We have lot of practice at import substitution.

"Late last month, Uber Eats, a subsidiary of ride-sharing major Uber, decided it had had enough of a market in which it was losing millions of dollars," wrote Sundeep Khanna. It sold out to Zomato even though "the online food delivery market in India is burgeoning, growing at 16% annually and likely to reach $17 billion by 2023 according to a study by business consultancy firm Market Research Future". Uber's decision could have been prompted by the problems facing Vodafone, with the government demanding "more than Rs 53,000 crore (Rs 530 billion), including over Rs 28,000 crore (Rs 280 billion) in licence fee, interest and penalties and the rest in spectrum usage charges". Vodafone CEO Nick Read "sought waiver of interest and penalties on its adjusted gross revenue (AGR) dues" and "to pay the principal over 10 years with a two-year moratorium". He refused to inject any more capital in the loss making venture. Khanna feels India is unlucky because "global trade growth slowed from 5.5% in 2017 to 2.1% in 2019," according to the Organization for Economic Co-operation and Development (OECD), and "corporate strategies are increasingly being re-engineered for deeper dives into local markets in preference to operating across multiple markets". But, does the government want other markets? Customs duty has been increased on a large number of imports, apparently to protect domestic industry. "The road towards a $5 trillion economy leads through the rapid expansion of India's exports," wrote Sharma and Goyal. Deglobalization is not an excuse because "neighboring countries have boosted their exports in the same global environment". When the government increased tariffs in 2018, Prof Arvind Panagariya thought it was an isolated incident but, "Not only have tariff increases continued, licence permit raj-era protectionist vocabulary also has had a comeback." "There is no wisdom in producing at home products that we can buy abroad at lower cost using our export earnings," because it "threatens to return us from the turnpike on which we have been travelling all these years on to the dirt road", he wrote earlier. "No country has achieved developed status on the back of a purely domestic economy. Even in the US, the world's largest economy, the total production capacity for all manufactured agricultural goods exceeds by a wide margin what can be consumed not just in that country but also in Canada and Mexico," wrote Khanna. Will increased tariffs improve our industrial competitiveness? No, wrote Puja Mehra. Without competition local industries can sell low quality goods to a captive domestic market at high prices. Forget 'middle-income trap', wrote SA Soz, "For now, India is in the Nigeria zone." Competition is stressful. Better to stay at home.

Not just the economy, it's the Constitution, stupid.

Political scientist Prof Rachel Bitcofer predicts that "the Democrats are a near lock for the presidency in 2020, and are likely to gain House seats and have a decent shot at retaking the Senate". She believes that there are no swing voters. Every voter is already committed to one party and the result depends on how many supporters turn out to vote. This is contrary to the classic view that "About 55 percent of eligible voters are likely to go to the polls, and the winner is determined by the 15 percent or so of 'swing voters' who flit between the parties." She says that Obama won in 2008 despite losing independent voters and the running mate will be more important for Democrats than the candidate for president in this year's election. Obama got 95% of black votes in the 2008 election compared to just 4% for John McCain. In 2010, the Republicans regained control of the House by flipping 63 seats held by Democrats, and won 6 seats in the Senate although Democrats kept control with 51 seats plus two independents. In 2012, 93% of blacks voted for Obama compared to only 6% for Mitt Romney, although the difference in median earnings between white and black men was the same in 2015 as it was 50 years back, found a study. The booming economy, high consumer confidence, GDP growth and low unemployment may not help Trump because his disapproval rating is consistently higher than approval, wrote Dylan Scott. "The system is rigged. It was rigged from the outset, quite intentionally, to favor small states. Under current political conditions, that's become an enormous advantage for Republicans," wrote Ian Millhiser. Why so? Because every state elects two Senators, regardless of size. So Wyoming with a population of just 567,025 gets to elect two Senators as does California with over 39 million. Then there is the electoral college, wherein each state is allotted a certain number of electors depending on population. Most states have a winner-takes-all system which means that all electors of the state go to the winner, even if the winning margin is one vote. In 2016, Hillary Clinton won 2.8 million popular votes more than Donald Trump because she got 4.3 million votes more in California alone. Trump won by getting 304 electoral college votes. If the leftist argument is to be accepted it would mean that anyone who wins California would become president. There would be no need for elections in the other 49 states. The authors of the Constitution grappled with exactly this dilemma. The US has 6.8 million unauthorized immigrants of which 2.2 million reside in California. The state has passed a law to protect illegal immigrants from deportation. If the presidential election is decided by popular vote, California will invite more illegals so that Democrats would win in perpetuity. The US would end up a one party state. Like China. The Constitution is right after all.  

Returns are huge. Worth fighting for.

Assembly elections in Delhi will be held tomorrow with the three main parties promising all kinds of freebies to capture the 'vote bank' of slum dwellers. Prime Minister Narendra Modi's party the BJP promises wheat flour at Rs 2 per kg, free bicycles for younger girls and free electric scooters for older ones, Rs 51,000 for marriage of poor women and free yoga lessons. The Congress promises 300 units of free electricity, unemployment benefits, Rs 72,000 for poor families and Rs 110,000 for marriage of poor women. The Aam Aadmi Party (AAP) promises free bus rides for women, subsidies on water and electricity, Rs 10 million for accidental deaths of sanitation workers and free pilgrimage for 1 million senior citizens. Delhi Transport Corporation (DTC) which operates buses has a working loss of Rs 17.50 billion in 2018-19. Earnings of DTC fell by 9% when women were allowed free travel on buses, and losses can only grow if students are also allowed free bus rides as AAP promises. Delhi is just a city, designated Union Territory in the Constitution, which was converted to National Capital Territory by the Parliament, in which law and order and land are controlled by the Central government. So why such high decibel campaigning? May be because Delhi being the capital city the diplomatic enclave is situated here and forming the government in Delhi gives second tier politicians a chance to get invited to embassy parties. The BJP brought out all its big guns, including the Prime Minister and Chief Minister of UP Yogi Adityanath who justifies shooting 19 protesters to death in his state and accuses anyone protesting against the government of being a spokesperson for Pakistan. Expenditure of Delhi government is projected to be Rs 600 billion in this financial year ending 31 March 2020, but with the AAP government spending heavily on subsidies Delhi roads are full of potholes and dirty. BJP MP Gautam Gambhir may mock Delhi Chief Minister Arvind Kejriwal on the condition of Delhi roads but he should remember the BJP controls all three municipal corporations in Delhi with clear majorities. A few minutes of heavy rain beings the capital to a standstill because of waterlogging. Dengue and malaria regularly kill the vulnerable every year. Taxpayers are ignored by every party but are not immune to vector borne diseases. Winning the election will give petty politicians the chance to bully cricket association for free passes for family and firends, which is why Rajasthan Royals want to shift to Guyahati in Assam. That is why India is ranked 80th among 180 countries in the perception of corruption index. Perception based on reality.

You can only exhort the exhorted.

"The finance ministry on Wednesday unveiled details of a new scheme that could fetch the exchequer part of the Rs 9.32 trillion direct taxes under dispute and free up courts and tribunals crippled by prolonged litigation," wrote GC Prasad. "The scheme offers companies a chance to pay disputed tax arrears without interest and penalty if paid before 31 March." Brilliant strategy. Make a completely outrageous illegitimate demand on a taxpayer and then magnanimously offer to waive interest and penalties if they pay up before a certain date. What is to stop tax officials making a similar demand the next year to meet unrealistic targets set on them by a rapacious government? Despite offering to cut corporate taxes by 10%, if companies gave up their exemptions, such as depreciation, tax officials were exhorted to meet targets set on them in the budget. Even Prime Minister Narendra Modi weighed in. "Through a video conference on Dec 16, officials were exhorted to meet the direct tax mop-up target of Rs 13.4 lakh crore ($187 billion), a government official told reporters. Collection in the eight months to November grew at 5% from a year earlier, against the desired 17%." Vodafone has agreed to be part of the scheme, with conditions. "Vodafone group CEO Nick Read said Wednesday the UK telco's Indian JV has sought waiver of interest and penalties on its adjusted gross revenues (AGR) dues and wants to pay the principal over 10 years with a two-year moratorium. Read reiterated that his company won't infuse any fresh capital into loss-making Vodafone Idea and once again described the situation in India as critical." Blackmail versus blackmail. Give us what we want or the company dies with loss of thousands of jobs. Bilateral investment treaties (BITs) incorporate a protection for investors known as investor-State dispute settlement (ISDS), wrote Prof Prabhash Ranjan. "In the last few years, more than 20 ISDS claims have been brought against India by different foreign investors challenging a wide gamut of actions such as the imposition of taxes retrospectively, cancellation of spectrum licenses and withdrawing tax concessions." "The central government is reportedly working on a new law to safeguard foreign investment." What if the next government changes the law? Companies have to comply with a 'bewildering' 6,796 compliance items when setting up manufacturing units, found Economic Survey 2020 (ES2020). More documents are needed to open a restaurant than to buy a gun, said ES2020, and processes for imports are easier than those for exports. "Come and invest in India," said Modi. "You will also find talent, infrastructure, favorable policy initiative and security of investment." Modi may exhort foreign funds but they have "teams of macroeconomists studying India", wrote Prof Shruti Rajagopalan. Citizens are a captive audience, foreigners are free. They cannot be exhorted. 

How do you cover up such a huge hole?

Criticisms of this year's budget presented by the Finance Minister (FM) on 1 February are unfair, "most commentary might simply end up reflecting inherent and pre-existing biases rather than informed analysis," wrote Prof VA Nageswaran who is a member of the Economic Advisory Council to the Prime Minister. The budget improved credibility by disclosing that fiscal deficit would be 3.8% of GDP, instead of 3.3% as predicted in Budget 2019, plus extra borrowing of another 0.5% of GDP, benefited income tax payers by increasing the number of tax slabs and by promising to raise more money by selling off assets, like the Life Insurance Corporation (LIC), which has 290 million policy holders and a total life fund of Rs 28.3 trillion. The economic slowdown is not the government's fault. "The recent slowdown is not of its own making," wrote Nageswaran because, "The Economist notes that all emerging economies are experiencing a prolonged productivity slowdown, contributing to slower economic growth." He is conveniently forgetting the windfall tax revenues of over Rs 11 trillion, till November 2018, that this government received from low crude oil prices, and squandered on a plethora of social schemes, including waiver of farm loans to win election in UP. Curiously, the FM did not mention the slowdown even once, wrote Prof Shruti Rajagopalan. "In the longest budget speech ever, not once did she mention the word 'slowdown' or reference slowing growth rates, or a growth slump -- phrases now recurring in the nightmare of economists and investors focused on India." Despite all the handouts, "With food inflation hitting 14% in December 2019 and real rural wages declining for eight consecutive months (latest data available till October), rural India is among the worst hit by the current economic slowdown," wrote Kapur, Paul and Irava. The two largest schemes to help the rural poor are Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) accounting for 1% of GDP. The Budget slashed funding for MGNREGS from Rs 710 billion this financial year to Rs 615 billion next year and the food subsidy bill has been cut by a "staggering" Rs 690 billion next year, wrote Sayantan Bera. Spending on Mid Day Meal Scheme for school children was cut by Rs 11 billion this year and supplementary nutrition for children under 6 years of age was reduced by Rs 21 billion. One third of children are already stunted in India. "It is said that size matters, but the longest speech in budget history did not guarantee Nirmala Sitharaman success," wrote SSA Aiyer. The longest speech was designed to hide the lack of policies because of the enormous fiscal hole, wrote Puja Mehra. The FM did her best to cover up for her boss, the Prime Minister. What is he going to do?

Why HIV drugs for common cold?

A paper, "Uncanny similarity of unique inserts in the 2019-nCoV spike protein to HIV-1 gp120 and Gag", was published on bioRxiv by researchers at Indian Institute of Technology (IIT) Delhi and Acharya Narendra Dev College, University of Delhi. "bioRxiv (pronounced 'bio-archive') is a free online archive and distribution service for unpublished preprints in the life sciences." "Articles are not peer reviewed, edited or typeset before being posted online." The paper was quickly retracted after criticism from scientists abroad. "Out of 4 inserts they identify between nCov and SARS, 2 are found in bat coronavirus. Of the remaining two, only one is most similar to HIV, and is so short (6AA) that the similarity is not higher than chance given database," tweeted Silvana Konerman. Speculation linking the 2019-nCoV to a biological weapons research laboratory in Wuhan has been dismissed by China, and was rubbished as conspiracy theory by Justin Ling. "A team led by Shi Zheng-Li, a coronavirus specialist at the Wuhan Institute of Virology, reported on 23 January on bioRxiv that 2019-CoV's sequence was 96.2% similar to a bat virus and had 79.5% similarity to the coronavirus that causes severe acute respiratory syndrome (SARS), a disease whose initial outbreak was also in China more than 15 years ago," wrote Jon Cohen. So, the similarities with the HIV genome is rubbish? Science keeps evolving as new observations lead to greater understanding of how nature works. What was dismissed as junk DNA in the past is now thought to have vital function in holding the integrity of the nucleus together. Coronaviruses cause common colds in humans and are RNA viruses which "spread through the air and are responsible for 10-30 percent of colds worldwide", said an article in the American Society for Microbiology. We do not prescribe anything stronger than hot chicken soup for the ordinary common cold, so why did the doctors at Rajavithi Hospital in Bangkok decide to treat a patient diagnosed with 2019-nCoV with "large doses of the flu drug oseltamivir combined with HIV drugs lopinavir and ritonavir". From testing positive for 10 days, a 70-year-old Chinese woman became negative in 48 hours. "A randomized controlled clinical trial is now underway in China to test anti-HIV drugs' efficacy". US airlines have suspended flights to China and foreigners who have been to China in the last 14 days are banned from entering the US. Don't worry say some. Common influenza kills 650,000 people worldwide every year. An Ebola outbreak has been going on since August 2018 in the Democratic Republic of Congo and neighboring countries but flights have not been stopped to any of these countries. Anti-HIV drugs are not used in ebola or for dengue fever which causes 390 million infections worldwide every year and has a 2-5% mortality rate. Why did Chinese President Xi Jinping call it a "devil virus" and why are Chinese police forcibly confining people indoors by chaining their doors from the outside? Drastic measures for something as harmless as common cold. Isn't it?

Need a collection of 'buts' to get the real picture.

"The budget speech was structured under Aspirational India, Economic Development and Caring Society -- signifying its holistic and inclusive approach to the way India grows," wrote industrialist Harsh Goenka. "The fine balancing that the finance minister has done between the tight fiscal situation and the need for a strong support to boost investment and growth is the right balance, but it could have been better," wrote British-born billionaire Gopichand HInduja. He feels that there could have been more support for the manufacturing and automotive sectors, which generate the largest number of jobs, but otherwise, he approves of the support for agriculture, education and skill development, encouraging investment, improving railways, and the changes in personal taxes. "My  key takeaway from today's budget is this one sentence, which I think summarizes the Modi government's efforts to stimulate the economy: Wealth creators will be respected in this country! I am one of them," wrote Anil Agarwal, London-based chairman of the Vedanta group. Wondering how the Finance Minister was going to maintain a balance between stimulating the economy and fiscal prudence, chairman of the Aditya Birla group Kumar Mangalam Birla wrote, "Evidently, the budget has achieved quite a pragmatic balance -- by letting the deficit trajectory slip by half a percentage point of gross domestic product (GDP), but still remaining consistent with the Fiscal Responsibility and budget Management Act." "One looks forward to the follow-up steps in monitoring and expediting these projects in the near term, which can be a key propellant for breaking the growth barriers that we have seen in the past." This year's budget was directionally sound, but could have done more to jump-start a stalling economy," wrote CEO of Biocon Kiran Mazumdar-Shaw. This was the best the Finance Minister could do because, "Any fiscal pumppriming of the economy would have other adverse effects. It can lead to higher long-term interest rates or risk a sovereign ratings downgrade," wrote Chief Economist of Nomura Sonal Verma. "There is much in Budget 2020 that I like," wrote Prof Arvind Panagariya. But protectionist measures have increased. "Not only have tariff increases continued, licence permit raj-era protectionist vocabulary also has had a comeback." "The government has underspent Rs 75,532 crore (Rs 755.32 billion) on budgeted food subsidy," wrote Prof Himanshu. "This food cutback has already hit the food consumption of the poor, who are struggling with high food inflation, and declining wages." "A fatigue with more good intentions rather than a big push for change. That's the story of Budget 2020," wrote consulting editor of Mint Monica Halan. No one dares to criticise Indian politicians. You have to collect the 'buts' to get the real picture. 

A complete waste of time. As usual.

After droning on for a record 2 hours and 43 minutes in delivering her Budget speech Finance Minister Nirmala Sitharaman was forced to stop because she was feeling unwell. We hope she is feeling well this morning. It must be very taxing to utter 13,275 words in 145 paragraphs on 43 pages when there is very little of substance. "Her second budget had no big fiscal stimulus, several protectionist duties, and few convincing steps to revive a slowing economy. Disappointed investors sent the Sensex crashing 987 points," wrote SA Aiyer. The fiscal deficit will be 3.8% of GDP in this financial year, ending 31 March, plus extra-budgetary borrowing of 0.7% of GDP which takes fiscal deficit to 4.5%. Next year she hopes to limit it to 4.3%. If she can manage to sell off some public sector assets. She has apparently reduced income tax rates on people earning up to an income of Rs 1.5 million. In last year's Budget people earning up to Rs 500,000 were exempt from paying any income tax, but anyone earning more than that would have to pay tax on the whole income, and not only on the excess. If that has changed so that those earning between Rs 250,000 to Rs 500,000 now have to pay tax at 5% then it is no benefit. To avail of this so-called lower tax rates the taxpayer has to give up all exemptions that she gets through tax-saving schemes. The trouble is that once you give up all exemptions you can never claim them again which is why many companies have not availed of lower corporate tax rates. There is no guarantee that tax rates will not be increased in a future budget. Securities Transaction Tax (STT) replaced long term capital gains tax (LTCG) in 2004, in which both buyer and seller of shares paid tax at 0.1%, presumably to extract taxes even if shares were sold at a loss. However, LTCG was reintroduced in 2018, without abolishing STT, a clear case of double taxation. The proposed tactic to reduce the number of tax disputes, presently at 480,000, is especially deceitful and dangerous. "If taxpayers pay just the amount demanded, the interest and penalty will be waived." This has to be the most egregious invitation to tax terrorism one can imagine. There is nothing to stop a tax official making a completely unreasonable demand and then terrifying the individual to pay up, to avoid interest and outrageous penalties. Indians living in countries which have no income tax, such as Dubai, will now have to pay income tax in India. This will encourage the rich to become citizens of countries with low tax rates and catch only the labor class who earn more than Rs 500,000, on converting currency to the Indian rupee, but not enough to buy a citizenship. Our current account deficit (CAD) is dependent on the $ 79 billion in remittances from Indians working abroad and if they stop sending money to avoid taxes the Finance Minister could end up losing billions of dollars to earn a few Indian rupees. A complete waste of time. As the Budget is every year.    

What is China hiding by its lockdown?

In December, China reported the first cases of humans infected with a new type of coronavirus in Wuhan  city, which has since been named Novel coronavirus or 2019-nCoV. Till today, about 10,000 cases and 213 deaths have been confirmed. Coronaviruses cause potentially deadly diseases in mammals and birds and infect humans when they mutate. Previous epidemics were called severe acute respiratory syndrome, or SARS, and Middle East respiratory syndrome, or MERS. Although the source has never been confirmed the SARS virus was thought to originate in civets which are sold in China's exotic animal markets to satisfy Chinese inclination to eat every living thing on the planet. China banned sale of live animals at Wuhan. "The move comes after the Huanan Seafood Market in Wuhan was shuttered on January 1, after it was believed to be the starting point for the outbreak of 2019-nCoV, also known as the Wuhan virus. Before its closure, the market was selling an array of unusual animals for food, including young wolves and civet cats, which experts believe could play a part in the spread of disease." Live baby mice are considered a delicacy in China and the dish is called 'Three Squeaks' because the mouse squeaks three times before dying. It is speculated that this particular virus originated in bats, which are immune to a large number of viruses, or in snakes which eat bats, because the Chinese eat both bats and snakes. China moved swiftly to contain the outbreak by putting Wuhan in quarantine and then extended the lockdown to at least 16 other cities. China is also constructing prefabricated hospitals within days at Wuhan to house thousands of patients. The World Health Organisation (WHO) praised China's response to the outbreak and did not declare a global emergency for as long as possible, to please China. It has since declared an international health emergency almost apologetically while lauding China's "extraordinary measures".  Chinese President Xi Jinping called it a "devil" virus and expressed confidence in defeating it. But Communists do not believe in religion, or the devil. To stop celebration of Christmas Chinese police go around breaking churches and arresting priests. Over a million Muslim Uyghurs are in prison camps where they are being indoctrinated to forget their religion and their language. Half a million Uyghur children have been forcibly separated from parents and held in state-run schools to teach them a new identity. Except Pakistan, China is feared and hated by its neighbors. Former Philippines President Aquino compared China to Nazi Germany and China is India's mortal enemy. So are the "extraordinary measure" adopted by China to protect the rest of the world by containing it within the country's borders? Knowing China's conduct in the recent past that is impossible to believe. The lockdown is to hide the true extent of the epidemic. The epidemic must have infected millions within China and killed tens of thousands prompting Xi to call it a "devil" virus. The lockdown is to prevent foreign journalists from entering the affected areas and recording the truth. It is time the world accepts that new epidemics will continue to originate in China because of their eating habits and shun the country completely. There will be no profits if people are wiped out. Greed for food, greed for money. Bad.

It's a game of numbers.

An editorial in the Mint feels that "income tax payers are a hapless minority in India. Within this class is a sub-class of the salaried, the most oppressed." Within this sub-class is the sub-sub-class of officers of the Indian Administrative Service (IAS) who enjoy royal perks and power in addition to enormous salaries. They get free healthcare for life and their families receive pensions after lifelong pensions for officers. In the 2018-19 budget speech the then Finance Minister revealed that "salary earners shelled out an average income tax of Rs 76,306 in 2017-19, three times the non-salaried taxpayer's mean outgo of Rs 25,753". Average figures mean nothing. Salaries are fixed and paid even when the employee is off sick or on vacation whereas the self-employed earn nothing when they are not working. The number of people filing income tax returns in 2018-19 increased 16% to 6.33 crore (63.3 million) but the number of income tax payers jumped 14% to 84.5 million. This is because of tax deduction at source (TDS), which is tax deducted by banks on interest earned on term deposits and taxes on dividends deducted before payment.  Many did not file tax returns possibly because these are old or sick people unable to claim refund on their taxes. Less than 3% of Indians paid income tax in assessment year (AY) 2018-19, wrote Bhaskaran and Sharma. They make the same lazy assumption that, "The government, therefore, needs to focus on bringing more high income earners into the tax net." Meaning that a large number of Indians are managing to hide large incomes. How is that possible when tax officials resort to extreme intimidation and harassment to meet targets? A target of 17.5% growth in collection of taxes has been set on tax officials despite nominal GDP growth expected to be 7.53%. Not only are tax officials ordered to meet targets but "Appellate commissioners are also involved in the effort to meet tax collection targets," wrote Gautam Nayak. "The worst part is that targets are set for each commissioner to launch prosecution against taxpayers and then being encouraged to opt for compounding of offences." Extortion and blackmail of taxpayers. Farmers pay no income tax even if they earn in millions, wrote Rohit Saran. Private sector taxpayers get no services for the taxes they pay. Indirect taxes are no better. The government has blocked Rs 400 billion on GST refunds for mismatch with filed returns. This apparently is proof of fraud. Small and medium industries in Coimbatore are dying because they have to pay GST as soon as they bill customers but receive payments after 90 days because of the slow economy. They borrow to pay tax. "Businessmen will never be sure what the next meeting of the GST council will unleash," N Rajadhyaksha. Keep taxes stable, stop tax terrorism and a portion of income tax should go to a national insurance scheme which will pay pensions and healthcare costs of income tax payers. Sadly, taxpayers are too few. They don't matter. 

Compare our average with their average.

Prime Minister Narendra Modi was elected for the first time in 2014 on a slogan of "minimum government, maximum governance", which he explained as taking quick decisions and trying to sell off some businesses. The government has earmarked 23 public sector units (PSUs) for sale but so far its record has been anemic. It raised a total of Rs 180 billion in 2019-20, when the target was Rs 1.05 trillion in the 2019 Budget. But many of the so-called sales have been pure subterfuge. For example, ONGC, a PSU, was forced to buy the government's entire stake in HPCL, another PSU, for nearly Rs 400 billion, which was shown as revenue for the government but landed ONGC with an enormous debt. The government has become a tad smaller in that the Council of Ministers has shrunk from a total of 75, including the Prime Minister, in 2017 to a total of just 63 today. The United States with an economy 10 times the size of India has 23 cabinet members, plus President Donald Trump. Salaries of ministers maybe less than those in the US but the perks, with no questions asked, would make even Trump envious. In addition, even the minister with the most insignificant portfolio gets a bungalow in the center of Delhi, called Lutyens Delhi, where one bungalow sold for Rs 4.77 billion in 2018. The area is, therefore, also known locally as 'Lootyens Delhi'. Each minister has an office with civil servants, who also have enormous salaries and perks, especially after the Seventh Pay Commission, with Dearness Allowance at 17% of basic salary and power, with permanent jobs, pensions and healthcare, for life. Compared to countries in the Organisation for Economic Co-operation and Development (OECD) and other large countries, our government is apparently very small, wrote Ajit Ranade. India has about 7 taxpayers for every 100 voters. Which is about right because 92% of Indians have wealth less than $10,000, and 92% of women and 82% of men earn less than Rs 10,000 per month. The threshold for paying income tax is Rs 250,000, which is 400% of India's per capita income, among the highest in the world. That is because Indians earn so little. About 50 million Indians still live in extreme poverty defined as earning less than $1.9 per day, about $700 in a year. In Britain, with a comparable GDP at $2.8 trillion, income tax starts at 12,500 pounds (GBP) per year, which converts to Rs 1.1 million per year, for a single person. This is 50% of average salary of full time workers at 35,423 GBP. India has a "bloated bureaucracy" which costs over Rs 2.7 trillion in wages, pensions and establishment expenditure, wrote Omkar Goswami. Add in subsidies and interest payment on previous debt and revenue expenditure will be 74% of entire government spending. The government appears small to Ranade because the pot is small. Because people have nothing. It is all relative.

Depends on the point of view.

A very strong supporter of Prime Minister Narendra Modi, SS Bhalla has written how his own study of nights lights in India, consumption of cereals and meat and sale of 75% of consumer goods shows that the gross domestic product grew strongly during Modi's tenure since 2014. He blames the sharp slowdown of growth since 2018 "to the ultra-tight monetary policy followed by Urjit Patel-Viral Acharya duo and the NBFC (non-banking financial companies)". Easy to blame the previous Governor of the Reserve Bank (RBI) who resigned, but Bhalla does not blame Patel's successor, who cut interest rate by 5.15% in 2019, for retail inflation jumping to 7.35% in December. Bhalla was a member of the Prime Minister's Economic Advisory Council and could be embarrassed by his own advice. The NBFC crisis started when IL&FS, which had central and state government officials on its board, collapsed, wrote G Haldea. This led to a severe liquidity crisis for the entire NBFC sector as banks refused to lend money to them. "It is easy for armchair analysts, many of whom seem to be dexterous to hold forth on any topic, leave alone the Union budget," wrote another supporter A Padmanabhan. He then decides to "hold forth" himself when he advises the Finance Minister to come clean on the economy and announce that "there is no magic bullet and the country has to dig in for the long haul". This apparently will improve the government's credibility which was eroded completely when two non-official members of the National Statistical Commission resigned because the government suppressed its report on unemployment. Trouble is that the truth will collapse the stock market which is in record territory in expectation of good news in the budget. With market capitalization wiped out, lucrative electoral bonds may also dry up. The GDP cannot grow unless productivity of agriculture, which employs 44% of the workforce but accounts for only 14-15% of GDP, is improved, said Prof Ashok Gulati. Money for rural development "is going in terms of subsidies, in terms of more of unproductive subsidies or even distorting subsidies like fertilizer subsidy or MGNREGA which is a fall-back arrangement, not a sort of business model on which sustainable income can be generated". He wants subsidies, including food subsidy, to be rationalized and an increase in agricultural research which is "peanuts" at Rs 70 billion. Incendiary stuff. It is easy to throw taxpayer money on subsidies but stopping them could be electoral suicide. Meanwhile, farmers are not getting insurance money owed to them after paying premiums. "In India, there is no evidence that good economics can win you elections," wrote Shankar Sharma. Hence, Modi is right to focus on politics. Unemployment is rising with the labor force participation rate (LFPR) falling among young people, wrote Vivek Kaul. The demographic dividend is turning into a nightmare. That could lose the next election.  

The Budget itch needs a cure.

With the annual budget to be presented at the end of the week speculation on its contents has reached feverish levels. "Tax collections in the current fiscal may fall short of targets by Rs 2 lakh crore (Rs 2 trillion) on a faltering economy, leaving very little room for Finance Minister Nirmala Sitharaman for offering any meaningful reduction in personal income tax rates." Direct tax collection will be short by Rs 1.5 trillion and indirect taxes by Rs 500 billion, so taxpayers can forget any reduction in tax rates. But, already an increase in handouts is being predicted. "The Center is proposing a major revamp of the National Social Assistance Programme (NSAP) that could raise pension payouts for senior citizens, widows and those with disabilities." Pensions will be raised to Rs 1,000 from Rs 500 per month for those older than 80 years of age and to Rs 500 for those up to 79 years of age. This only applies to those below the poverty line (BPL) but even then these paltry amounts will barely pay for food or medicines, but not both, but it will add to spending. Revenue expenditure, which is comprised of interest payments on previous debt, salaries and pensions of central government employees and subsidies, will be Rs 3.80 trillion more than revenue receipts, wrote Omkar Goswami. Rs 2.70 trillion will go on salaries and pensions and at Rs 8.29 billion "the cost of maintaining our Cabinet Secretariat in 2019-20 will be only 4% less than running Dadra and Nagar Haveli". To raise money, "India plans to increase import duties on more than 50 items, including electronics, electrical goods, chemicals and handicrafts, targeting $56 billion worth of imports from China and elsewhere, officials and industry sources said." The government might be gambling that since we export so little, it will not lose much if our trading partners levy retaliatory tariffs on our exports. Our trade deficit was an eye-watering $176 billion in 2018-19 so a fall in imports could be more than the fall in exports. In the last budget personal income taxes were increased so expecting a reduction makes little sense. A 10% long term capital gains tax on the sale of shares was added to securities transaction tax (STT) in 2018, now there maybe a reduction in that tax. The government needs to find more revenue, but with the nominal growth of the gross domestic product (GDP) falling to 7%, tax collections are bound to fall. If the Finance Minister predicts growth in nominal GDP at higher than 10% "it can only mean that either she is misleading us, or that the government is looking to increase tax rates substantially in the course of the year. or that the tax harassment of business and individuals is only going to intensify in an effort to increase tax collections, or a combination of these," wrote Praveen Chakravarty. Constant changes in tax laws, along with tax terrorism, means that companies and individuals cannot plan for the long term. If the government really wants the economy to improve, with increased consumer spending and higher private sector investments, tax rates and rules have to remain constant, wrote Lubna Kably. Get rid of the itch to change things. It creates confusion, not wealth.

Senator Warren could do with Section 124A.

"US Sen. Elizabeth Warren (D-MA), a 2020 presidential candidate, wants to cancel student loan debt for more than 95% of borrowers, and would entirely cancel student loan debt for more than 75% of Americans with student loan debt," wrote Zack Friedman. "Now, she says she would institute student loan forgiveness without Congress." Warren argues that under the Higher Education Act of 1965 she does not need approval of the Congress to forgive student loans worth $1.6 trillion. Strange a candidate of the Democratic Party proposes to spend $1.6 trillion to win her election when her party would not approve a paltry $5 billion to keep out illegal immigrants and drug smugglers. Warren was confronted by a man who had financed his daughter's education and wanted to know if he will get his money back. "My daughter is getting out of school. I've saved all my money. She doesn't have any student loans. Am I going to get my money back?" he asked. "Of course, not," Warren answered without hesitation. "So you are going to pay for people who didn't save any money and those of us who did the right thing get screwed?" the father pressed. Warren is accused of buying votes of debtors. In India, the ruling party thinks it has a right to distribute handouts to win elections with no accountability. No Indian will dare to question a politician like the American man questioned Sen Warren. He will be immediately arrested under the law of Sedition. "Sedition was made an offence under the Indian Penal Code of 1860 which was drafted by (British Whig politician) Thomas Macaulay," said lawyer and writer Suhrith Pathasarathy. "It was unquestionably a weapon in the hands of the colonial government." Macaulay thought Indians are uneducated idiots. "I am quite ready to take the Oriental learning at the valuation of the Orientalists themselves. I have never found one among them who could deny that a single shelf of a good European library was worth the whole native literature of India and Arabia," he said. Since the British were a superior race they could treat Indians ruthlessly for the crime of sedition. "There is no proposal to scrap the provision under the IPC dealing with the offence of sedition. There is a need to retain the provision to combat anti-national, secessionist and terrorist elements," Minister of State for Home Affairs Nityanand Rai. BJP won the general election in 2019 by making sure handouts reached their intended targets, wrote Prof Ila Patnaik. When politicians can do whatever they like people think that corruption is increasing. Today is Republic Day when politicians and their families, dressed in their fineries, will be seated on VIP seats while the armed forces and assorted citizens entertain them by marching past while paying homage. Seventy two years after so-called independence we are policed by a 149 year law. Happy Republic Day.

When the roots are rotten.

Poverty has risen during the first term of Prime Minister Narendra Modi's administration "based largely on reduction in average per capita expenditure", wrote Kukarni and Gaiha. However, since this is an average figure, it does not give a true picture of the depth of poverty which is provided by income inequality. "India's richest 1 percent hold more than four times the wealth held by 953 million people who make up for the bottom 70 percent of the country's population, while the total wealth of all Indian billionaires is more than the full year budget, a new sturdy said on Saturday." "According to Global Wealth Report 2018, since 2000, wealth in India has grown at 9.2% a year, faster than the global average of 6% even after taking into account population growth of 2.2% annually." But, this rise in wealth is because "market capitalisation rose by close to 30%, house prices by about 10%, and the rupee 4% against the dollar", while "92% of India's adult population has wealth below $10,000". Wealth in stocks and real estate do not create jobs for the poor. Jeff Bezos is the richest man in the world because he owns 16% of Amazon whose stock price has increased 97,000% since its initial public offering (IPO) on 15 May 1997. Amazon employs near 700,000 employees and its cloud business is worth $18 billion. "Last fiscal, average annual remuneration of a CEO of a Nifty 50 company stood at 249 times more than the median remuneration of the company's employees according to data from nseinfobase.com." Figures are misleading. This government has jacked up fees of IITs to Rs 200,000 per year, a jump of 900%, and fees for IIM have skyrocketed to Rs 2.2 million per year, as a kind of advance tax because these people are expected to earn big salaries. On the other hand, unemployment among ordinary graduates has risen to over 13%, so many will be thankful to work for any salary. The answer is "inclusive and environmentally sustainable growth" which is a picture of "bottom-up growth and mass entrepreneurship", wrote Arun Maira. The government has a multitude of schemes from rural employment to right to education, skill development to loans for setting up new business and health insurance to pensions. Modi has added 25 schemes to pre-existing ones. The whole population, apart from taxpayers, have been included already. The answer is education. "Net primary enrolment is now over 92% and secondary enrolment is also around 75%. However, scant attention was paid to learning outcomes," wrote Sudipto Mundle. "At least 25% of school children in the four-eight age group do not have age appropriate cognitive and numeracy skills," according to a report by ASER. Children are given excessive marks. "Marks are inflated via setting easy exams, asking factual recall questions, liberal marking schemes which give 100% marks for pre-specified keywords and wholesale raising of marks in the name of 'moderation'," wrote Geeta Kingdon. When the roots are rotten the tree will fall.

It's going to be more of the same.

"Calls for ramping up the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) are growing louder ahead of the upcoming budget, with rural distress deepening across India and private consumption growing anemically," wrote Alexander and Kwatra. "In theory, MGNREGS should boost wages by directly providing paid rural employment to rural households and by providing greater competition for rural wage-earning activities." Which means that the scheme acts as a minimum wage, thus pushing up wages and increasing consumption across rural areas. "Between 2011-12 and 2017-18, earnings of regular workers declined in both rural and urban areas," wrote Prof Himanshu. No action to improve the economy will succeed "in the absence of public expenditure-led demand injection, which must be undertaken even if it means breaching the Center's fiscal deficit target". The government finances fiscal deficit by borrowing from the market by issuing bonds, on which it pays interest. The higher the borrowing the higher the interest the government has to pay so the Reserve Bank (RBI) has resorted to 'Operation Twist', buying long-term bonds while selling short-term ones, to bring down bond yields. Unfortunately, the jump in retail inflation in December has raised bond yields despite Operation Twist, wrote Aparna Iyer. Since borrowing cost for private companies have not come down the RBI needs to continue with Twist, thinks Iyer, as increased borrowing by the government raises the cost of borrowing for everyone, "The key to macro-economic stability, therefore, is to keep the fiscal deficit of government borrowing within prudent limits," wrote M Bhusnurmath. But, "People are not spending as much money on buying things as they used to, given the lack of confidence they have in their economic future," wrote Vivek Kaul. Which means that economic growth is solely dependent on government spending. "For all these reasons, and more, now is the time for the FM (finance minister) to take courage in her hands and use the only tool at her command - fiscal easing - to provide the much-needed counter-cyclical stimulus to the economy," thinks Bhusnurmath. India has a large informal economy which "accounts for nearly half of the GDP and employs 85 percent of the labor force," wrote M Ghatak. The government should increase spending without worrying about fiscal deficit because stimulating the informal sector will increase spending, which will increase earnings of the formal sector and bring down the deficit by increasing tax collection. In addition to global problems, "India faces several structural problems that a tweak of tax rates or budgetary allocations cannot address," wrote TK Arun. With experts so confused we can expect more handouts and higher taxes. In other words, more of the same. 

The taxpayer had no more money.

"If the government's off-budget liabilities (or withheld payments) are taken into account, the central government's real fiscal deficit could end up being as high as 5.5% of gross domestic product (GDP) in the current financial year, a Mint analysis of public accounts suggests," wrote Nikita Kwatra. India's GDP is around $2.8 trillion, which is around Rs 199 trillion at Rs 71 to the dollar. At 5.5% of GDP, the fiscal deficit comes to around Rs 11 trillion. The total expenditure proposed for the Budget of 2019-20 was Rs 27,86,349 crore, or Rs 27.86 trillion, which means fiscal deficit is 39% of our budget. In the last financial year the government proposed to borrow Rs 6.24 trillion, "More than 92% of this amount would be spent on paying interest on the already running loans on the government." Interest payment is about 40% of government revenue. Increasing fiscal deficit is only going to add to interest outgo. Analysis of revenue data shows that 53% of total revenue is collected by November, so "Going by that trend, total revenue receipts this year should at best be close to Rs 18.4 trillion, falling short of budgeted Rs 19.6 trillion by Rs 1.2 trillion," wrote Kwatra. Disinvestment, or sale of assets, will fall short by "40% or about Rs 42,000 crore (Rs 420 billion)". "There are eight regional economies that are growing faster than India is at this point in time, including China, Cambodia, Indonesia, Myanmar, the Philippines, Vietnam, Bangladesh and Nepal," wrote N Rajadhyaksha. Couple of days back the International Monetary Fund (IMF) cut India's GDP growth rate further to 4.8% for this year. "There is no country that has slowed down as sharply as India since 2017, by 2.2 percentage points." "India's domestic air passenger traffic growth traffic growth slowed to 3.74% in 2019, from 18.60% in 2018, amid a subdued economy and the grounding of Jet Airways (India) Ltd." If people cannot afford to fly they cannot afford to buy new cars either. "The number of registrations of vehicles at regional transport offices (RTOs), which is a proxy for retail sales, slid 15% in December from a year ago. The decline was on already low base since the ongoing sales slowdown had already started showing its effects by December 2018." Air travel and cars attract humongous taxes, so if people are not buying these tax collections are bound to drop. Only China has a fiscal deficit higher than the 5% rate of India. "China aside, most of the other regional Asian economies that have been considered in this analysis run relatively tight budgets, ranging from the Philippines (1.1%) and Cambodia (1.3%) to Vietnam (4.4%) and Bangladesh (4.8%)," wrote Rajadhyaksha. They have more space to increase spending to stimulate growth if needed. Politicians think taxpayer money belongs to them. The taxpayer has no more. 

Forget fairy tale figures. People can't afford GST.

The government proposes to spend Rs 19.5 trillion in FY21 (financial year 2020-21) on a National Infrastructure Pipeline (NIP), even though people believe it has "no money", wrote Rajrishi Singhal. "The NIP document estimates gross domestic product (GDP) for FY20 at Rs 205.37 trillion and, yet, the government's own first advance estimates do not put it beyond Rs 147.79 trillion, short by 28%." The NIP estimates the FY21 GDP at Rs 227 trillion, "an incredible 53.6% growth over the government's own advance estimates". Right on cue, has come the report, "The government may be losing Rs 5 trillion in indirect tax revenue a year, amounting to 40% of its goods and services tax (GST) collection target, because of defaults and evasion, according to the Fifteenth Finance Commission (FFC), confirming policymakers' fears that businesses are not paying their fair share of taxes." How is that possible when the government's own site says that GST will "make compliance easy and transparent" "due to a robust IT infrastructure" and impossible to cheat because of "the seamless transfer of input tax credit from one stage to another in the chain of value addition". In the explanation provided by Cleartax, a company will get a tax refund when the next company in the chain of manufacture pays its tax. It is, therefore, in the interest of companies in early stages of manufacture to ensure that others further down the line pay their taxes so that they get their money back, failing which they should complain to tax authorities. Which makes GST foolproof, prompting Prime Minister Narendra Modi to describe it as the "Good and Simple Tax". So how did the pundits of the FFC conjure up the figure of Rs 5 trillion of tax evasion to support the government's brutal tax terrorism? Along with the FFC's fairy tale figure the International Monetary Fund (IMF) predicted India's GDP to grow by only 4.8% in 2019-20, dragging global growth down with it. "The growth of the Indian economy had been predominated by consumption inclusive of both - Private Final Consumption Expenditure (PFCE) as well as the Government Final Consumption Expenditure (GFCE)," wrote Amit Varma. PFCE growth fell to 3.1% in the June quarter compared to 7.2% in the March quarter of 2019. "Rural household consumption slumped to a seven-year low in the September quarter, in a sign that the prolonged agrarian distress and near-stagnant rural incomes have eroded demand for consumer goods, market researcher Nielsen said." Although 94% of all households now have domestic gas connections for cooking, 48% of rural households still do not use gas for cooking because of the cost of refills, which are subsidised. Businesses are not paying GST because people are not buying. They can't afford to.

Don't go to Davos. They know everything anyway.

"This year, we have chosen the theme, Power of India. We believe India reflects the power of democracy, the power of demography, leadership, opportunity and talent," said Commerce and Industry Minister Piyush Goyal when asked about attending the annual jamboree of the World Economic Forum (WEF) at Davos in Switzerland. The minister has over "50 engagements" with other leaders where he will have "several dialogues around the investment opportunity, sustainability, industry and manufacturing potential". Foreigners will of course listen politely but will they believe? "Now, stagflation looms as the economy grinds towards its slowest expansion in more than a decade and inflation spikes above the central bank target, driven by higher food prices," wrote Anirban Nag for Bloomberg. US company Walmart bought online retailer Flipkart for $16 billion last year and paid nearly Rs 80 billion in taxes to the government following which the government changed the rules of e-commerce, apparently to protect bricks-and-mortar retail stores, known as 'kirana stores'. Naturally, Walmart was most unhappy and complained to the US government, which under President Donald Trump, wants to "Make America Great Again" (MAGA). The minister snubbed Amazon CEO Jeff Bezos who offered to invest $1 billion in India. "They may have put in a billion dollars," said the minister. "But then if they make a loss of a billion dollars every year then they jolly well have to finance that billion dollars. So it's not as if they are doing a great favor to India when they invest a billion dollars." "Top executives at several multinational and Indian companies on Thursday took umbrage at commerce minister Piyush Goyal's comment..." The minister wants to know why e-commerce giants are making such huge losses. "Clearly there is an element of pricing control or predatory pricing," he feels. Strange he did not use such strong words, or any words at all, on the predatory pricing by Reliance Jio which has driven Vodfone Idea to the brink of collapse. Call charges have soared in recent months as telecom companies look to survive. "When Amazon gives you these incredible sales, it is doing you a favor, not preying on you," wrote Amit Varma. If the government stops Amazon from doing that, it is the government that is predatory. The real reason is that Washington Post, also owned by Bezos, has been critical of Prime Minister Narendra Modi and the minster feels obliged to defend the Supreme Leader. French economist Guy Sorman said that currently, both local and foreign investors are frightened and do not want to invest in India. The minister is to cut the amount of duty free goods that people can bring in when they return from foreign trips, in an effort to conserve foreign exchange. Surely, the minister can save an awful lot of foreign currency by canceling his enormously expensive trip to Davos? It's of no use anyway. They know.

Getting rid of old men may not be easy.

"India has 50% of its population below the age of 25. So there are more than 700 million Indians alive today who should expect to be alive 50 years from now," wrote Biju Dominic. On the other hand, "The average age of the Indian cabinet is around 60 years. It is very difficult to get people who are in their 70s to think of a future that is even 10 years ahead. Their common response is: 'I don't expect to be alive then, so I don't think about it.'" Even if these old men are conscious of their mortality most of them have children so they should not have to be told by 16 year old Greta Thunberg that climate change will be disaster for everyone. Getting elected is an easy way to amass enormous wealth without having to account for it. Since elected politicians control the police and investigating agencies, such as the Criminal Bureau of Investigation (CBI) which was described as a "caged parrot" by the Supreme Court, winning an election gives impunity from serious crimes. Not surprising that the highest number of criminals are in the ruling party the BJP. The BJP also has the highest number of elected politicians with charges of crimes against women. "Every politician knows that losing an election is equivalent of death," because you may end up in prison, as former Home Minister P Chidambaram discovered. India has some seriously rich people but even they cannot match the power wielded by politicians, which is why over 5,000 dollar millionaires fled from India in 2018. Those who have businesses in India are busy safeguarding their wealth by transferring it to trusts in other countries. Prime Minister Narendra Modi is unhappy about not being able to win the respect of the Lutyens Delhi crowd, but that maybe because his party the BJP is not significantly different from the Congress, which it replaced. Not only has he taken ownership of almost all policies of the Congress by changing their names, the BJP has also adopted the same corrupt tactics he accused the Congress of, wrote SA Aiyer. "At times, age imparts decay, dementia and derangement," wrote S Shanghvi, which is why Young India is protesting. Not just in India. In the US, older people are put off contemptuously by the young with the phrase "OK, Boomer", referring to the baby boomer generation. The older generation thinks that the young live in a smartphone world and are unable to socialise with people. "Roughly a quarter of Japanese between 20 and 49 are single, according to government data." Europe has got rid of old men and selected women in top jobs. Finland has gone a step further. Prime Minister Sanna Marin is a 34 year old woman and she has formed a coalition with 5 parties, all led by women. "But a study reveals queens have been 39 percentage points more likely than kings to wage war over the centuries." God help us.