The Wolf of Dalal Street?

One week back we were shocked to hear that "Ahead of the launch of the Rs 20,000 crore (Rs 200 billion) mega follow on public offer (FPO) of Adani Enterprises, Adani Group shares lost up to 10% in Wednesday's trade after Hindenburg Research said it holds short positions in companies owned by billionaire Gautam Adani." ET. "The report alleged that the Adani Group was involved 'in a brazen stock manipulation and accounting fraud scheme over the course of decades'." TOI. In a 413 page response, the Adani Group said that "The document is a malicious combination of selective misinformation and concealed facts relating to baseless and discredited allegations to drive an ulterior motive." ANI. Calling Hindenburg Research the "Madoffs of Manhattan", Adani Group accused it of conducting a "securities fraud". BS. Bernie Madoff, one time chairman of the NASDAQ stock exchange was sentenced to 150 years in prison in 2009 for running the largest ponzi scheme in history worth $64.8 billion. wikipedia. Adani Group called the report a "calculated attack" on India, its growth story and its institutions. TOI. "Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised," was Hindenburg's riposte. It questioned the billions of dollars of the Group's "suspicious dealings with the chairman's brother, Vinod Adani, and his labyrinth of offshore shell entities." Adani Group did not clarify its relation with Chinese national Chang Chung Ling, who ran Gudami International which was "said to have been part of a massive corruption scheme in the Augusta Westland scandal, one of India's largest bribery scandals". "The son of Chang Chung Ling is the beneficial owner of the major contractor to Adani Group called PMC Projects." Very specific charges. "While its rebuttal does go point for point, as it should, a zoom-out picture offered by these points doesn't inspire much confidence in the group's corporate governance." Mint. Adani Group "sought to explain AEL's ( Adani Enterprises Ltd) sky-high price earnings ratio as reflective of future value currently in incubation" and "claimed that the fraction of pledged equity in major firms had dropped by 2021-22 to under a fifth." "Pledged equity" means money borrowed against shares as collateral. ET. About "30% of Adani's borrowings are denominated in foreign currencies," wrote Shuli Ren. "For instance, Adani Ports and Special Economic Zone Ltd, the group's biggest dollar-note issuer, is rated at BBB-, the lowest level of investment grade." "One bad margin call on pledged shares, one credit rating downgrade, and everything unravels." In October, UK pension funds had to dump assets to meet margin calls forcing the Bank of England to buy government bonds to stabilize markets and the pound. Public sector banks are controlled by the government, but will any private or foreign bank dare to initiate a margin call on Adani? If one bank does, others may be forced to fall in line and suddenly everything could collapse. Adani denied being personal friend of Prime Minister Narendra Modi. Reuters. And yet, his FPO for Rs 200 billion sailed through with the help of fellow industrialists. ET. There was The Wolf of Wall Street. wikipedia. What about 'The Wolf of Dalal Street'? Great suspense. 

The excess of cess.

"The budget continues to be seen as the centerpiece of the State's annual economic planning, even though its importance has been dipping in recent years." HT. "In some ways the Indian State is still considered the proverbial mai baap (benefactor of last resort)." Also, "Decisions on taxes on profits or capital gains can have a significant impact on the finances of companies and high net-worth individuals." "The 2022-23 Budget assumed a nominal GDP growth of 11.1% for the Indian economy. First advanced estimate of GDP for 2022-23 put India's nominal GDP growth to be 15.4%," wrote Pavitra Kanagaraj. Since taxes are collected on the nominal GDP, higher collections are to be expected for the last financial year. The 15th Finance Commission has mandated that the Centre transfer 41% of its gross tax revenue to states." However, states will get only 29.6% of revenues in 2022-23. In 2021-22, the central government raised 28% of gross revenue through cess and surcharges which it does not share with the states. TNIE. Why this is not labeled as robbery is a mystery. "In the 2022-23 Budget estimate of revenue earned from GST (goods and services tax) was Rs 7.8 lakh crore (Rs 7.8 trillion) compared to Rs 7.2 trillion from corporation tax and Rs 7 trillion from income tax." TOI. India's labor force participation rate (LFPR), which is the ratio of the population employed or looking for work, was 47.5% in the second quarter of 2022, TE, which means that over half the population had dropped out of the workforce. "With poor quality employment and low wages, the share of those earning more than Rs 250,000 per annum or about Rs 21,000 per month, the level above which income tax applies, is very small." By equalizing taxes throughout India it was thought, that GST would increase investment in poorer states where land and labor should be cheaper and, since the richer states are the manufacturing ones, the poorer states will get a higher share of GST because it is a consumption-based tax. However, "over half of the proposed industrial investment - including capacity expansions - are still accounted for by just three, relatively industrialised states: Gujarat, Maharashtra, and Karnataka. Ten states account for over 85% of investment proposals made between 2018 and August 2022." Mint. "As it turns out, more industrialized states such as Maharashtra and Gujarat also have a high consumption base comprised of a relatively more affluent population, and are thus able to 'capture' the tax within their state borders." "While India's rapid economic growth since the 1990s has undoubtedly expanded the spending capacity of its 1.4 billion people, acute and rising inequality - among the worst in the world - makes for a notoriously budget-conscious median consumer." ET. 'Mai baap' means 'my dad'. Which permits impunity in clobbering us with cess and surcharges. Perhaps, we would be better off as orphans.  

Secular or not at all.

"There have been huge bubbles in the stock market, real, estate, cryptos and venture capital funding over the last three years," wrote Vivek Kaul. Bubbles keep coming back because "some people can make more money by ensuring that the bubble continues to thrive and inflate than by calling it out and letting it burst too soon." "Further, regulators are also reluctant to call out bubbles. First, because no one really knows when a bubble is likely to burst. Second, as and when a bubble bursts, it can create trouble in the overall economy and no regulator wants that to happen on his watch." Trouble is assured, writes Prof Nouriel Roubini. "Inflation rose sharply through 2022 across both the advanced economies and emerging markets. Structural trends suggest that the problem will be secular, rather than transitory." There are five hot and cold wars in the world. The war in Ukraine, in the Middle East, against climate change, against future pandemics and against rising inequality. "Fighting these 'five' wars will be expensive, and economic and political factors will constrain governments' ability to finance them with higher taxes." "The Great Moderation is dead and buried; the Great Stagflationary Debt Crisis is upon us." Not so, wrote Prof Tyler Cowen. "It is possible, contrary to the predictions of most economists, that the US will get through this disinflationary period and make the proverbial soft landing." "The US may sidestep a recession for mysterious reasons specific to the aggregate demand model." "In most places, measured savings rose during the pandemic. Yet the problem of insufficient demand has vanished, and so secular stagnation theories no longer apply." "The US economy did better than expected at the end of last year, despite higher borrowing costs and rising cost of living dragging on growth. The economy grew at an annual rate of 2.9% in the last three months of 2022, official figures show." BBC. "Grounds for more hope that the global economy can avoid a major slump may emerge in the coming week in business surveys showing gradual improvement across much of the advanced world." ET. "Vladimir Putin has lost the gas war against Germany." DW. "Germany has the largest natural gas storage capacities in the whole of the EU. And if these are more than 90% full in mid-January, at the height of the heating season, it means the loss of Russian gas supplies no longer constitutes a threat." "More central banks around the world are pausing their tightening campaigns as inflation shows signs of cooling and economies slow down." ET. "India's economic transformation is kicking into high gear. The government is spending nearly 20% of its budget this fiscal year on capital investments, the most in at least a decade." But, "The Indian government is set tap the brakes on a torrid pace of capital investment growth in the coming fiscal year," and "Food and fertiliser subsidies that help two-thirds of India's 1.4 billion people will also be scaled back." ET. Less investment means fewer jobs and lower subsidies mean weaker spending power. So, will the world avoid recession? Or only India and the US? 

Domino economy.

"While wage earnings of casual workers in urban areas increased by 3.3% per annum between 2017-18 and 2020-21, those actually declined for regular workers by 0.8% per annum. In fact, the earnings of a regular worker in the April-June quarter of 2021 were 3% lower than in the same quarter of 2018," wrote Prof Himanshu. "Essentially, a regular worker was earning 14% lower wages than a decade ago. Much of this decline was among highly educated workers." "A large part of the demand for discretionary spending comes from urban India. With inflation further eroding the purchasing power of urban consumers, we are facing the biggest demand crisis we have seen in recent times." One huge reason for inflation is the price of fuel as "net profits of top three oil-marketing companies (OMCs) in the country - IOC, BPCL and HPCL - have grown exponentially. IOC's net profit stood at INR5,273 (Rs 52.73 billion) in FY15." ET. In FY22 its net profit was 5 times higher at Rs 241.84 billion. "The combined net profit of all three OMCs for FY21 was Rs 515.42 billion." In the last 7 years excise duty on petrol has gone up by 258% and on diesel by 820%, while the Center has raked in Rs 24 trillion. The Budget for 2023-24 will be revealed on 1 February. indiabudget. gov.in. "Ahead of next week's Union Budget, speculation over an expansion of the government's Production -Linked Incentive (PLI) scheme is running rife." ET. "The PLI scheme - which offers incentives on incremental sales of products manufactured in India - was initially rolled out for three sectors in early 2020 and then extended to 11 more." Why not cover the whole lot? "In FY2022-23 of every Rs 100 budgeted to be spent, debt servicing, defence, transfers to states, subsidies and pensions take up 2/3rd of the budget. If one adds salary costs of the current establishment, this will go up to 3/4th of the budget," wrote Somnath Mukherjee. "While the Centre has said it will tighten its fiscal deficit to 4.5% of GDP by 2025-26 (it is budgeted at 6.4% this year), anxiety has been aired at this being too big a target." Mint. Because government debt is above 80% of GDP, so that "Already, the Centre's allocation for its interest bill takes up roughly half its revenue." "It is likely that this core fiscal target (6.4%) will be met despite the fact that the subsidy bill will overshoot the budgeted target by over Rs 2 trillion," wrote Niranjan Rajdhyaksha. That is because of higher tax collections. "The main reason why this extra money has flowed into the tax coffers is high growth in nominal GDP; it will be lower in the next financial year as economic growth loses steam while price pressures ease." Nominal GDP is the value of total production at current prices without correcting for inflation. Investopedia. The government collected huge taxes because of soaring prices and the rebound in spending. This will not be repeated in the next fiscal. To add to it, "India's goods exports in December declined by 12.2% to $34.48 billion on an annualised basis and imports fell by 3.46% to $58.24 billion." HT. Increase prices by huge excise duties on fuel, which bring in a windfall Rs 24 trillion in taxes, higher profits and, hence, higher dividends from OMCs, higher tax collection from goods and services tax (GST) and, bingo, the fiscal deficit is controlled. Like a domino effect. Sheer genius. 

To eat or not to eat.

"After eroding investor wealth worth around Rs 1 lakh crore (Rs 1 trillion) on Wednesday (25 January), the selling pressure in stocks of Adani Group companies intensified on the second trading session on Friday and lost up to 20% on claims made in short-seller Hindenburg report." ET. "Billionaire US investor Bill Ackerman said on Thursday that he found short-seller Hindenburg Research's report on India's Adani Group "highly credible and extremely well researched'." Reuters. "India celebrated its 74th Republic Day on Thursday with a colorful parade displaying military might and cultural diversity." BBC. Markets were closed on Thursday, so when they opened on Friday, the sell-off accelerated wiping out over $50 billion in market value in two sessions. ET. When caught cooking the books it is better to resort to bluster. "Describing Hindenburg's report as maliciously mischievous and unresearched, the company said it is deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community and the general public, undermine the goodwill and reputation of the Adani Group and its leaders, and sabotage the FPO (Follow-on Public Offering) from Adani Enterprises." ET. Note the mention of 'foreign entity', calculated to rouse the ire of imbecile nationalists. In 2021, protesting farmers shut down an Adani dry port in Ludhiana, Punjab. The Wire. In 2020, "A group of nearly 500 farmers staged a protest outside a silo constructed by Adani Agro-Logistics at Dagru village in Moga district." In 2021, apple growers protested against Adani Agro Fresh because, "In 2020, Adani offered Rs 88 per kg for premium quality apples, which after two years was reduced to Rs 76 per kg." These apples "according to the growers fetches the company not less than Rs 250-300 per kg in off season". Not much goodwill there. The Adani Group has threatened to sue Hindenburg for a "malafide and mischievous" report just before the company's FPO for Rs 200 billion. BS. "In the 36 hours since we released our report Adani hasn't addressed a single substantive issue we have raised," Hindenburg Research said on Twitter. "At the conclusion of our report, we asked 88 straightforward questions that we believe give the company a chance to be transparent. Thus far, Adani has answered none of these questions." Adding "it has a long list of documents it will demand in a legal discovery process." ET. Mr Adani would be well advised to stay in India where he is safe. "First, the Adani bubble is unlikely to burst unless there's a change in the political wind." Bloomberg. In Asia, "Adani is not the only conglomerate with lofty valuations and questionable corporate governance. China's HNA Group Co. and Evergrande Group naturally come to mind." "Shorts gained momentum only when Beijing changed its attitude." The government may bail out Adani with taxpayer money. The Life Insurance Corporation of India (LIC) and the State Bank of India, both controlled by the government "have liberally financed the Adani Group even as their private sector counterparts have chosen to avoid investing," said Congress General Secretary Jairam Ramesh. LIC has already invested Rs 740 billion and is "spending about $37 million as an anchor investor in a $2.5 billion new share sale by Adani Enterprises Ltd, according to a filing." HT. "Na khaunga, na khane dunga" means "I will neither eat (be corrupt), nor allow anyone else to do so (take bribes)". Official handouts of taxpayer money from LIC and SBI is not corruption. It's called crony capitalism.

Finger in the dike.

On 1 February, "Amid rising inflation and high-interest rates, taxpayers are expecting a host of relief measures from the Budget this time. Some of the items on the taxpayer's wishlist from this year's Budget include an increase in basic income tax exemption, higher deduction limit in Section 80C, sops for homebuyers, a separate deduction section for life insurance." TN. "Net export depends on what is happening globally." ET. "Consumption has been the main driver to date; but as inflation begins to bite, this is bound to slow down. Investment, especially private sector investment, has not picked up as we hoped earlier. That leaves government spending" which is "constrained by the extent of funds available to the government" and by "the amount it can borrow without upending the market by pushing up interest rates". "Advance estimates by NSO project India's nominal GDP growth for FY23 at 15.4 percent against the Budget estimate of 11.1 percent, thanks to the high inflation of FY 23. The estimated nominal GDP of Rs 273 lakh crores (Rs 273 trillion) against the Budget estimate of Rs 254 lakh crores (Rs 254 trillion) is the bounty bestowed on the finance minister by the unusually high GDP deflator (a mix of CPI and WPI inflation) of around 8.5 percent," wrote VK Vijaykumar. That led to very high tax collections which may not be repeated next year. "Alas, the bad news is that India's current account deficit for the July-September quarter skyrocketed to a terrible 4.4% of GDP, up from 1.3% in the corresponding quarter a year earlier. This was way above the official comfort level of 2.5%," wrote Swaminathan SA Aiyar. So, what is to be done? "Fiscal caution should replace adventurism. The RBI should let the rupee weaken. India needs a competitive currency, not a strong one." The RBI has been selling dollars to stop the rupee from weakening because that will increase prices and make inflation worse. "India's foreign exchange reserves rose by a whopping $10.417 billion to $572 billion in the week ending on January 13." ET. It was $645 billion in October 2021. However, India's trade data for the first 8 months of 2022-23 have been revised. "The import bill for April to November 2022 is now estimated to be $493.5 billion. This amount is about $1.7 billion higher than initial estimates. Total merchandise exports are at $298.3 billion, nearly $12 billion higher than that originally estimated." The Wire. The trade deficit has been reduced to $25.6 billion for $30 billion originally estimated. News media are predicting an increase in customs duty on "electronic items, vitamins, helicopters, plastic goods, jewelry and high-gloss paper among others". DH. Previous two budgets also increased tariffs on a range of imports. This is apparently to reduce the trade deficit with China. Unfortunately, "While trade in 2022 between China and India touched USD 135 billion, imports from China were at USD 118.5 billion and exports at USD 17.48 billion. The trade deficit crossed the USD 100-billion mark." This is despite ever increasing customs tariffs on imports. China's consumer price inflation rate was 1.8% in December, investing.com, compared to 5.72% for India and 6.7% of FY23. ET. A relatively stronger rupee with inflation nearly 3 times that of China's makes China's goods cheaper regardless of tariffs. Only helps domestic industries to increase prices further. A finger in the dike has never helped. Or even two fingers.    

India's moment

"In 2023, India is chairing the Group of 20 (G20). This has triggered talk of 'India's moment'," wrote Prof Adam Tooze. Is it? "The chair of G20 has no real authority. The dominant global powers are China and the United States (US). Nothing has changed about that." Whoops. "India is huge, but it finds itself thrust into the center of world affairs when it finds itself struggling to reach basic development objectives with regard to health, poverty alleviation, and education." Actual prosperity is less than that in "Bangladesh and Vietnam". The reason is simple. Every institution and policy is geared towards winning elections, which means handouts for the poor and huge taxes on the middle class. "Less than half a million taxpayers have opted for the new exemption-less income tax regime since its rollout," so "Policymakers are now examining the regime more closely to see what could be done trigger shift to the simpler, without exemptions, personal income tax regime." ET. "Simpler" means simpler ways to increase effective tax rates on hapless taxpayers. "India's top 1% owned more than 40.5% of its total wealth in 2021, according to a new report by Oxfam. In 2022, the number of (dollar) billionaires in the country increased to 166 from 102 in 2020, the report said." BBC. This, despite the ferocious coronavirus Delta wave in 2021 which killed millions of people, Vox, and an almost total lockdown of the nation for 21 days in 2020, followed by slow relaxation over months, wikipedia. "Gautam Adani who is the world's second richest person with a wealth of Rs 10.94 lakh crore (Rs 10.94 trillion), has added more than Rs 1,600 crore (Rs 16 billion) to his earnings per day in the last one year, according to IIFL Wealth Hurun India Rich list 2022." TOI. What is the secret of his Midas touch? "Trapeze artist Adani now owes Rs 4.5 lakh crores as NPA (non-performing assets) to banks," Interest on Rs 4.5 trillion must be humongous? A generous Reserve Bank (RBI) is there to help. The RBI kept interest rate unchanged at 4%, well below the rate of inflation, for 24 months, from May 2020 to May 2022.  NDTV. Mr Adani could buy a variety of assets to augment his wealth, Mint, as "Richest Asian Gautam Adani's group will invest USD 150 billion across businesses ranging from green energy to data centers to airports and healthcare as it chases the dream to join the elite global club of companies with USD 1 trillion valuations." ET. Adani Group got control of six of India's airports for Rs 24.40 billion. ET. In 2020, it acquired 74% stake in Mumbai Airport. BS. Meanwhile, "At the bottom of India's socioeconomic pyramid, meeting daily needs is a struggle even when gross domestic product is expanding at 7%," wrote Andy Mukherjee. Low earnings, soaring prices and "simple" income tax regime. Is this "India's moment"?  Which India? 

Wheat flour as a counterbalance.

"According to Zafar Iqbal Yousafzai...China is supplying the Taliban with contemporary weapons in response to the Islamic State Khorasan Province's (ISKP) recent attack on a hotel in Kabul that primarily housed Chinese nationals, ANI reported." TN. "The Jamestown Foundation claimed that as a result, the US exit and the Taliban's ascent to power - with whom Beijing has deep ties - were viewed as positive geopolitical developments for China." In 2021, "Chinese President Xi Jinping...hailed relations between China and Pakistan as between 'iron brothers' in a phone conversation with Pakistani Prime Minister Imran Khan." Iron Brother Pakistan must be very uneasy. "As the Pakistani Taliban (TTP) ramp up their murderous attacks on Pakistani soldiers, ISI officers, police and ordinary citizens, the men who run Pakistan's security establishment are trotting out the usual bluff and bluster. Over 100 attacks have occurred over the last 50 days." Dawn. "The Pakistani 'establishment' believed it had pulled off a spectacular coup in ensuring a hasty US retreat from Afghanistan, and the Taliban regaining control in Kabul in August 2021." TOI. But the Afghan Taliban "haven't cooperated with Islamabad's demand of reining in the TTP (Tehreek-e-Taliban) - a group that Pakistan considers the biggest threat to internal security." What is even more worrying, "Estimates vary. But given the current pace of business closures, temporary shutdowns, and planned reduction in industries' outputs, around 6.025 million people or 8.5 percent of the total workforce of 73m may remain unemployed during this year." Dawn. Terrorists find it easy to recruit from hungry people. In November 2022, Lieutenant General Upendra Dwivedi said that around 300 terrorists were present in Jammu and Kashmir (J&K), while another 160 were waiting across the Line of Control to sneak across to our side. ET. On 1 January 2023, 4 people were killed and 9 injured in indiscriminate firing by militants at Dangri village in the Rajouri district of J&K. wikipedia. On 2 January, an improvised explosive device (IED) exploded in the same village, killing one child and injuring 5 others, one of whom died later. Six people were killed in total. "Protests and shutdowns continued in some parts of Jammu division...following the twin terror attacks in Rajouri, with protester's criticising BJP's inability to control the situation on the ground and demanding action against Pakistan." ET. Following protests "the ministry of home affairs... rushed 18 companies of Central Reserve Police Force (CRPF) to intensify anti-terror operations in the region." HT. The price of wheat flour has shot up in Pakistan, causing serious hardship, Zee News. So, should India supply wheat flour to Pakistan at concessional rates? Will that pacify the terrorists?    

Don't have to change.

"Less than half a million taxpayers have opted for the new exemption-less income tax regime since its rollout,  prompting a review to see if measures are needed in the budget to promote its adoption, people familiar with the matter said." ET. Out of "75.2 million income tax returns have been filed in the current assessment year." It's easy to understand why. "Individuals and HUFs (Hindu undivided families) can opt for the Existing Tax Regime or the New Tax Regime with lower rate of taxation (u/s 115 BAC of the Income Tax Act). The taxpayer opting for the concessional rates in the New Tax Regime will not be allowed certain Exemptions and Deductions (like 80C, 80D, 80TTB, HRA) available in the existing tax regime." incometax.gov.in. Income up to Rs 2,50,000 in a financial year does not attract any income tax in both regimes, but after that there are 3 slabs in the old regime while there are six in the new one, and because the slabs are so narrow a small income will send an individual into a higher slab. Also, every year taxable items, such as capital gains, and tax rates are changed in the budget. The new regime could therefore be a trap. Middle class "Households have about a third of what they earn taken away at lifestyle levels that are modest in comparison with their counterparts in well-off countries. In the US, for example, where the top income tax rate is 37%, a 32% rate kicks in only once an assessee rakes in roughly over $170,000 (Rs 13.94 million) a year, which affords a cushy life even by American standards of comfort with the result that professionals who make, say, $85,000 (Rs 6.97 million) and live middle-class lives do not feel a tax pinch." Mint. Then there is tax terrorism. Every budget sets an imaginary target on tax officials, ET, who then resort to strong-arm tactics on taxpayers, leading to disputes. "In 2017, the income tax law was amended to weaken the checks on tax authorities," wrote Suyash Rai. They can now conduct searches and seize assets without giving any reason, thus operating like historical secret police forces (toptenz.net). Authorities are successful in over 50% of cases of tax disputes in OECD countries. "In 2020, the average for 47 jurisdictions included was 66%. In India, this was only 7.9%." To enhance job creation, the government has introduced Production Linked Incentive (PLI) Schemes providing incentives to increase production in manufacturing. wikipedia. The budget should extend the PLI schemes to more sectors, enhance the "Remission of Duties and Taxes on Exported Products scheme", concessional taxes on research, and funds for sustainable development, wrote Arun Chawla, Director General, Federation of Indian Chambers of Commerce & Industry. It is impossible to invest and create wealth if the budget keeps changing tax regimes every year to penalise hard work. Perhaps, a printed budget should be presented to Parliament for debate and amendments, like in the US. To take away the grandstanding by the Finance Minister. Sadly, they prefer coercion.  

Savings and loans.

"India's economy picked up speed in December as business conditions improved, marking a rebound for the South Asian nation that had showed signs of a slowdown the preceding month." ET. "The needle indicating so-called animal spirits moved right after holding steady for five straight months," as "Consumer spending boosted tax collection and manufacturers signaled optimism about the future, while services sector saw expansion of new businesses." "The Reserve Bank of India (RBI),...said that India's economy has witnessed improvement in macroeconomic stability due to the slowing down of inflation." ET. "The RBI bulletin further said that the real GDP growth may decelerate from 7 percent in 2022-23 to 6.5 percent in 2023-24. India will be a $3.7 trillion economy in 2023, and move to a fourth place in 2025 and third place in 2027 when it will be a $5.4 trillion economy." "India's retail inflation eased to 5.72 percent in December on an annual basis as against 5.88 percent in November 2022." ET. On an "annual basis" means that the rise in prices was calculated on prices a year earlier when, "India's benchmark inflation rate, measured by the Consumer Price Index (CPI) firmed 5.59% year-on-year in December 2021." ET. As prices have soared households in India have struggled to maintain their expenses. "Recent estimates suggest that the net financial savings of households in India fell to a three-decade low of around 4 percent of Gross Domestic Product (GDP) in the first half of the current fiscal, the Financial Express reported." BS. "The net household financial savings are estimated to have been around Rs 5.2 trillion in the first half of 2023 compared to Rs 17.2 trillion in FY22." So, our economic growth has been fueled by households spending Rs 12 trillion of their savings and at some point they will have to cut down their expenses. However, India turned up in force at this year's World Economic Forum at Davos in Switzerland (NDTV), as emissaries form India "have taken over at least eight storefronts with appeals to the elite gathering's political and business class". CNN. If it can maintain its growth rate, "India can overtake Germany as the world's fourth largest economy in 2026, knock Japan from the number three spot in 2032 and become only the third country with GDP worth $10 trillion by 2035." However, foreign portfolio investors (FPIs) are bearish as "In less than three weeks, on a net basis, these fund managers have taken out nearly $2.1 billion (over Rs 17 thousand crore or Rs 170 billion) from the domestic stock market, data from CDSL showed." TOI. As foreigners have reduced their exposure, domestic investors have poured Rs 1.5  trillion in the stock markets through systematic investment plans (SIPs) in 2022. ET. At the same time personal loans against "fixed deposits, advances against shares or bonds, loans against gold jewelry and other personal loans - grew by 71% between April 2020 and November 2022," wrote Rajrishi Singhal. Are Indians gambling on the stock markets from their savings and by taking loans? We hope not.     

If George Bush can't.

"India holds the Presidency of the G20 from December 1, 2022 to November 30, 2023. The 43 Heads of Delegations - the largest ever in G20 - will be participating in the final New Delhi Summit in September next year." pib.gov.in. "India will host over 200 meetings in over 50 cities across 32 different work streams." The trouble is that G20 meetings attract thousands of protesters from across the world. In October 2021, thousands of protesters marched in Rome during the G20 summit. NYT. In 2017, "German police clashed with protesters before a G20 summit in Hamburg..., tarnishing the outset of a meeting Chancellor Angela Merkel hopes will cement her role as a stateswoman." CNBC. "A BBC documentary, 'India: The Modi Question' looks at" "his role in the large-scale communal violence" in February and March 2002" following the "burning of a train at Godhra on February 27, 2002 carrying kar sevaks which led to 59 deaths." The Wire. "These were very serious claims - that Chief Minister Modi played a pretty active part in pulling back the police and in tacitly encouraging the Hindu extremists," Former British Foreign Secretary told the BBC. The Ministry of External affairs in India dismissed the documentary as "propaganda" and "colonial mindset". HT. But then, Union Home Minister Amit Shah said in November 2022, "During the Congress rule in Gujarat (before 1995), communal riots were rampant." "But after they were taught a lesson in 2002, these elements left that path (of violence)." TOI. Any Indian knows that "communal" means "Muslims" and what "taught a lesson in 2002" means. AIMIM Chief Asaduddin Owaisi, a Muslim, tweeted, "What lesson did Amit Shah teach in 2002? Lessons from Naroda Patiya (97 Muslims killed, wikipedia)? Lessons from Gulbarga, (35 killed, 31 missing, wikipedia)? Best Bakery lesson (11 Muslims and 3 Hindus killed, wikipedia)? Lessons from Bilkis Bano (gang rape of pregnant Bano and killing of 14 family members including her 3-year old daughter, BBC)?" In November 2022, "In his remarks last week over defending immunity to Saudi Crown Prince, US state department principal deputy spokesperson Vedant Patel cited immunity given to several heads of state including Indian Prime Minister Narendra Modi." TN. Immunity only as long as he is head of state. Interesting. The misuse of the national investigation agencies - the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED) and the National Investigation Agency (NIA) - against opposition parties has reached intolerable levels. The Wire. For all these reasons it is of paramount importance for Modi to win the 2024 general election, by any means possible. But, what will he do if foreigners come to India to protest against him? After all, he cannot use the draconian UAPA law against Americans and Europeans like he did against Indian citizens in 2019 for protesting peacefully. Legal Service India. We understand that President George Bush does not travel abroad even though there is no arrest warrant against him. Politifact. And, he is American.      

ExxonMobil and Cairn Energy.

"The annual circus, alias the Budget, is here again. Zee. "Given that it's his last, big spending opportunity before next year's general elections, it won't be unreasonable to expect Prime Minister Narendra Modi to sprinkle the Fed 1 government budget with a dose of populism," wrote Andy Mukherjee. "The global economy is slowing." "Even with a bumper tax harvest - thanks to faster-than-expected domestic inflation - the federal government will just about meet its targeted budget deficit of 6.4% of gross domestic product for the fiscal year that ends on March 31." "India's macroeconomic imbalance is already among the worst across major economies." "Energy giant ExxonMobil is keen to invest in the Indian upstream sector, but wants the country to offer protection against expropriation, neutral arbitration and globally competitive returns that must stay intact through the term of the contract." ET. Sounds extremely reasonable. And, India's "Crude oil production at 29.69 million tonnes in 2021-22 (April 2021 to March 2022) was 2.63 percent lower than the 30.5 million tonnes output a year back and 11.67 percent below the target of 33.61 million tonnes, according to official data." Outlook. "According to official data, India's total petroleum consumption in 2019-20 was 194.3 million metric tonnes (MMT)." HT. "The annualised consumption growth in April - September 2022 was 107.7 MMT." "India, the world's third biggest oil consuming and importing nation, spent USD 119.2 billion in 2021-22 (April 2021-March 2022), up from USD 62.2 billion in the previous year, according to data." ET. So, we desperately need enormous investment in our oil and gas sectors to reduce our import bill. But then, there was Cairn Energy. Using a retrospective tax law "the tax department in 2014 attached and subsequently sold the residual shares that Cairn held in the India unit. It also withheld tax refunds and confiscated dividends due to it to settle part of the tax demand. All this totaled Rs 7,900 crore (Rs 79 billion)." ET. Cairn moved courts abroad to attach flats used by Indian diplomats in Paris and Air India planes. Finally, in February 2022 the government had to refund the entire amount. A humbling experience. The government abruptly changed rules for e-commerce in December 2018 affecting US companies Amazon and Walmart, which had just bought the Indian company Flipkart. This, after Walmart bought a 77% stake in Flipkart for an eye-watering amount of $16 billion, ET, and had paid taxes of Rs 74.39 billion. ET. What has all this to do with the budget? Because tax rules and rates can be changed to finance handouts for the election in 2024. After all, the government earned over Rs 8 trillion in taxes on petrol and diesel in the three years to 2021. ET. ExxonMobil is right to be terrified.  

A race to wealth. Or old age.

"China's population fell last year for the first time in six decades, a historic turn that is expected to mark the start of a long period of decline in its citizen numbers with profound implications for its economy and the world." Reuters. Its population declined by 850,000 in 2022. "That possibly makes India the world's most populous nation." "Online searches for baby strollers on China's Baidu search engine dropped 17% in 2022 and are down 41% since 2018," while in India, "Google Trends shows a 15% year-on-year increase in searches for baby bottles in 2022, while searches for cribs rose almost five-fold." Will India benefit from a 'demographic dividend' as the number of young people increases? "The South Asian nation's working age population stands at over 900 million, according to 2021 data from the Organization for Economic Cooperation and Development (OECD). The number is expected to hit more than 1 billion over the next decade, according to the Indian government." CNN. Sadly, India's labor force participation rate stood at 46%, the lowest in Asia, while that for women was just 19% in 2021, as per World Bank. Why do we quote foreign organizations for our data? Because, "for the first time India's decennial census - which was set to be held in 2021 - has been delayed, with no clarity on when it will be held." BBC. Shockingly, "observers don't expect the exercise to take place before late 2024, as India is scheduled to hold its general election in the first part of next year." The growth rate of India's population has fallen sharply, and "has averaged 1.2% since 2011, compared to 1.7% in the 10 years previously". Reuters. "India's total fertility rate (TFR) - children per woman - fell to 2 in the latest assessment period, for 2019-2021, from 3.4 in 1992-93." A TFR of 2.1 is taken to the replacement level for the population in developed countries, NIH, possibly because neonatal and child mortality is higher in most developing countries. The neonatal mortality rate for India was 20 per 1,000 live births in 2020, much higher than an average of 4 for OECD members and 3 for North America. World Bank. The number of youth was 333.4 million in 2011 and was projected to reach 371.4 million, according to a government report, wrote Vivek Kaul. However, possibly, "The number of youth in India is expected to contract to 367.4 million by 2026, 356.6 million by 2031 and 345.5 million by 2036." Around 71.4 million women were single, according to the 2011 census, and this number is rising, especially in urban areas. BBC. A higher number of children result in less savings in banks. As the TFR fell from 1991 to 2011, savings in banks increased, peaking at 70.6% of GDP in 2010. "These rising deposits in turn funded increased lending by banks, which rose from 10% of GDP in 1971 to 20.2% in 1991 and 51.6% in 2011," wrote Vivek Kaul. This led to India's economy growing by over 7% in most years. macrotrends. Most alarming is that, as India population grows older, there will be a lack of enough savings to finance pensions and healthcare, resulting in poverty among retired people. India may grow old before becoming rich. ET. It's a race to be rich or to be old. Which one comes first?

Social capital is the key.

There is a stark contrast in the growth stories of India and China. Mint. "For India, consumption - essentially, spending by households - has been the economic driver." Household consumption accounts for 60% of GDP. "By comparison, consumption accounts for 39% of China's GDP." "China's great strength, and India's weakness over the past 15 years or so, has been investment, or the net addition to capital goods like machinery and equipment." "One thing that enabled China to grow this fast, and for this long, was the social capital it had in place in 1980," which was that "Although it was a developing nation then, China had in place building blocks in education and healthcare, helping it to harness the demographic dividend provided by a large young population." In 75 years since independence, India's GDP has grown from Rs 2.7 trillion to Rs 135.13 trillion and is now the sixth largest economy. NDTV. The problem is that India has suffered premature deindustrialization, the share of manufacturing and agriculture in our GDP has shrunk, "The services sector is one of India's largest and most important sectors, from a growth perspective," and "For a long time now, India's net importer position has widened its trade deficit vis-a-vis other countries," wrote Prof Deepanshu Mohan et al. "India will need to increase manufacturing to become a viable alternative to China, as the world is looking to move their production from the factory floor," but "Recent data shows that while India's gross domestic product (GDP) grew at 6.3%, a sharp fall in the manufacturing sector has raised alarm bells." ET. In the developing world, we can think of four-wheeler ownership as a proxy for upper middle class status and two-wheeler ownership as a proxy for lower middle class status," wrote Pramit Bhattacharya. The share of households owning a two-wheeler was 50% in 2020 in India, 54% in 2017-18 in Pakistan and 79% in 2017 in Indonesia. "The penetration of two-wheelers and four-wheelers in India today is roughly at the level where Indonesia was in 2007." "Never bet against Indian (stock) markets," exulted Somnath Mukherjee. "Over the last 30 years, through global and local ebbs and flows, the zeitgeist of globalization and now the unraveling of the same, through conflict and wars, Indian stocks have been massive outliers to all its emerging market (EM) peers." But, "RBI data for commercial banks shows consumer loans in four categories - advances against fixed deposits, advances against shares or bonds, loans against gold jewelry and other personal loans - grew by almost 71% between April 2020 and November 2022. It is quite likely that a large proportion of these loans found their way into stock markets," wrote Rajrishi Singhal. Stock markets on steroids. For how long?

Subsiding Himalayas.

"Parts of Joshimath may have sunk by nearly 2.2 feet (70 cm), sources told TOI...on the basis of ground investigation of affected areas carried out recently in the picturesque town, which is facing aggravated land subsidence since the beginning of January." Joshimath is a small town in the state of Uttarakhand, in the Himalayas, of enormous religious significance for Hindus. wikipedia. The town is on the way to Badrinath temple which was visited by 20,000 pilgrims on the first day of pilgrimage on 8 May 2022. euttaranchal. com. A satellite survey by the Indian Space Research Organisation reported 5.4 cm subsidence in 12 days. "The National Disaster Management Authority (NDMA) has directed government officials and institutions not to 'interact with media and share data on social media regarding ground subsidence at Joshimath'." TOI. Unfortunately, this government is in the habit of suppressing unfavorable data. For instance, official reports suggest only a few thousand died of the ferocious coronavirus epidemic in 2021 when car parks were turned into cremation grounds. Reuters. More than 4.7 million died, said the World Health Organization (WHO). "India's government has rejected the figure, saying the methodology is flawed." BBC. And hence, millions of Indian citizens ceased to exist. So, why is Joshimath sinking? "One reason is that the town came up on landslide debris, which was unable to bear the load of houses and roads," wrote Mridula Ramesh. It would be natural for a landslide to slide. Another reason is, "The Tapovan Vishnugad Hydroelectric project lies a few kilometers away from the town. In 2009, a tunnel boring machine employed in this project punctured an underground aquifer and released about 60-70 million liters of water daily for nearly a month." Even a two-year old would predict that the overlying area must subside. A two-year old may also ask why an old technology called seismic survey, Science Direct, was not used before tunneling. "There is more water gushing out of one of those cracks and houses in nearby Karnaprayag have recently developed cracks." Joshimath is not alone. "A construction boom with scant regulations , often under the pressure of burgeoning tourism, finds echo across the Himalayan region." TOI. "As many as 650 hydroelectric projects are planned or underway in high altitude locations across the Himalayan and Hindukush region, many close to glaciers or glacial lakes and seismically active zones." Will anyone be held to account? Of course not. There is taxpayer money. The Uttarakhand government has announced Rs 150,000 for losing homes, Rs 5000 for paying rent and Rs 15,000 to buy fodder for cattle. India Today. This may actually help in getting the votes from grateful residents at the next election. Never waste a good crisis.  

Competing for trillions.

"RBI Governor Shaktikanta Das made a hard case on why India is still in a strong economic position, despite him cutting the GDP growth forecast to 6.8% for the full fiscal year 2022-23." FE. "Despite macro challenges, Das said, the RBI thinks economic activity will remain strong in Q3." Fortune. "He argued India will remain among the fastest-growing major economies, even as rising recession possibilities characterise the global economy." To be fair, as governor of the Reserve Bank (RBI), he can hardly say that India's economy is precariously balanced and there is every chance that it may tank. But, what about others? "The Indian economy is expected to reach $7 trillion in the next seven years, chief economic advisor V Anantha Nageswaran has said." BS. It is expected to reach $3.5 trillion at the end of this financial year on 31 March. India's nominal GDP was $3.176 trillion in 2021. World Bank. When corrected for inflation, the real GDP should be much lower. Last June Nageswaran said, "The size of the Indian economy is projected to cross $5 trillion in 2026-27 and likely become $20 trillion by 2040." TOI. "India's real GDP is likely to expand by 7% in 2022-23," wrote Soumya Kanti Ghosh. He pours scorn on critics who argue that India is seeing a k-shaped recovery when it is so v-shaped. A two-wheeler is usually the first vehicle bought by the poor and lower middle-class. "Two-wheeler is the only automotive segment which has witnessed a year-on-year negative growth for three consecutive years. Sales in the financial year 2021-22 were the lowest in the last 10 years. In the first half of 2022-23, domestic sales did inch up, but volumes are still lower than what we saw in 2016-17, 2017-18, 2018-19 and 2019-20," said Rajesh Menon, director general, Society of Indian Automobile Manufacturers (SIAM). Mint. Pshaw, "In the current fiscal, at the current rate the two-wheeler sales could end at 1.6 crore (16 million), 10% higher than 2020-21, and almost equivalent to 2019-20 pre-pandemic levels." "Could" and "almost" could hide millions. As for borrowing against gold, it is very good. "Such loans have picked up significantly in the last few years, as with an increasingly formalised economy, farmers are now using this route to circumvent the money lenders who used to make a killing with the rate of interest for gold loans anywhere in the range of 24-36%." Indians borrow against gold only in extreme distress as a last resort. "The Marathwada region of Maharashtra reported 1,023 farmer suicides in 2022, up from 887 in the previous year, according to an official from the divisional commissioner's office." DNA. The real question is why the chief economic officer of the State Bank of India is campaigning for the government instead of writing about the health of banks. "Earlier this year, Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister said that India's GDP will be close to $20 trillion by 2047." The Wire gives a list of public officials acting as cheerleaders for the government. Natural. They don't want to lose what they are getting. They were beaten by Commerce Minister Piyush Goyal who predicted a $30 trillion economy. ET. It will soon be raining dollars. Get ready to collect.   

Nothing to celebrate.

"Weakly inflation, measured by Sensitive Price Index (SPI), posted an increase of 31.75 percent for the combined income group on a year-on-year basis ending Jan 12 due to a massive surge in prices of both food and non-food items, according to data released by the Pakistan Bureau of Statistics." Dawn. In contrast, "India's retail inflation eased to 5.72 percent in December on an annual basis as against 5.88% in November, 2022." ET. "A 20kg wheat flour bag in Karachi touched the highest rate of (PKR) Rs 2,900," and "Onion prices in Islamabad stood at Rs 280 per kg." On a year-on-year basis onions have jumped by 437.21%, chicken by 80.51%, eggs by 61.63% and wheat flour by 56.11%. Prices of wheat flour in India seem much lower if bought online, pricee.com, and are slightly higher in stores. However, one US dollar buys PKR 228, xe.com, while 1 USD is worth just over INR 81, xe.com. So, in dollar terms, prices of wheat flour work out almost similar in both India and Pakistan. Pakistan's problem is that it suffered devastating floods in 2022, and so, such an enormous percentage rise in prices of basic food items must be unbearable for the poor. "Months after unprecedented floods ravaged Pakistan, vast swathes of cropland and villages remain under water, while nearly 10 million girls and boys remain in need of immediate lifesaving support." UNICEF. Foreign exchange reserves of Pakistan's central bank fell to $4.343 billion in the week ended 6 January. As a result, "Coupled with another $5.8 billion held by commercial banks, the nation has $10.2 billion in reserves - enough to pay for just three weeks of imports." The Siyasat. "India's forex reserves dropped by USD 1.268 billion to USD 561.583 billion for the week ended January 6, the Reserve Bank of India said ." ET. Business families are moving out of Pakistan. "Some of the families that run the largest conglomerates in the country have also been moving people." Dawn. "A lot of money has been moved or is in the process of being moved." To make things worse, an offshoot of the Taliban (originally created by Pakistan), calling itself the Tehreek-e-Taliban-e-Pakistan, wikipedia, has been attacking Pakistani police and security forces. "A group of heavily-armed militants from the Pakistani Taliban attacked a police station in the suburbs of restive northwestern city of Peshawar on Saturday (yesterday) and killed three policemen, including a senior police officer, authorities said." TOI. In India, 300 terrorists, 82 from Pakistan, 53 local residents and 170 unidentified, are active in Jammu & Kashmir, according to Lt Gen Upendra Dwivedi, General Officer-Commanding-in-Chief of the Northern Command. The Tribune. "With 18 million emigrants spread across the world, India has the biggest diaspora by a huge margin." TOI. The US detained 16,000 Indians on the Mexican border in 2022," and "According to the UN's refugee agency, over 82,000 Indians had sought asylum around the world." DH. Should we be happy that Pakistan is suffering? How do we explain 82,000 Indians seeking asylum in one year? Perhaps, just a matter of degree.

Moonshot is imagination.

"The only significant policy initiative that the post-pandemic Indian economy has seen from the government has been an openness to use Industrial Policy as a tool for economic development," wrote Diva Jain. "There are several examples of countries that have failed to develop without a coherent Industrial Policy, but no example of a country that has achieved an advanced economic status without it." "Having said that, outcomes from using Industrial Policy tools have ranged from moderate success (Mexico, Brazil, Malaysia and Thailand) to superlative economic performance (Japan, South Korea and Taiwan," wrote Jain. "A good policy does not seek to replace the 'invisible hand' of markets, but to introduce the guiding hand of the state in places where the former has failed." "Japan, South Korea, Taiwan and Singapore have become advanced countries within two generations because not only did their Industrial Policy focus on areas of comparative advantage (like Chile), and on expanding these (like Malaysia), but, more importantly, they took moonshots at new technology and harnessed innovation to dominate export markets." "The dismantling of India's industrial policy, starting in the early 1990s, juxtaposed with increasing economic openness, had its consequences. The share of the manufacturing sector in GDP dropped from 17.5% in 1995-96 to 13.5% in 2019-20," wrote Prof Deepak Nayyar. "For latecomers, catching up in industrialization is not simply about imitating, following and learning from leaders," but "It is just as important to think ahead of the curve, anticipating technological changes on the horizon, and leapfrog through innovation to become a leader in some sectors, as South Korea did." "Since Make in India launched in 2014, the deadline for one of its key goals - to lift the share of manufacturing in GDP to 25% - has been pushed back three times, from 2020 to 2022 to 2025." ET. "While recent financial incentives under Modi offered Apple a cost-efficient path to set up shop in India, the California-based company is still making a fraction of its iPhones in the nation. And for every success, there are many companies that have quit India because of long-running challenges such as dealing with the country's bureaucracy, including General Motors Co, Ford Motor Co and Harley-Davidson Inc." "After contracting 16.7 percent year on year (YoY) to USD 29.8 billion in October, merchandise exports last month (November 2022) were USD 31.99 billion." BW. India's services exports were $250 billion and merchandise exports reached $419.65 billion, for a total of $670 in the financial year 2021-22. HT. China's exports were a colossal $3.95 trillion and its trade surplus was a record $877.6 billion in 2022. ET. India imported goods worth $118.5 billion from China, but exported only $28.1 billion worth, for a trade deficit of $101.02 billion. The Hindu. "Walmart and other PhonePe shareholders will have to pay nearly $1 billion in tax after the digital payments company shifted its headquarters to India." TOI. "Over 8,000 Indian startups have incorporated in Singapore since the year 2000." Is Walmart stupid? India is the second-most stock obsessed country in the world after Singapore, claimed a study. BT. It gives venture capital funds a chance to make handsome profits from Indians if PhonePe goes for an initial public offering (IPO). Despite the tax.   

Rule of Law.

At the social media platform Twitter, "It appears that till (Elon) Musk took over, matters like what tweets were deleted and which users banned were to a large extent decided by American security and intelligence, especially the Federal Bureau of Investigation (FBI)," wrote Sandipan Deb. "In the run-up to the 2020 presidential election, which Donald Trump narrowly lost, the agencies had asked for the suspension of a staggering 250,000 user accounts." "The FBI pressured Twitter to suppress the Post's blockbuster scoop about Hunter Biden's laptop by warning it could be part of a Russian 'hack and leak' operation - even while knowing the concern was unfounded, according to internal company records." New York Post. "The whistleblower who revealed the contents of US President Joe Biden's son Hunter Biden's laptop claimed in a new book that an FBI agent threatened him to stay silent." News18. Apparently, one agent DeMeo said, "It is our experience that nothing ever happens to people that don't talk about these things." However, Biden supporter CNN rubbished these allegations. "In fact, the opposite view emerges from sworn testimony by an FBI agent at the center of the controversy. And in interviews with CNN, half a dozen tech executives and senior staff, along with multiple federal officials familiar with the matter, all deny such a directive was given." They are hardly likely to admit that they acted as bandits. "The FBI paid Twitter nearly $3.5 million of taxpayer cash to ban accounts largely linked to conservative voices and target so-called 'foreign influence' operations, the latest installment of the 'Twitter Files' revealed." New York Post. "An FBI agent who was accused of bias in handling the investigation into Hunter Biden's laptop has resigned." Fox. FBI Assistant Special Agent in Charge Timothy Thibault "retired over the weekend, according to a source familiar with the matter. He was walked out of the building.., which is standard procedure, per the source." How convenient! "From 2013 through 2018 Hunter Biden and his company brought in about $11 million via his roles as an attorney and a board member with an Ukrainian firm accused of bribery and his work with a Chinese businessman now accused of fraud according to an NBC News analysis of a copy of Biden's hard drive and iCloud account and documents released by Republicans on two Senate committees. The documents and the analysis, which don't show what he did to earn millions from his Chinese partners, raise questions about national security, business ethics and potential legal exposure." "US President Joe Biden's officials have found a fresh batch of classified government records at a second location, in growing political embarrassment for the White House." BBC. This was from when Biden was vice-president to Obama. The US lectures the world about Rule of Law. But it seems that some are immune. Just like in India. 

Pyramid to diamond by 2024.

"India is witnessing record-breaking FDI inflows, said Prime Minister Narendra Modi, while addressing the investors virtually at the 7th edition of invest Madhya Pradesh - Global Investors Summit...in Indore." FE. That may be why the rupee has strengthened to 81.61 to the US dollar this morning, xe.com, after hitting a record low of 83.06 to one dollar in opening trade on 20 October 2022. TOI. "Today, the country boasts more than 4.3 million 'crorepati' (those with wealth of over Rs 10 million) households, equivalent to 23 million consumers," wrote Rajesh Shukla. "Consider this: by the end of this decade, the structure of the country's demographics will change from an inverted pyramid, signifying a small rich class and a very large low-income class, to a rudimentary diamond, where a significant part of the low-income class moves up to become part of the middle class." Poorer households are still in distress. "RBI's monthly bulletin indicates that commercial bank loans against gold jewelry increased by 218% between February 2019 and August 2022," wrote Raghuram Rajan, Rohit Lamba and Rahul Chauhan. "According to the National Family Health Survey, average land holdings were 22% lower in the latest round (2019-21). For households in the lowest wealth quintile, land holdings shrunk by 8.5% annually since the previous round, even though the land holdings of this quintile were growing between 2% and 5% per annum in surveys between 2004-05 and 2015-16." "The reassuring news is that India's gross domestic product (GDP) in the financial year ending in March 2023 will be significantly higher than in the financial year March 2020, the last one before the pandemic sent economies across the world on a downward spiral," wrote Niranjan Rajadhyaksha. However, in the next financial year, "Export demand will weaken as other major economies slip into recession." "Nominal GDP growth will be lower while government borrowing costs will be higher." Higher spending by an expanding middle class will naturally increase imports. "A flood of imports swelled the Centre's customs duty receipts in the three months to November," Mint. Receipts grew to Rs 1.41 trillion from Rs 1.26 trillion a year ago. As a result, "India's current account deficit, which is already at a nine-year high, is set to worsen further going forward due to the current scenario of high imports and slower exports, Deloitte warned in a report." The Wire. "India aims to cut spending on food and fertiliser subsidies to 3.7 trillion rupees ($44.6 billion) in the fiscal year from April, down 26% from this year...to rein in fiscal deficit." TOI. "Compared with January 2020, around 14 million fewer individuals - 4.5 million fewer men and 9.6 million fewer women - were employed in October 2022." ET. These astrological articles about how India will become the richest country in the world will probably continue till the general election in 2024, wikipedia. Long time for banana skins, though.    

Count the dollars.

"India's GDP will be close to USD 20 trillion by 2047 and per capita income may reach USD 10,000 (at current value of USD), Bibek Debroy, chairman, Economic Advisory Council to the Prime Minister, said." ET. "At current value of the US dollar" means that, as inflation erodes the value of the dollar, the final figures would be much higher. China's GDP in 2021 was $17.734 trillion in 2021. World Bank. "A section of country's households which earn over Rs 5 lakh ($6,250) and up to Rs 30 lakh ($37,500) per annum can be categorised in the middle class segment of the population. Around 55 percent of the population is in that category." Another 13% earn more than $37,500 and are considered rich. ET. India's total population is at 1,415 million, worldometer. That means 68% (55+13) of 1,415 million people, or a total of 962.2 million people, should be paying income tax every year. The total population of the European Union (EU) was 447.2 million in 2021, World Bank, and the total population of the US is 336 million, worldometer, for a total of 782.3 million. Which means that the number of people paying income tax should be nearly 200 million more than the combined population of the US and EU. However, "Over 6.85 crore (68.5 million) income tax returns have been filed so far for fiscal 2021-22 and the number is expected to go up further by December 31, a senior official said." ET, 16 November 2022. Of this, not everyone earns enough to be in the income tax bracket as shown by tax refunds of over Rs 2 trillion so far in this financial year. In the financial year 2019-20, a total of 14.6 million out of the then population of 1,300 million actually paid income tax. yahoo. If 962.2 million Indians were earning just $6,250, it would mean India's gross national income (GNI) should be in excess of $6013.75 billion per year, but the actual figure was just over half that number at $3,126.9 billion in 2021. World Bank. So, either, almost no one is paying income tax, which is impossible because the permanent account number (PAN) for paying tax must be linked with the biometric card Aadhaar. HDFC Bank. Or the figures of 55% middle class and 13% rich are pure cloud cuckoo land stuff. According to the government, 7.2% of Indians, that is 101.88 million, possess a passport. TOI. And, "Over 1.33 crore (13.3 million) Indians are living abroad at present, as per data submitted by the government." India Today, 1 December 2021. All these people presumably pay income tax where they are living and working. "Compared to January 2020, around 14 million or 1.4 crore fewer individuals were employed in October 2022, according to the latest CEDA-CMIE bulletin. " TOI. Clearly, it is impossible that 962.2 people are earning in excess of $6,250 per year. Irresponsible articles like this give the government an excuse to subject people to tax terrorism. And leads to Indian companies registering in other countries where tax rules are reasonable. Mint. It was clearly fake news. Should have been rejected.