yet shortages have arisen almost simultaneously for all, pushing up prices." "A rising green attack on oil and coal companies has led to under-investment in energy for years." High prices immediately have an effect on consumer spending. "A quick calculation using shares of different items in the households' consumption basket shows that a 5% increase in spending on fuel and transport costs alone could reduce overall consumption levels in the economy (in nominal terms) by almost 0.5% of GDP. Add to this the rise in food bills (which enjoys an almost 40% share in the consumption basket) and the pressure on households' spending on 'non-essentials' - ranging from buying cars to electronics or eating out - becomes apparent," wrote Sakshi Gupta. The Reserve Bank (RBI) has a mandate to keep consumer inflation (CPI) between 2 to 6%, with a target of 4%, ET. Why hasn't it done anything? Because, "Those against tighter credit conditions feel that just when the Indian economy was showing signs of a pick-up, the Monetary Policy Committee's (MPC) decision to hike rates will affect its path," wrote Madan Sabnavis. Will it? Bank credit, or borrowing by businesses and individuals, Investopedia, is an indication of growth of the economy. In the 15 years from 2007-08 to 2021-22, there were 5 years when the repo rate was raised but bank credit remained high. In the 7 years the repo rate was lowered credit uptake remained low. Then, why this irrational faith in low interest rates? Like religious fervor. Equally damaging.