Don't have to prove your case before breaking buildings?

"Between 6.30 am and 9 pm on December 5, almost a dozen government teams in Indore cornered one man." "They couldn't find him. Jitendra Soni vanished hours before the hunt began. He knew he was in trouble." "Between 18 and 30 November, he published in his local evening tabloid, Sanjha Lokswami, and on its YouTube channel, a series of reports allegedly exposing the contents of a CD showing some Madhya Pradesh (MP) politicians and civil servants in a compromising position with women in an alleged honeytrap racket." Following a complaint to the police by city municipal engineer Harbhajan Singh, that he was being blackmailed for Rs 30 million by 2 women who had records of his relations with them in a hotel room, a Special Investigation Team (SIT) of MP police alleged "that the gang of women blackmailed the influential men with the audio and video proof of their encounters into granting government funds and contracts to companies and non-governmental organisations (NGOs) with which they were connected." MP is no stranger to criminal scandals involving politicians and civil servants. There was the Vyapam scam in 2013, in which politicians and civil servants were helping candidates to cheat in selection tests for medical and engineering college seats in exchange for vast sums of money. After the scam broke more than 40 journalists and witnesses died under mysterious circumstances. Two police officers investigating the deaths received threats from 'influential' people. A 19-year old medical student Namrata Damor was found dead near railway tracks on 7 January 2012. Three years later journalist Akshay Singh visited her home but started coughing and frothing while talking to her father. Hours later he was dead. Then Chief Minister Shivraj Singh Chouhan of the BJP refrained from asking the Central  Bureau of Investigation (CBI) but was forced to accept it under Supreme Court order. The opposition Congress labeled the CBI a "Compromise Bureau of Investigation" for allegedly tampering with the hard disc of a computer with proof of Shivraj Singh's involvement. Naturally, the Congress campaigned on the scam for the assembly election in MP in November 2018. Although it got more popular votes, the BJP won 109 seats to 114 seats for the Congress. The Congress formed the government in MP with veteran leader Kamal Nath as Chief Minister. The Congress has started a fresh investigation into the Vyapam scam, possibly hoping to involve some BJP politicians and milk some more mileage out of the scam. So what has the Congress done regarding the sex scandal in MP? By 7 December "government departments in Indore struck down on every aspect of Soni's inlfuence. His newspaper's licence was recalled, his gun licence and state-sanctioned armed guards were withdrawn, his son arrested, and nearly every building owned by him and his family raided and the razed -- bungalow, factory, bar, hotel, cafe, tabloid office, printing press." An insane frenzy of revenge without proving any culpability in a court of law. All political parties are organised gangs. Sadly we live in a police state where they can do anything they like. Helpless.

Winning elections not linked to economic growth.

"In India, there is no evidence that good economics can win you elections. There is no guarantee that a government that focuses on the economy will get re-elected," said Shankar Sharma. "The Modi-led BJP government is doing what it thinks is right for the country." Seems like an oxymoron. How can it be right for the country if it is bad for the economy? "India's economic report card continues to be in the red as the year draws to a close, with 10 of the 16 high-frequency indicators below the five-year average trend as of November, according to the Mint Macro Tracker." "India's macro-economic outlook is 'more subdued and uncertain than in recent years', the International Monetary Fund (IMF) said in its latest country report on India." This is hurting ordinary citizens. "India's grocery consumption basket shrank by an average 5 kg per household in the 12 months ended September from the year earlier, although they spent slightly more overall." The average basket size dropped by 3%, from 222 kg in September 2018 to 217 kg in 2019, but the cost went up to Rs 15,015 in 2019 compared to Rs 14,724 in 2018. Average values do not reveal how many of the rural poor are facing starvation, as Sayantan Bera discovered. India has been lucky because low oil prices helped to keep the current account deficit (CAD) under control, while "Low global interest rates have helped India attract $18.6 billion from foreign portfolio investors (FPIs) in 2019 so far," wrote Joshi and Tandon. The inflow of foreign currency ensured that the rupee weakened slowly, which allowed the Reserve Bank (RBI) to cut interest rate by 135 points. However, we must guard against any external shock because "fragile economies fall harder in a risk-off scenario". "Consensus seems to be building that the economy needs government intervention to tide over the slowdown," wrote Rajrishi Singhal. Which means increased government spending. But, "International credit rating agencies have already served notice on India, stating unequivocally they won't take kindly to any fiscal slippage." Singhal thinks that a rating downgrade will not affect flow of foreign funds looking for higher returns. Trouble is that rating agencies can and do influence investment decisions even in the US. To earn the faith of global investors "the government will also have to start improving the quality of data it releases", wrote Singhal. What if the data shows that our economy is much worse than we think? The government has to be very careful before increasing its spending to stimulate economic growth, wrote an editorial in the Mint. "So long as the rate of interest paid on government debt is higher than the rate at which the economy expands, our debt would mount rapidly and revenue growth will not be able to lighten that load." To reduce yields on government bonds the RBI resorted to "Operation Twist", wherein it bought long term bonds while selling short term ones. "The yield on the 2029 benchmark bond fell as much as 15 basis points to 6.604%", while the GDP grew by only 4.5% in the second quarter of 2019. Hence Modi has forgotten about the economy and is concentrating on winning elections. Thankfully, they are not related.   

Is it a trap with no escape?

"India's economy showed nascent signs it may be turning a corner after six straight months of anemic activity," wrote Anirban Nag. "Two of the eight high-frequency indicators compiled by Bloomberg News came in stronger in November based on a three-month weighted average reading..." "Services Purchasing Managers' Index (PMI) rose to a four-month high of 52.7 in November", with the manufacturing sector PMI "jumping to 52.7 from 49.6", but exports contracted by 0.3%, "capital goods imports contracted sharply by 21.8% in November", "consumer confidence dropped to its lowest level since at least 2014", and "industrial output contracted 3.8% in October". "The Indian economy is in a transitional phase, given the many structural reforms GoI (government of India) has introduced," wrote B Yadav. "These reforms are currently showing that growth is in slow track, but will eventually ensure that the economy will emerge more resilient." With a growth rate of 4.5%, "India is no longer in the top three or four" fastest growing economies of the world, wrote Prof Kaushik Basu. "In fact, it is not in the top 30 or 40." "Between 2011-12 and 2017-18, for Indians living in rural areas (a vast majority)," "on a per capita basis, people are now consuming 8.8 percent less than they were doing five years ago". "The richest 1 percent Indians owned 53 percent of all the wealth in the country." "The government's official data, released as part of the Periodic Labor Force Survey Report 2017-18, shows that the country's unemployment rate has not been this high in 45 years." On 1 November, US based Cognizant Technology Solutions (CTS) "which has 75% of its workforce based in India" announced that "it was closing down its content moderation business, resulting in job cuts for an estimated 12,000 personnel". "Within days of this came in reports that Infosys would be shedding between 4,000-10,000 of its people across all grades." The rate of unemployment is highest among those who are graduates and above, so hopes of finding suitable employment for those losing their jobs would be slim. Worse: "Value of new state government projects saw a 75% decline from a year-ago period in the June-ended quarter of 2019, settling at the lowest in fifteen years," wrote Surbhi Bhatia. "The past couple of quarters saw a sharp drop in new project announcements, data from the project tracking database of the Center for Monitoring Indian Economy (CMIE) shows." "The government is staring at a shortfall of at least Rs 63,000 crore in compensation payout to the states" for the Goods and Services Tax (GST). Which means lower investment. So are we stuck in a low income trap? We have to avoid the "Four Horsemen" said the Economic Survey of 2018. Even so, India needs to recognise "that for low income nations a 5% growth rate is the new benchmark of success", wrote Ruchir Sharma. We are stuck. 

Indian economy opposite of other emerging economies.

Prof VA Nageswaran confessed to being like a broken clock in predicting a collapse of financial asset price bubbles but has been proved wrong so far. "More than half of European pension fund managers said that quantitative easing (QE) had undermined the long-term viability of pension plans" and 65% of 38 pension consultants said "QE would be very hard to unravel without huge market volatility". Stock markets have defied all fundamentals. Although corporate profits declined from $1.792 trillion in the third quarter of 2014 to $1.621 trillion in the third quarter of 2016, US stock prices remained buoyant. "Nearly $13 trillion of sovereign debt is currently trading at negative yields," which could be the "mother of all bubbles". Could there be a repeat of 2008-09? "The financial-market buzz has seized on the possibility of 'reflation trade', in the hope that the recent global slowdown will be followed in 2020 by accelerating growth and firmer inflation," wrote Prof Nouriel Roubini. "US and other equities are trending toward new highs, and there is even talk of a potential 'melt-up' in equity values." However, a slowdown in China, persisting weakness of Europe, renewed trade war or conflict in the Middle East could trigger a collapse of the bubble. Couple of weeks back President Donald Trump halted new tariffs on Chinese products. In return, China halted new tariffs on US corn and auto parts. China's exports were down 1.1% in November, "after a drop of 0.9 percent in October on slowing global demand". Imports were up 0.3% from a year earlier. Online P2P lending in China, earlier encouraged by the government, was spiraling out of control. "Outstanding P2P loans peaked about two years ago at more than $150 billion" which prompted the government to shutdown the number of providers from around 5,000 to 1,490. At a cabinet meeting at Zhongnanhai in late May "officials were grappling not over the trade war, but how to tackle a home-grown adversary: about $35 trillion in corporate, household and sovereign debt". At the beginning of the year central banks in emerging markets were increasing liquidity but now "emerging-market central bank liquidity has dried up" which "helps to explain the anomalous poor performance of emerging market currencies". "The greatest risk remains, as it has been for years, that China succeeds in averting a Lehman-style credit crisis at home, but at the cost of an economic slowdown that would affect the rest of the world." Not in India. Here the stock market is hitting record highs almost daily while the Reserve Bank (RBI) has been buying dollars to keep the rupee from appreciating to much. Foreign exchange reserves are a record 454.492 billion. Indian markets are expected to rise even further on renewed growth. We export little and even that is falling so a global slowdown led by China may not affect us at all. We may become king of the wreckage.

GDP is about money. And money is finite.

"While it is true that there has been a decline in the growth rate, reading GDP numbers in isolation doesn't give us a holistic picture of the economy," wrote Bhupendra Yadav, National General Secretary of the BJP, which is the party of Prime Minister Narendra Modi. "The Indian economy is in a transitional phase, given the many structural reforms GOI (government of India) has introduced. It should emerge stronger once the positives of these reforms have percolated the market. The good news is that the percolation process is already underway." Some green shoots may have sprouted already. "Passenger air traffic volumes climbed 11.2 percent in November", "Maruti clocked the highest volumes since March of this year", and "fuel demand rose over 10 percent in November mainly driven by higher consumption of petrol and diesel". This figures maybe because of comparison with particularly low numbers in previous months, 'the base effect'. "India expects its oil consumption to expand at the slowest pace in six years as the economy sputters," wrote D Chakraborty. Consumption of petroleum products is expected to rise by 1.3% to 216 million tons. "That's the slowest since the 0.9% demand growth in 2013-14, when crude oil averaged over $100 a barrel." One reason is the 95% tax on fuel products which inhibits people from using their vehicles. The Finance Minister added another Rs 2.50 to the price of petrol in the Budget in July. Till the end of last year the government had collected Rs 11 trillion from taxes on petrol. "GDP is basically the sum of private consumption expenditure, government expenditure, investment and net exports," wrote Vivek Kaul. Leaving out government expenditure, the non-government part which forms 87-92% of the economy "grew 3.05% in July-September and was 150 basis points lower than overall growth of 4.55%," "The government expenditure grew by a whopping 15.64% and in the process pushed up economic growth to 4.55%." "India's government has nobody to blame," wrote Mihir Sharma. "Since early in his first term, Modi has largely abandoned his campaign promise to get government out of business. Instead he has relied on the public sector to build a welfare state and prop up growth." "But the money is rapidly running out." Some people recommend increased government spending to revive growth. "Certainly it's possible to see a temporary revival in the medium term if handouts increase. But that won't be sustainable." On the other hand, the International Monetary Fund (IMF) advises less spending. "A clear sense of keeping to the target of fiscal consolidation is very important," said IMF Chief Economist Gita Gopinath. "Now that the task of hauling the economy out of its slump is squarely the government's, central finances will have to come into focus. Can a burst of extra spending do it?" wrote an editorial in the Mint. Modi won the last election in 2019 by ensuring welfare program reached the poorest households, wrote Prof Ila Patnaik, and party workers carried that message to voters. Trouble is people get used to handouts and want new ones. Otherwise they may get annoyed.     

Winning was easy. Now for the hard part.

The Conservative Party, led by Prime Minister Boris Johnson won the general election in UK on 12 December by a huge majority. "This means the Conservatives will have their biggest majority at Westminster since Margaret Thatcher's 1987 election victory." It was as much a disaster for the Labour Party which lost traditional strongholds that had voted Labour for decades. Labour MPs who lost their seats blamed their leader Jeremy Corbyn for the disaster. According to YouGov, 35% of people approve of Boris Johnson, while 47% of people disapprove of him, giving him a negative approval rating. "He has a reputation as an untrustworthy buffoon and an even more sinister history of racism: He has compared women in burkas to 'letterboxes' and claimed that Muslim immigrants lack 'loyalty to Britain' because of their religion: 'Islam is the problem,' as he put it. He once penned a column describing Africans as 'pickaninnies' with 'watermelon smiles'." wrote Zack Beauchamp. He won because Corbyn was even more unpopular so that "While Johnson at minus 12 in the YouGov approval rating polling, Corbyn was at negative 40." Corbyn was blamed for anti-Semitism in the Labour Party and his refusal to apologize for it. Indians blamed him "for his anti-India and anti-Hindu stance after towing Pakistan's line over Kashmir in the aftermath of the Article 370 abolition". North of the border the Scottish National Party (SNP) won "48 seats after securing 45% of the vote -- 8.1% more than in the last general election in 2017, when it won 35 seats". Labour was virtually wiped out. The Scots are against Brexit and leader of SNP Nicola Sturgeon claimed the resounding victory as support for her demand for a referendum on independence from the United Kingdom. A previous referendum on independence in 2014 was heavily rejected by the Scots by 55% to 45%. Johnson has clearly indicated his opposition to another referendum in Scotland. Soon after results came in the Brexit bill was passed by the House of Commons and Johnson has promised to take Britain out of the European Union (EU) by 31 January. To make Brexit binding, Johnson intends to pass a bill limiting the transition period of negotiating a trade deal with the EU till 31 December 2020. During the transition period Britain will follow EU rules on trade and continue to contribute to the EU's budget. Johnson believes that leaving the EU will save 350 million pounds per week which can be spent on the National Health Service (NHS). At the same time Johnson wants a free trade deal with Europe, with free movement of goods and people. Whether the EU will want to be seen to be encouraging Brexit with a sweet deal for Britain, which may encourage other nations to leave, remains to be seen. If the time proves too short for negotiating a deal is Johnson prepared to take Britain out without a deal, with a hard border between Northern Ireland and the Republic of Ireland and immigration and customs check in both directions? The hard part starts now. 

Are people daring to speak out at last?

Political parties have latched on to the Citizenship Amendment Act (CAA) to mount protests against Prime Minister Narendra Modi's government. After being trounced in the general election in May of this year opposition parties have quickly turned the Act as being anti-Muslim. With Muslims comprising at least 15% of the population it has been easy to bring thousands on to the streets in often violent protests. The major mistake was to use the term "illegal immigrants" instead of "refugees" to define people fleeing religious persecution in neighboring Muslim countries. "The Act seeks to amend the definition of illegal immigrant for Hindu, Sikh, Parsi, Buddhist and Christian immigrants from Pakistan, Afghanistan and Bangladesh, who have lived in India without documentation." Since these are Islamic countries Muslims cannot face religious persecution in them. The problem is that Assam, which has a large number of immigrants, does not want any non-Assamese people,including those from other parts of India, to settle there. The second problem is that the Act will create a National Register of Citizens who have to prove that they were resident in India before 1971, which could be impossible for many citizens born around 1950 because this was just after independence and institutions were being established. Modi's party the BJP is a hegemonic party, wrote Neelanjan Sircar. "Fundamentally, when a party is hegemonic, the chief aim of policy is to bolster its own organisation and entrench it in society. The logic that stifles criticism within a party must then be extended to the population as a whole." "Scholars of India's political history will see strong similarities between the position of the BJP today and the Congress in the late 1960s and early 1970s." The BJP is becoming as corrupt as the Congress. "Alas, after post-election machinations in Maharashtra and Karnataka, many MLAs look very well fed, and those feeding them have a lot of food to distribute," wrote SA Aiyar. "Modi's personal reputation for integrity may remain strong, but not the BJP's." Indians have a tendency to hero worship and supinely give up their freedoms because of their trust in politicians. Modi is an expert in persuading people so they don't see that making Fadnavis the chief minister of Maharashtra for three days was to transfer Rs 400 billion state funds to the central government. Ten MLAs of the Congress were tempted into joining the BJP in Goa, including one alleged to have bought a minor girl from her mother and raping her repeatedly. Modi has been surviving on bombast, wrote Prof Kanti Bajpai but people maybe getting impatient. "As the recent state elections have shown, Indians are losing patience with boosterism and bombast. The prime minister has time to change course. Unfortunately, he seems to be trapped in a Lutyens bubble of his own making." Will Modi burst his own bubble? 

Trump is going through fire. Is he being purified?

As expected, Democrats in the House of Representatives voted to recommend impeachment of President Donald Trump on two counts of abuse of power and obstruction of Congress. While every Republican voted against the proposals, two Democrats voted with the Republicans and Tulsi Gabbard, a Democratic candidate for president in 2020, voted 'Present' on both articles. Democrats have never accepted Hillary Clinton's defeat to Trump in 2016 and have been fishing around for any excuse to try and remove him from office. At first they charged him with colluding with Russia when it was discovered that teenagers in a small town in Macedonia called Veles were generating wild stories supporting Donald Trump. "The young people in Veles may or may not have had much interest in American politics, but because of the money to be made via Facebook advertising, they wanted their fiction to travel on social media." Macedonia is not Russia but under Democrat pressure Special Counsel Robert Mueller was asked to investigate if there was any collusion between Russia and Trump campaign. Mueller did not find any evidence of collusion but said in his report that he could not certify if Trump was innocent of obstruction of justice. Right on cue, a 'whistleblower' emerged who had heard Trump pressuring Ukraine President Volodymyr Zelensky to investigate former Vice President Joe Biden's son Hunter Biden regarding his business affairs in that country. President Zelensky denied that he has been pressured or that there was any blackmail but the Democrats, itching to impeach Trump any which way, latched on to this as evidence of abuse of power. "But there's a gaping hole in this line of defense, as it leaves out vital context and ignores the fact Zelensky's hands are tied by the necessities of his job." Zelensky must be lying because it does not suit the Democrats. What was Hunter Biden doing in Ukraine and why had his father the former Vice President "successfully gotten a Ukrainian prosecutor removed from office". "The move raised questions about possible conflict of interest and if Biden was trying to shield his son from an investigation into the company, whose founder faced multiple investigations into alleged tax evasion and money laundering." As chief executive it has to be Trump's duty to expose any crime. Chairman of House Intelligence Committee Adam Schiff repeated allegations from rogue FBI agents even though he knew them to be false. Doesn't that make him guilty of abuse of power and obstruction of justice? Trump wants the articles of impeachment sent to the Senate, where Republicans have a 53:47 majority, immediately so that the charges maybe thrown out, but House Speaker Nancy Pelosi has delayed sending the articles, presumably to insult Trump a little longer. All this could actually help Trump win re-election in 2020, wrote Seema Sirohi. "His approval rating hasn't plummeted as might be expected, but stayed in the range of low to mid 40% as before." Democrats must be hoping they have covered up any wrongs that Hunter Biden may have committed so that his father is not tainted if he wins the primary to become the Democratic candidate for president. Or it could become a festering sore if he does become the candidate to take on Trump. Questions remain. 

How much can we consume while in ICU?

With 1 million Indians entering the workforce every month there was great optimism for the economy in 2007, wrote Vivek Kaul, but since 2011 "things have started to go south and now, in 2019, we have enough evidence to say with reasonable confidence that India's so-called demographic dividend has started to unravel and is the main reason behind the current economic slowdown". The rate of unemployment among 15-29 year olds has jumped from 5% in 2011-12 to 17.4% in 2017-18. Private consumption expenditure constitutes 59.4% of the economy and the growth of this metric has fallen from 17.53% in 2011-12 to 7.02% this year. People have been saving less and borrowing more to finance consumption. Naturally, the number of new investments has contracted while the value of dropped projects has soared from Rs 4.04 trillion in 2010-11 to Rs 20.74 trillion n 2018-19. A study predicts that retail loans for buying real estate and vehicles will double to Rs 96 trillion in the next five years. How this will happen when growth of per capita gross national disposable income (GNDI) is slowing down is not explained. Some green shoots are visible. "Passenger air traffic volumes climbed 11.2 percent in November, the fastest pace in 2019 so far, while Maruti clocked the highest volumes since March this year of 139,133 in November." Fuel demand rose by over 10% and bitumen, used in road building, also rose. Former Chief Economic Adviser Arvind Subramanian said "India is facing a "Four Balance Sheet" Challenge -- comprising banks, infrastructure, plus NBFCs (non-banking finance companies) and real estate companies". "It is India's Great Slowdown, where the economy seems headed for the intensive care unit." "After a collapse in rural incomes and a de-growth in casual wages -- heightened by the ban on high-value currency notes in end 2016 -- a recent National Statistical Office (NSO) survey leaked by Business Standard showed a significant 9% drop in rural consumption, including on staples, between 2011-12 and 2017-18," wrote Sayantan Bera. "With access of jobs and food worsening, there have been frequent reports of starvation deaths from Uttar Pradesh and Jharkhand." While food inflation climbed to 10.01% in November core inflation, which strips out volatile food and fuel costs, fell to 3.26%. "Core inflation being at a five-year low indicates the sluggishness of economic activity," wrote Vivek Kaul. Which means lower wage growth. Meanwhile, the government has asked tax officials to extort as much tax as they can which will worsen tax terrorism. Restrictions have been imposed on imports of gold and silver while the Reserve Bank (RBI) is buying dollars to stop the rupee from overheating. Why is the rupee so strong when the economy is headed for ICU? Because the stock market is hitting record highs everyday so that the prices of stocks are 26.57 times forward earnings of listed companies. So, higher share prices make some richer while we become poorer due to higher taxes. The nation is gasping in ICU.

Logic sacrificed in this meaningless debate.

"One of the most important economic reforms accomplished by the Narendra Modi government was the Agreement on Monetary Policy Framework, which formalized the targeting of inflation," wrote Prof Dubey and Mishra. The idea is popular and, "Since 1990, it has been adopted by eight advanced and 32 emerging economies." "However, an issue that received minimal attention in the Urjit Patel Committee report and in the recent debate on the growth slowdown is that of the output cost of such a large and quick disinflation." At its latest meeting in December, the Monetary Policy Committee (MPC) kept interest rate unchanged at 5.15% by unanimous opinion. "Not a single economist among the 43 surveyed by Bloomberg News predicted this outcome," wrote Daniel Moss. Why, when "Central banks generally hate giving surprises"? The reason was food inflation caused by late heavy rains. "For a major economy, India appears far too worried about inflation targets, especially when other central banks are questioning their effectiveness." "If demand is sliding then price increases ought to subside. There's little inflation in a graveyard." Disinflation, or falling inflation, through monetary policy leads to a fall in output, and, hence, a slowdown in the economy. wrote Dubey and Mishra. This is the 'sacrifice ratio'. India's GDP grew by a mere 4.5% in the second quarter of this financial year, compared to 7% in the same period last year. "India is better off with a low and stable inflation, but this has surely not been costless," wrote Dubey and Mishra. The constant debate about inflation and interest rate in India is illogical and meaningless. Those who demand a higher rate of inflation must enumerate a figure they think will be ideal. Even the most ardent Modi supporter would surely not want an inflation rate of 10 million, as in Venezuela. The fact is, analysts will calculate the real GDP growth rate by deducting the rate of inflation from the nominal rate of growth and so, given a high rate of inflation, the rate of growth of real GDP will remain low. Why this constant clamor over inflation and interest rate? Because high inflation helps the government by reducing the value of government debt and by increasing tax collection as company earnings increase and higher wages lead to higher income tax collections. Thus, tax collection depends on nominal GDP, which is raised by high inflation. A low rate of interest reduces the borrowing cost of the government while penalising savers, usually retired people, thus transferring wealth from senior citizens to politicians. By not slashing interest rates more drastically the MPC "did real injury to the economy" and "needs to be wound up", wrote an angry R Jagannathan. We would absolutely support that. It will stop the stupid meaningless debate.       

The story may have begun, but what is the plot?

"Since 1991, when systematic economic reforms were launched, the economy has oscillated between periods of high and low growth with the latter lasting two to three years," wrote Prof A Panagariya. There is, therefore, no reason to panic about the fall in the growth rate of the gross domestic product (GDP) to 4.5% in the second quarter, after growing at 5% in the first. Private final consumption expenditure (PFCE) grew at 5.1% compared to the same period last year, showing that consumer spending is down. Naturally, gross fixed capital formation (GFCF), which shows new investment, grew at just 1%, compared to 11.8% in the same period in 2018. "The Indian consumer has traditionally been the most dependable source of demand whenever the economy lost momentum," wrote N Rajadhyaksha. But, "The narrow Indian consumer market is showing signs of fatigue because there are not enough new entrants into the pool of discretionary spenders." The economy grew at 6.4% from 1992-93 to 1999-2000, "plummeted to 4.1% during 2000-01 to 2002-03 and then grew at "8.2% for a continuous nine-year period from 2003-04 to 2011-12". India missed a great opportunity by refusing to join the Regional Comprehensive Economic Partnership (RCEP), wrote Gurcharan Das, but it could become a $5 trillion economy, as promised by Prime Minister Narendra Modi, in 10 easy steps. "First, get over an inferiority complex and change our old mindset of export pessimism that has limited our share of world exports to 1.7%," wrote Das. India needs to lower tariffs on imports to improve the competitiveness of our industries, improve infrastructure and utilise vast tracts of land lying unused with public sector companies, wrote Prof Ram Singh. India should close a trade deal with the US, wrote Frank Islam, but despite several meetings that has not happened so far. "Currently, US businesses face significant market access barriers in India. These include both tariff and non-tariff barriers, as well as multiple practices and regulations that disadvantage foreign companies," said US Commerce Secretary Wilbur Ross. Instead of going down tariffs on imports could increase. The commerce department has asked the finance ministry to "levy border adjustment tax (BAT) on imported goods to offset the impact of levies such as electricity duty, clean energy cess, levies on fuel and that are not part of goods and services tax". First levy excessive taxes on domestic goods and services and then increase tariffs on imports to level the playing field. Because the government is "unlikely to meet tax revenue target in 5 years". The government wants the top 25 companies to invest more to stimulate economic growth. They will naturally want protection against imports. At the same time, it is forcing telecom companies to pay huge taxes, licence fees and penalties by 13 December, which may see at least one company going bankrupt. "India's story has just begun," said CEO of Niti Aayog Amitabh Kant. Then, what were we doing for the last 72 years?

We are having a wonderful time, they tell us.

The Indian government deliberately practices disinformation to hide its failures by confusing the people, wrote Gautam Bhatia. The government claimed a growth rate of 6.6% when the actual figure was 4.5%, it claimed that its program of providing free school meals was a resounding success when a UN survey found that rural India has larger number of children with malnutrition than Sub-Saharan Africa, and claimed that Delhi's water is safer than most European cities when it was found to be polluted. "India is like a large unwieldy prison, in which the warden carefully filters news of the outside world and makes it more palatable for consumption. The idea is to insure that the inmates are not left uninformed or out of touch, but are given incoherent and competing views of the larger perspective." Apparently, not everyone believes these fairy tales. "Nearly 10,000 Indians were detained in the US in 2018 by law enforcement agencies as part of their operations to identify and remove aliens who present a danger to national security or are a risk to public safety, according to a government report." Indians pay Rs 2.5-3 million each to people smugglers to be helped to enter the US illegally. Clearly, if they are willing to pay a fortune and risk the lives of their children, they are not buying the canards put out by the government. Last month a woman veterinarian was gang-raped and murdered in Hyderabad by four men. On 6 December, all four accused were shot dead by the police during a reconstruction of the crime scene. The police claim that the men snatched weapons from them and began shooting forcing the police to return fire, killing all four. Extra judicial killing is common in India and is known as "encounter". While the nation rejoiced, "many judges and columnists expressed dismay at police vigilantism, saying it violated human rights and the rule of law," wrote SSA Aiyer. "The Supreme Court on Thursday appointed a three-member inquiry commission headed by former SC judge VS Sirpurkar to conduct a probe into alleged encounter killings of the four men accused in the gang-rape and murder of a veterinarian in Telangana." "Sorry, but the real culprit is a moribund judicial system that simply does not deliver what can reasonably be called justice," wrote Aiyar. The public supports encounters because of its contempt of the judicial system. Why were the men able to snatch weapons from the police? Because the Supreme Court banned the use of handcuffs for criminals as a violation of their human rights. Police have to apply for judicial permission to handcuff dangerous criminals, making it easy for them to escape. Courts take years to deliver a verdict, often after the death of the plaintiff. The gang-rape and gruesome murder of a young woman in a Delhi bus in 2012 created a furious outrage in the whole nation and the adult perpetrators were sentenced to death by hanging. In a mockery of the system, one of the men has appealed to the Supreme Court to convert the death penalty to life in prison because pollution in Delhi will be lethal in the long run anyway. When the nation is a prison the guilty have all the rights. Citizens obey in silence. 

When the solution caused the problem.

"How can India's most precious resource, its crores of children, adolescents and young adults, be actually educated, taught to be lifelong learners, instead of being merely sent to school and a free meal?" asked TK Arun. Healthcare, housing for all, care for the elderly and protection of environment are necessities. All this needs good governance, which means reform of politics. "Industry routinely inflates project costs to create a war chest with which to pay off a the neta-babu-political thug nexus, besides paying for that getaway to Thailand. The inflation cost structure makes for pricier output." "To cease this political funding need to come off the books of companies." This government started the Electoral Bond Scheme wherein any individual or company can buy bonds from the State Bank of India and donate it to any political party. The bonds are anonymous so no one knows who the donor is but the bank, and hence the government, knows who bought the bonds. Naturally, the ruling BJP got over 95% of bonds, helping it to win elections. Politics can only be reformed by those in power, which means politicians need lots of money to bribe voters. Prime Minister Narendra Modi "has relied heavily on welfare schemes to boost hos popularity. In some parts of India, it is hard to locate a voter who has not benefited personally from one of Modi's schemes, or is not related to someone who has," wrote Sadanand Dhume. "But is it sustainable? With economic growth slowing to a meagre 4.5%, the fiscal deficit ballooning and so-called tax terrorism by rapacious taxmen driving businesses into their shell, it is hard to see how." If welfare schemes are benefiting the majority of people has Modi achieved some of what Arun is demanding? The problem is that welfare schemes are financed by taxes raised by the government, which depend on nominal GDP, and the growth rate of nominal GDP fell down to a record low of 6.088% in September 2019. The Budget predicted a GDP growth rate of 12% , so with the rate of growth dropping to nearly half of that there will be a substantial drop in expected tax collection. The government needs to spend more to stimulate GDP growth to increase tax collections to pay for welfare schemes but that will mean increasing debt. Modi suddenly withdrew Rs 1,000 and Rs 500 notes from circulation hoping to earn Rs 3 trillion from notes that would not be returned. "After demonetisation, considerable amounts of cash made their way to banks, who on-lent a major part of that to NBFCs (non banking financial companies)," wrote Arvind Subramanian. They in turn lent heavily to the real estate sector and with both real estate and NBFCs is trouble debt funding has dried up. So, what to do? "Stepping up government expenditure on consumption and investment is the only answer," wrote Deepak Nayyar. But that is what started the rot in the first place. Oh dear.  

British people rejected Labour handouts.

Prime Minister Boris Johnson won a massive victory in Thursday's general election which gave him absolute majority in the House of Commons. "That means the Conservatives will have their biggest majority at Westminster since Margaret Thatcher's 1987 election victory." The total number of seats is 650 which means 326 gives absolute majority. In 2017, the then Prime Minister Theresa May had a working majority of 17 but lost it in a snap election, which she called because opinion polls showed a healthy majority over the opposition Labour Party. This time the Conservatives increase their seats from 317 to 365 and Labour was hammered from 262 down to 203. North of the border, the Scottish Nationalist Party (SNP) increased their seat share from 35 to 48. Leader of SNP Nicola Sturgeon wants a "legal" referendum to decide independence for Scotland so that the Scots can remain a part of the European Union (EU) as Johnson is committed to taking Britain out by 31 January. "We have won votes and the trust of people who have never voted Conservative before," he said. "These people want change. We cannot, must not, must not let them down." Johnson can now get his deal with the EU passed by parliament. The deal takes the whole of the UK out of customs union with the EU but Northern Ireland will still follow EU rules on customs so as to have free trade with the Republic of Ireland. The problem for Johnson is that the Conservatives lost 7 seats in Scotland to end with just 6 seats, the Lib Dems won 4, while Labour has been virtually wiped not with just 1 seat. With an overwhelming 48 seats Sturgeon thinks that "a referendum has to be legal and accepted because I'm not in the business of just having a referendum, I want Scotland to become independent..." The Labour manifesto for this election, with its Socialist handouts and nationalisation of utilities, would be easily recognised in India. It promised to create a million jobs in every region with a minimum wage of 10 pounds per hour, free full-fiber broadband to every home, free education with lifelong learning, old age care, expansion of the National Health Service (NHS) and nationalisation of rail, mail, water and energy. This would presumably be financed by increasing taxes on the rich and on properties. The Conservatives, on the other hand, promised more nurses, more police and extra spending on education without any increase in  income tax, VAT or National Insurance contributions. The British rejected Labour showing the UK is a developed country. Even a picture of a little boy sleeping on a pile of coats on the floor of a hospital did not touch Johnson, while Labout leader Jeremy Corbyn was unable to shake off charges of anti-Jewish racism. The British rejected handouts. When will India do the same?     

What they do with our money is more important.

"The US, Mexico, India, China and Chile tax global income. Western Europe, Japan, Canada, Peru and Colombia tax territorial income," wrote Prof Ricardo Hausmann. "if the world moved toward global taxation and enhanced some incipient information-sharing mechanisms, the impact on inclusive growth, especially in the developing world, would be very positive." The US forces all countries to share financial information on US citizens. "For example, the US Foreign Account Tax Compliance Act (FATCA) requires that all international financial institutions report to the US on the accounts held by its tax residents." However, US companies were enticed to repatriate profits held abroad by cutting taxes and not by force, even though the government was aware of the practice. Governments have signed Double Taxation Avoidance Agreements (DTAA) to attract foreign investments into their countries. As for individuals, excessive income tax encourages people to move to "the informal sector of sole proprietorships and unincorporated micro-enterprises, where withholding does not work and the tax system has trouble collecting." "While eight out of nine workers in the US work for incorporate businesses", "in India it's fewer than one in ten". "Close to 81% of all employed persons in India make a living by working in the informal sector, with only 6.5% in the formal sector and 0.8% in the household sector," found a report by the International Labor Organisation (ILO).  The Economic Survey of 2018-19 by the Ministry of Finance, presented before the Budget, estimated that "almost 93%" of the total workforce is in the informal sector. Prof Shruti Rajagopalan distinguishes between 'good corruption', which increases efficiency and promotes economic growth, and 'bad corruption', which is using public office for private gain. Trouble for us ordinary citizens is that professors concentrate of increasing tax collection but not enough on what governments do with our money. Elections in India are won not by long term reforms but by distributing handouts to the poor, which leaves little money for infrastructure investments. "Over the last five years, the Modi government has been trying to raise the Centre's resources through attacks on black money, making stringent compliance provisions..." wrote R Jagannathan. So stringent are the tax demands that they prompted owner of Cafe Coffe Day VG Siddhartha to take his own life. Finally, Hausmann's own country, Venezuela is a classic example of gross misuse of public funds by Hugo Chavez. Massive overspending by Chavez was financed by borrowing so that Venezuela "had used the oil boom to sextuple the foreign debt". If politicians are stopped from misusing government finances to buy votes or on ideological fantasies there may not be a great need for global collection of taxes. We need protection from predation.

How do you put a value on free products?

"Hair oil, shampoos, toothpastes and biscuits have been among the worst hit in the FMCG (fast moving consumer goods) industry due to the prolonged slowdown in consumer spending, which has hit volume growth of major players in the previous quarter." While other goods saw a fall in the rate of growth, volume of toothpaste sale actually shrank by 3%. This is alarming because dental health is linked to general health and poor dental hygiene could be the source of serious illness. Since 55 million people in India were pushed into poverty last year because of medical emergencies we need studies to show if economic slowdown is causing poverty to rise, not just remain at the same level. Stories of rising debt and poverty in rural areas have been published but we need figures. "The most startling fact about the Indian economy over the past few quarters is the collapse in nominal economic growth to its lowest level in two decades," wrote N Rajadhyaksha. This is important because tax collection depends on the nominal GDP, so falling nominal growth means lower than expected tax collection when there is pressure on the government to increase spending to stimulate growth. ""The latest quarterly nominal growth rate is lower than the incremental cost of government borrowing, a flashing amber light for a country such as India that also has a primary government deficit." The Reserve Bank (RBI) can slash interest rate but that may not increase lending as companies are still trying to reduce their enormous debt loads while banks are loath to lend until the bad loans have been cleared up. This is the twin balance sheet problem. Increasing fiscal spending could increase the cost of borrowing by increasing bond yields and a weaker rupee may help exports but could be disastrous for firms which have unhedged dollar borrowings. Macroeconomics has failed to prevent repeated economic crises in the last 25 years and its remedies are not working, wrote R Jagannathan. Technology is making things worse. "There is a huge collaborative economy for free products, from free publications on the web to electronic marketplaces that let borrowers and lenders, buyers and sellers, do business at zero or low cost." "The fact that so much innovation is given away for free does not only create a measurement problem for economists; it is also a real problem for those trying to find investment opportunities," wrote Prof R Hausmann. So, how to cure the economy if economists don't have an answer? Go for broke in the next budget, suggests Jagannathan. Forget about fiscal prudence and "focus on big bang spending" and "bring all off-balance-sheet borrowings by public sector companies such as Food Corporation of India back into the budget by clearing their dues in a single shot". "That will push the overall fiscal deficit to nearly 5.5-6% of gross domestic product (GDP), but this is not a time to fret about empty numbers." That could create questions this government may find hard to answer. Elections are not won on telling the truth.    

Selective policies cannot help everyone.

Chairman of the Economic Advisory Council to Prime Minister Narendra Modi (PMEAC), Bibek Debroy expects the economy to grow at 5% this year and at 6-6.5% next year. "I think we are on a band of 6-6.5%. Expecting anything significantly higher in two year would be somewhat unrealistic." Debroy is extremely erudite having "authored over 100 books in the field of Economics, Polity, Indology and Sanskrit," according to Wikipedia. He has been honored with Padma Shree, a civilian honor. He would like states to carry out land and labor reforms, which would include the ability to lay-off workers, while ensuring a minimum wage and a social safety net. But, what about civil servants who have 'permanent jobs' and time bound promotion, regardless of productivity. They cannot even be investigated for corruption without permission of their departments but such permission may not be forthcoming for certain officials. Politicians have the power to transfer officials at whim and some, with a reputation for honesty, have been transferred scores of times. Debroy thinks that a 6% upper limit of inflation is too low and the RBI should be set a higher tolerance level. Retail inflation rose to 4.62% in October, mainly due higher food prices. Inflation is an increase in prices which results from an increase in demand or a fall in supplies. The rise in food inflation is mainly because of a surge in prices of onions because of excessive untimely rains in onion growing states. Demand for consumer goods, like soaps and shampoos, has slowed down, fewer people are eating out and even demand for liquor is not growing, while high-end resorts and hotels are reporting higher occupancy rates and there is demand for more expensive cars and decorative paints. This was predicted by another member of the PMEAC Rathin Roy who said, "The economy since 1991 is growing not on the basis of exports ... but on the basis of what the top 100 million of the Indian population wants to consume." This 100 million has been driving India's growth story and this is now petering out. We will not become South Korea or China, but rather Brazil or South Africa. "We will be a middle-income country with large numbers of people in poverty seeing rising crimes." Debroy wants a higher rate of Goods and Services Tax (GST) which will certainly increase prices but may reduce consumption even more. Low-income countries are suffering from low inflation, as in richer nations, but cannot use monetary and fiscal means as freely because their currencies might get out of control. Prices maybe increased by cutting supplies but that will result in jobs losses. The only way is to increase consumer demand which can be done by giving us more money to spend. Polymaths like Debroy should find ways of making the nation richer, rather than finding ways to help the government to the detriment of the people. Ordinary people can't. 

Better than in August. But 5% is the new normal.

"On a visit in August, India's prospects had rarely looked less promising," wrote Ruchir Sharma. "The economy was stumbling as badly as it had during the Asian financial crisis of 1998 and the rout of the rupee in 2013. And a fear psychosis had gripped the nation." "Since then, however, conditions have changed." Since the 1980s, India's economy "has tended to rise and fall with the global economy". But, "India's economy began to decouple from the rest of the world in 2017, when it missed out on the synchronised global upswing, and has slowed more sharply than its peers in the subsequent years." Aparna Iyer takes issue with the Reserve Bank (RBI) for making inaccurate forecasts of retail inflation and the expected growth rate of GDP. Her anger is due to the Monetary Policy Committee (MPC) of the RBI keeping interest rate unchanged at 5.15% at its last meeting on 5 December. "During 2011-13, the central bank was pulled up for consistently underestimating headline inflation," sniffed Iyer. "In the current fiscal year, RBI seems to have consistently overestimated gross domestic product (GDP) growth." That is because this is India. In 2011-13, both the Governor of the RBI and Prime Minister Manmohan Singh were economists, but the Finance Minister P Chidambaram was not. Chidambaram wanted the RBI to cut interest rate in the face of high inflation and threatened to "walk alone" when it was kept unchanged, reminding us of the song by Tagore "If no one responds to your call, then go your own way alone". This time, both the Governor of RBI and the Prime Minister are not economists but the Finance Minister N Sitharaman definitely is. So she should devote all her energy in seeking out the exact growth rate of GDP and dispel any doubts regarding data being cooked. Instead, she "signalled a multi-pronged approach involving higher public expenditure, enhanced direct cash transfers, and smoother credit disbursals, noting that as much as Rs 5 trillion had been lent by banks via various schemes in October and November alone". Handouts and 'loan melas', not much different from what Janardhan Poojary of the Congress did, with Manmohan Singh as the governor of RBI. But, whereas the Congress did not rubbish reports of population surveys from the National Statistical Office (NSO) this government discredits the NSO when its report does not match administration data, wrote Prof Himanshu. "So much so that the chief statistician of India (CSI) along with another secretary of the government of India, has argued that responses to survey questions suggest a diminishing sense of nationalism." Citizens who give honest answers are anti-Indian. Sharma wrote that "for low income nations a 5% growth rate is the new benchmark of success". What if, even that is cooked?    

Will fearless bankers chase after terrified companies?

Claiming that the Indian banking sector is "much stronger" than before, Prime Minister Narendra Modi urged bankers to lend without fear. "Questions will not be raised on the genuine business decisions taken by bankers. To reduce the pressure from the banking sector is also government's job. If bankers are under pressure, then they will not be able to take decisions. I am not one to run away from responsibilities." Very admirable. But what happens if there is a change of government in 2024? What if a loan given now turns bad and a new government decides that it was a case of "telephone banking", as alleged by Modi against the Congress?The former Finance Minister P Chidambaram has just been released on bail after 3 months in Delhi's Tihar jail on charges of corruption. Chidambaram naturally took a dim view of the allegations, and claimed that the case is "politically motivated and an act of vendetta". Responding to charges of political vendetta, Union Minister Nitin Gadkari said, "We have never been vindictive, on the other hand when P Chidambaram was Home Minister during Congress rule, he filed false cases against me, he also filed false cases against against Prime Minister Narendra Modi and Amit Shah. Later we all were proved innocent." So all this is just friendly joshing to entertain people, but a bank official caught up in political tit-for-tat will not see it as a game. Charges of corruption are investigated by our premier investigating agency the Central Bureau of Investigation (CBI). Just one year back the Director and the Special Director of CBI were investigating each other on charges of corruption. But, even if some banker is completely fearless, who will he lend to? "The core of our manufacturing economy is staring at an abyss," according to Sandipan Deb. After the Supreme Court cancelled all 122 telecom licenses in 2013, most companies gave up business in India, leaving just 3 companies behind. Now Bharti Telecom is looking for funds from foreign companies which may take control from out of its hands. The total debt of the 3 telecom companies still operating in India is a colossal Rs 3.9 trillion, so why any foreign entity would be interested in buying a stake in Bharti is not clear. The only foreign company still hanging on in India is Vodafone which posted a loss of $7 billion in the second quarter. The main reason is that the government grabs a large chink of revenue and taxes the rest, leaving nothing for the company. Even with the sword of bankruptcy hanging over the companies the tax department has ordered them to pay their share of revenue. Modi may not run away but companies might. Taking economic growth with them.

The economy is in chains. Experts advising it to jump.

"At the current rate of growth, India will become a $5 trillion economy in a decade from now, which would be almost twice as long as the government wants," wrote an editorial in the Mint. This is because the growth rate of our gross domestic product (GDP) has fallen to 4.5%, the lowest in 6 years. The Reserve Bank (RBI) is expected to cut interest rate for the sixth time this month and the government is being urged to relax its fiscal deficit target. "For starters, if the economy's growth rate is 2.5 percentage points below India's potential, then there is an escape clause even from the Fiscal Responsibility paradigm to pump in money," wrote Ajit Ranade. "In that sense, it may be possible for the Budget to propose a deficit of 3.5% or 3.8% of GDP." That is happening already. "India's fiscal deficit in the first seven months through October stood at 7.2 trillion rupees ($100.32 billion), or 102.4% of the budgeted target for the current fiscal year." The danger of an overshoot of fiscal deficit is a cut in credit rating which will increase borrowing cost for Indian companies and the government and there maybe a sudden fall in foreign investment in our markets. "There is, however, space for for the overvalued rupee to weaken, say up to a level of 75 to the dollar, but not beyond, and certainly not abruptly," wrote Ranade. That may not be in our hands as, according to the Bank for International Settlements, "Average daily volumes for rupee in the UK soared to $46.8 billion in April", compared to $34.5 billion within India. It is not just the Real GDP that is down. "The nominal GDP, a number we rarely watch, has come in at 6.1% for Q2 and just 7% for the full first half. This number is scary because it means that all of India's output, rather earnings before interest, taxes, depreciation, and amortization (Ebitda) grew by 6.1% in Q2 when the government was borrowing money at more than 6% and industry at nearly 9%," wrote Latha Venkatesh. "Why would any company take loans for production at 9% if Ebitda grows only by 6%." Recent exposures of scams at non-banking financial company (NBFC) IL&FS and cooperative bank PMC Bank have severely affected credit to industry. "The crisis of confidence in India's financial sector comes at a time when real credit flow (adjusted for inflation) has slowed sharply, mirroring the slowdown in Asia's third-largest economy," wrote Bhatia and Bhattacharya. "Many experts expect the real fiscal deficit, including those hidden in the Food Corp of India and the Power Finance Corp and including the deficits of the states, to be at 9%, which is the rate at which household savings is growing." So, if the government sucks up all of the savings there is nothing left to lend to the private sector. Only 4 countries, South Korea, Taiwan, Chile and Israel have become rich from poor, wrote Kelkar and Shah. "In all those countries, growth came as a result of improvements in state capability." In India, on the other hand, higher GDP growth results in reduced state capability, as seen after 2005. The economy is in a straitjacket. Experts are advising it to jump. 

A bubble has to pop sometime.

"The Indian economy is not showing signs of bottoming out. Growth in the September quarter slowed for the sixth consecutive time to 4.5%, the lowest since March 2013, as manufacturing output contracted, according to data released on Friday." The Economic Affairs Secretary came out with the tired old bromide of fundamentals being strong and that growth will accelerate soon. Former Prime Minister Manmohan Singh said that a growth rate of 4.5% is "unacceptable". Why, when the global economy is also slowing down? "The global economy is in a synchronized slowdown and we are, once again, downgrading growth for 2019 to 3 percent, its slowest pace since the global financial crisis," said IMF Chief Economist Gita Gopinath. According to IMF projection, advanced economies will grow at 3% in 2019, while emerging economies will grow at 3.9%. A 4.5% growth rate for India is much higher than any of its peers so why the point scoring? Because, only in January, Prime Minister Narendra Modi was boasting that he had transformed India from a member of the "fragile five" group to the fastest growing economy in the world. The term "fragile five" was coined by an analyst at Morgan Stanley in 2013 for economies that are "too dependent on unreliable foreign investment to finance their growth ambitions". Not just foreign investors, "India continues to retain its position as the world's top recipient of remittances with its diaspora sending back $78.6 billion in 2018." Despite all the bad news the stock market in India is hitting record highs everyday. "The Indian stock market is already factoring in reasonable recovery in the economy and earnings," explained analysts to their clients, wrote Alvares and Sultana. "We remain fairly sceptical about any imminent recovery in the Indian economy," said the same analysts. "As odd as it may sound, Larsen & Toubro Ltd (L&T) is doing a better job of portraying the current economic woes of the country than mainline indices, Sensex and Nifty," wrote Vatsala Kamat. The price-earnings valuation of L&T shares, considered a bellwether, have fallen about 25% since early July, while that of Nifty has risen about 5% in the same period. In another sign of weak economic activity, "Bank credit to private sector non-financial firms grew at a five-year low of 9.3%", because companies are having to pare down their previous loan burden. They have not succeeded because "corporate debt was 46.8% of GDP as of September, not very different from 45.8% in September 2015". The reforms of 1991 did not help manufacturing and so did not create jobs. "For the nearly three decades after Manmohan Singh's economic reform 'finance and real estate' was India's fastest growing sector," wrote Prof Ashoka Mody. That bubble is deflating. "Reforms in emerging markets and developing economies are also more effective when good governance is already in place," wrote Gopinath. Who will do that?