Will they accept our invitation?

"As several countries face supply distortion of many products due to the outbreak of the novel coronavirus in China, a report by HDFC Bank said that India can turn into an alternative global sourcing base for many items." "The report, however, observed that the regulatory mechanism in India, limited production capacity and competition from countries like Vietnam and Cambodia in manufacturing sector are the major constraints for India in becoming China's replacement." In fact, India imports 68% of active pharmaceutical ingredients and 40% of electrical machinery and equipment from China. "India needs to act proactively to create an environment that is favorable to global manufacturing so that once the COVID 19 crisis blows off, international organizations can look at us as trusted supply chain partner," wrote Pankaj M Munjal, Chairman & MD, HMC, a Hero Motors Company. "India is developing a land pool nearly double the size of Luxembourg to lure businesses moving out of China, according to people with the knowledge of the matter," wrote Shruti Srivastava. "Land has been one of the biggest impediments for companies looking to invest in India, with the plans of Saudi Aramco and Posco frustrated by delays in acquisition." "The government in April reached out to more than 1,000 companies in the US and through overseas missions to offer incentives for manufacturers seeking to move out of China, according to India officials who asked not to be identified, citing rules on speaking with the media," reported Bloomberg. "But apart from ensuring land, water and sewerage, the most important change India needs to make is to give a clear guarantee that the government will not introduce retrospective tax amendments," said Ajay Sahai, director general and chief executive officer of the Federation of Indian Exporters. The tendency of trying to extract taxes from businesses through coercive and unfair methods, as in the telecom sector, is a big disincentive to invest in India, wrote Andy Mukherjee. "In a recent address to the nation, Indian Prime Minister Narendra Modi made 'be vocal for local' his rallying cry," wrote Nikhil Inamdar. "As things stand, Vietnam, Bangladesh, South Korea and Taiwan seem to be favorites to benefit from the backlash against China." Business Standard columnist Debashish Basu noted "data released by the department of industrial policy and promotion shows that inward FDI (foreign direct investment) declined in fiscal year 2018-19 for the first time in six years", wrote Prof Vivek Dahejia. In addition to the huge cost of relocating from China, the collapse in demand due to the coronavirus lockdown will not tempt many companies. Services Purchasing Managers' Index (PMI) fell to 5.4 in April while manufacturing PMI fell to 27.4. "But unlike manufacturing, the output loss in services is permanent in nature. While we can buy more than one book or gadget later (after the lockdown), we cannot bunch up the use of services, such as, say, travel," wrote Aparna Iyer. We can invite companies, but will they accept. If they cannot make money.     

2008 was a fall, 2020 is deep coma.

"The government kept the lessons of the 2008-13 period in mind when designing its Rs 20 lakh crore stimulus package, Finance Minister Nirmala Sitharaman told ET, explaining why it had avoided spending recklessly to revive the economy." In 2008, there was no lockdown of the entire nation bringing economic activities to a near halt. In 2008, millions of daily-wage laborers were not forced to walk hundreds of miles back to there villages, driven by fear of starvation. In 2008, retail inflation was high and rising, while this time, "The real danger is that of a prolonged deflation rather than inflation," said Vice Chairman of Niti Aayog Rajiv Kumar. Not a single car was sold in April. India's biggest car company Maruti Suzuki reported zero sales. In 2008, all international and domestic flights did not come to a halt for two months. In 2008, the unemployment rate did not rise to 24% and back then over 20 million white collar workers did not lose their jobs. And, in 2008, the economy was still growing but this time Goldman Sachs predicts a 45% contraction in the second quarter and a contraction of 5% in the real GDP in the financial year 2020-21. The two situations are completely different and not comparable at all. Prime Minister Narendra Modi announced a stimulus package for the economy worth Rs 20 trillion on 12 May. "Alas, the package is a sedative to ease the pain, not a stimulus that will revive a crashing economy," wrote SA Aiyar. "Yet, the package might just go down in history as a turning point in economic reform," because the "dramatic embrace of privatisation is unambiguous and stunning". "In the case of the covid economic package, ironically the government has displayed, kept the medium to long term in view and has used the crisis to usher in some long-pending and much needed reforms, instead of focusing too hard on short-term palliatives," appreciated VA Anantha Nageswaran. "In the context of immediate support to the economy, the government has conserved some firepower, just in case the pandemic does not go away in six months or so." "In the US, the unemployment benefits announced in the wake of the pandemic are seen to be incentivizing the jobless to stay jobless." If the idea is to starve people back to work, then it is certainly revolting. "Factories and other establishments in some states may be allowed to cut salaries and initiate disciplinary action against workers who don't want to report back to work within a stipulated period once the Covid-19 lockdown is lifted." The Uttar Pradesh (UP) government has withdrawn a cruel order to force industrial workers to work 12 hour shifts in the middle of a blistering summer. The meager economic stimulus is a political move by Modi, said Aiyar. "At best, you could say it is a very cold calculation that if I take a bigger hit this year, I will have a bigger bounce next year and then there is no political damage because there are no elections to be lost." By next year the economy maybe dead. 2008 was a fall, 2020 is deep coma.    

Bat meets pangolin in Wuhan lab.

"Chinese President Xi Jinping said he supports calls for an investigation into the handling of the coronavirus pandemic at a key summit Monday, but insisted that any inquiry should wait until the virus is contained." Which makes it completely meaningless because that may take years and the virus may never go away, according to the WHO. "The wording of the resolution is weak compared to Australia's previous calls for a probe into China's role and responsibility in the origin of the pandemic." Even as Xi was lying to the world China was imposing 80% tariffs on import of Australian barley. "The tariffs, set to begin on Tuesday and continue for five years, are effectively to stop billions of dollars of trade between the nations, Reuters reported." Earlier, China "suspended beef imports from four of Australia's largest meat processors, as the trade of several key agricultural commodities suffers in the wake of souring ties stemming from a dispute over the Covid-19 pandemic." Why take revenge on Australia for calling for an investigation unless Xi has no intention of cooperating with one? The spat has been ongoing since April when the Daily Telegraph in Australia questioned China's handling of the virus leading to an angry response from the Chinese ambassador in Australia. In a point-by-point answer to the ambassador's letter the Telegraph brutally ridiculed him and China. A follow up complaint by the Chinese ambassador was answered with the same mockery. "China's claims that the pandemic emerged from a wild animal market in Wuhan last December have been challenged by a landmark scientific study. The Mail on Sunday can reveal that analysis of the coronavirus by specialist biologists suggests that all available data shows it was taken into the market by someone already carrying the disease. They also say they were 'surprised' the virus was already 'pre-adapted to human transmission', contrasting it to another coronavirus that evolved rapidly as it spread around the planet in a previous epidemic." Scientists are sure that the virus originated naturally and was not engineered by human beings. Bat coronaviruses need an intermediate host to become infective to human beings and this one is suspected to have passed through pangolins. Bats live in the air and pangolins on the ground so how did a bat virus go through pangolins. This is where the Wuhan Institute of Virology comes in. Earthquakes are natural phenomena but dams have been blamed for causing slippage of tectonic plates. Hydraulic fracking has also been linked to earthquakes. Scientists in the lab in Wuhan must have passed the bat coronavirus through different animals, including pangolins which are a delicacy in China. The bat virus picked up the S gene from the pangolin virus and then infected people working in the lab. That is why China destroyed all samples of the virus, to destroy mutations produced by passing through other animals. Thus, the virus appears natural. But is man-made. 

Stimulus is to make every citizen self-reliant.

The lockdown of India which started on 25 March to control spread of coronavirus is to continue till 31 May but shops and markets will be allowed to open with staggered timings and customers will have to maintain minimum distance. Hotels, restaurants and malls will remain closed. Metro and airlines will not function. Spread over 5 days, Finance Minister Nirmala Sitharaman has been explaining details of the Rs 20 trillion stimulus package announced by Prime Minister Narendra Modi. The package is designed to increase liquidity to ease borrowing and the actual spending by the Center will be a tad over Rs 2 trillion, wrote P Vaidyanathan Iyer. Apart from increase in support for MGNREGS, which provides employment for unemployed rural workers, and free food for migrant workers there is no increase in spending by the government. Deficit limit of states has been increased to 5% from 3%, even as the Center has not paid compensation for goods and services tax (GST) to the states for the period of December to March. Farmers will be encouraged to borrow on Kisan Credit Card which already has outstanding loans of over Rs 7 trillion. Goldman Sachs predicts, "Gross domestic product (GDP) will contract by an annualized 45% in the second quarter from the prior three months, compared with Goldman's previous forecast of a 20% slump." "Those estimates imply that the real GDP will fall by 5% in the 2021 fiscal year, which would be deeper than any other recession India has ever experienced." Real estate companies are allowed to cite Covid-19 as 'force majeure', which probably means 'unavoidable circumstances', to postpone completion of building projects. Which means buyers, mainly middle-class people, will be forced to live in rented accommodation while also paying interest on their mortgage. Seems that when Modi said that the stimulus package is about 'Atma Nirbhar', meaning 'self reliance', he meant every citizen for herself with no responsibility for the state, except to enforce his orders with brutal force. "In some sense, there is an attempt to try and construct something equivalent of a 'New Deal' that President Roosevelt came up with during the Great Depression (in the US)," appreciated Chief Economic Adviser KV Subramanian. The New Deal strengthened banks, ended prohibition and provided direct stimulus to agriculture. On the other hand, it probably extended the Depression to 10 years. Explain Modi's 'New Deal' to the family of the young man who died on the verge of a highway while on his way home to escape hunger. Or to those who are forcibly locked up in quarantine centers in "unhygienic rooms and toilets, being treated like untouchables, living in cramped rooms, fighting for food". "Some kind of lockdown was necessary to tackle the pandemic, but these deaths are unforgiveable tragedy," said businessman Azim Premji. "Those sixteen young men died because we have almost no social security and too little worker protection -- not because we have too much of it." He is a rich businessman. He does not make promises to win elections. 

A deluge of words.

"Unveiling the fourth tranche of government's mega stimulus, Finance Minister Nirmala Sitharaman laid emphasis on wide-ranging structural reforms across eight critical sectors - Coal, Minerals, Defence Production, Airspace management, Power Distribution companies, Social Infrastructure Projects, Space sectors and Atomic Energy." She said that commercial mining of coal will be allowed "on revenue sharing mechanism instead of the regime of fixed rupee/tonne".  Ominous words! The telecom industry also has to share its so-called Adjusted Gross Revenue (AGR) with the government. Telecom companies naturally expect AGR to mean revenue from their core business but the Department of Telecommunications (DOT) wanted a chunk of "dividend, interest, capital gains on sales of assets and securities and from foreign exchange fluctuations". DOT won in Supreme Court. "Exploring the earth for economically viable (high grade) mineral deposits is a high risk improbable activity," wrote Peter Nichols and Rahul Tongia. "Existing mining law provides that any discoveries (winnings) made by an explorer will be handed back to the government and the government will reimburse the explorer for the funds they expended." That is why, despite having a coastline of over 7,000 km, India imported crude oil worth $111.9 billion in 2018-19. As for privatising electricity distribution companies, or discoms, how are they to make any profit if electricity theft is rampant, if the local administration allows free consumption of electricity, and then will not allow the company to raise prices on other users. "Indian Space Research Organisation (ISRO) has over a dozen facilities that design and develop communication and earth observation satellites and rockets that can carry up to six tonnes of payload into space." It earned Rs 3.24 billion in 2018-19 and has contracts with at least 10 countries to launch their satellites. What if the startups sell out to foreign company of a hostile nation, like China or Pakistan, which will then get a foothold in India's space research. India loses to China because of low productivity, because our companies are small, electricity and transport costs are too high, a strangling bureaucracy and corruption which is why we cannot even make pictures of our own gods, wrote Prof Farok J Contractor. "Many say the government's stimulus lacks demand-side push and is more medium to long-term focussed, when the economy needs a more immediate dose of adrenaline booster."  Sitharaman "will unveil the fifth and final tranche of mega Covid stimulus today at 11 am". May we suggest that she concludes by singing, "It's only words and words are all I have." No tax on words. Pity.

We prefer a simple life on a dirt road.

The Finance Minister Nirmala Sitharaman required three sessions to explain the 'mother of all stimuli' of Rs 20 trillion announced by Prime Minister Narendra Modi. "Dubbed Atmanirbhar Bharat Abhiyan (Self-reliance campaign for India), this mother-of-all-incentives puts bold reforms at the heart of Modi's stated plan to make India self-reliant so that any other crisis that may emerge in the future could be efficiently tackled." "India as a country has maintained a trade deficit as it imports more goods than it exports," wrote Karan Bhasin. "There is a possibility of raising import duties on a wide range of final goods and services," to protect local industries. Unfortunately, others have the same idea. "President Donald Trump has threatened to slap new taxes on American companies like Apple to dissuade them from moving their manufacturing bases from China to countries like India and Ireland instead of the US amidst the Covid-19 pandemic." "I said we shouldn't have supply chains. We should have them all in the United States," said Trump. "Union Minister Nitin Gadkari on Tuesday said the government was considering introducing a policy on import substitution and urged India Inc to upgrade technologically and come with cost-effective substitutes to reduce the country's inward shipment." It is not clear why companies would want to waste money on upgrading when they are being urged to provide cheap products free from competition from foreign companies. "But the Indian economy needs to be wary of trying to gain domestic competitiveness in every sector of the economy," wrote Prof Amit Kapoor & Chirag Yadav. That would take us back to pre-1980 India. "Every political party, from the communists to the BJP, has always sworn by self-reliance," wrote Sanjaya Baru. "For India to be truly self-reliant and self-confident, public investment in education, human capability and research and development has to increase." Trouble is, there is no money. "We don't have money. Our people are poor. Our government is poor," wrote Chetan Bhagat. "Here's what we think is good: Living a simple life (and hence GDP contracting, consumption reducing behavior is great)," "letting the government regulate and take care of everything (particularly those business guys who are all bad and therefore sarkari babu needs to control them) and worshiping politicians like leaders of religious cults (and therefore not holding them accountable)." "Global smartphone, FMCG, electronics and apparel companies are confident that their customers in India will stay loyal to them even after Prime Minister Modi's call to support local businesses." What they are not saying is that Indians are willing to pay more to buy superior quality products. "Sadly, our current turn to import substitution threatens to return us from the turnpike on which we have been traveling all these years on to the dirt road," wrote Prof Arvind Panagariya in 2018. The poor cannot afford to complain, they bear every assault on them. Why change?

It is going to get very interesting.

The Republican Party won two special elections to the House of Representatives in the US this week. State Senator Tom Tiffany won in Wisconsin's 7th District which Trump had won by 20 points in 2016. In California, Republican Mike Garcia won in suburban Los Angeles, flipping a seat held by Democrats for more than two decades. What these results in the midst of a virus pandemic augur for the presidential election on 3 November 2020 no one can tell. As things stand at present, President Donald Trump will be taking on Democrat Joe Biden who was Vice President to President Barack Obama. "Nearly eight years after he was last on the ballot, Barack Obama is emerging as a central figure in the 2020 presidential election" and Democrats are eagerly embracing him to bring in votes. In a recent private conference call, Obama criticized Trump's handling of the coronavirus crisis as "an absolute chaotic disaster". Obama is the third Democrat president to speak against his successor, two Republicans have also done so. Obama made the 2016 presidential election a referendum on his legacy and was rejected by American voters. "My name may not be on the ballot, but our progress is on the ballot," Obama told a gathering of black leaders in September, in a formulation he would deliver repeatedly throughout the fall as he stumped for Clinton." Hilary Clinton lost at least four states that Obama won twice. "During President Obama's first year in office, Democrats held the vast majority of both state house and senate seats and had 28 sitting governors, compared to only 22 Republicans," wrote Newt Gingrich. By the end, the Republicans held "over 4,100 out of 7,383 state legislative seats, the most since the 1920s", controlled both legislative chambers in 32 states, and had 31 governors, compared to just 18 for Democrats. So, why does Biden need Obama? Because of Tara Reade. "Tara Reade, who worked for the former US vice-president nearly 30 years ago, says he sexually assaulted her in the halls of the Congress." Biden has denied the accusation "unequivocally". "Acquaintances of Ms Reade have said she confided in them after the alleged assault." She has recently asked Biden to step down from the race. "Several prominent Democratic women have voiced their support for former Vice President Joe Biden as he faces a sexual assault allegation by his former Senate staffer Tara Reade." An irked Fox News wrote how Christine Blasey Ford could not produce any witness to corroborate her accusation against Judge Brett Kavanaugh but the media and Democrats went berserk. They are silent now. All those named by Ford, including her friend Leyland Ingham Keyser, denied being at such a party. Virus, economy and Reade, it's going to be interesting.

Should our CEA doubt the US and UK?

"After repeated calls by experts and economists for more fiscal stimulus to kickstart India's stalled economy, PM Modi finally unveiled a Rs 20 lakh crore (Rs 20 trillion) mega package yesterday." "While the Rs 20 lakh crore stimulus package is being revealed in parts like the episodes of an intense television serial, and we today have seen only the first episode, we are in no position to present a review of the entire production," wrote an editorial in the Economic Times. "Not all of the Rs 20 trillion constitute extra fiscal expenditure," wrote Prof Arvind Panagariaya. "This is just as well. The medium to long-term impact of adding 10 percentage points to fiscal deficit would not have been pretty. The government would have had to print massive sums of money raising cash in circulation by a very large percentage -- perhaps by as much as 25-30%." "Of the Rs 20-lakh-crore package that Prime Minister Narendra Modi announced to defend the economy against Covid-10 disruptions, fresh support may be only around 60 percent of the offer as it counts the first financial stimulus and liquidity support that Reserve Bank (RBI) has given already, and will overburden bond market, says a report." For comparison, the US passed a $2 trillion stimulus package which would give $1,200 to every person with income of up to $75,000 per year. Those on unemployment benefit will receive an additional $600 per week for 4 months. There was another $484 billion to help small businesses so that they could continue to pay staff. The US economy is nearly 10 times that of India so we could compare with Britain which is of almost equal size. The budget presented by Chancellor of the Exchequer Rishi Sunak, son-in-law of Narayan Murthy, will pay 80% of wages, up to a maximum of 2,500 pounds per month, to all those who have lost their jobs due to the coronavirus lockdown. Employees of small industries who fall ill with coronavirus will get sick leave pay for two weeks. However, the Chief Economic Adviser (CEA) to the Indian Government Krishnamurthy Subramanian rubbished these numbers, saying that the UK package is not 15% of GDP but only 3.7%, because it includes loans, and the US package is worth just 6% of GDP and not 10%. Given that logic, the package announced by Finance Minister Nirmala Sitharaman yesterday consists almost entirely of loans and so is worth nothing. What is the point of earmarking Rs 3 trillion for collateral-free loans to micro, small and medium enterprises (MSMEs) if they cannot operate because they are in a red zone or because their suppliers are shut. Are they supposed to borrow just to pay employees? Red zones account for 43% of GDP while orange zones account for 38%, wrote SA Aiyar. Any district magistrate can shut down an area if she/he so wishes. Less tax is to be deducted at source (TDS), apparently to give more cash to taxpayers, but that tax will still have to be paid when filing tax return. Smoke and mirrors. Our lot are experts.

Will Rs 20 trillion get rid of the terror?

The Prime Minister has spoken. "The mega Rs 20 lakh crore (Rs 20 trillion) stimulus package announced on Tuesday by Prime Minister Narendra Modi includes previously announced measures to save the lockdown battered economy, and focuses on tax breaks for small businesses as well as incentives for domestic manufacturing." "A stimulus of Rs 20 lakh crore is awe-inspiringly large," wrote a skeptical TK Arun. "What was missing was any tangible announcement of concrete relief for the suffering mass of humanity fleeing lost jobs, penury and callous abandonment at their place of work, for the meagre but assured refuge of a distant home." India should ignore threats of credit rating downgrades because these agencies are biased, wrote Rajrishi Singhal. Total debt of the Center and states in India was 72% of gross domestic product (GDP) in 2019-20, whereas Italy will have a fiscal deficit of 10.5% and its public debt will "jump to over 155% of GDP" this year. Yet, it's rating of BBB/A-2, which is higher than that of India's, was confirmed. "The rating agencies are private entities incorporated in the US and march to different idiosyncratic tunes, free of regulatory oversight." On 31 December 2019, "Total market capitalisation of the Indian equity market stood around Rs 154 lakh crore, or $2.2 trillion, as of Monday's close. Foreign portfolio investors held around Rs 30 lakh crore, or 20 percent of that market cap.." "Foreigners hold just 3.7 percent of almost Rs 60 trillion ($835 billion) of sovereign bonds issued by India, and the government has set a 6 percent limit on foreign ownership." A substantial portion of foreign investments will be US firms and hence rating agencies have a duty to warn them of risks. Unlike ratings agencies in India, which were fined by the Securities and Exchange Board of India (SEBI), for rating IL&FS at the highest level of AAA before it defaulted on its debt in 2018 and caused an enormous financial crisis. "Overseas investors have begun to factor in a likely sovereign rating downgrade", because "Many of estimated 9,500 portfolio investors have the mandate to put cash only into investment grade countries." FPIs can see the inhuman suffering of migrant laborers as they walk along highways with children and their meager belongings. "Exhausted people sleep on the roadside. Children cry in hunger. Mother's cast anguished glances at vehicles that won't stop." With no protection against swarms of mosquitoes that have emerged due to recent rains. Over 8,000 auto-rickshaws loaded their belongings and fled Mumbai for their distant villages in UP and Bihar. "Center for Monitoring India Economy (CMIE) on Tuesday said 27 million youth in the age group of 20-30 years lost their jobs in April 2020 following nationwide lockdown to prevent the spread of the novel coronavirus. Terror of the virus, terror of hunger and terror of the future. Will Rs 20 trillion heal that terror? 

Was the coronavirus altered by passing it through different animals?

"A new study has suggested that the Sars-CoV-2, the virus that causes Covid-19, might have originated from a recombination of coronaviruses in a bat and pangolin." "Genome sequencing found that the pangolin-CoV was very similar to both SARS-CoV-2 and bat Sars-CoV RaTG13 (from which SARS-CoV-2 is suspected to have originated) but the only difference was the spike or S gene." The bat coronavirus cannot bind to human cells but once it obtained the S protein from the pangolin virus it became infective to humans. President Donald Trump has blamed China for covering up the severity and spread of the infection when it first appeared in Wuhan. He said that it was an attack on the US. worse than that on Pearl Harbor. Secretary of State Mike Pompeo also accused China of cover-up and hinted at the virus originating in a laboratory in Wuhan. US officials are investigating the possibility of whether the virus could have escaped from a lab. Scientists studying the virus genome are convinced that there is no possibility of the virus having been genetically manipulated in a lab. One group of scientists have gone even further, saying that the "virus could have spread among humans for years or even decades before now". They do not explain why it has become so contagious and virulent suddenly and why we do not seem have developed any immunity against it. Although different, herpes viruses live in our bodies for decades without causing any inconvenience. HSV-1 may cause cold sores on our lips during a fever, while the chicken pox virus may cause a painful rash along a nerve, called herpes zoster, if immunity levels drop. "Top Russian expert has claimed that scientists at Wuhan laboratory did "absolutely crazy things" to alter the coronavirus and enabled it to target humans." Prof Clive Hamilton claimed that the virus could only have originated in the Wuhan lab and not in the wet market in Wuhan because some early cases had no contact with that market. "The hypothesis came from Chinese scientists themselves and was all over the internet before disappearing, Professor Hamilton said." Is it possible that the virus did originate in the Wuhan lab but was not manipulated by the Chinese directly? The Chinese scientists could have deliberately exposed a range of wild animals to the bat coronavirus to encourage natural mutation and succeeded when it passed through pangolins. These mutations would be natural. China has refused to share samples of virus isolated by its scientists and even destroyed samples of the virus from the Wuhan lab, wrote Prof Brahma Chellaney. Pompeo accused China of not sharing virus samples and of destroying existing samples. China has furiously denied any cover-up in a long article, quoting Abraham Lincoln about fooling people.  The virus has already mutated into 10 different types in the few months that it first appeared in Wuhan. So, there is no reason why China refuses to share its samples. Unless they are mutations which occurred during their experiments with different animals. Scientists should be looking into that. 

Any idea how to get out of this maze?

The number of deaths from coronavirus infection was lower yesterday than the day before, and much lower than 3 May, but the number of new cases was higher. This maybe because of increased testing which is detecting mild cases. "It has been well understood that among various countries responding to the Covid-19 outbreak, India enforced one of the strongest lockdowns at an early phase of case growth. Now, an index created by the University of Oxford quantifies that. The Stringency Index has found that India indeed had one of the strongest lockdown measures in the world -- at a 100 score since March 22." Other countries also had a score of 100 but, "India now has the highest number of cases in this set." When researchers "examined if countries meet four of the six World health Organization's (WHO) recommendations for relaxing physical distancing measure", "India scored 0.7 (below Australia, Thailand, Taiwan, and South Korea) because it scored 0 for controlling its cases." Dire predictions of economic contractions started coming in. The Manufacturing Purchasing Managers' Index (PMI) fell to 27.4 in April, the lowest score ever. That was nothing. The Services PMI came in at 5.4, almost complete standstill. One week back the government announced a slight easing of the lockdown with the nation divided into red, orange and green zones, with strict restrictions in red zones and much less in green ones. "But the red zones create 43% of GDP, and even with new relaxations will be 50% closed. The orange zones with another 38% of GDP will be 30% closed. Since companies even in orange and green zones require components from red zones, the economic disruption will remain massive," wrote SA Aiyar. India's economy grew 3.9% during the recession in 2008, yet the financial sector has still not recovered. A contraction will be disaster. Migrant workers, who were stuck in cities, have begun to return home in special trains, causing enormous stress for their home states.  "As over 1 lakh (100,000) migrants returned to Bihar on 83 special trains till Sunday, the number of positive coronavirus cases in the state has seen a rise too." Labor intensive sectors like construction and manufacturing cannot restart without labor so Karnataka tried to forcibly detain the migrants by canceling special trains but retreated after an outcry. Now they are being threatened with cuts in pay and disciplinary action if they do not return when ordered. This, after thousands walked hundreds of miles with children to escape starvation when the sudden lockdown stopped their earning. How can authorities treat citizens with such brutal callousness? Because, politicians win elections with handouts with taxpayer money. So a submissive, servile people will obey any order, however repugnant, not to lose their subsistence. It also shows a complete lack of ideas. 

Why waste a stimulus?

Former Governor of the Reserve Bank (RBI) Prof Raghuram Rajan has explained how to fund an economic stimulus by selling government bonds directly to the RBI. Normally, the government sells bonds to commercial banks. The government spends this money on public projects by paying companies which deposit the money back in banks. The RBI's balance sheet stays neutral. With banks reluctant to lend, the RBI should buy government bonds. The money will end up with banks which are parking money with the RBI at 3.75% interest. Since the government owns the RBI, it means it is borrowing at 3.75% interest instead of selling bonds to banks where yields are at 5.967% on 10-year benchmark bonds. This is known as monetization of the fiscal deficit. It can happen in two ways, explained Biagio Bossone. The central bank prints extra money and transfers it to the government, or the government sells bonds in the market and the central bank buys an equivalent amount from the secondary market, which are held to perpetuity and the interest is returned to the government. In both scenarios the government incurs no new debt. "Debt monetization by RBI was the norm in the 1980s and up to late 1990s Govt deficits were monetized through ad hoc treasury bills," wrote an editorial in the Economic Times. Benefits will be much higher than risks of inflation or excess credit. The strict lockdown in India has stopped farmers from transporting produce to markets, resulting in a crash in prices, wrote Sayantan Bera. Farmers are destroying crops as the cost of transport would be higher than the price they will get. This is especially true for perishable items like, fruits, vegetables and milk, wrote Ajay Vir Jakhar. Vegetable sowing is down is March and April and will be low in May as well. If the government is to increase subsidies to the poor there will be increased demand for food and inflation might follow. "Monetization is neither a game changer nor a catastrophe in abnormal times," said Rajan. "It helps a little at the margin, but does not solve the governments's fiscal problems nor does it lead to runaway inflation." However, all this discussion is completely unnecessary because the RBI is already monetizing the deficit. It has increased the cap on short term government borrowing from Rs 750 billion from April to September last year to Rs 2 trillion this year. The RBI "bought chinks of debt just after the government sold it, the latest data showed, further fueling talk that the central bank is supporting the nation's fund raising efforts," wrote Subhadip Sircar. The RBI has done "all the heavy lifting to date. The ball is now in the government's court. And has been so for a while now, unfortunately," wrote Mythili Bhusnurmath. However, after an early announcement of Rs 1.7 trillion for the poorest sections of society the government has been reluctant to announce any more, when the economy needs in excess of Rs 10 trillion, wrote an editorial in the Mint. Why, when the Prime Minister is expert at announcing new schemes, especially before elections? Maybe he is waiting for the election dates to be announced. 

Who to stimulate and by how much?

"While the government's coronavirus stimulus package is still a work in progress, industry body Confederation of Indian Industry (CII) has stated that India needs a Rs 15-lakh crore (Rs 15 trillion) immediately to support poor and micro, small and medium enterprises (MSMEs)." As the MSME sector was "left weakened by the twin shocks of demonetization and a cumbersome goods and services tax in 2016 and 2017, the coronavirus lockdown of 2020 appears to have sounded the death knell for many", wrote an editorial in the Mint. While other governments have been providing vast sums of money for  economic stimulus, the Indian government has been dragging its feet, wrote Sriram Ramakrishnan. The US Congress has provided $2.5 trillion in direct payments to individuals and small businesses, while the Federal Reserve is buying bonds worth $3 trillion. "Four major problems have so far characterised GoI's (government of India's) fiscal response: incrementalism, over-reliance on bankers, undue fear of macro problems, and fear of optics over helping the well-off." Bankers are naturally worried about bad loans. "Companies that need credit are not getting it from banks, while loans are being offered to those who do not need it," wrote Shayan Ghosh. Loans are based on credit risk. "Most bankers have turned risk-averse and are happy to park their money with the Reserve Bank of India (RBI) even at a 3.75% interest." Incrementalism is not working and there is no need to be afraid of credit rating agencies. The government does not want to be seen to be helping the rich, but does it mean it should not help airlines or the leisure industry and the jobs that go with them? "Of late, there have been suggestions of imposing a one-time Covid-19 relief cess and/or a wealth tax on India's super rich population, as this segment is believed to have a higher obligation towards ensuring the larger public good," wrote Siddhartha Sanyal. Trouble is, public sector employees are some of the most highly paid and so have to pay more, while nearly 90% of workers, an estimated 450 million, lead a precarious existence in the informal sector. 52 out of 70 members of Delhi Assembly are multi-millionaires, as are 475 out of 542 members of the Lok Sabha elected in 2019. Not easy to tax one's own, but raising taxes on fuel and alcohol is easy. "Central and state governments, starved of revenue due to nationwide lockdown, are increasingly resorting to fuel tax hikes to capture most gains from global oil crash that began in early March, leaving little benefit for customers." The base price of petrol is Rs 17.96 a liter, while the tax on it is Rs 49.42, wrote Vivek Kaul. The Delhi government has imposed an extra 70% coronavirus tax on alcohol. Hard drinkers will buy at any cost, despite loss of earnings, thereby putting their families in greater danger of penury. If casual and recreational drinkers, who tend to buy more expensive brands, refuse to buy at these prices the move will be self-defeating. Tax repression instead of stimulus. Not what the economy needs.  

Confusion is no good for business.

Blind panic about the coronavirus is no good, wrote Prof Kaushik Basu. "In many countries, especially in the developing world, it is leading to policies that generate more risks -- such as economic hardship, food insecurity, and generalized anxiety -- than they mitigate." "The chance that a person will die from covid-19 in Europe is typically 2-4 thousand times higher than in Africa or South Asia. Even when considering only the better-performing European countries, the gap is large: the risk of covid-19 fatality in Germany is about 100 times higher than in India." A view shared by SA Aiyar, who wrote that mortality increased in countries that imposed strict lockdowns, by 60% in Belgium and by 51% in the Netherlands, but only by 12% in Sweden where there is no lockdown. "From New Delhi to Tiruppur, one of the principal side-effects of the pandemic is that the licence raj of the 1970s is back with a vengeance," wrote Rahul Jacob, as local administrations crack down on businesses because of conflicting and vague orders from the government. Self-isolation is impossible in India, wrote Rangoli Agrawal. "Of the 246 million households in Census 2011, about 103 million households average more than three people to a room." Not just at local levels, there is confusion at the highest level as well. "The government in April reached out to more than 1,000 companies in the US and through overseas missions to offer incentives for manufacturers seeking to move out of China, according to India officials who asked not to be identified, citing rules on speaking with the media," wrote Archana Choudhary. At the same time, "Union Minister Nitin Gadkari on Tuesday said the government is considering introducing a policy on import substitution and urged India Inc to upgrade technologically and come up with cost effective substitutes to reduce the country's inward shipment." How will companies get raw materials and parts to manufacture in India? Cost of manufacture in India maybe cheaper than in the US and Japan but it will still be more expensive than China. Apparently, "India expects to win over US companies involved in healthcare and devices" but why they should be interested with price caps on medical devices and drugs, is not explained. Faced with starvation due to the shutdown millions of migrant labor have been frantic to return to their home villages, creating a shortage of labor as the government seeks to ease the lockdown. To stop the exodus, the BJP government in Karnataka canceled special trains to force migrants to stay back and get back to their jobs. However, faced with massive criticism it has backed down. Why would anyone want to come here?

A clear and present danger.

"China insists it has been fully transparent and hidden nothing on the killer coronavirus disease (Covid-19), whose international spread from Wuhan has turned into the greatest disaster of our time," wrote Prof Brahma Chellaney. "So, why is Beijing opposing an independent international inquiry into the origins and spread of the virus?" Why did China allow international flights out of Wuhan when it stopped domestic flights to the city? "Authorities shut a Shanghai laboratory a day after its publication of the coronavirus genome opened the global path to diagnostic tests." It destroyed lab sample of the virus instead of sharing them with the world. China's foreign ministry accused the United States of "lying through their teeth", reported Fox News. Prime Minister of Australia Scott Morrison said, "I don't think anybody is in any fantasy land about where it started -- it started in China. What the world over needs to know -- and there is a lot of support for this -- is how did it start and what are the lessons to be learnt." Seems entirely reasonable. Not to the Chinese Ambassador Chen Jingye though, who snarled, "Maybe the ordinary people will say, 'Why should we drink Australian wine? Eat Australian beef?'" China reacts aggressively if any nation objects to its criminal behavior. In 2016, the Permanent Court of Arbitration in the Hague found China in violation of international maritime law by claiming the entire South China Sea as its territory by an illegal 9-dash line on an old map drawn by the Communist Party. The state-run Global Times called the US and Japan "eunuchs" and "paper tigers" for supporting the judgement. "The president of the European Commission backed calls for an investigation into the origin of the new coronavirus and said China should be involved in the process." If China does not cooperate, countries will do their own investigations. "A research dossier compiled by the so-called 'Five Eyes' intelligence alliance states that China intentionally hid or destroyed evidence of the coronavirus outbreak, leading to the loss of tens of thousands of lives lost around the world." A report by the Department of Homeland Security in the US says that "Chinese leaders intentionally concealed the severity of the pandemic from the world in early January" so as to "stock up on medical supplies needed to respond to it". It 'disappeared' whistleblowers to cover-up evidence of human to human transmission. China is trying to manipulate news coverage of the pandemic by "upping its spy game on US soil", US officials said. It is directly interfering in Nepal to keep the communist government in power. The virus will pass, but China will still be here. A permanent danger to the world.

Uses of the coronavirus.

"The idea that the war against coronavirus can be waged by scientists, epidemiologists and other men (and women) in white coats -- the so-called experts -- strikes me as being naive," wrote Swapan Dasgupta. He does not explain why it would be better to leave decision-making to ignorant people with no knowledge of medicine, statistics or behavior of infections. President Jair Bolsonaro of Brazil has been against lockdowns to control the spread of the coronavirus and even joined protests against them. As a result, total number of confirmed cases has risen to 101,147 with 7,025 deaths. Prime Minister Narendra Modi "opted for the most drastic option of a total national lockdown, including the suspension of public transport" so that his "approval ratings have touched dizzying heights". Three cheers. "The most startling lesson from global experience is that shutdowns may be killing almost as many people as the Covid virus," wrote SA Aiyar. "Excess mortality was 60% in Belgium, 51% in the Netherlands, but only 12% in Sweden," which is the only country to refuse a complete lockdown. There was worldwide surprise and admiration at the low levels of deaths due to the virus in India. The government started relaxing the lockdown from 4 May, dividing the country into red, orange and green zones, when the number of cases is rising. There were 3,900 new cases in the last 24 hours with 195 deaths. There are predictions that the Indian economy will contract by 16-20% in the April-June quarter of this financial year and by 1-2% for the entire year. 122 million Indians lost their jobs, taking the rate of unemployment to 27.1%, reported Bloomberg. Taking advantage of low international crude oil prices, both central and state governments have markedly increased taxes on fuel in India, instead of slashing prices to help trucking, railways and airlines industries. What were the other gains from the lockdown worth destroying the economy?  The lockdown was announced by Modi, giving 4 hours notice, at 8 pm on 24 March. While the sudden cessation of public transport trapped millions of migrant labor in cities with no money or jobs, it did not stop Chief Minister Shivraj Singh Chouhan, of the BJP, proving his majority in the Madhya Pradesh Assembly on 25 March, boycotted by the Congress. Sit-in protests against the Citizenship Amendment Act (CAA) led by women had been going on since 15 December. Protesters were cleared by Delhi Police on 24 March, following which there have been a spate of arrests of women who took part. "Illiterate women in burqas sitting with babies on their laps and eating biryani purchased with foreign funds," was the description by West Bengal President of BJP Dilip Ghosh. A student of Jawaharlal Nehru University was charged with sedition by Delhi Police for organising a riot at Jamia Milia Islamia. Baijayant Jay Panda of the BJP railed against leftist liberals and the foreign media for taking a jaundiced view of India. Perhaps, he can explain why Modi celebrates Independence Day when he is still using a draconian British law against citizens. Will Modi's approval rating remain at dizzying heights if the economy tanks to dizzying lows remains to be seen. We still pay the price. 

Change, or more of the same?

The coronavirus is not changing everything, wrote Ruchir Sharma. "The coronavirus hit at a time when the world was already turning inwards, largely in reaction to the global financial crisis of 2008." "Democracy was in retreat, and autocrats were on the march, before the virus appeared." "The universalist spirit of globalization was fading before the pandemic, and is harder to find now." So-called populists and autocrats did not grab power by armed coup but were elected by disillusioned masses who suffered from globalization. "Multinational corporations and investors have increasingly shaped the agenda of trade negotiations, resulting in global regimes that disproportionately benefit capital at the expense of labor," wrote Prof Dani Rodrik. "Stringent patent rules and international investor tribunals are prime examples. So is the capture of agencies by the industries they are supposed to regulate." Increasing debt, deflation, depreciation of currencies, de-globalization, digital work replacing humans, and geopolitical tensions will lead to a "Greater Depression" later on in this decade, even if there is a recovery from the Greater Recession induced by the coronavirus, wrote Prof Nouriel Roubini. "In a matter of mere months, the coronavirus has wiped out global gains that took two decades to achieve, leaving an estimated 2 billion people at risk of abject poverty." "By the end of the year, 8% of the world's population, a half-billion people, may be pushed into destitution largely because of the pandemic, the United Nations estimates." 210 million Indians were lifted out of poverty from 2006 to 2016. "As India receded into homes in the last week of March, a section of Bharat hit the streets defying the order to stay indoors," wrote Rohit Saran. Millions of Indians float just above the poverty line. "An illness, a job loss, death of an earning member ... is all it takes for a family in this zone to plunge into poverty." McKinsey & Co suggested an Empowerment Line instead of the Poverty Line for India based on 8 parameters -- food, energy, housing, drinking water, sanitation, healthcare, education and social security. Developing countries will suffer more because of falling commodity prices, falling inward remittances, falling investment and falling currencies, making foreign debt more expensive. "A direct hit at the global economy has been the disruption of the global value chains (GVCs) by the pandemic," wrote Profs Amit Kapoor & Richard Dasher. Businesses are looking to diversify away from China. "India is developing a land pool nearly double the size of Luxembourg to lure businesses moving out of China," wrote Shruti Srivastava. Building of a $22 billion ITER fusion reactor stalled when stainless shims, manufactured by Larsen and Toubro Ltd in India, fell short. To save time "ITER got Indian government permission to hire trucks for a 500 kilometer (311 mile) journey to transport 7 tons of shims to a chartered airplane bound for France". The reason for poverty is that 90% of our workers are informal. We should encourage large companies which will create formal employment, wrote Prof Arvind Panagariya. That will mean reforms. Why would our rulers want that?

The dollar has fallen against gold, the rupee against the dollar.

"Prime Minister Narendra Modi has asked the civil aviation ministry to expedite privatization of six more airports in a bid to make them more efficient and garner more revenues for the exchequer." He has asked the tendering process to start within three months. Although why anyone would rush in to buy an airport with air services banned for coronavirus outbreak is not clear. The ban will remain in place until the government is sure that "spread of the virus has been controlled and it poses no danger to our country and people". "Indian airlines, excluding market leader IndiGo, will need to raise a minimum of $2.5 billion to survive the grounding due to the lockdown imposed to contain Covid-19 pandemic, aviation consultancy firm CAPA India said in a report on Friday." "Introducing social distancing at airports is 'physically impossible', the boss of Heathrow has warned." Airlines will have to keep the middle seat vacant which will reduce the number of passengers and increase prices. Fewer people will fly. A survey of CEOs in India revealed that 45% expect economic recovery to take over one year and 15-30% of jobs to be lost. Which means, fewer business flights. The solution is for the Reserve Bank (RBI) to print rupees, by directly buying government bonds or debt, which would allow the government to stimulate demand by spending, and also by buying corporate bonds, which would give money to companies to invest or relieve banks of bad loans and allow them to lend again. With revenues collapsing because of the shutdown of the economy to control Covid-19, the combined fiscal deficit of the center and states is expected to shoot up to 15%, wrote Udit Misra. Printing large amount of currency carries the risk of a fall in its value against foreign currencies and consequent rise of prices of imported goods leading to inflation. But, with demand severely suppressed, there is little danger of that. Also, other currencies too are losing value since other central banks are also printing money to reduce the effect of lockdowns on their respective economies. After all, one ounce of gold cost just $250 in 2001 but is now selling at around $1700. Though the gold standard was abolished by Richard Nixon in 1971 it surely shows how the mighty dollar has fallen. Trouble is, the rupee has fallen against the dollar even more, from Rs 4.16 to the dollar in 1947 to 69.18 in 2019. The rupee is near 76 to the dollar today. There are calls to transfer money to the poor to prevent hunger and hardship, which is entirely reasonable. But transferring money will immediately increased demand but supplies will take much longer because the chains are broken. Laborers who have returned to their villages maybe reluctant to return and 50% of trucks are off-road because of a lack of drivers. A devaluation of the rupee and a spike in inflation are distinct possibilities. Better to sell unwanted airports.

Notice of four hours, consequence for years.

"India can be the destination of choice for global manufacturing in the post-Covid 19 world if it gets its act together with the right policies as a lot of things are going for this country, say industry experts." "We have the people, the demographics, ability to skill our people very,very quickly. We have democracy, we have a lot of things going for us," said a top executive of a company, afraid to disclose his identity in this citadel of democracy. "I won't return to Delhi once I reach home. I don't care about the extra money," said "47-year-old Asha Devi, who sold tea in Preet Vihar and earned four times what she did in her village in Bihar". There are 4 million migrant workers in Delhi, "And worryingly, the assertions of the distressed people never to return to the city worries experts how an economic revival can be achieved without them." Chief Ministers of Karnataka and Telangana have appealed to workers to stay back, worried about a shortage of labor once they start opening their economies. A total lockdown was announced by Prime Minister Narendra Modi at 8 pm on 24 March, giving people just four hours notice to prepare. When trains and buses stopped running, trapping migrant laborers in cities with no jobs and no money, tens of thousands resorted to walking back to their villages hundreds of miles away, to avoid starvation. "Uttar Pradesh has embarked on a mammoth exercise involving thousands of buses, and which could last up to two weeks, to bring back 1 million of its residents, mostly migrant workers stuck in other states since March 25, when a national lockdown was enforced to fight the spread of Covid-19, officials familiar with the plan said." Modi apologized for his action, saying, "It is a battle of life and death and we have to win it." But, for the poor, fearing starvation for their families, it did not improve their situation. Modi has a history of a dramatic announcement severely affecting the quality of our lives when he announced demonetization of Rs 1,000 and Rs 500 notes with four hours notice. At that time the poor were happy because they believed that the rich would lose vast amounts of cash on which they had not paid any tax. Called 'black money' in India. Even though it was the poor who suffered the most because they earn their daily wages in cash. Two years after demonetization farmers and rural workers were still suffering. Growth has been falling and unemployment rising since 2016 and the virus lockdown has just made matters infinitely worse. The textile hub in Tiruppur in Tamil Nadu. which exported worth Rs 260 billion last year, is at a standstill because overseas orders have dried up and the lockdown has closed all mills. Migrant workers can be enticed back to work with large cash rewards, which will bankrupt companies, or forced to return by stopping their subsidies and food support, which will cause starvation. Over to PM Modi.    

At least we are equal to China in one thing.

Yesterday the Indian government extended the coronavirus lockdown for two more weeks and divided the country into red, orange and green zones, with red zones seeing severe restrictions and relative freedom in green zones. "The data show 17.7% of all 733 districts are still in the red zone and 38.7% in orange with a significant 43.5% in the green zone. However, all major cities, including Delhi, Mumbai, Chennai, Hyderabad, Bengaluru and Kolkata, continue to be in the red zone." It is notable that all the cities in the red zone list, except Bengaluru, are in non-BJP ruled states. BJP is the party of Prime Minister Narendra Modi. "The business community reacted cautiously with many pointing out that the partial relaxation of the lockdown won't be enough to repair the fractured supply chain." India's largest selling car company Maruti Suzuki has not sold one car in the whole of April for the first time ever. Industries tend to congregate in certain regions and manufacturing cannot start if these are under lockdown. Dr Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases (NIAID) in the US, said that the coronavirus will not go away and will almost certainly recur again. What is the point of extending the lockdown if the virus recurs once it is lifted and supply chains remain broken as districts face rolling lockdowns whenever cases are diagnosed? "This is bureaucratic self-indulgence not policy that helps either public health or the economy," said an editorial in the Economic Times. "A second or third round of lockdown will be devastating for the economy, former RBI governor Raghuram Rajan said today." If it is devastating for the economy, which is political suicide, the government will not do it without careful calculation of what it stands to gain in other ways. Under cover of the panic created by lockdowns the government has created an app, innocuously named 'Aarogya Setu", which translates to 'Health Bridge', which is a tracking device on mobile phones. It was started as voluntary but is being made mandatory insidiously. Apparently, an app is being prepared for feature phones and the app will be mandatory in containment areas. The app will be pre-installed in all new smartphones manufactured in India and since cases of Covid-19 will keep recurring it will become a permanent surveillance tool. The biometric identity card Aadhaar, which is based on prints of all 10 fingers and iris scans, also started as voluntary but has now been forced on every person in India, including children. Facial recognition technology has been installed surreptitiously and is being used against citizens. Our GDP is one-fifth that of China, our exports are one-eighth that of China, our foreign reserves are one-seventh that of China, but we are equal to China in surveillance of our citizens. No one can displace Modi for as long as he lives.