A government on the people.

Thankfully, after an excruciating delay, a 9-judge bench of the Supreme Court ruled that privacy is a fundamental right of all Indian citizens. A lot of us strongly believe that privacy is not just a fundamental right, it is a basic human right because animals do not have any sense of privacy and one cannot be human without privacy. After all, we have been wearing clothes for over 20,000 years, and our close relatives, the Neanderthals could have been covering themselves 100,000 years ago. After repeatedly arguing that we have no right to privacy and, most horrifying, that we have no right to our own bodies, ministers are now lauding the judgement. We know that lawyers can speak from both sides of their mouths, but surely there should be some dignity. This case was important not just for India but for the entire world, because it sets the standard for personal freedom, wrote Prof Eben Moglen and lawyer, Mishi Chowdhary. "The importance of a fundamental right in our system is that it can only be enforced against the state. 'Platform' social media companies receive voluntary disclosures of personal information in immense quantities every minute, but they are not subject to constitutional controls. Moreover, though these corporates are indeed ubiquitous in our lives, they are not obligatory. In dealing with them we still have choices. Only the power of the state can, in fact, compel us to expose ourselves more fully than we choose to do," they wrote. We can choose not to be on social media and many people lie about themselves. We will be arrested if we lie to the government and biometric information cannot be fudged. The state has a monopoly of violence against citizens, against which we have no defence, but the law of self defence, sections 96 and 97 of the Indian Penal Code, protects us if we take up arms against criminals, terrorists or other attackers. Besides social media is free, but we pay heavy taxes to the government to serve our interests, and not to impose its will on us. Hounding on social media has become intolerable, wrote Megan Mcardle, and once something is published it is there permanently. "Whenever a new form of power arises, we need to think about how to safeguard individual liberty against it." Europe and Argentina have laws that guarantee 'a right to be forgotten' but our government is not arguing for that. It wants these companies to base their servers in India, no doubt to snoop on us. We do not have a government of the people, by the people, for the people, we have a government on the people. Only absolute privacy can protect us.

Zhou En Lai understood, so China is richer.

A Nageswaran was confused while researching government websites trying to find whether India allows visa on arrival for tourists. One site clearly mentions the names of 11 countries whose citizens are offered this courtesy at 8 airports in India. However, the Ministry of Home Affairs site says that only 4 airports have this facility but Chennai airport officials said that only Japanese nationals are allowed visa on arrival. Naturally, the report of the Fourteenth Finance Commission could not be retrieved from its own website or that of the Ministry of Finance and the 2 websites of the MoF look different. "Digital India is an enterprise for India's transformation on a scale that is, perhaps unmatched in human history," lectured the Prime Minister at Silicon Valley, in the US, in September 2015. What is the point of wrong information provided digitally? We do not have any reliable data about employment in India, wrote R Singhal. "One set of numbers claims the current phase of economic growth as jobless. Alternative data sets have accompanied vigorous assertions of rising employment. And there are many in the middle, trying to make sense of the scant (and outdated) data and wondering how anybody reached any conclusion at all." The Employees Provident Fund added 10.13 million new subscribers in the first half of this year, which would suggest many new jobs were added. Not just in employment. In 2015-16 the Agriculture Ministry estimated 30.15 million bales of cotton had been produced while the Textile Ministry said 33.8 million bales, a difference of 620 million kg. Perhaps not surprising when we have 72 ministers, in addition to the prime minister. The list has apparently been updated on 18 July. In 1956, the then Chinese Prime Minister, Zhou En Lai refused to leave the National Sample Survey Office, at the Indian Statistical Institute in Calcutta, because he was talking to Prasanta Chandra Mahalanobis, who set up methods of statistical surveys in India, wrote Prof AV Banerjee et al. "In the 1940s, even before India became independent, the ISI had emerged as one of the great centres for the study of statistical methods." Even GDP figures vary between those published by the NSS and the Central Statistical Organization. Prof T Jayakumar cannot understand how the nominal GDP grew by 1.1% when the real GDP fell from 8% to 7.1%. There is wide discrepancy between figures published by the Economic Survey II and those of the Reserve Bank with regard to the amount of currency in circulation. No wonder China's GDP is 5 times that of India. Could be more.

May seem easy but it is very difficult.

S Ray wrote about "The cold truth jobseekers face" in India. Why? "The bleak situation we have here is a result of the Indian youth's obsession with textbook education and white-collar jobs, and a consequent disdain for skill development and professional training courses." The government is spending thousands of crores on skill development centers but young people are not convinced. "Data provided by the National Skill Development Corporation (NSDC) shows that despite partnering with private companies, it has succeeded in training less than one crore people since May 2014." Will they be guaranteed jobs once they finish training? When the Prime Minister urges youth to be 'job creators' rather than 'job seekers', in his Independence Day address, it means that the government has no idea on how to create jobs. Trouble is that people need some income straight away to survive. When just 27.9 million people, out of a total population of 1,300 million, filed income tax returns this year, it shows how poor people really are. Given a chance people would prefer a steady salary than the uncertainty of trying to run their own business. Although there is no causality between ease of doing business, or EoDB, and a rise in economic growth there is a definite correlation between per capita GDP growth and EoDB, wrote Prof V Dahejia. What is most worrying is that year-on-year job creation is falling instead of rising, wrote H Jethmalani. Prof V Wadhwa warned of an impending shock to business leaders in India because they are resistant to change. This is because of Industry 4.0 which will be driven by Artificial Intelligence and robotics. So, the problems are very well known, but what are the solutions. NITI Aayog, which has replaced the erstwhile Planning Commission, presented a paper stressing employment generation. It said that industry should be concentrating on exports, rather than on the domestic market, there should be a shift from small enterprises to large companies and there should be a shift from informal to the organized sector. When you export you have to compete against others who are also trying to sell to the same customers, so this encourages innovation and productivity, wrote Prof R Hausmann. Why go to so much trouble when you can sell rubbish to citizens. As for increasing size of companies, Japan has 4.7 million small enterprises, employing about 30 million people, compared to just 13 thousand large enterprises, employing about 14 million people. Increasing education will not decrease inequality, wrote Nobel Prize winner, Paul Krugman. It is all about power and those who have power are not going to let go. In the case of India they are politicians and civil servants. The system gives them power, why should they change the system?

Why has it taken so long to understand?

In a half hour speech at Fort Myer military base in Arlington, Virginia, President Donald Trump laid out his policy on Afghanistan, in which he stressed that ending the war against the Taliban will depend on results and not on a timetable. And for the first time a US president laid the blame squarely on Pakistan. "For its part, Pakistan often gives safe haven to agents of chaos, violence and terror," he said. Former Taliban chief, Mullah Omar died in a hospital in Karachi in April 2013. Pakistan kept it secret for over 2 years and the news was announced by the Afghan government in July 2015. For some unknown reason the US has turned a blind eye to Pakistan's involvement in the 9/11 attacks even though India provided proof that Gen Mahmood Ahmad of the ISI transferred $100,000 to Mohamed Atta, the lead hijacker. Bill Clinton ordered missile strikes on Al Qaeda camps in Afghanistan in August 1998, in revenge for attacks against US embassies in Kenya and Tanzania, but Bin Laden escaped, presumably warned by the ISI. After that Bin Laden was terrified of using phones and preferred to give instructions through couriers. It would have been impossible for him to have planned and executed 9/11 attacks while hiding in a cave in Tora Bora. The Americans had him cornered a few months later but somehow allowed him and his comrades to walk freely into Pakistan, where he was protected for 9 years. "We can no longer be silent about Pakistan's safe havens for terrorist organizations, the Taliban and other groups that pose a threat to the region and beyond," said Trump. While acknowledging sacrifices Pakistani citizens have made he said,"But Pakistan has also sheltered the same organizations that try every single day to kill our troops. We have been paying Pakistan billions and billions of dollars at the same time they are housing the very terrorists we are fighting." It's a puzzle why it has taken the US so long to understand that 9/11 could only have been planned and executed by the ISI. The first plane hit the 80th floor of the north tower of the World Trade Center at 8.45 am. Why not lower? Because the rising smoke would have obscured the vision of the pilot of the second plane which hit the 60th floor of the south tower 18 minutes later. At around 10 am the south tower collapsed, followed by the north tower at 10.30 am. Such meticulous planning required people trained in strategy and tactics of war. So, what will Pakistan do if the US turns off the taps? Saudi Arabian economy is struggling to diversify as revenues from oil have plunged due to low prices. The only option is China which is struggling with over capacity as exports fall due to competition from other countries. But Pakistan may find that China is a predator and China may find that Pakistan is a parasite. As long as we protect our borders we can watch the fun.

How to know which professor is right?

"Cut the monetary policy some slack," wrote Prof V Dahejia, in defence of the Monetary Policy Committee of the Reserve Bank, or MPC, which meets every 2 months to decide on policy rate in India. Chief Economic Adviser, Arvind Subramanian has been vociferous in calling for a hefty reduction in policy rate by at least 50 basis points. Policy rate depends on predicting the level of retail inflation in the near future so "the best that monetary policy can do is to try and keep inflation within a band of uncertainty". "The reality is that the world over, in both advanced and emerging economies, and not just in the case of India's MPC, economists have been consistently over-predicting inflation in recent years," wrote Dahejia. Why? Apparently, the short run Phillips curve has become flatter and analysts maybe over-estimating Friedman-Phelps natural rate of employment, or both. In short, it is extremely complicated. "The broader point is that a well-functioning MPC does not jump up and down in the face of minor and potentially transitory shocks, but attempts to smooth the changes in policy rates over the medium to longer term. This naturally imparts caution (or, if you prefer, inertia) to rate setting behaviour because this means it is better to err on the side of not cutting rates rather than cutting too much and having to raise again in the near future (or the converse)." The MPC did cut rate by 25 basis points on 2 August, when 4 members voted for the cut, one voted for a cut of 50 basis points and one voted against any cut at all. After the MPC meeting retail inflation for July went up to 2.36%, compared to 1.46% in June, and wholesale prices rose by 1.88% in July, compared to 0.9% in June. Vegetable prices jumped by 21.95% in July. Prof Kaushik Basu, who was Chief Economic Adviser to India from 2009-2012, was not impressed with the MPC. "Instead of cutting rates by 25 basis points,it should have cut by 50, and signalled that this is the broad direction it intends to pursue in the future," he wrote. A higher rate of inflation, between 3-4% creates jobs in developing economies, high inflation is usually due to one item and not broad based and we need higher investment. But his real reason is that high interest rate is attracting foreign capital into Indian markets and making the rupee stronger. A large reduction in interest rate will stop such inflows and make the rupee weaker which will stimulate growth and exports. But what if capital flows out of India, causing the rupee to drop sharply? Inflation will jump because imports, especially oil, will become more expensive, and the MPC will have to raise rates again. Which professor should we believe?

Is 2019 decided already?

Prime Minister Narendra Modi is invincible as of now, according to a Mood of the Nation, or MOTN, poll carried out by India Today. If an election was to be held today the National Democratic Alliance will win 349 seats, 10 more than what it won in the last general elections in 2014. 20% of people think his performance has been outstanding so far and 43% think that it has been good. 24% of people think he is not afraid of taking risks, 23% applaud his crackdown on black money and 14% welcome that his administration is free of corruption. Most surprisingly, Mamata Banerjee of West Bengal has been rated the best chief minister. 33% think that he has been the best prime minister in our brief history, 17% opt for Indira Gandhi, 9% for Atal Bihari Vajpayee and only 8% for Jawaharlal Nehru. Of course, Nehru died in 1964, and 65% of our population is below the age of 35 years, so they will have little knowledge of the nation Nehru inherited from the British to form an opinion about his policies, both good and bad. The popularity of Indira Gandhi is surprising considering the bad press she gets regularly. According to motivation guru Simon Sinek, Modi is expert at making people concentrate on his intentions rather than his actual achievements. So, Modi is unbeatable. Not so fast, say MVR Gowda and S Soz of the Congress. "In contrast to its pronouncements, the government's own data suggest the economy is in a deep hole," they wrote. They point to the Economic Survey II which says that growth of both GDP and GVA will be softer and industrial production, capacity utilisation, credit and investment are all weak. Companies are unable to repay their enormous loans, which is why banks are struggling with bad loans of Rs 7.8 trillion. The Economic Report II is actually a "Cause for caution, not gloom", wrote NK Singh, who is Chairman of the FRBM Committee. FRBM stands for Fiscal Responsibility and Budget Management Act of 2003 which is supposed to impose fiscal discipline on government spending. In January this year, his committee recommended that fiscal deficit should be brought down to 2.5% over the next 6 financial years and government debt should be reduced to less than 60% of GDP by 2023. An Escape Clause can allow an excess of 0.5% on fiscal deficit, but this should be with the permission of the committee, wrote Ira Dugal. You cannot fool all the people all the time, said Abraham Lincoln. Just fool enough to win elections. That's all.

Will minimum wage lead to minimum jobs?

"The cabinet recently approved the Code on Wages Bill, which proposes to make minimum wages a statutory right for all citizens," wrote Puri and Manur. The bill seeks to incorporate various laws on wages passed in 1936, 1948, 1965 and 1976. But it will be a big mistake. "Seminal work by Nobel Prize winning economist George Stigler concludes that a minimum wage does not satisfy its original intentions -- elimination of poverty -- and will tend to increase unemployment and reduce family income." So, will it be a single figure across all of India, easily understood and simple to enforce? Of course, not. "The Bill recognises that a universal minimum wage across India and across different sectors does not work and proposes that the minimum wage set can be augmented based on the skill required, the arduousness of the work assigned to the worker, geographical location of the place of work and other factors which the appropriate government considers necessary." Who will decide what is fair wage? It will be done by "any number of committees and sub-committees". Which means juicy sinecures for retired civil servants and a chance to earn extra money on the side from employers and unions alike. Wonderful. Like the Goods and Services Tax, which was supposed to simplify indirect taxes, has 5 rates, varying cess on luxury or sinful goods. Besides, gold has a GST of 3%, a GST of 5% on making charges and a 10% customs duty. Why so complicated? Because, it gives civil servants untold opportunities to add to their incomes. Who drafts these bills? Civil servants. Minimum wage has to be set at a high rate to tempt people, enjoying life on MGNREGA, to work. A study by S Agarwal et al showed that "factory jobs have declined by 10% and mechanisation has increased by 22.3% as a result of implementing MGNREGA". As it is, manufacturing in India contributes just 15% of GDP, and unless it grows to 25-30% of GDP it cannot create enough jobs for our ever increasing population. Trouble is that industry in India is capital intensive and may become more so by increasing automation if minimum wages are increased. A UNDP report suggests that lack of jobs is likely to increase in the next 35 years. Higher wages will increase the price of goods. Already cheap Chinese imports are flooding into India because the rupee is so strong compared to the yuan. The situation must be dire if the number of young people looking for work is declining. Lack of ideas is so easy.

Who pays for oxygen?

Over 70 children have died recently in Baba Raghav Das Medical College in Gorakhpur, which happens to be the constituency of the Chief Minister, Yogi Adityanath. Apparently, the children died because there was no oxygen. Why? Because the hospital had not paid the supplier despite repeated reminders. A timeline of events show how Pushpa Sales, the company which supplied oxygen to the hospital, repeatedly wrote to administrators to clear its dues and threatening to stop supplies, but, as is usual in India, the letters were not answered. A hasty inquiry blamed doctors for neglect and blamed the company for stopping supplies because its business is linked to saving lives. Again, as is usual in India, there is no fault attached to politicians and civil servants, who receive eye-watering salaries and perks and, most crucially, have all the power, but are never responsible Politicians instantly blamed encephalitis for the deaths but hospital data shows that only 5 out of 30 children, who died on 10 and 11 August, suffered from Acute Encephalitis Syndrome, while others had a variety of serious conditions.  Dr Yogesh Jain questions the quality of care at BRD. Why were so many patients admitted to ICU, so that there were 3 children to one bed, which led to a shortage of ventilators, so that children were ventilated manually, and, led to a relative lack of qualified staff? A government hospital cannot refuse admission to very sick children and extreme poverty with a high birth rate means that medical services are overwhelmed. Sandipan Sharma defends suspended Dr Kafeel Khan, who apparently tried to buy oxygen with his own money. Gorakhpur is in UP which was won by the BJP, the party of the Prime Minister, with 312 seats out of 403 in March 2017. This is the same Prime Minister who has sanctioned 5 new branches of All India Institute of Medical Sciences, including one in Gorakhpur, as if excellence in medial education can be transferred through a brand, like in selling toothpaste or face cream. The PM is on a mission to eradicate corruption and black money in India, as when he made the entire nation stand in queues for hours to get our own hard earned money sanctified, when highly value notes were suddenly banned on 8 November 2016. Strange then that the BJP received Rs 1.59 billion from sources without PAN number or addresses, between 2012 and 2016 and Rs 21.25 billion from unknown sources in the last decade. While, we, the hapless taxpayers, have to provide fingerprints and iris scans to file tax returns. The Election Commission mourned a lack of ethics in tactics adopted by the BJP to win Rajya Sabha seats in Gujarat. Truth is like oxygen, a lack causes deaths.  

Exit is not easy. Ask Britain.

"The Brexit debate is an endless source of mirth for anyone with a dark sense of humour," wrote Prof B Eichengreen. Why? Because Brexiteers were predicting that the UK economy will grow much faster without the shackles of stifling European rules, while economists were predicting that Brexit will "deeply damage the British economy". "People in this country have had enough of experts," said Michael Gove, current Education Secretary. In the early stages there was no recession as the Bank of England cut interest rate and the pound fell, making exports cheaper. But now things have changed. Expecting prices of imports to rise with the fall of the pound people increased their spending. Now they have so much debt that they have to cut down. Rising cost of imports has increased retail inflation to 2.9% so that savers are predicted to lose 1.5 billion pounds in the value of their savings. Plans revealed by UK government Brexit negotiator, David Davis,  show how Britain is wriggling to keep free trade like now but stop unrestricted migration with EU. There are suggestions to keep a 'back door' between Northern Ireland and the Republic of Ireland, so that goods and people can move freely without check. Vince Cable of the Liberal Democrats thinks that there is a chance that Brexit may never happen. To make matters worse, the International Monetary Fund predicted a lower growth rate for the UK economy. It is 10 years since the global financial crisis and the countries are doing much better economically. Banks are much better regulated but "there will inevitably be another financial bubble", wrote Prof J O'Neill. He thinks that this time it will be led by companies which are resorting to share buybacks to increase returns of shareholders. Increasing 'shareholder value' is tied to compensations of company CEOs so they concentrate on short term gains instead of investing in long term growth, wrote J Nocera. Persistent extremely low interest rates are building asset price bubbles, wrote A Nageswaran. He thinks that there are "real estate, stock market and junk bond bubbles around the world". Global economy is in a perfect zone where it is growing at around 3.5% per year with persistently low inflation. Even the Bank of International Settlements thinks that inflation will remain low because labor has lost the power to bargain for higher wages. Central banks are stuck with low interest rates which are encouraging reckless borrowing and creating asset price bubbles. With all the uncertainty of global economic outlook Britain is having to negotiate how to leave the European customs union. How successful it will be will depend on answers to 4 questions regarding whether it will be richer, fairer, more open society where citizens have more control over their own lives. Perhaps, Brexit will not happen at all.

Spending during the festival season is the best index.

The Reserve Bank of India (RBI) is transferring Rs 30,659 crore of its surplus to the government for financial year 2016-17 (July-June), less than half of the Rs 65,876 crore it had transferred in the previous year, and substantially lower than what the government had estimated in its budget document (Rs 58,000 crore)," wrote T Bandophyay. The RBI earns this surplus through Open Market Operations, to control money supply, by earning interest on foreign securities, such as US Treasuries, through short term lending to local banks and through seigniorage, which is the money it earns through printing currency. Previously the RBI used to transfer 53.40% of its surplus to the government, saving the rest for unforeseen emergencies, but now it is compelled to transfer the entire amount. So why did the RBI earn less this year? Because prices of foreign securities, especially US Treasuries, have fallen, so the RBI has to reduce the value of its holdings according to market prices. The rise of the rupee has reduced the market price of its foreign currency holdings. The dollar bought Rs 67.32 in July 2016 but in June 2017 it fell to Rs 64.58, so the value of foreign holdings of the RBI has fallen by 4.25%. Printing and distribution of new currency notes and the cost of reducing the flood of money that poured into banks, through its Market Stabilization Scheme, during demonetization increased expenses What were the benefits of demonetization? Direct tax collections were higher, money deposited during demonetization is under scrutiny for tax evasion, digital payments have increased and more people are investing in stocks. The Prime Minister claimed yesterday that Rs 1.75 trillion is under scrutiny which means nothing because we don't know how much of it will turn out to be genuine. He knows people have short term memory so no harm in tall claims. Foreign funds have poured $7.8 billion into Indian stocks and local mutual funds have seen huge collections, wrote A Mukherjee. Higher use of cards maybe because of rising number of people shopping online, and this will rise as more people get access to broadband. RBI survey points to rising pessimism among people about jobs, earnings and economic conditions, and industrial production is going to remain slow. The State Bank of India, the backbone of our banking system, is gradually freezing up as it is hamstrung by bad loans worth a whopping Rs 5 billion. The festival season is about to start. Should we spend, or cling on to whatever we have?

Why do people seem to have forgotten basic maths?

A state owned Chinese newspaper, The Global Times, warned India of a trade war after India imposed anti-dumping duties on 93 products imported from China. Because of the confrontation in Doklam there has been a call to boycott Chinese goods in India but that has not stopped imports from China increasing by 33% in the April-June quarter of this year. "It is the Indian economy that will suffer because of the boycott," the paper warned. How? India's exports to China fell by 11.75% last year while our trade deficit with that country increased to $52 billion. So, surely we have less to lose? But, India need not feel lonely. Another government mouthpiece, the China Daily, warned the US that any attempt to reduce the trade deficit with China "could trigger a trade war". Last year the US suffered a trade deficit of $347 billion with China. This year the deficit is already more than $170 billion. Donald Trump has ordered an investigation into Chinese infringement of US intellectual property rights, which could be anything up to $600 billion. The Director of National Intelligence estimates that the US loses up to $400 billion every year through official hacking of US companies. Although, US officials have been warning of theft of intellectual property for a long time, China has merrily continued to do so because there are those in the US, just like many in India, who seem to be terrified of a trade war with China. William Pesek wrote that China will retaliate by devaluing the yuan sharply, dump US treasuries, levy taxes on Walmart and Apple and cancel orders for Boeing planes, resulting in the loss of 180,000 American jobs. That is just so much froth. If China dumps US treasuries the yuan will rise, if it cancels orders for Boeing it will have to pay a lot more to Airbus and if it levies taxes on US firms its exports will drop like a stone. China not only steals trade secrets it actively creates barriers to imports so that it earns a huge trade surplus year after year, wrote Michael Schuman. China deliberately uses trade as a weapon, wrote Prof Brahma Chellaney. Surprisingly, Chinese expats living and working in the US, like Prof Yasheng Huang, also support China's violation of all trade protocol and rules. China's financial sector is in a mess, wrote Prof Zhang Jun, and the government is trying to control it without bringing it down altogether. So how does China get away with threatening every country even though it has more to lose? Probably because people in other countries forget basic maths out of self interest.

Why carry out unnecessary surveys?

For the first time the government has carried out a survey of the economy in mid-year. The first one was carried out before the budget in January, so it is about middle of the calendar year, but our financial year starts on 1 April so mid-year should have been in October. Why this hurry in releasing a second volume? The survey warns of the dangers of sustained deflation. What does it mean? Does it mean a contraction in the supply of money or does it mean a fall in prices of goods and services? The survey talks of structural fall in inflation due to persistently low commodity prices, especially oil and, predictably, calls for interest rate to be lowered by 100 basis points. Retail inflation is low because of lower food prices, even though consumption remains at previous levels. The fall in food inflation is partly due to increased production, due to a good monsoon and, partly due to lower Minimum Support Price, or MSP, at which the government buys agricultural items. The real economy grew by 7.1% in 2016-17 despite the sudden shock of demonetization, when the government withdrew all Rs 1,000 and Rs 500 notes from the circulation. "This growth suggested that the economy was relatively resilient to the large liquidity shock of demonetisation which reduced cash in circulation by 22.6% in the second half of 2016-17," the Survey said. "The apparent resilience was even more marked in nominal growth magnitudes because both nominal GVA and GDP growth accelerated by over 1 percentage point in 2016-17 compared with 2015-16." However, it said that growth will not be as expected this year. Why? Because of twin balance sheet problems, which means companies defaulting on debts and banks with large bad loans on their books, farmers' loan waivers, and increase in fiscal deficit of states. Reducing MSP and then spending Rs 3 trillion in loan waivers to farmers has merely transferred deficit from the center to the states and so they have curtailed spending. What the survey shows is that the informal sector was badly hit by demonetization but it is recovering and cash in circulation is still not back to normal, but nominal GDP is rising. Perhaps, the key to increasing GDP growth is to bring supply of currency back to the levels it was before demonetization. To increase growth, manufacturing has to increase from its dismal level of 16.2% of GDP to 25-30% of GDP. Hourly, rate of wages in manufacturing has actually fallen. Level of capacity utilisation of Indian companies is between 70-72% and they will start expanding only when it goes up above 80%. Indian companies are unable to compete with imports of Chinese goods because the rupee is so strong. If the rupee falls inflation will rise. But then, interest rate might rise as well. Like going round in circles. What is the point of surveys?

We are independent, but we do not belong.

Tuesday is our Independence Day, the day in 1947 India rid itself of over a thousand years of slavery under Muslim and British invaders. On this day the Prime Minister lectures the nation from the ramparts of the Red Fort, schools force students to sing patriotic songs and people treat it as just another holiday. The US also celebrates its Independence Day on 4 July, when it got rid of British rule, but their celebrations are the exact opposite of what happens in India. There the people celebrate with parades, barbeques and fireworks. Why the difference? Because, in the US, the people own their nation, their flag and their anthem, while here the politicians own us. The US has strict laws regarding its flag but the people make clothes in the same colors and draw it on the road because they love it, here we would get arrested. Ruchir Sharma analyses "Why politics has nothing to do with economics in India". People are voting against incumbents, even those who have improved the economies of their states. The Indian economy is not doing well under Modi but stock prices keep going up. A lot of that maybe because of huge foreign investment in Indian stocks and bonds because of excess money in richer countries. During the Congress government stocks of politically connected companies were very high but now "dubious companies are hard to find among the stocks with the best performance..." "Bad billionaires come from corruption-prone industries like oil and real estate, good ones come from industries like tech and healthcare that tend to be relatively free of political influence and make the most impact on productivity." Global oil prices are down and part of the reason why real estate has fallen maybe because the economy is weak. Modi's popularity depends on his ability to persuade the masses that the middle and upper classes are responsible for the malaise in the country because they are all corrupt and his policies, like demonetization and biometric identity cards, are hitting them. Only 28.2 million people filed tax returns this year, 48 million filed tax returns in 2014-15. The number of people in employment has fallen from 408.4 million to 405.4 million but the number of people looking for work has also fallen from 25.9 million to 13.7 million, which means people have given up looking for work. Rajmohan Gandhi wrote that the hyper-nationalism is different from the nationalism in 1947, the year we got independent. That is only natural. At that time our leaders understood the British tactic of divide and rule and united against it. But now the people are divided because they do not own the nation. They do not feel a part of it. 

Anniversary of 2007, should we celebrate?

"On 9 Aug 2007, the European Central Bank flooded its money markets with billions of euros of emergency cash to prevent a seizure in the European banking system after France's BNP Paribas became the latest to shut down investment funds hobbled by a collapse of US mortgage and asset- backed bond markets," wrote R Carvalho. "Serial bank collapses in Britain, the US. Germany and elsewhere were to follow over the following 18 months." Lehman Brothers went bankrupt in September 2008 and 'The Great Recession' followed. So, how is the health of the global economy on its tenth anniversary? Global trade, as a percentage of GDP, has grown, but not to the pre-crisis peak. Equities are 22% above levels of 10 years ago, because of near zero interest rate, and yields of benchmark 10 year government bonds are half what they were, as central banks have bought bonds to release more funds into the banking system, known as quantitative easing. Those who invested in stocks just before the crisis saw a fall in the value of their investments by 47%, but the S&P 500 has given annual returns of 7.8% since then, so that they have still gained. Inflation has remained low, which is another reason for low interest rates, real wage growth of labor has remained flat, even as corporate and financial profits have boomed, giving rise to justifiable anger. Total global debt has ballooned by 327% to $217 trillion. Total GDP of the world is around $80 trillion and is expected to reach $90 trillion by 2020. So, total debt is 2.5 times the global GDP. Banks which had large exposure to the US mortgage market have lost their positions in terms of the size of their assets, while Chinese banks have taken over. Banks did not realize how vulnerable they were. US banks have recovered and are again too large to fail. What if bond yields start to rise in developed economies? Should that happen traders fear that emerging market bonds, and currencies, will slump. Stock markets in emerging economies are reminiscent of 2007. There is "Still too much risk in the financial system", wrote Mohd El-Erian. Although, central banks have strengthened financial systems so that "risks posed by the banking system have been reduced markedly, those assumed by financial players that aren't banks have come roaring back". Which means financial companies are just gaming the system. The central banks know this but are afraid of turning off the taps in case markets collapse. Reforms have to come from governments but politicians are reluctant to act because they do not want to take the blame. Seems that we should prepare for another shock.

War is bad, but will it lead to freedom?

The US is a superpower, with an economy worth $18.46 trillion, while North Korea is an impoverished nation, with an economy worth $28.50 billion, sandwiched between China and South Korea, bordering the Sea of Japan. And yet both are making bloodcurdling threats against each other. It would be comical, like a 2 year old child taking on a sumo wrestler, except that N Korea has nuclear weapons and has developed ballistic missiles capable of reaching Guam. The Korean peninsula has been divided by a Demilitarized Zone, or DMZ, since the Korea war in 1950. In 1950 both China and the Soviet Union were impoverished communist states. The Soviet Union disintegrated in 1991 and the Russia that has emerged is not communist and China, although still ruled by the Communist Party, embraced capitalism during economic reforms initiated by Deng Xiaoping in 1978. North Korea has been left behind in a time warp. Any reform would mean an end of the regime, but, what is more important is that both China and Russia, especially China, are happy with a buffer between their borders and South Korea, with US troops and missiles. The people of N Korea are pawns in this great game, living with hunger and deprivation and probably unaware of the technological revolution taking place in the rest of the world. Kim Jong Un became president of N Korea at the age of about 28 years, when his father died, and has consolidated his power through a systematic elimination of anyone who displeased him, including members of his own family. He has seen the ends of Saddam Hussein and Col Gaddafi, who had no nuclear weapons, so has devoted his time in power in developing nuclear weapons and missiles capable of delivering them. He knows that even if he cannot reach the US, if he is capable of taking out Seoul, Tokyo and Guam with nuclear strikes, the West will not attack him lightly, as they did Iraq and Libya. Thousands of people rallied in Pyongyang in support of the regime. One banner read, "Let's become bullets and bombs devotedly defending respected Supreme Leader Comrade Kim Jong Un." A state-run newspaper in China advised the government to stop the US if it attacks first, in an attempt to overthrow the Kim regime, but to stay neutral if N Korea attacks first. Does it mean that if N Korea is deemed to be the aggressor China will be content to let US forces right up to its border? Trump's biggest enemies are at home. Politicians, Democrats and Republicans, are hostile to him because he promised to "drain the swamp" in Washington, and the swamp naturally does not want to be drained. Who gains from a fight between the US, N Korea and China and between Trump and the Congress? Russia, which has seen more sanctions inflicted on it. And India, if China gets involved. 

The Reserve Bank seeks to protect us by staying silent.

To the disappointment of banks and markets, the Reserve Bank imposed restrictions on new issues of Masala bonds in June. Masala bonds raise money from foreign investors in rupees, which takes away the risk of a fall in the value of the rupee at the time of redemption. In 2012-13 Suzlon and Wockhardt defaulted on their dollar loans and faced enormous pressures from foreign creditors. Masala bonds seek to reduce the risks faced by those companies. The RBI put a ceiling to the rate of interest at which the bonds maybe sold and also increased the period of maturity for issues of over $50 million. "The central bank is clipping the wings when the market was just starting to take off," said a disappointed trader. "It is a retrograde step for sure, it will kill the Masala market further," said a banker. Not just the RBI, the Securities and Exchange Board of India, or Sebi, ordered a temporary stop to any new issues of Masala bonds, wrote R Singhal. The RBI became concerned because "certain Indian companies raised foreign currency loans in overseas markets and then on-lent the proceeds to domestic entities as rupee bonds." The RBI is battling "a tsunami of portfolio flows", which means foreign investment into Indian stocks and bonds. "FPI investments in equity and debt markets saw combined net inflows of Rs 171,581 crore til July end. This is six times more than the Rs 27,055 crore invested by FPIs during the same period of 2016." With so much money flooding into India the Real Effective Exchange Rate for the rupee is 18% overvalued. This, despite the RBI buying over $100 billion from the market so that our foreign currency reserves climbed to $386 billion in July. Buying dollars releases rupees into the system which is already flush with liquidity, following demonetisation in November last year, and slowing of growth. A strong rupee reduces prices of imports, especially oil, and keeps a lid on inflation, which then increases pressure on the RBI to lower policy rate, which was lowered by 25 basis points to 6%. Some think that the RBI should allow the rupee to rise so that imports are affordable. Already India's trade deficit with China is over $50 billion, so a stronger rupee is only going to increase that. India needs to create millions of new jobs and for that it needs to increase exports, as the East Asian economies did. A survey by the RBI in June showed that people expect lower employment growth and lower income growth and manufacturers also predict a lower employment growth. Then there is a danger of flight of currency if something unexpected happens, like a war with North Korea. No wonder the RBI prefers to keep silent on external risks.

They can't say it, but is it all a ponzi scheme?

VA Nageswaran disputed Alan Greenspan's statement,"We are experiencing a bubble, not in stock prices but in bond prices." "Stock markets can ratchet up expectations of future cash flows from owning the stock and thus rationalize any stock price. In theory there is no ceiling on optimism on future earnings.," wrote Nageswaran. "On the other hand, bond prices reflect the present value of future coupons and the redemption value of the bond." Bond prices are high because markets expect inflation to remain low, which means they expect growth to remain subdued well into the future. Which is why interest rates are at such low levels. Nageswaran blames the International Monetary Fund for advising the Federal Reserve of the US and the European Central Bank to continue with loose monetary policy. "The IMF is part of the problem, as are major central banks, with respect to its embrace of monetary policy snake oil that delivers no growth but delivers on market instability and inequality." MA El-Erian also disagreed with the World Economic Outlook of the IMF which predicts low growth till 2022, after a little upward bump in 2017. El-Erian thinks that "the medium-term baseline for continued low growth would worsen the risks that the IMF correctly identifies". Future growth depends on government policies. "But if policymaking continues to lag, the new normal will be remembered as the frustrating prelude to a period of unsettling financial instability, recessionary pressures, and even greater inequality and more damaging anger politics." Alex Brazier, a director of the Bank of England recently warned of rising household debts. Unsecured personal debts in the UK have reached an eye-watering level of 198 billion pounds. People are buying bigger cars on debt, on condition that they just have to return the cars after 4 years if they cannot pay their loans. That puts lenders are great risk. Europe is furious with US Congress for imposing new sanctions on Russia, just to spite Donald Trump. If the US imposes sanctions on EU companies the EU may impose tit-for-tat sanctions on US businesses. Michael Schuman has doubts about the growth potential of China because of the government's interference in markets and business. Foreign investors will be wary of investing in China if they feel that the government will suddenly change rules of business. The Chinese government has forced Dalian Wanda to sell of 91% of its theme parks to a rival to reduce foreign debt, wrote K Vaswani. In its efforts to find new markets for its companies China is forcing huge debts on other countries in its Belt and Road project. The IMF is predicting a growth rate of 5% for emerging economies but that may drown in debts to China. Globalization is looks increasingly like a giant ponzi scheme.

Would assistance be better than trying to abolish?

"I have lived life with suicidal ideation and more than one failed suicidal attempt," wrote Akhileshwar Sahay as he made an emotional heartfelt plea for a program to reduce the rate of suicides in India to zero. Mr Sahay is a director at Feedback Ventures, an infrastructure firm in Gurgaon and his article contains a bit of corporate jargon, such as "paradigm shift" and "eschewing incrementalism in favour of radical transformational, and systemic preventive agenda", but is sincere because he is a patient of bipolar disorder. He also has a history of hallucinations, which are more common in psychotic disorders. Patients with bipolar disorders swing between a state of mania, during which they are hyperactive and irritable, and depression, during which they have no energy and may commit suicide. It is not uncommon and many prominent people suffer from it. Sahay cites studies by Dr Vikram Patel, one of which show that 1,87,000 people, aged 15 years and older, committed suicide in India in 2010, of which 1,15,000 were men and 72,000 were women. He gives a breakdown of figures and calculates that India could save at least Rs 250 billion if suicides are totally prevented. Every patient attending the Henry Ford family clinic with medical conditions, in Detroit, in the US, were asked about suicidal thoughts and given therapy. Suicide was completely abolished among these patients in 2008 and 2009. It would be impossible to translate this success to the entire population, especially in a country like India with a population of 1.30 billion. Perhaps, we can ask a different question. Why don't more people commit suicide in India, where everyday is a grind, essential services are not available for most and a brutal rapacious government makes life precarious? Healthcare is not available for the vast majority of people, and private care is extremely expensive. Most of us would surely welcome some form of assisted suicide in comfort rather than suffering an excruciating death for lack of money. Sex workers are afraid of visiting hospitals for fear of discrimination, so suffer in silence. With no social safety net the pressure on children to qualify for entrance into professional institutes is so extreme that one student commits suicide every hour. More than 20,000 housewives have been killing themselves every year since 1997. Curiously, suicide rates are lowest where women live in large families and highest in high income nuclear families. Clearly, the stress of earning enough to be able to afford the luxuries that are now available in India are proving too much for some. 7.5% of people suffer mental health problems. To improve their health we have to improve the whole nation.  

Impossible to get the monkeys of its back.

Everyone knows more than the Reserve Bank of India. As always, politicians and government officials have no doubts that policy rate must be lowered significantly. The Chief Economic Adviser, Arvind Subramanian wanted the rate to be reduced by at least 50 basis points. In June the Finance Ministry asked to meet all the members of the Monetary Policy Committee, to pressure them to reduce rates, but the MPC refused unanimously. "In recent times, seldom have economic conditions and the outlook warranted substantial monetary policy easing," said Subramanian in June this year, when the MPC kept the rate steady at 6.25%. In September 2015, Mr Subramanian was terrified of a looming deflation and even the eminent economist Arvind Panagariya was calling for a 50 basis point rate cut. To add to the fire, retail inflation fell to 1.54% in June. True, this is the first time in decades that prices are rising so slowly, but they are not falling, so there is no deflation. Giving in to the hysteria the MPC reduced policy rate by 25 basis points last week, but frustrated officials, who did not want to be identified, insisted that the RBI is 'behind the curve' and the rate should have been cut by 75 basis points. R Jagannathan thinks that "the RBI doesn't seem to know its backside from its elbow". He thinks that five of the economists on the MPC are idiots and only one, Prof RH Dholakia knows anything, because he recommended a 50 basis points cut. The RBI sets policy rate, not on the level of inflation at present, but on how prices will behave in the next 6 months to one year because policy rate takes a few months to have any effect. It has come under ferocious attack for its expectation of higher retail inflation when actually the rate has been falling. On the other hand, RK Pattnaik thinks that a rate cut was not warranted and the RBI acted just to get the monkey, or monkeys, off its back. Obviously, the RBI cannot blame the government directly, but Mihir Sharma points out that the RBI is quite clear that the fall in private investment is not due to interest rate, but due to the inability of banks to pass on the lower rates because of huge bad loans on their books and because implementation of infrastructure projects is too slow. Having advanced the Union Budget to January the government has already exhausted 80.8% of its predicted fiscal deficit in the first quarter itself. The farmer loan waiver is expected to cost Rs 3.1 trillion. Assam needs extra help because of floods. The Real Effective Exchange Rate, or REER, is 18% overvalued for the rupee, which makes imports, especially oil, cheaper. The US added 209,000 jobs last month and if this results in a rise in wages, interest rate in the US will rise, the dollar will get stronger and the rupee may fall. If that happens the monkeys will blame the RBI for rising inflation. 

The indecency of exposing personal details.

"The government claims 99% of people over age 18 now have Aadhaar. I, however, belong to the 1% who don't," wrote Tathagata Satpathy, a member of the Lok Sabha. Aadhaar is a biometric identity card that is being forced on all citizens to avail of any service, including opening a bank account, getting a mobile phone, and even for filing tax returns. The government and private companies are profiting from our personal data. "The biggest industrialist in India stated very clearly: 'Data is the new oil'," wrote Mr Satpathy. "If data is the 'new oil' and you are extracting that oil from me, it implies I am the resource. I should be compensated for providing that resource." He recommends a Universal Basic Income of Rs 12,000 per year to every citizen, regardless of wealth. A 9-bench Constitutional Court has been set up to decide whether privacy is a 'fundamental right' for citizens of India. The Court is considering splitting privacy into three levels, intimate, private and public. The judges are too learned. It is very simple: only humans need privacy, so privacy is a basic human right. Nandan Nilekani, who perpetrated this indecency on citizens, swore that biometric identity is completely safe. This was echoed by Union Minister Ravi Shankar Prasad. The government says that privacy is not eroded because religion, income or class are not included and it is safe because the information is encrypted, the database is secure against hacking and any attempt to hack into it will be a criminal offense. But many experts have grave doubts about its security and the possibility of identity theft. L Vishwanath that biometric data maybe stolen at the point of verification and once a person's data is compromised she cannot use it for life, because biometrics cannot be changed like a password or a pin number. As for the data being secure it has been proven to be a complete lie. One Abhinav Srivastav has been arrested for hacking into the Aadhaar database through Digital India App, which is has been created by the government. He even demonstrated to the police how easy it was. He is a hero and we should be raising a large sum of money through crowd-funding to reward him for exposing the lies told to us. Since he is an Indian he has been caught, but what if a foreign agency or terrorist hacks into the database. He can produce identity cards and use them to obtain phones and launder money to create havoc inside India. How will the government catch him? The chief of UIDAI claimed that no data was stolen. Should we believe him?  

Should we give tax sops to Apple?

Apple, makers of iPhone and iPad, has removed its VPN services from its app stores in China. VPN, or Virtual Private Network makes point-to-point connections, allowing users to bypass censorship with relative anonymity, and is encrypted, so that messages cannot be read. Both China and Russia have cracked down on VPNs because they want to eliminate online dissent in any form. Naturally, Apple CEO, Tim Cook defended the decision saying that the company always obeys local laws. Of course, it does, especially as revenue has fallen 14% in the first quarter of this year. Over 20% of Apple's profits come from China, so Cook will justify any government action so as not to annoy authorities there. The same Tim Cook took a highly principled stand against unlocking an iPhone used by the San Bernadino shooter Syed Farook. "At stake is the data security of hundreds of millions of law-abiding people and setting a dangerous precedent that threatens everyone's civil liberties," he said at the time. Ah so, who cares about law-abiding Chinese? Liu Xia, widow of Liu Xiaobo, who developed liver cancer while in prison for dissent and died last month, has been 'disappeared' by the government in Beijing so that she cannot talk to journalists. Bloomberg Gadfly explored both sides of the Apple story. Tim Cook is depending on sales in China to keep profits at high levels and keep shareholders happy. And high profits ensure juicy bonuses. Last year Cook home around $8.75 million, of which his base salary was $3 million and $5.37 million was bonus. Unfortunately, that was quite insufficient because he was paid a salary of $10.3 million in 2015. Apple links compensations to performance and revenue generated by the company was a mere $215.6 billion when the target was set at $223.6 billion. Operating income was $60 billion, instead of the expected $60.3 billion. As Lalu Prasad said,"I don't want them to die in poverty," when defending his sons against charges of Rs 5 billion land scam. Manufacturing and selling in China has other benefits, like avoiding taxes in the US, which increases profits. And bonuses. India also has 1.3 billion people, just like China, but most people are unable to buy expensive Apple products so the company refuses to produce its phones in India unless it is bribed with tax sops. Before we get excited we must remember that the European Union has asked Apple to pay $14.5 billion in back taxes. Principles cost money. So, is it a good apple that keeps the doctor away or a bad apple which we should avoid? Depends on the money.

Is anyone worth that much?

Gabriele Marcotti explains  "Neymar's record breaking move: What it means for Barcelona, PSG and more". Naturally, there are diverse opinions on whether any player is worth so much, 222 million euros or $260 million, whether Paris Saint-Germain is breaking the Financial Fair Play regulations, or whether Neymar will get his comeuppance for being so greedy. Writing for Bloomberg Gadfly, Lelia Aboud explains that Neymar's fees aren't that surprising  because "the players themselves aren't generally grabbing a larger share of the pie. It's just that the pie has gotten very, very big." Football clubs are earning so much that they can afford to pay such eye-watering amounts for players. However, for those of us who enjoy watching these wizards on television it still doesn't make sense. A player can miss entire seasons through injury, as O Fenomeno, Ronaldo did in 1999-2000. The tag of being the most expensive player on the planet raises expectations of fans to such levels that very few can fulfill their demands. Paul Pogba's transfer from Juventus to Manchester United last year, at 105 million euros, was the most expensive before this, but, although he has been good, he does not seem to have satisfied everyone. Gareth Bale was bought by Real Madrid from Tottenham Hotspurs in 2013 for 100 million euros, a record then. Real wants to unload Bale to buy Kylian Mbappe from Monaco. Seeing the amount of money Barcelona got for Neymar, Monaco has raised 18 year old Mbappe's price to 200 million euros, hoping that Barcelona will compete with Real to buy him. So, paying such astronomical sums is probably not good for clubs or players, and it is certainly not good for fans because the price of tickets and cost of sports channels on television go up. Manchester Untied bought Romelu Lukaku from Everton for 85 million euros. Manager, Jose Mourinho is probably looking for someone like Didier Drogba who performed so well for him at Chelsea. Lukaku has been quick to deny that he is at the same level as Drogba, probably realising the danger of such comparisons. It is like comparing a batsman with Donald Bradman, in cricket. It is usually a death knell for a player. Some people feel that paying such huge sums of money will ultimately destroy the 'beautiful game'. Only some football players command such salaries. According to Business Insider, basketball players earned the highest average salaries in all sports in 2016, beating Premier League and American Football. But there is no comparison. Basketball is limited to only those who are over 7 feet tall, while football is played by people of every height and it belongs to the masses, because there is no need for expensive gear. So maybe the players deserve what they get.

Not easy to give up power, is it?

Prof Ricardo Hausmann is saddened by "Venezuela's unprecedented collapse". He was once Minister of Planning in Venezuela, so was probably a citizen of that country. Why is he sad? Because, the economy has collapsed. "Venezuela is running out of food. Hospitals are overcrowded with sick children while doctors don't have enough medicine or X-ray machines. Electricity isn't guaranteed. About the only thing Venezuela has in abundance is chaos." So bad is the situation that "on 22 July, when the border with Colombia was reopened, 35,000 Venezuelans crossed the narrow bridge between the two countries to buy food and medicines". In 2010, one US dollar was worth about 8 bolivars, today it is worth 8,000 bolivars, and inflation is expected to reach 2,000% next year. Venezuela has the highest oil reserves in the world and from 1950 to 1980 it was the strongest economy in South America due to enormous public spending, based on foreign debt. The price of oil fell in the 1980s causing the economy to contract and inflation to rise to 84%. There was public rioting in Caracas in 1989. Hugo Chavez was elected president in 1998 and in 2000 oil prices soared, fell in 2004, but rose again to a peak in 2011. Like in the 1960s-70s, Chavez used the oil wealth to start social programs for the poor, while berating the rich as enemies and ranting against an imagined US conspiracy to take over Venezuelan oil. Chavez nationalized the oil industry, resulting in a fall in output by 1 million barrels per day. When prices fell in 2014 the economy collapsed. It needs a price of over $120 a barrel just to break even. Nicolas Maduro became president in 2013, when Chavez died. The opposition won a two-thirds majority in parliament in 2015, since when they have been calling for Maduro to resign. There have been violent clashes between police and protesters for months and over 100 have died. Maduro called for a vote to elect a new parliament but, it now seems, that there was massive cheating. Maduro has his own supporters who see protesters as agents of the elite wanting to take away social schemes started by Chavez. Once people have something they are extremely reluctant to give it up, as Donald Trump is discovering in his efforts to get rid of Obamacare. Having used violence against protesters Maduro is probably afraid that he will be prosecuted and jailed if he loses power, so he uses more violence to cling on. Perhaps, Prime Minister Modi should remember not to reach a point of no return as he seeks to consolidate his power by ranting against corruption, while announcing long lists of social programs for the poor. It can be very hard to give up power. Ask Maduro.

New type of farmer, new type of problems. Same result.

"In the winter of 1988, the feisty farmer leader from Uttar Pradesh, Mahendra Singh Tikait, laid siege to Delhi, with thousands of his followers and their cattle gathering on the boat club lawns near Parliament," wrote S Bera. But the farmers of today "are not our dhoti-clad, topi-wearing, hookah-smoking farmers". They are educated and tech-savvy. In 1988, agriculture contributed 30% of GDP and employed 60% of workers in India, whereas today, it contributes just 15%, while employing 55% of workers. Farmers are protesting again. Why? "The fundamental root of the agrarian crisis is the intense pressure of population on land. Demographic pressure has pushed down the land:man ratio to less than 0.2 hectares of cultivable land per head of rural population," wrote Prof S Mundle. "Around 83% of rural households are entirely landless or own less than 1 hectare of land." They are forced to sell their produce to licensed traders who pay them 25% of what consumers pay wrote R Kaundinya. With rising input costs, despite subsidies given by the government, about 52% of agricultural households are in debt, the average size of debt being Rs 47,000. Crops are planted according to previous year's demand and when there is excess production prices crash causing acute distress. After a shortage of pulses last year the government pushed farmers to shift from cotton to pulses with the result that the price of pigeon peas crashed this year, while the price of cotton has gone up. The government is committed to buying a certain proportion of crops at a fixed price, known as the Minimum Support Price. This provides a floor for market prices and so prevents prices from falling too far in the event of bumper crops. The present government has been raising MSP at less than the rate of inflation. If prices of food items go up in India the government immediately bans export of those products to increase supply in local markets, while importing those products at lower prices from abroad. In 2015-16 the government spent Rs 1.4 trillion on imports of agricultural products. Why spend such a huge amount in paying foreign farmers, instead of paying Indian ones? Because food and beverages constitute about 46% of our consumer price index, so forcing food prices down keeps retail inflation in check. Retail inflation rate was at 1.54% in June 2017. This allows the government to apply pressure on the Reserve Bank to reduce policy rate. So, the government is forcing poverty on farmers to force interest rate lower. Why? Because politicians and civil servants believe that a low interest rate will stimulate the economy. But, are prices likely to stay down or is this temporary? We shall see. Meanwhile, farmers will keep protesting.