Statistics and story.

"The Reserve Bank of India's (RBI) rate-setting panel...increased the benchmark rate by 50 basis points, in a bid to bring inflation to its comfort zone and in line with aggressive policy tightening by key global central banks." ET. "The Monetary Policy Committee (MPC) increased the repo rate, or the key rate at which the RBI lends short term funds to commercial banks, to 5.9% from 5.4%. It also decided to remain focused on withdrawal of accommodative stance." "The real GDP for FY23 has been revised downwards to 7.0% from 7.2% projected earlier." Growth for Q1FY24 (April-June 2023) has been revised to 7.2%." ET. Real GDP is derived from nominal GDP by dividing by a GDP deflator to adjust for inflation. Investopedia. "The inflation projection for FY23 has been retained at 6.7%." "Price-tags of daily groceries from oil and spices to rice and hair oils have risen between 10% and 22% since January this year, according to retail analytics platform Bizom, on the back of higher commodity rates. This has impacted volume sales, particularly in rural markets dragging down the market growth." ET. "The rural markets witnessed a 5% decline in monthly purchases of essential items, including cooking oils, laundry products, biscuits and chocolates, besides personal hygiene products such as toilet soaps, said the Rural Barometer Report." Mint. As expected, 'experts' eulogized the RBI's move, with stock markets zooming to dizzying heights. "Sensex rallied over 700 points while Nifty reclaimed the coveted 17,000 mark as banks and financials led the bull charge." ET. Debt fund managers were non-committal, preferring to talk about international commodity prices and actions of other central banks. ET. The rich celebrate while ordinary folk cut consumption. All this may be fairly straightforward, but it begins to get weird. "India's current account deficit (CAD) widened to 2.8% of gross domestic product (GDP) in the three months through June, up from 1.5% in the March quarter, primarily due to a widening of the merchandise trade deficit and an increase in net outgo of interest income payments. The CAD increased to $23.9 billion in the June quarter of FY23" Mint. However, the RBI data "showed the country's balance of payments came at a surplus of $4.6 billion for the quarter," even though "Robust services revenue led to CAD coming in less than forecasts" at $23.9 billion. ET. "About 67% of the decline in reserves during the current financial year is due to valuation changes arising from a appreciating US dollar and higher US bond yields," said RBI Governor Shaktikanta Das. "The Indian rupee has fared better than many other currencies but it has cost the RBI more than two-thirds of its warchest in defending it, Governor Das said." CNBC. "Multiple revisions by the RBI in its projections for growth and inflation have caused concern within the government about these being off the mark from actual numbers." TIE. Because, "India's growth story will be second to none in the world: Piyush Goyal." ET. Forget statistics. Just stick to the story.

Up the GII.

 "India has entered the top 40 countries in the Global Innovation Index (GII) for the first time, owing to increases in information and communication technologies (ICT) services exports," as "The World Intellectual Property Organization (WIPO) said on Thursday (yesterday) that India's six-notch jump to 40th place in the 132 nation GII in 2022 from 46th place in 2021 elevated it to the topmost innovative lower middle-income country in the world, surpassing Vietnam." Vietnam has a population estimated at 10.4 million in 2022, with nominal GDP of $409 billion and GDP per capita of $4,122, wikipedia. India has a population of about 1400 million, nominal GDP of $3.5 trillion, wikipedia, while GDP per capita was $2,277 in 2021. World Bank. While beating tiny Vietnam is indeed laudable, Indian students would prefer to study and work abroad if at all possible. "While countries like Russia, China, and Australia are popular choices for technical courses among Indian students, a large number of them have also turned to universities in the US, the UK, and Canada for programs that will fetch them work permit for global technical jobs. According to Canada's Immigration, Refugee and Citizenship data, the number of students studying in the country has increased by a whopping 350 percent between 2015-16 and 2019-20 academic years." ET. The labor force participation rate (LFPR), which is defined as the section of working population in the age group of 16-64 in the economy currently employed or seeking employment, ET, was 73.4 for males, just 20.4 for females and 47.3 combined, while the worker population ration (WPR) was 67.7 for males, a dismal 18.3 for females  and 43.4 combined in the January-March 2022 period, pib.gov.in. Which means that more than half the population of India is not working. India's employment elasticity, which is the percentage change in employment associated with 1% change in GDP, peaked at 0.31 by 2002, plunged to a negative -0.04 in 2014 before recovering modestly. DH. "In fact, the average elasticity between 2006 and 2018 was a mere 0.01." "An attendant problem of this prolonged period of low to no employment generation is that currently, India has virtually the largest share of discouraged workers in the world." On the other hand, "Pay hikes on an average in India are likely to increase by 10.4% in 2023, compared to an actual increase of 10.6% to date in 2022, which is slightly higher than the 9.9% increase projected in February, according to a survey by Aon plc, a global professional services firm." ET. Not surprising, "Household spending trends ahead of India's main festive season are flashing warning signs of a widening chasm in demand recovery as inflation hovers around 7% and unemployment keeps on rising. Consumer-goods makers are reporting robust demand for items priced nearly $2,000 in a nation where per capita income is just a tad above that level, while industry data on sales of budget phones priced below $100 and motorcycles, an indicator of rural demand, are showing a weaker trend." ET. Most have-nots, a few have-lots. Perhaps those in GII.

Race to be fifth.

"I know an unpopular economic policy when I see one. And the consensus among economists about the tax cuts and deregulations announced last week by UK Prime Minister Liz Truss is almost universally negative," wrote Prof Tyler Cowen. In an immediate reaction the British currency the sterling fell by 4.85% to $1.037 and "British bond prices were set for their biggest slump of any calendar month since at least 1957." Reuters. Bond prices are inversely related to yields, Investopedia, so a fall in prices means higher borrowing costs for the government. This also signals that markets expect inflation to increase. The rate of inflation in the UK was 9.87% year-on-year in August, a tad lower than 10.101% in July. RI. A bigger danger was that the fall in bond prices slashed asset value of pension funds which invest in government bonds because of their safety. "Pension funds, which invest in bonds, were forced to start selling, sparking fears of a fresh market downturn." BBC. The fear was that falling value of assets could result in pension funds being forced to default on their debts. So the Bank of England pledged to buy 65 billion pounds worth of government bonds which would increase their price. This is good old 'quantitative easing' in which central banks buy government securities to encourage lending by reducing borrowing costs and increasing liquidity in banks. But, won't this increase inflation? Prof Cowen is baffled by the panic. Current yields are 4.5% on two-year security and 4.3% on 30-year security while core inflation was 6% for July and August. "In other words, the UK government is borrowing at about a negative 2% real rate of interest right now." Despite the cut in top rate of income tax from 45% to 40% it is still higher than the top rate of 37% in the US. So, why such a reaction? India's economy is now larger than that of the UK. "On September 2, the International Monetary Fund (IMF) announced that India has surged past the United Kingdom to become the fifth largest economy in the world." HT. "India increased its lead over the UK in the quarter ending March, IMF data showed." If India's economy is booming the rupee should be stronger. But, "In a battle that has so far failed to staunch the rupee's fall to a record low against the greenback, the RBI has drawn down its foreign exchange reserves by nearly $100 billion to $545 billion from $642 billion a year ago, and more is coming." Mint. "The Reserve Bank of India (RBI) is said to be contemplating several bespoke measures, such as opening a special window for oil importers and reducing the hedging costs for foreign-currency depositors, to minimise the pace of decline in the rupee against the surging US dollar." ET. "The RBI has used its forex stockpile across platforms - spot, futures, forwards and non-deliverable forwards markets." "The Indian rupee has held back very well against the US dollar compared to other currencies, Finance Minister Nirmala Sitharaman said." ET. That will make our exports more expensive compared to our competitors. Little surprise that exports contracted by 1.15% to $33 billion while the trade deficit doubled to $28.68 billion in August. BT. Which will win - UK or India, pound or rupee? Who comes fifth?      

And, the devil take the hindmost.

"Chinese President Xi Jinping reappeared on state television Tuesday (yesterday) after a several-day absence from public view that sparked rumors about the 69-year-old leader's political fortunes. Xi was shown visiting a display at the Beijing Exhibition Hall on the theme of 'Forging Ahead into the New Era." abcnews. "China's focus of political goals like Covid Zero over economic objectives is making the country less appealing to European companies as a place to invest, a business group said, calling on Beijing to refocus on reform." ET. "The OECD slashed GDP forecasts for most of the G-20, with only Indonesia featuring a moderately higher outlook." ET. "The global economy will expand just 2.2% in 2023," so "The new projection for the year means output will be $2.8 trillion less than officials had predicted at the end of 2021." "A downturn in business activity across the euro zone deepened in September, according to a survey which showed the economy was likely entering a recession as consumers rein in spending amid a cost of living crisis." ET. "S&P Global's flash Composite Managers' Index (PMI), seen as a good gauge of overall economic health, fell to 48.2 in September from 48.9 in August." "A PMI reading under 50 represents a contraction, and a reading at 50 indicates no change." Investopedia. "The downturn in German business activity deepened in September," as the PMI "fell to 45.9 in September from August's final reading of 46.9." Reuters. The UK currency, the sterling fell sharply. "Sterling has weakened more than 20% against the dollar this year and it is set for its biggest monthly decline since November 2008." Reuters. Partly, this is due to a massive reduction in taxes in a mini-budget unveiled by the new Chancellor of the Exchequer Kwasi Kwarteng. wikipedia. Partly, this is due to the strength of the US dollar. "Fueled by hawkish Federal Reserve policy, US economic strength and investors in search of a haven from market swoons, the greenback is surging relentlessly against counterparts big and small by the most in decades." ET. What about the US? Is it immune? "US GDP has fallen for two consecutive quarters - 1.6% during the first quarter of 2022, and 0.6% the next. In most countries, that's a recession. Just not in the US." BBC. "US consumers buying cars and going to restaurants and bars in August drove a surprise bounce in retail sales, even as spending on gasoline fell as prices at the pump dropped." ET. "Every recession has led to loss of factory jobs that never returned. But the recovery from the pandemic recession has been different: American manufacturers have now added enough jobs to regain all that they shed - and then some." ET. However, some forecast a grim future. "As in the 1970s, persistent and repeated negative supply shocks will combine with loose monetary, fiscal and credit policies to produce stagflation. Moreover, high debt ratios will create the conditions for stagflationary debt crises," predicted Prof Nouriel Roubini. Each nation has to look out for itself. And, the devil take the hindmost.        

Middle income.

"India is expected to add another 183 million people to the working age group of 15-64 years between 2020 and 2050," wrote Prof Amit Kapoor & Bibek Debroy. "According to the World Economic Forum, by 2030, India is projected to be led by the middle class. In 2030, around 80% of households will be middle-income, up from 50% today, with the middle-class expected to drive 75% of consumer spending." Provided they are "equipped holistically in terms of education, skills and health". But, how? "According to the report (released by Mr Debroy), income data from the Periodic Labour Force Survey (PLFS) 2019-20 showed that a monthly income salary of Rs 25,000 (about $312) is already among the top 10 percent of total incomes earned," "while the top 10 percent accounts for one-third of all incomes earned". "If an amount like this comes in the top 10 percentile, then the bottom-most condition cannot be imagined." TOI. "The all-India female labour force participation rate (LFPR) in usual status has increased 2.3% in 2021 to 25.1% as compared to 22.8% a year ago, shows the PLFS annual report for July 2020-June 2021." TNIE. Point to note is that LFPR of rural women increased 3% to 27.7%, while that of urban women rose 0.1% to a dismal 18.6%. According to Prof Himanshu, this is an indication of rural distress with the elderly and women forced to work to augment household income. "Most of these indicators are showing trends and patterns which are similar to what was observed during the last period of severe distress in India's economy, between 1999-00 and 2004-05." These are women who survived birth. "Uttarakhand's sex ratio (number of females per 1000 males) at birth was found to be the worst in the country at 844, and Kerala's the best, at 974, according to the Sample Registration System (SRS) 2020, released by the Registrar General of India." TOI. Normal ratio at birth is around 105 males for every 100 females, wikipedia, which works out to 952 females per 1000 males. "Data shows that southern Indian states continue to outperform the country in health, education and economic opportunities." BBC. Populations in southern states have been falling. They pay more taxes because of their prosperity but get less from the Center because of fewer people. If delimitation of seats, which means reallocation of seats according to population, in parliament goes ahead in 2026 it will mean "with revenue loss and lack of freedom to make their own policies, the prosperous south may have fewer seats in parliament in future." Also our borders are insecure. "Locals near India's border with China in the mountainous region of Ladakh have claimed that the Indian government 'ceded' land to China after both sides agreed to withdraw troops from contentious ares earlier this month, The Guardian reported." Dawn. May be because, "Prime Minister Narendra Modi's push to boost domestic manufacturing of defense systems is leaving India vulnerable to persistent threats from China and Pakistan, according to officials with knowledge of the matter." DH. Middle income is between $1,036 and $12,535. Which figure are we aiming for? 

Going down.

"Sterling slumped to a record low on Monday (today), prompting speculation of an emergency response from the Bank of England, as confidence evaporated in Britain's plan to borrow its way out of trouble, with spooked investors piling into US dollars." Reuters. "The pound plunged nearly 5% at one point to $1.0327, breaking below 1985 lows." "The euro wobbled to a two-decade low at 0.9660 as risks rise of the war escalating in Ukraine, before steadying at $0.9686." "Black Wednesday refers to September 16, 1992, when a collapse in the pound sterling forced Britain to withdraw from the European Exchange Rate Mechanism (ERM)." Investopedia. George Soros made $1 billion betting against the pound and the Conservative Party of John Major lost the next general election in 1997 by a landslide. On 5 September 2022, Liz Truss won the Conservative Party election to become the Prime Minister of Britain by promising tax cuts. BBC. On 15 September, "The dollar reached as high as 7.0188 (Chinese) yuan in offshore trade, its highest since July 2020, and was last up 0.35% at 6.995." ET. The yuan, or renminbi, is trading at 7.15 to the dollar this morning, xe.com. On 7 September, "The US currency soared as high as 144.99 (Japanese) yen, hitting the level for the first time since August 1998. It is now within a large leap of its 1998 high of 147.43." Reuters. "The Indian rupee has held back very well against the dollar compared to other currencies, Finance Minister Nirmala Sitharaman said." ET. That is only because the Reserve Bank (RBI) has been selling dollars and buying rupees to keep it higher. It sold $5.22 billion in the week ending 16 September. ET. We don't know how much it sold last week. The idea is that a stronger rupee reduces prices of imports and keeps a lid on inflation. "A prolonged period of high and rising inflation weakens the rupee by hurting India's growth and competitiveness and a declining exchange rate sets of inflation because of higher import prices," wrote Deepa Vasudevan. "Sustained high inflation in the US means the Federal Reserve may continue to tighten rates," so the RBI should also keep pace with the Fed which will control inflation and "attract foreign investments and consequently dollar inflows, which will support the rupee". The problem is that the government won't allow the RBI to increase rates as it should, TIE, because of a mythical belief that low interest rates stimulate growth and economic growth wins elections. That high prices will hammer growth by stifling consumer spending seems to escape them. Keeping the rupee stronger than our competitors has consequences. "In 2021-22, the trade deficit between India and China rose to $72.9 billion." The Print. A weaker yuan will only make it worse by sucking in cheaper imports. How long can the RBI fight the dollar? "Amid a surge in US bond yields and the US dollar index, the rupee on Monday (today) opened 0.68% lower to hit a fresh record low of 81.55 against the greenback." ET. A finger in the dyke will fail. We need concrete. Action.

Inscrutable China.

"The internet is abuzz with speculation about China President Xi Jinping being under house arrest. According to several posts on social media, Xi Jinping has been removed as the head of China's People's Liberation Army (PLA) and has been placed under house arrest. Neither the country's ruling Chinese Communist Party nor the state media have given an official confirmation yet." NDTV. "The video of military vehicles moving to Beijing comes immediately after the grounding of 59 percent of the flights in the country and the jailings of senior officials. There's a lot of smoke, which means there is a fire somewhere inside the CCP. China is unstable," said author Gordon G Chang. However, "China expert Aadil Brar noted that Xi is likely in quarantine after returning from the Shanghai Cooperation Organisation (SCO) Summit, which would explain his absence from public affairs at the moment. Brar also shared flight data showing there is no disruption of flights. He further shared visuals of public briefings by senior Chinese officials, suggesting the government is functioning normally." Outlook. In March 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. "China had imposed a two-term limit on its president since the 1990s." In 2016, "China's Communist Party gave President Xi Jinping the title of 'core' leader..., putting him on par with past strongmen like Mao Zedong and Deng Xiaoping, but it signaled his power would not be absolute." Reuters. However, retired party leaders like 94-year old former Premier Zhu Rongji voiced opposition to Xi's plan to be elected for a third term this year. HT. Xi has done the disappearing act before. "In August 2012, Chinese politician Xi Jinping suddenly disappeared for three weeks. China's 18th Party Congress was weeks away, an event where Xi would be anointed as China's next leader." npr. Apparently, he was consolidating support among party elders for his ant-corruption drive which would put any opponents behind bars. Xi could be trying to generate support for his third term this time and he could have ordered PLA vehicles to move to Beijing to protect him till the Party Congress. "A novel study in China led by MIT scholars shows that anticorruption punishments meted out by government authorities receive significant support among citizens," and "The findings help explain how authoritarian governments endure, not merely based on domination and fear, but as regimes generating positive public support over time." MIT News. "By 2017, 15,000 party members had received punishment for violations of CCP discipline, more than the number punished during the Tiananmen purge of 1989-1992. Another highlight of the political discipline campaign was the expulsion of 63 military generals." Diplomat. Xi Jinping has every reason to hang on to power for life. His opponents want revenge. Xi could be trying to endplay his opponents. Or, he is down.  

A sweet spot.

"I believe that India is in a sweet spot both as an economy which will benefit from an advanced country recession and a market which will benefit from flows in a decreasing oil price scenario. India is in a very sweet spot at this point in time," said Sunil Subramaniam, MD & CEO, Sundaram Mutual. The US Federal Reserve hiked interest rate by 75 basis points for the third time this year on 21 September and committed to bringing inflation down to 2%. BT. "The median projection for the Fed rate is now 4.4 percent at the end of this year." "When interest rates are hiked it is killing demand. So naturally US economic growth will slow down and ultimately slip into recession. But from an Indian economy perspective we are fairly decoupled from America because we do not have too much exports to America compared to the size of our GDP." "The United States has remained India's largest trading partner, with exports of goods and services to the United States worth $102.3 billion." ITA. India imported goods and services worth $56.8 billion from the US in 2021, giving us a positive trade balance of $45.5 billion. "Indian origin FDI into the United States was valued at $12.7 billion in 2020," while "FDI from the United States into India was valued at $41.9 billion in 2020." Strange that Subramaniam dismisses the US as not important when we are gaining in both balance of trade and FDI. There are five big positives for India if advanced economies go into recession. ET. Inflation will fall as commodity prices fall, the rupee will be stronger as we spend less dollars to buy cheaper oil, current account deficit will fall, more money will come into our markets because India's growth will be strongest and supply chains will shift from China to India. It's win, win, win, win, win for India. "We've never had QE (quantitative easing). So the Fed is acting literally in uncharted waters. There's never been global QT (quantitative tightening)," said JP Morgan Chase CEO Jamie Dimon. "India should strive to be the fastest growing economy on the planet for the next decade." "And the question you should always ask is, what are we doing to get there? We deserve it. Why are we not there?" "The government is in no hurry to push inflation - now hovering near 7% and eight-year highs - back to the central bank's 4% medium-term target, for fear that aggressive rate hikes could hurt economic growth, two sources with direct knowledge of the matter said." TOI. Instead, "India's foreign exchange reserves fell by $5.22 billion to 545.65 billion in the week ending September 16." ET. "India purchased some of the nation's most expensive liquefied natural gas shipments after Russian deliveries were canceled." ET. We are in a sweet spot. How sweet?  

Similar neighbors.

"In what is billed as its largest operation ever, the National Investigation Agency has launched search operations across 10 states against operatives of several suspicious groups, mainly the Popular Front of India (PFI), for supporting terrorism." DNA. "The agency in consonance with the Enforcement Directorate, has raided the houses of national, state and local leadership of PFI, officials said." "Over 100 PFI operatives have been arrested." 'The PFI came into being in South India in 2007 with the merger of three Muslim organisations: the National Democratic Front in Kerala, the Karnataka Forum for Dignity and Manitha Meethi Pasarai in Tamil Nadu." DH. "It is similar to right-wing outfits like the VHP (Vishwa Hindu Parishad), the Hindu Jagaran Vedika and RSS (Rashtriya Swayamsevak Sangh) in that it does social work for Muslims." "The RSS presents itself as a cultural, not a political, organization that nevertheless advocates a Hindu nationalistic agenda of hindutva or 'Hinduness'." Britannica. "Several of the major political leaders of India's Bharatiya Janata Party (BJP) were or still are members of the RSS." The PFI is blamed for organising protests against the Citizenship Amendment Act (CAA), which eases the path to citizenship of India for religious minorities from Pakistan, Afghanistan and Bangladesh. wikipedia. It does not apply to Muslims. On 13 September, "Parts of Kolkata turned into a battlefield after thousands of BJP workers took to the streets to protest against alleged corruption by the ruling Trinamul Congress government. A police vehicle was torched in Lalbazar area, while stones were pelted in Santragachhi amid clashes between the protesters and the police." HT. The PFI is charged with funding the riots in Delhi which began on 23 February 2020 after a speech by BJP leader Kapil Mishra against peaceful protests against the CAA by Muslim women. "Of the 53 people killed two-thirds were Muslims who were shot, slashed with repeated blows or set on fire." wikipedia. The PFI is blamed for bringing attention to a gang-rape and murder of a Dalit woman in UP on 14 September 2020. The Wire. "On the last day of September, India woke up to the disturbing news that authorities had forcibly cremated the body of a 19-year-old Dalit (formerly untouchable) woman who had alleged gang-rape and died a day earlier." BBC. The victim repeatedly reported that she was beaten up because she resisted rape but authorities kept denying it. BBC. "UP: Gang-raped & robbed, girl, 15, walks naked for 2km to reach home in Moradabad." TOI. Will they blame this on the PFI as well? Pakistani journalist Arifa Noor compares authoritarianism in Pakistan, Bangladesh and India. "Free speech and a free press are under attack in the entire region." "The more democratic dispensations in India and Bangladesh (compared to Pakistan) have not led to more democratic structures such as freedom of speech." Thankfully, she didn't compare incidence of gang-rape. We may win.

Adani wins over Bezos.

"The Federal Reserve on Wednesday (yesterday) raised its benchmark interest rates by another three-quarters of a percentage point" to take its "federal funds rate up to a range of 3%-3.25%, the highest it has been since early 2008." CNBC. Markets would have already priced in a 75 basis points hike after Fed Chair Jerome Powell's speech at Jackson Hole, Wyoming last month, promising aggressive rate hikes to control inflation. BS. But, US markets fell yesterday with all three indices falling by over 1.70%. Reuters. Because "Along with the massive rate increases, Fed officials signaled the intention of continuing to hike until the funds level hits a 'terminal rate', or end point, of 4.6% in 2023." "The 'dot plot' of individual members' expectations doesn't point to rate cuts until 2024." "Powell conceded that a recession is possible." The US may be intolerant of inflation but, "India's government is in no hurry to push inflation - now hovering near 7% and eight-year highs - back to the central bank's 4% medium-term target, for fear that aggressive rate hikes could hurt economic growth, two sources with direct knowledge of the matter said." ET. The Reserve Bank of India (RBI) has a mandate to keep inflation at 4% with a margin of 2% on either side till March 2026. ET. If the government is overriding the RBI in this vital function they should get rid of the Monetary Policy Committee and save a large sum of money in huge salaries and perks for these officials. "Higher rates hurt demand, inflate the loan rates for consumers, or the 'aam aadmi' (common man) in particular who feel more burdened when they are already paying over Rs 100 for a liter of petrol in many parts of the country." ET. That is a complete canard. The common man is more burdened by rising prices of items of daily use and nobody takes a bank loan to buy milk, rice or cooking oil. "And of course, higher rates increase the interest costs for corporates too." That is very true. "The recent acquisition by the Adani Group of the cement maker Holcim's India businesses is expected to add another Rs 40,000 crore (Rs 400 billion) to the conglomerate's debt taking it to approximately Rs 2.6 trillion, an analysis by Credit Suisse showed." TIE. As a result, "Creating wealth at an unprecedented speed of Rs 1,612 crore (Rs 16.12 billion) per day, billionaire Gautam Adani has more than doubled his wealth in the last one year to beat Amazon founder Jeff Bezos as the world's second-richest man, according to IIFL Wealth Hurun India Rich List 2022." ET. The rupee "hit a fresh record low of 80.285 against the dollar at open". ET. A weak rupee will boost inflation by increasing the cost of imports. Unless the RBI also matches US rate rises. Another smokescreen is to compare with other countries. Should we feel proud by comparing with failed states like Zimbabwe, Lebanon or Venezuela? Inflation may have jumped to 9.8% in August in Sweden but till last year Sweden had a negative interest rate, to discourage people from saving, Reuters, because its inflation was so low. Bluffing will not stop rising prices. Jeff Bezos loses because he is in America. Adani wins because he is in India.      

No worries.

"Stocks fell broadly in morning trading on Wall Street Tuesday (yesterday) ahead of a key decision on interest rates by the Federal Reserve." moneycontrol. "The Dow Jones Industrial Average fell 393 points, or 1.3%, to 30,629 and the Nasdaq fell 1%." "The yield on the 2-year Treasury, which tends to follow expectations for Fed action, rose to 3.97% from 3.95%," while "The 10-year yield, which influences mortgage rates, rose to 3.58% from 3.52%." Since yields on 10-year bonds are lower than yields on 2-year bonds, is this inversion of the yield curve? Does this mean the US is in recession? "The yield curve inverts when long-term interest rates drop below short-term rates, indicating that investors are moving money away from short-term bonds and into long-term ones. This suggests that the market as a whole is becoming more pessimistic about the economic prospects for the near future." Investopedia. "A popular rule of thumb is that two consecutive quarters of decline in gross domestic product (GDP) constitute a recession." Investopedia. "US GDP has fallen for two consecutive quarters - 1.6% during the first quarter of 2022, and 0.6% the next. In most countries, that's a recession. Just not in the US." BBC. Even as US markets fell, Indian stock markets rose by around 1%, as "Notwithstanding the rising yields and a stronger dollar, Foreign portfolio investors (FPIs) net bought shares worth Rs 1,196.19 crore (Rs 11.9619 billion), according to provisional data." ET. "The US dollar is experiencing a once-in-a-generation rally." Mint. "The dollar's rise this year is being fueled by the Federal Reserve's aggressive interest-rate increases, which have encouraged global investors to pull money to pull money out of other markets to invest in higher-yielding US assets." "It's early days yet," said Prof Raghuram Rajan. "We're going to be in a high-rates regime for some time. The fragilities will build up." "Much of the weakness across broader EM (emerging markets) - for example in the South African rand or the Indian rupee versus the dollar - reflects challenges that are qualitatively not dissimilar to many DMs (developing economies): Policy rate increases that have struggled to outpace the US Fed, for example, and shocks to energy prices that have exacerbated current account deficits. The challenge for these EMs is that weaker currencies complicate what is already a tough challenge of bringing inflation and inflation expectations under control." Goldman Sachs. The Reserve Bank of India has responded by selling dollars and buying rupees to keep the rupee falling below 80 to the dollar. "India's forex reserves have fallen to a two-year low of $550 billion from a peak of $642 billion in October 2021." ET. "Alongside its intervention in the spot market, the central bank's forward dollar holdings have fallen to $22 billion from $64 billion in April." The Fed doesn't seem worried about recession. Neither are we.  

Dollars instead of rupees.

"According to calculations by European thinktank Bregel, where countries like China, Brazil and the United States (US) focused anything from 60-90% of their pandemic response packages on fiscal spending, India's program allocated just 12% to this bucket," wrote Rajeev Mantri. Indeed, not only did the government refrain from increased spending, it sucked out "nearly Rs 8.02 lakh crore (Rs 8.02 trillion) from taxes on petrol and diesel during the last three fiscal years, of which more than Rs 3.71 lakh crore (Rs 3.71 trillion) was collected in FY 21 (1 April 2020-31 March 2021) alone, Finance Minister Nirmala Sitharaman informed Parliament" on 14 December 2021. ET. In April 2022, former Finance Minister P Chidambaram said that in the eight years of the Modi government, the central government collected Rs 26,51,919 crore as fuel taxes. "There are approximately 26 crore (260 million) families in India. That means from every family the central government has collected Rs 100,000 as fuel tax," he said. india.com. Even though the international price of crude oil has fluctuated the retail prices of petrol and diesel have been the same since 28 May because the government controlled oil marketing companies (OMCs) absorbed higher prices to prevent inflation from rising even higher, wrote Vivek Kaul. Now that the price of crude has fallen OMCs have maintained retail prices to make up for losses. The Reserve Bank (RBI) has been selling dollars to keep the exchange rate of the rupee below 80 to the dollar to reduce import cost of oil "The foreign currency assets of RBI have fallen from around $580 billion in September 2021 to around $490 billion." "India's central bank is using up its foreign exchange reserves at a quicker pace than during the taper-tantrum period in 2013 as it tries to prevent an overshoot in the rupee, but a larger pool of reserves may allow it to support the currency for some more time, economists said." BS. "Alongside its intervention in the spot market, the central bank's forward dollar holdings have fallen to $22 billion from $64 billion in April." Naturally, the rupee has appreciated against other currencies. "In inflation-adjusted real terms, the rupee has appreciated 8% against the (Chinese) yuan." "The dollar's rise this year is being fueled by the Federal Reserve's aggressive interest-rate increases, which have encouraged global investors to pull money out of other markets to invest in higher-yielding US assets." Mint. "For the US, a stronger dollar means cheaper imports, a tailwind for efforts to contain inflation, and record relative purchasing power for Americans." When the RBI sells dollars for rupees it creates a shortage of rupees in the market. "India's central bank may have to reverse its approach towards currency markets and liquidity management after an ungainly spike in overnight lending rates Monday (yesterday) reflected the near-total erosion in systemic surplus - from about Rs 8 lakh crore (Rs 8 trillion) a year ago to within touching distance of a deficit last week." ET. The other effect of an overvalued rupee is that India exported $21.25 billion worth of goods to China while it imported $94.16 billion and the volume of imports is increasing. ET. We did not spend rupees during the pandemic like other nations so we are having to spend dollars. Not independent of the global economy.

Zooming taxes, booming economy.

"A sharp rebound in consumer spending and rising employment will sustain economic growth in India in the months ahead, the government said in its monthly economic review for August." ET. "Business investment has been encouraged by government spending which climbed 35% in April-August compared to the same period a year ago, the report said, adding that tax revenue for the government had been buoyant." "Gross direct tax collections grew 30% to Rs 8.36 lakh crore (Rs 8.36 trillion) till September 17 of current fiscal year on higher advance tax mop-up buoyed by the economic revival post pandemic, the finance ministry said." Zee. "This includes revenue from Corporate Income Tax of Rs 4.36 lakh crore (Rs 4.36 trillion) and Personal Income Tax of Rs 3.98 lakh crore." If consumer spending is so high that corporate tax collection is booming then companies must be producing much more. Why then, "Union Finance Minister Nirmala Sitharaman...sought to know from India Inc what is stopping them from getting into manufacturing when countries abroad are showing their belief in India." ET. Is it because high government taxes are squeezing their cash balance? "The Union government...urged bankers to increase lending to the industries segment given the multiplier benefits it offers for the country's economic growth." ET. Department of Financial Services Secretary Sanjay Malhotra said that "the maximum loan growth has been in the retail segment over these years, and the banks have been focusing on the same." Maybe banks have no money left after lending to the Adani Group. "The recent acquisition by the Adani Group of cement maker Holcim's India buisnesses is expected to add another Rs 40,000 crore (Rs 400 billion) to the conglomerate debt, taking it to approximately to Rs 2.6 trillion, an analysis by Credit Suisse showed. The Gautam Adani-led Group has seen its debt levels increase over the past five years from Rs 1 trillion to Rs 2.2 trillion." TIE. "The unemployment level in urban areas has shrunk for the fourth consecutive quarter ending at 7.6 percent in the June quarter of 2022," and "Work demanded under MGNREGS (scheme to help rural unemployed) has been diminishing since May and was the lowest in August 2022, as compared to the same period in the last two years." News18. If more people are employed why are they reducing their spending? "The recent Index of Industrial Production data showed that the consumer non-durable sector contracted by 2 percent and was almost flat in the April-June period. This is a worrying scenario as people have cut back spending on day-to-day items like soaps, shampoo, biscuits among others." ET. The government is pressuring the Reserve Bank (RBI) not to increase interest rate to control inflation because prices are rising due to supply problems. TIE. Sanctions on Russia are not going to go any time soon so if consumer demand increases, as the government claims, then prices are sure to rise further. Increasing interest rate will subdue demand and control prices. If the economy is galloping, why trying to whip industry, banks and RBI into submission? What gives?

Monkey on our backs.

"Nearly eight decades after the last cheetah was hunted to extinction in India, its cousins from Africa are now here to restore the spots of glory." TOI. "PM Narendra Modi released eight cheetahs to the enclosures inside Kuno National Park in Sheopur district of Madhya Pradesh through the apparatus, rotating a lever on Saturday morning. It is also PM Modi's birthday today." "Genetic analysis of wild cheetahs shows they may have survived two historical bottlenecks, events that sharply reduce the size of the population. When this happens, the few remaining individuals end up inbreeding, or mating with relatives." National Geographic. Genetic similarity leads to deformation and diseases. And, "Cheetahs have a low rate of reproductive success, meaning that as a species they are not always able to reproduce." "Cub mortality is higher in protected areas like national parks and wildlife reserves where proximity to larger predators is greater than in non-protected areas. In such areas, the cheetah cub mortality can be as high as 90%." cheetah.org. As of 2018, there are 12,852 leopards in India, of which 3,421 are in Madhya Pradesh. TOI. Cheetahs are not stuffed toys for birthday present. "An e-auction of gifts and souvenirs presented to Prime Minister Narendra Modi began on Saturday as the top leader marked his 72nd birthday." TN. Two days before that, Modi "said Rajpath symbolised India's 'slavery' and has now been consigned to history as he inaugurated the revamped stretch with a new name, Kartavya Path, and unveiled a statue of Netaji Subhash Chandra Bose at India Gate." BS. Anything to get in the news. But, ominously, 'kartavya' means 'duty', so whose duty is it, the government's or the people's? "In many of his actions, instincts and most importantly his approach to the practice of power, he echoes Mrs (Indira) Gandhi," wrote Shekhar Gupta. On Kartavya Path "What Modi has been doing there is putting the monkey on the citizen's back, by shifting the definition of the constitutional state from the government's duties to the citizen." If 'Rajpath' signified slavery to the white British, 'Kartavya Path' signifies slavery to our brown masters. We still remain slaves. Oppression of citizens could not be possible without extreme sycophancy. Finance Minister Nirmala Sitharman was enraged because there was no picture of Modi in a government fair price shop in Telangana. ET. She does not know that subsidised food is paid for, not by Modi, but by taxes paid by the people. A Parliamentary panel blamed the government for the large number of deaths due to inadequate vaccination and lack of oxygen during the Covid epidemic last year. DH. An estimated 3.4-4.7 million people died during the pandemic in India, 10 times the government's count of 414,482. npr. Modi's "push to boost domestic manufacturing of defense systems is leaving India vulnerable to persistent threats from China and Pakistan. DH. Duty for us, posturing for him. Will India survive?   

Recession may be catching.

"India is likely to be the fastest-growing Asian economy in 2022-23, according to analysts at Morgan Stanley. They expect India's gross domestic product growth to average 7 percent during this during this period - the strongest among the largest economies - and contributing 28 percent and 22 percent to Asian and global growth." BS. "The country has become the fifth biggest economy during the last three months of 2021, pushing the United Kingdom to the sixth spot, with the country grappling with a harsh shock of high cost of living." News18. "As per a Bloomberg report, the size of the Indian economy with regards to 'nominal' cash was $854.7 billion during the quarter through March. On the contrary, the same for the UK was $814 billion." India may be zooming like a rocket but it is still a part of the world, so if the global economy falls sick we are bound to feel its drag. "The world economies may fall into a global recession next year amid aggressive monetary policy tightening by central banks to tame inflation, the World Bank said." "Aside from recession, a string of financial crises in emerging markets and developing economies is also likely to do them 'lasting harm', the report said." FE. "India's overall exports, both merchandise and services, in August 2022 rose 6.75 percent year-on-year to $57.47 billion." News18. Trade deficit was $18.37 billion in August. However, the merchandise trade deficit in August was estimated at $27.98 billion and for April-August 2022, the merchandise trade deficit was estimated at $124.52 billion. If our economy grows and consumption improves, there will be a commensurate rise in imports, while a global recession will reduce demand for our exports, which may increase our current account deficit (CAD). An article by the Reserve Bank (RBI) said that CAD is likely to remain within 3% of GDP in 2022-23. ET. Fingers crossed. "US and European importers of merchandise like bags, apparel and jewellery are asking their Indian suppliers to ship cheaper products, as the purchasing power of inflation-battered consumers in those markets has declined." ET. The national debt of the US is $30.888 trillion. pgpf.org. Almost ten times India's nominal GDP which was $3.173 trillion in 2021. World Bank. "Federal Reserve officials look on track for another jumbo increase in interest rates this month, as they hasten to crimp demand and assure Americans they will bring inflation back down to 2%." ET. Which means, "A rally that has the dollar on course for its best year since 1984 has further to run, traders and analysts say, suggesting more pain almost everywhere else as other currencies either crumble or require rapid rate hikes to stay put." Reuters. Or sell dollars, as the RBI has been doing. "The country's forex reserve has shrunk by almost $90 billion from the peak of $642 billion in November 2021. Forex reserves at current level can pay for 9 months of imports. India's monthly import bill is around $63 billion." TNIE. Once the piggy bank is empty then what?

This hand or that?

"Foxconn and Vedanta have announced $19.5 billion to build one of the first chipmaking factories in India." BBC. "The facility, which will be built in Mr Modi's home state of Gujarat, has been promised incentives." "The project is expected to create 100,000 jobs in the state, which is headed for elections in December, where the BJP is facing stiff competition from opposition parties." This should be a balm for Finance Minister Nirmala Sitharaman "who sought to know from India Inc what is stopping them from getting into manufacturing when countries abroad are showing their belief in India." ET. Foxconn is a Taiwanese multinational company with its headquarters in Tucheng, New Taipei City, Taiwan. wikipedia. "After a decade of scepticism over free trade deals, India has been signing a bevy of new agreements with a number of countries to reduce trade barriers, eliminate tariffs and gain preferential access to global markets." BBC. "These deals are expected to cover a range of products and services from textiles to alcohol, automobiles, pharmaceuticals as well as subjects like labor movement, intellectual property enforcement and data protection." At the same time Prime Minister Narendra Modi has been pushing for 'Atmanirbhar Bharat', which can be translated to 'self-reliant or self-sufficient India'. wikipedia. In line with that, "The government ...warned multinational and local auto companies of serious action if they force Indian component makers to compulsorily source from overseas suppliers and not localise within the country. The warning comes amid a strong push by the government to Make in India initiative through programs such as Armanirbhar Bharat scheme and production-linked (PLI) schemes." TOI. "India's trade policy is not just incoherent across time but contradictory at any particular moment in time. For example, steel producers justifiably complain that the new export taxes mean that they will fail to meet government-set targets for exports under an incentive subsidy regime begun as recently as last year," wrote Mihir Sharma. "Last year, he (Modi) promised India would vaccinate the world - only to end vaccine exports after the Delta variant hit. In April, he promised to 'feed the world' and to 'send relief from tomorrow itself'; within weeks, his government shut down the wheat trade." Then, there is the government hunger for taxes. India's goods and services tax (GST) is the most complex and, at 28%, it is the second highest rate in the world. BS. India's horticulture production was 334.6 million tonnes in 2020-21, of which fruit production was 102.5 million tonnes, and yet we are 19th in revenue in the beverage sector, wrote Arpita Mukherjee & Eshana Mukherjee. Because "In India, zero-sugar carbonated drinks and carbonated fruit-based drinks attract 40% tax (20% GST+12% compensation cess)." Regarding the Foxconn/Vedanta deal, "If voters and taxpayers in Gujarat are excited about this 'landmark investment' they ought to read up on recent Wisconsin history," wrote Tim Culpan. "Wisconsin never hit its target. And neither will Gujarat." The right hand seems ignorant of the left hand.

Sledgehammer vs pussyfooting.

"US and European importers of merchandise like bags, apparel and jewellery are asking their Indian suppliers to ship cheaper products, as the purchasing power of inflation-battered consumers in those markets has declined." ET. "The high inflation is taking a toll on the consumer's pocket, forcing them to cut down on spending, especially on discretionary items. That is getting reflected on the orders for Indian exporters from their biggest markets." Exactly. High inflation, or rising prices, forces people to cut spending to fit their earnings. In India, "Retail inflation rose to 7 percent in August on higher food prices, ending a three-month downtrend and threatening to further destabilise household budgets and hurt consumer spending." DH. "Meanwhile, industrial production (IIP) growth plunged to a four-month low of 2.4 percent in July compared with 12.3 percent in June." Manufacturing sector grew by 3.2%. "India's wholesale-based (WPI) inflation eased to 12.41 percent in August as against 13.93 percent in July, 2022. The number has remained in double digits for the 17th consecutive month." ET. The WPI inflation was 11.39% in August 2021. NDTV. Inflation compounds year-on-year, so with input prices galloping upwards, consumer prices are going to rise as well. "The US Federal Reserve is expected to strike the inflation monster with a sledgehammer rate hike of 75 basis points in its next meeting on September 21." ET. In India, "Analysts expect a sharper 50 basis points hike in the next policy meeting." The European Central Bank, "the ECB raised rates by an unprecedented 75 basis points," and "will be raising rates several times in the near future." CNBC. Why is our Reserve Bank (RBI) pussyfooting with inflation when other central banks are going at it with a sledgehammer? Because, "The Finance Ministry expects goods and services tax (GST) collections to top Rs 1.5-lakh-crore-mark (Rs 1.5 trillion) from October." ET. The higher the prices the more booty for the government. "Of the total increase in employment of 82 million between 2017-18 and 2020-21, more than 60% was among women workers, and more than half was in agriculture, reversing a trend seen since 2004-05. A break-up by age groups also indicates that a significant increase was recorded among younger age cohorts along with the elderly, who, like many women, were likely forced to move into the labor market to supplement household incomes during times of distress," wrote Prof Himanshu. "For India, the World Inequality Report estimates that in 2021, the share of the top 1% in national income was 21.7% and that of the top 10% was 57.1%, while that of the bottom 50% was only 13%," wrote Prof Deepak Nayyar. "Union Finance Minister Nirmala Sitharaman...sought to know from India Inc what is stopping them from getting into manufacturing." ET. Simple: we cannot afford to buy at these prices. You can have growth or you can have huge tax collection, can't have both. Something akin to eating your cake. wikipedia.

Cleverer than the rest.

"Chief Economic Advisor V Anantha Nageswaran...said India is not defending the rupee and the Reserve Bank of India (RBI) is taking necessary steps to ensure that the movement of the rupee is gradual," and "that the rupee is is being managed in a manner that reflects the fundamentals of the economy." BS. Extraordinary statement when "India's foreign exchange reserves grew $8.895 billion to reach a new record high of $642.453 billion in the week ended September 3,2021." LM. Exactly one year later, the RBI's "headline foreign exchange reserves declined by $7.9 billion to $553.11 billion in the week ended September 2." "Analysts cited the RBI's defence of the rupee through dollar sales amid a globally strengthening greenback as one of the reasons." BS. "RBI has achieved its objectives very well as Rupee has remained an outperformer till date and on volatility score as well, we have done quite well." ET. "Outperformer" means the rupee is stronger than other emerging market currencies, which means the RBI is cleverer than all other central banks. What about the fundamentals? "On September 2, the International Monetary Fund (IMF) announced that India has surged past the United Kingdom to become the fifth largest economy in the world." HT. On the other hand, "World Bank's database shows India's per capita GDP (in current USD) stood at $2,277 in 2021, the global average was $12,263." Fortune India. Indians earning Rs 25,000 per month, or Rs 300,000 per year, fall in the top 10% of wage earners in the country. "Finance Minister Nirmala Sitharaman...sought to know from India Inc what is stopping them from getting into manufacturing when countries abroad are showing their belief in India." ET. One reason could be sudden changes of policy. Customs duties started going up in 2014-15. "But the real break in the policy came in 2018-19: That year, a massive 42.3% of all tariff lines went up, the average of all customs duties increased from 13.7% to 17.7%, and the proportion of tariff lines bearing 15% or higher duty rates shot up from 28.7% to 51%," wrote Prof Arvind Panagariya. The government has started a Production-Linked Incentive (PLI) scheme which provides "financial incentives for businesses to augment their output. They could come in the form of tax rebates, lowered import and export duties or easier land acquisition norms." CNBC. How does the scheme work? First the government increased custom duties on mobile phones by 20% in April 2018, then it offered PLI of 6% on every mobile manufactured in India, down to 4% in fifth year. "This is important, for it means that even if a manufacturer imports all the parts from abroad, and simply assembles it in India, he gets 6% subsidy on the invoice price," wrote Prof Raghram Rajan & Rahul Singh Chauhan. The result is that "The Indian customer pays a higher price because of tariffs," and "The Indian taxpayer pays for subsidies." India's economy may be growing but it is jobless growth said Prof Rajan. MC. Higher prices and higher taxes keep the nation poor. Despite the blather.

The reality of forward guidance.

"Central banks could afford to provide forward guidance and use it to shape expectations over the past decade because economies were characterized by low inflation and interest rates," wrote Rajrishi Singhal. But Reserve Bank of India (RBI) Governor Shaktikanta Das is unhappy as, "Federal Reserve Chair Jerome Powell...emphasized the importance of getting inflation down now before the public gets too used to higher prices and comes to expect them as a norm." CNBC. Das said, "Such forward guidance may even have destabilising effects on financial markets," because the "RBI has frequently missed the mark with its GDP growth forecasts, which presumably then feed its inflation forecasts and shape its rate policy." Unfortunately for Das, "Federal Reserve officials look on track for another jumbo increase in interest rates this month, as they hasten to crimp demand and assure Americans they will bring inflation down to 2%." ET. Forward guidance by the European Central Bank (ECB) also promises higher rates. "The ECB lifted all its key rates by three-quarters of a percentage point and warned it was likely to raise rates again later this year." BBC. In its eagerness to keep borrowing costs low to help the government the RBI kept interest rate unchanged for a full 24 months at 4% since May 2020. NDTV. Until it suddenly increased its policy rate by 40 basis points in an emergency meeting of the Monetary Policy Committee in May 2022. ET. After that the RBI raised rates twice by 50 basis points each for a total of 140 basis points, taking its policy rate to 5.4%. ET. In contrast, "The Fed has already hiked interest rates by 225 basis points since March this year." BS. Instead of raising rates the RBI has been trying to control imported inflation by strengthening the rupee by selling dollars. The RBI sold $13 billion in August to keep the rupee from falling below 80 to the dollar. ET. As a result, our foreign exchange reserves slumped to $553.105 billion in the week ended 2 September. NDTV. Despite that "India's retail inflation based on consumer price index (CPI) snapped a 3-month downward trend in August and surged to 7%. TOI. It's being blamed on rise in food prices. Is it? "People are spending more than they bring home in income, forcing families to dig into savings of borrow money to make up the difference." India Today. Personal debt climbed to Rs 35.2 trillion at the end of June 2022, the RBI said. "Credit growth of commercial banks is at a nine-year high of 15.5 percent year-on-year for the week ended August 26." BS. Clearly people are not borrowing to buy food. "Emerging Asian central banks have seen a sharp depletion in their foreign-exchange reserves." ET. "Reserves cover about nine months of import for India, six for Indonesia, around eight for Philippines and seven for South Korea, Standard Chartered said." Das is complaining about forward guidance. What will he do when they become facts? Sell all the dollars?

Long live the king.

"Queen Elizabeth II, the UK's longest-serving monarch, has died at Balmoral (her estate in Scotland) aged 96, after reigning for 70 years." BBC. "Queen Elizabeth II's tenure as head of state spanned post-war austerity, the transition from empire to Commonwealth, the end of Cold War and the UK's entry into - and withdrawal from - the European Union." "Her reign spanned 15 prime ministers starting with Winston Churchill, born in 1874, and including Ms Truss, born 101 years later in 1975." Her eldest son "Charles III was formally proclaimed Britain's new king by the Accession Council on Saturday in a history-laden ceremony following the death of his mother." NDTV. "There is also a new title for Charles' wife, Camilla, who becomes Queen Consort - consort is the term used for the spouse of the monarch." BBC. Camilla is the second wife of Charles and not the mother of his sons. Charles was first married to Diana Spencer. "The marriage of Charles and Diana, (later Prince and Princess of Wales), took place on 29 July 1981, marking the high point in the popularity of the Royal Family. It was seen by a global television audience of 750 million 74 countries." BBC. However, the marriage broke down and ended in an acrimonious divorce in July 1996. wikipedia. "Princess Diana died in a car crash in Paris in August 1997. She was accompanied by a bodyguard, a driver, and her partner at the time Dodi Fayed." Showbiz CheatSheet. Dodi was the son of Egyptian billionaire Mohamed Al-Fayed. But, apparently Diana had no intention of marrying Dodi. She "was so 'madly in love' with Pakistani surgeon Hasnat Khan that she wanted to marry him and was even willing to move to Pakistan, according to Jemima Khan." News18. As mother of Prince William, who was named Prince of Wales by King Charles III, BBC, Diana would perhaps have had to be invited to the coronation of Charles. Hard to imagine Diana sitting in the front row in a hijab. Anne Boleyn had her head chopped off with a sword for alleged adultery. smothsonianmag.com. Diana died in a car crash. "All English, Welsh and Northern Irish football and senior Scottish football has been postponed this weekend as a mark of respect following the death of Queen Elizabeth II." BBC. Silly, because the Test Match between England and South Africa is being played with England on the verge of victory. The Telegraph. "New Prime Minister Liz Truss will limit energy bills for all households" "at 2,500 pounds annually till 2024. The huge support scheme could cost up to 150 billion pounds." BBC. But, "The Bank of England has postponed a key interest rate decision." BBC. Even though the energy cap may send the fiscal deficit soaring. Some confusion is natural. After all, they have not practised for 70 years.   

No free lunch.

"Over 2022-23, India's growth will average 7 percent, the strongest among the largest economies, contributing 28 percent and 22 percent to Asian and global growth, Morgan Stanley said in a report." ET. "Despite repeated pressures from 'fancy economists', intelligentsia, freeloaders, the government was fiscally prudent and knew the dangers that uncontrolled inflation can wreak on Indian economy and public. It repeatedly prioritised very careful spending and targeted stimulus only to those sections that desperately required it." Very true. On 12 May 2020, Prime Minister Narendra Modi said, "The Covid-19 pandemic has brought an opportunity for India to be self-reliant for which we have announced a Rs 20 lac crore (Rs 20 trillion) package which is 10% of GDP." ET. But, "New stimulus measures unveiled by Finance Minister Nirmala Sitharaman...will cost Rs 40,000 crore (Rs 400 billion), taking the actual fiscal impact of all the steps announced over the last few days to Rs 1.50 lakh crore (Rs 1.50 trillion) or 0.75 percent of the GDP, a report said." ET on 17 May, 2020. "Emerging markets (EMs) which stimulated most aggressively got no payoff in a faster recovery, owing in part to the downsides of overindulging. India was not among the biggest spenders, which tended to suffer higher inflation, higher interest rates and currency depreciation, at least partly cancelling out the sugar high of stimulus," wrote Ruchir Sharma. However, India is likely to be much more affected by what the developed economies do. "(US) Federal Reserve Chair Jerome Powell... emphasized the importance of getting inflation down now before the public gets too used to higher prices." CNBC. "Markets widely expect the rate-setting Federal Open Market Committee to enact a third consecutive 0.75 percentage points increase this month." The probability has risen to 86%. The European Central Bank (ECB) "lifted all its key rates by three-quarters of a percentage point and warned it was likely to raise rates again later this year." BBC. "Euro area inflation is expected to be 9.1% in August, up from 8.9% in July, according to Eurostat." "After roughly doubling its balance sheet to $9 trillion after the pandemic, the Fed began unloading some of the Treasuries and mortgage-backed securities it holds in June at a pace of $47.5 billion. It has announced this month that it is ramping up the pace of quantitative- tightening to $95 billion." Reuters. QT could add another 75 basis points. "India's exports have taken a knock with demand crashing in several developed world economies," and "Many exporters say their factories are running at 25-50% capacity or have reduced the number of shifts to one from three earlier due to muted demand from the US and Europe." ET. "India's foreign exchange reserves fell to their lowest in over 23 months on likely dollar sales by the country's central bank to stem the fall in the local currency. The reserves fell over $7.9 billion to $553.1 billion as of September 2, data released by RBI showed." ET. Selling dollars to control inflation by strengthening the rupee will make exports more expensive and further increase trade deficit. India's current account deficit (CAD) will rise to $140 billion, or 3.9% of GDP, predicted Deutsche Bank. BS. Other EMs spent own currencies for stimulus. We didn't. We are spending dollars instead. 'Fancy economists' and intelligentsia may not be fools. There is no free lunch. 

A sale needs money.

The US State Department has approved the potential sale of F-16 aircraft sustainment and related equipment to Pakistan in a deal valued at up to $450 million, the Pentagon said." Reuters. "Reversing the decision of its predecessor, the Biden administration has approved a whopping USD 450 million F-16 fighter jet fleet sustainment program to Pakistan." BS. Donald Lu, US Assistant Secretary of State for South Asia and Central Asian Affairs, told India Today, "It's a sale, not assistance." Diplomats are trained liars, but this is 'pants on fire', stuff. Pakistan is not in a position to pay for anything. "During the week ended September 2, 2022, SBP (State Bank of Pakistan) received $1,166 million from IMF under EFF (Extended Fund Facility) program," the SBP said in a statement. tribune.com.pk. "On September 2, the foreign currency reserves held by SBP were recorded at $8,799.9 million." So dire was the situation that in July, Pakistan Army Chief "Gen Qamar Javed Bajwa discussed the issue with US Deputy Secretary of State Wendy Sherman, appealing to Washington to use its influence with the IMF to help Pakistan." BS. In June, Pakistan Federal Minister for Planning and Development Ahsan Iqbal "urged the nation to cut down on tea consumption as part of measures to help overcome the foreign exchange glut." Dawn. Pakistan imported tea worth $589.8 million in 2020. So Pakistan is never going to be able to pay back $450 million for F-16 spares and it will be quietly written off, making it a gift. At the same time, "Group of Seven (G7) agreed...to impose a price cap on Russian oil aimed at slashing revenues for Moscow's war in Ukraine while keeping crude flowing to avoid price spikes." VOA. US Assistant Secretary, financing and financial crime, Elizabeth Rosenberg said that the price cap will help India buy oil at a more affordable price. Times Now. The US seems to have a surfeit of assistant secretaries shooting their mouths off. It could perhaps reduce its inflation rate by firing the lot of them. India is already doing nicely, thank you. "India ramped up its import from Russia from about 2 percent of the total shipment of petroleum products to 12-13 percent as part of inflation management," said Finance Minister Nirmala Sitharman. In 2019, Group Captain Avinandan Varthaman's MIG Bison was shot down inside Pakistani territory by a F-16 fighter jet of the Pakistan Air Force. wikipedia. "Pakistan...rejected India's claim that an Indian pilot shot down the Islamic nation's F-16 fighter plane in 2019." abc. So, the US can give arms to Pakistan to be used against India, but we should not buy Russian oil. We should put a cap on their sales. A cap for a cap, as it were.