An end to extraction would be a good start.

"Cathay Pacific has said it will get a HK $39 bn ($5 bn) in state-backed bailout, as the airline struggles in the face of the coronavirus pandemic. Under the deal the Hong Kong government could take a 6% stake in Cathay and can have two observers on the board." "Airlines globally will lose over $84 billion during financial year 2020, the biggest in aviation history, due to the outspread of covid-19 and a muted travel appetite is expected to lead to at least $16 billion losses for airlines during financial year 2021, Alexander de Juniac, director general and chief executive of industry body International Air Transport Association (IATA) said on Tuesday." This is nearly one-fourth of the earlier estimate of $314 billion of losses by the IATA. Not just home governments. "Switzerland and Austria pledged to help Lufthansa with state-backed loans as the German airline pursues talks with Berlin over a $9 billion euro ($9.8 billion) rescue package." Singapore Airlines is to get a package worth S$19 billion ($13.27 billion) arranged by sovereign investment fund Temasek. So, what about India's national carrier Air India? The government tried to sell it in 2018 but did not receive a single bid for it. That was because the buyer was expected to take on debt of Rs 330 billion and the government intended to retain a 24% stake. This year the government has put 100% of the airline up for sale and reduced the debt load to Rs 232.86 billion. The lockdown due to the coronavirus grounded all flights, which are just beginning to take off again. Once the initial rush of people stuck away from home for two months abates, we will see how many are keen to put up with all the inconveniences of social distancing mandated by the minister. Since the sale is in abeyance for the time being the government is using Air India for mercy missions for Indians stuck abroad, which has been named Vande Bharat, meaning 'Hail to India'. Unfortunately, "Air India's special international service, which ferries Indians stranded abroad as well as flies some Indians to global destinations, is getting flak for what customers say exorbitant and arbitrary pricing and a poorly run website." "A Vande Bharat economy class ticket from Delhi to Houston starts at Rs 1.03 lakhs (Rs 103,000), twice of normal economy class fares." As far as our government is concerned, the quality of mercy is twice blest for it that takes and takes. While other governments are supporting their airlines our government has increased the price of jet fuel by 48%. "To rebuild the economy, we must focus on rebuilding social capital. To rebuild social capital, we need greater compassion across society," wrote Nitin Pai. Compassion is very far. We could do with an end to extraction. it's not 'Hail to India', it's 'Hail to the extractors'.     

If there is no money, bromide is free.

"On 12 May, in an address to the nation, Prime Minister Narendra Modi announced an economic package worth 10% of India's GDP." "The lack of fiscal push surprised not just commentators but even markets," wrote Roshan Kishore. "The fiscal impact of the Rs 20-lakh crore (Rs 20 trillion) economic package stands at only Rs 2.14 lakh crore or just 1.1 percent of GDP and not the 10 percent of GDP, as much of the government support is in the form of credit guarantees or additional credit lines, having minimal impact on government finances, said the report by India Rating on Monday." A point made by SA Aiyar, who wrote that Modi should ignore the threat of a credit rating downgrade and say, "So, I have decided to boldly expand the fiscal deficit by 5% of GDP to help needy people and enterprises. RBI (Reserve Bank) will print the required sums." The growth rate of India's GDP has been falling for three succeeding years, starting from 2017-18 which led to a fall in demand, wrote Kishore. The government's policy response until 2019-20 was largely a supply side response but this did not result in increased investment because demand remained flat. Demand comes from three sources: "domestic consumption, exports and investment". Exports are not going to rise because of protectionism and the shock of the pandemic and companies will not invest unless there is a demand for their products, as shown by low capacity utilization. So, demand must come from domestic consumption. But, "Consumer confidence has collapsed amid the coronavirus pandemic and it may result in contraction of the economy by 1.5%," said a report by the RBI. Household spending as shown by "Private Final Consumption Expenditure has had a share of almost 60% of India's GDP in the recent period" and "An analysis of 2011-12 NSSO (National Sample Survey Office) data (latest available figures) shows that almost half of it came from the top 20% of the population". This 20% may reduce spending and start saving more due to the uncertainty created by the virus. So, "There is merit in focusing on the bottom 80% of the population" who spend all they earn because "at least half of India's population spend half of its budget on food". "Sadly, GoI (government of India) seems to be a prisoner of its own fears. Rather than let fiscal policy take the lead, it seems content to shoot over RBI's shoulder, seemingly impervious to both theory and practice when it comes to the right fiscal-monetary mix in a downturn," wrote Mythili Bhusnurmath. Trouble is, India's fiscal deficit may have risen to 7.2% in the last financial year, ending 31 March, which includes just one week of the lockdown which started on 25 March. "Economists are now pegging the fiscal deficit of the central government at 5-6%," wrote Aparna Iyer. "The government plans to bridge the fiscal deficit by borrowing more money this year." wrote Vivek Kaul. "On 8 May, it said it will now borrow Rs 12 trillion  to finance the fiscal deficit." "This is debt that someone will have to pay in the years to come." The government cannot force people and business to spend more by borrowing, so will it borrow more to spend more? Better to mouth bromides.     

Pakistan seems to have forgotten the law of holes.

"China said on Thursday that its relationship with Pakistan stood the test of the changing international landscape and remained 'firm as a rock' as the all-weather allies celebrated the 69th year of the establishment of their diplomatic relations." "China has far surpassed the US as the biggest weapons supplier to Pakistan and the partnership is expected to increase in the coming years -- last year Beijing officially declared its largest defence export deal worth over $4 billion to supply eight new submarines to Pakistan that will augment its fleet of French origin boats." "Last week, China once again called Pakistan its 'iron brother' to symbolise the close relationship between the two nations." Must be pretty uncomfortable to be between a rock and an iron place with China. "A recently concluded probe conducted by the Imran Khan government into the anomalies of China-Pakistan-Economic-Corridor has revealed that six China-funded power projects under CPEC has resulted in huge profits for Chinese firms setting up the plants through over invoicing and tariff charges compared to market rates." "A new formation is emerging in the Islamic World and OIC as Pakistan in a selfish move has decided to get further closer to Turkey and widen ties with Malaysia at the cost of its old ties with Saudi Arabia and UAE -- who had bankrolled Islamabad for decades." Pakistan's obsession with military equality with India is costing it very dear. "Pakistan, alive on steroids supplied by China, is making claims as it has failed to push its false Kashmir propaganda with its Army facing humiliation in the backdrop of India's decision to change special status of Article 370," wrote Dipanjan Roy Chaudhury. "There are reports that ISI is busy recruiting terrorists on the ground to increase terrorism activities in Jammu and  Kashmir's Poonch-Rajouri belt." Inflation in Pakistan rose to 14.6% in January, the highest in 12 years. In response the State Bank of Pakistan (SBP) raised interest rate to 13.25%, but slashed it to 5.25% in May when inflation fell to 8.2% because of collapse in demand due to the coronavirus lockdown. "The state shrivelled internally as it fought the international war. The power of the madrasa arose from the countryside and invaded the big cities." wrote Khaled Ahmed. "The police and the lawyer community originate from the countryside and are heavily indoctrinated in the madrasa culture and its pedophilia." "Pakistan is in deep economic trouble and is in the IMF's care, inflicting pain on the common man through policies of austerity." "Most economists think that 2020 will be the year of punishment rather than recuperation." Strangely, "Pakistanis get radicalised after migrating to the UK," wrote Ahmed. "Al-Muhajiroun had come to Pakistan along with its British-based sister terrorist organisation, Hizb Ut-Tahrir, in the mid-2000s, and recruited a number of people inside the Pakistan army till the Musharraf government banned them." Pakistan is in a deep hole, but can't stop digging. It will bury itself.

It was already sliding down, now it is precipitous.

"India's unemployment rate fell between July 2018 and June 2019 to 5.8% from 6.1% during the same period of 2017-18, even as the labor force participation rate rose to 37.5% from 36.9%." Labor force participation rate (LFPR) is the proportion of civilian working age population who are employed or actively looking for work. LFPR in the US was 62.7% in March 2020. It explains the enormous difference in wealth creation between India and the US. "The India economy grew 6.1% in 2018-19, slower than the 7% expansion recorded the year before." Why was the LFPR in the US double that of ours when economic growth in the US during the same period was half of that in India? Actually, "The Indian economy has been losing growth momentum for three consecutive years beginning 2017-18. GDP growth was 8.3% in 2016-17. It fell to 7% in 2017-18, 6.1% in 2018-19 and 4.2%  in 2019-20," wrote Roshan Kishore. India has lost growth momentum for three consecutive years only twice before -- from 1970-71 to 1972-73, due to Bangladesh war, and again in 1989-90 to 1991-92, due to the Gulf War. The government reduced corporate tax rate from 30% to 22% to boost investment and supplies, but demand had dropped, so capacity utilisation "touched an all-time low in December 2019". Then the coronavirus hit and Prime Minister Narendra Modi put the country in a stringent lockdown, starting 25 March. The economy came to almost a standstill. In May, the Finance Minister Nirmala Sitharaman revealed a stimulus package, said to be worth Rs 20 trillion, over 5 days. But most of the money is to make it easier for businesses to borrow, in an effort to stimulate supplies, but not enough to stimulate demand, which has collapsed. Global securities research firm Sanford Bernstein called the package a "lost opportunity" "Government programs of $173 billion includes $132 billion of loans, $24 billion of fiscal support (0.9% of GDP) and rest largely for food grains etc, which is from Food Corporation of India (FCI) stock and other schemes." "You might say that when the patient is crashing, I am trying to ease the pain a little," said Swaminathan Aiyar. "But aggregate demand is collapsing at a time when supply itself is collapsing, because the lockdowns have interrupted all kinds of production chains. The outlook is grim." Indians care little for the economy, wrote Chetan Bhagat. "You still can and will continue to to get a graduate in India for less than Rs 7,500, or $100, a month. This is what a minimum wage McDonald's burger flipper makes in the US in one eight-hour shift (and no PPP nonsense explains this dichotomy)." "In the eyes of the government, ease of doing business is an entrepreneur having tea and Marie biscuits with an IAS officer, where the latter allows the entrepreneur to do business." And, Indian businessmen are more interested in promoting their children than in innovation. The middle-class does care about the economy but governments are elected by the legions of poor whose survival depends on government handouts. Poverty gives power to politicians and civil servants. Why should they change?

Why blame the virus?

"Traffic congestion, power generation, port activity, vehicle registration and other high-frequency data point to the economy perking up as India reopens, recovering from a devastating slump as factories went idle and people were ordered to stay at home amid the coronavirus pandemic." "It is, however, unclear whether the current pent-up demand after a two-month lockdown will sustain as joblessness and pay cuts have been widespread." India's fuel demand is also recovering, according to Oil Minister Dharmendra Pradhan. "Sales of petrol, diesel and jet fuel have reduced by 70% in April from a year ago," Pradhan said in Hindi. This maybe good news for the government, which is extracting 69% in taxes on ever liter of fuel, but bad news for consumers, commuters and transport companies. Apart from the enormous inconvenience of the new rules of catching a flight, passengers may have to pay very high prices for tickets as the price of aviation turbine fuel (ATF) has been increased by Rs 11,000, or 48%, per kilo liter. High taxes reduce demand, especially as 122 million Indians are estimated to have lost their jobs. However, "At least 21 million people became employed after the nationwide lockdown was partially lifted," but "The salaried class did not see any increase in jobs," said the Center for Monitoring Indian Economy (CMIE). Sales of alcohol have fallen sharply because of an excess tax of 70%, according to Confederation Indian Alcoholic Beverage Companies (CIABC). "Consumer confidence has collapsed amid the coronavirus pandemic and it may result in contraction of the economy by 1.5 percent during 2020-21, surveys released by the Reserve Bank (RBI) showed on Sunday. As per the RBI, "85.3% households expect inflation to accelerate in the next three months". The RBI predicted that it may take years for economic growth to return from the recession. "The high-frequency indicators for March-April 2020 also suggested a collapse in demand." So if the economy is contracting and there is no demand, but prices keep on rising, then we can claim to be in stagflation. Of course, high taxes raise prices and depress demand when income is dropping. It is not just that the tax rates are high but companies have to pay goods and services tax (GST) on bills which have not been paid. As services companies "struggle with cash flows, they have to pay GST out of their own pocket even when the customer has defaulted".  Manufacturing is no different. Factory owners in Coimbatore were borrowing to pay GST for fear that their bank accounts will get frozen. "By all accounts, reversing the disruption caused by India's lockdown will be a long haul -- and the price businesses, especially small firms, have paid is just starting to become clear," wrote Nikhil Inamdar. It is not the virus which is causing so much economic pain in India, but government policies. Or lack thereof. 

Why didn't he speak up when he was in charge?

"Former President Barack Obama threw his support behind the efforts of peaceful protesters demanding police reforms during his first on-camera remarks since a wave of protests over the killing of George Floyd convulsed the country and upended the 2020 election." "Chokeholds and strangleholds, that's not what we do," Mr Obama said as he sat, tieless in blue shirt sleeves, in front of a bookcase. That is absolutely not true. "On July 17, 2014, Eric Garner died in the New York City borough of Staten Island after Daniel Pantaleo, a New York City Police Department (NYPD) officer, put him in a chokehold while arresting him," During that time Garner, an asthmatic, pleaded "I can't breathe" 11 times. No charges were brought against the officer even though the post-mortem report attributed Garner's death to homicide. Obama was president from 2009-2016. No one would have known about Garner's killing had his friend Ramsey Orta not recorded it on his cellphone. Orta was arrested on a charge of possessing a firearm and sent to  prison in 2015, where he says he is being tortured. On 9 August 2014, unarmed 18-year old Michael Brown was shot 6 times by police officer Daren Wilson in Ferguson, Missouri. On 22 November 2014, 12-year old Tamir Rice was playing with toy gun when he was shot dead by police officer Timothy Loehmann in Cleveland, Ohio. Loehmann was not charged but was sacked for lying on his job application and hired by an Ohio police department. From the killing of Eric Garner in 2014 to the killing of Philando Castile on 6 July 2016, Obama was the president in office, but he did not give speeches supporting black protests against police brutality, let alone giving his support to the Black Lives Matter movement. But perhaps the worst case during Obama's time in office was the killing of unarmed 17-year old Trayvon Martin by neighborhood watch coordinator George Zimmernan who followed Martin and shot him dead, despite being told not to do so by the police dispatcher. Zimmerman was found innocent on the 'Stand Your Ground' law, showing that none of the police, prosecutor, judge and jury know the meaning of the word 'stand'. 'Stand' not only means erect posture but stillness and Zimmerman was definitely not standing when he followed Martin. Obama is educated in law so he could have passed his knowledge about the meaning of the word 'stand' to the prosecutor in the Martin case. But then, Obama was instrumental in the killing of hundreds of innocent civilians by indiscriminate assassinations using drones. He was responsible for the killing of 16-year old US citizen Abdulrahman Al-Awlaki, who was not suspected of anything wrong, his teenage cousin and several innocent customers in a restaurant in Yemen. "The Samuels piece shows an Obama administration no less willing than previous administrations to assemble insider teams to construct elaborate sales pitches for its controversial policies," wrote Jack Shafer. "What distinguishes the Obama administration's propaganda machine from the previous efforts is its cold, casual style." Obama had his chance. Perhaps, he should can it.        

Why blame foreigners?

India has never defaulted on its debt, wrote Shashwat Alok. It came close in 1991 but, "Prime Minister PV Narasimha Rao ferried 47 tonnes of gold to the Bank of England as collateral. In contrast, the US has defaulted twice. Portugal, which has defaulted four times, also has a credit rating of Baa3". A paper in 2017 suggested that "nations culturally similar to the 'home' countries of the ratings agencies tend to receive a higher rating than comparable countries with the same economic and political fundamentals". Alok recommends that the "Centre for Advanced Financial Research and Learning (Cafral), the Reserve Bank of India's (RBI) policy research wing," should set up its own rating agency. But, will foreigners be guided by the RBI or their own ratings agencies? And, will that stop foreign banks from selling their loans to Indian companies? On 31 March 2019. foreign banks had outstanding loans of Rs 4.03 trillion in India, compared to Rs 57.72 trillion for public sector banks and Rs 32.58 trillion for private banks. Ratings agencies are following double standards, said an official, because, "Japan has a debt-GDP ratio of 250  and despite the denominator not growing as fast as India, it still attracted a higher rating". But, it is not just ratings agencies. Investors also prefer Japan to India. The yield on 10 year bonds for Japan is only 0.023%, showing low risk of inflation, and its probability of default is rated at 0.37, while yield on 10 year Government of India bonds is at 5.815% and default risk is rated at 2.19%. The Japanese yen has strengthened from over 120 to the dollar in 2016 to 107 to the dollar today, so investors will make money when they convert their gains from yen to dollar, while the Indian rupee has fallen from 64 to the dollar in 2016 to about 76 to the dollar today, so investors lose money as they repatriate their earnings. However, the State Bank of India (SBI) is not surprised by Moody's action because 21 emerging economies have been downgraded because of the Covid-19 outbreak. The markets had already priced this in because, "BSE Sensex and NSE Nifty rose and even Rupee appreciated against the US dollar." "For every Rs 100 of gross domestic product (GDP), India owed Rs 72 to the market in fiscal year 2019. Moody's expects India's debt-to-GDP ratio to worsen to 84% for fiscal year 2020-21," wrote Aparna Iyer. This is higher than other emerging economies. The government did not consult experts before imposing a "draconian" lockdown, said representatives of Indian Public Health Association (IPHA), Indian Association of Preventive and Social Medicine (IAPSM) and Indian Association of Epidemiologists. The lockdown is being lifted when the country is in a "community transmission phase".The lockdown was announced suddenly by Prime Minister Narendra Modi, giving just 8 hours notice, catching people totally unprepared. Just as he announced demonetization of 86% of our currency with 8 hours notice in 2016 ignoring RBI advice. Foreigners can see that government policy is decided on whim and there is no accountability for the carnage. Why blame them?

Are we returning to Indira Gandhi's India?

"A day after Moody's downgraded India's credit rating to a notch above junk status on growth concerns, Prime Minister Narendra Modi on Tuesday asserted that the country will definitely get back its economic growth and said reforms undertaken during the lockdown will help the economy in the long run." He said growth will come through self-reliance. Self-reliant India is about cutting down imports, improving productivity, setting targets, and not relying on others in strategic sectors." The government has introduced a policy of import substitution already by increasing customs duty on imports in successive budgets. Many nations started with import substitution to protect domestic industries but moved away from it as they got richer. This was what Indira Gandhi tried in 1980-84 when she came out with the slogan of "Utpadan badhao", which means 'increase production', somewhat similar to Modi's "atmanirbhar", which means 'self-reliance'. "It helps that the embrace of the homegrown carries a long pedigree in Indian politics," wrote Sadanand Dhume. "For the average Indian, the self-reliant decades before liberalisation were synonymous with shoddy products made by businesses whose success depended more on access to government than on providing better goods and services to customers." In an open letter to Modi, Ajay Chhibber wrote, "The slogan of self-reliance, sir, sounds good and we have heard before. But if we lift the drawbridge and retreat into Fortress India, it will ensure low growth and no jobs for millions for years to come." "Beyond their varying epidemiological effectiveness, lockdowns have been economically devastating," wrote Prof Ricardo Hausmann. "Emerging and developing economies around the world will shrink by 20-40% in the second quarter, with double-digit contractions for the year." "First, they need money just to fund huge collapses in tax revenues caused by a shrinking economy. In addition, they will be asked to help hospitals, households and firms, just as in advanced countries." Fuel prices are set to rise in India by Rs 5 per liter. Why, when crude oil is still below $40 a barrel? Because, taxes now make up over 70% of retail prices of fuel. "Travel and tourism will not recover at least until a vaccine is available." Price of jet fuel has been increased by 48%. "Now a kilo liter (kl) of aviation turbine fuel (ATF) will cost Rs 33,575, up by Rs 11,000 from last month. We need freedom of individuals, of institutions and of states in India, and reform of political parties and financing of elections, wrote Chanakya. "While personal freedom is the cornerstone of fundamental rights, this is under jeopardy. The executive, through a range of draconian laws, has succeeded in curbing the extent of liberty." Political reforms are never going to happen. Self-reliance means more control. Are we going back to Emergency? Possible.    

Is self-reliance a preparation for depression?

Economist Surjit S Bhalla explained that according to the IMF policy tracker (IMF-PT) India's economic package "is estimated to be at least 3.5 percent of GDP as expenditure for poor households, migrant workers  and agriculture". In May, the Finance Minister Nirmala Sitharaman unveiled a Rs 20 trillion package of economic stimulus over 5 days to mitigate the effects of the economic shutdown, which was to control spread of the coronavirus. But a report calculated that the cost of new stimulus measures would be Rs 40,000 crore (Rs 400 billion) and the total of actual spending would be Rs 1.50 lakh crore (Rs 1.5 trillion) or 0.75% of the GDP. TK Arun was not impressed with the stimulus package. "Some of the proposed reforms are sound. And some of the promised money is likely to be spent and benefit the people. But there is not a large supply of these bits." "The support for businesses (MSMEs) is estimated to be 2.7 percent. Of this, at least 2 percent of GDP is in the form of 100 percent credit guarantees and equity infusion," wrote Bhalla. "About 35% of micro, small and medium enterprises (MSMEs) and 37% of self-employed individuals have started shutting their businesses, saying they saw no chance of recovery in the wake of the covid outbreak, a survey by the All India Manufacturers' Organisation has revealed." "Over the last few weeks, analysts of various hues were having a field day with their growth projections for the India economy," wrote Anil Padmanabhan. But, "Leave alone a year from now, I doubt anyone has an idea about the next quarter of the current fiscal year." Why? Because, "The machinations of the Union government with respect to the release of official data over the last one year has further eroded the credibility of the data." The economy has been slowing down since 2017 but a lack of credible data makes it difficult to formulate corrective policies. The Modi government is directly responsible for interfering with inconvenient data, resulting in the resignation of two independent members of the National Statistical Commission. "These inconvenient facts about the economy came as a surprise because the government has made sure that there is no data to decipher," wrote MP for Congress MV Rajeev Gowda. Trouble is, India's "foreign exchange reserves hit an all-time high of $490 billion in the week-ended May 22 on account of foreign direct investments (FDI), net inflow of funds by FPIs (foreign portfolio investors) in domestic equities over the last couple of weeks". Why is this a problem? Because in the absence of credible data foreigners make their own assessments of the dangers of investing in India. Moody's has just reduced India's credit rating to Baa3, with negative outlook. This is not such a big deal because Moody's upgraded India in 2017, so it brings Moody's in line with S&P and Fitch. Any further downgrade will take us to junk status. Is that why Modi is going on about "atmanirbhar", meaning self reliance? Because he expects foreigners to flee a sinking economy. Terrifying.

Nothingburger can only lead to severe malnutrition.

"China's parliament has backed security legislation for Hong Kong which would make it a crime to undermine Beijing's authority in the territory." As expected, "The National People's Congress (NPC) -- meeting in Beijing after a two-month delay caused by the coronavirus pandemic -- backed the security bill resolution with 2,878 votes in favor, one against and six abstentions." The new law overrides Hong Kong Police and allows agents from the mainland to arrest and  charge any protester with treason and sedition which carry long prison sentences. A law which would have allowed Hong Kong citizens to be extradited to the mainland for trial had to be withdrawn last year after months of violent protests. China's stool pigeon, Hong Kong CEO Carrie Lam naturally supported the new law, saying it will not affect freedom of citizens of the territory. In response, US President Donald Trump has asked officials to end preferential status of Hong Kong and threatened sanctions on Chinese and Hong Kong officials who are "directly and indirectly involved in eroding Hong Kong's autonomy" and "smothering absolutely smothering Hong Kong's freedom". "China is dismissing threats of sanctions from the Trump administration over Beijing's proposed national security law in Hong Kong, calling it a 'nothingburger'." "It is only bluffing," said Global Times. "China's state media and the government of Hong Kong lashed out on Sunday at US President Donald Trump's vow to end Hong Kong's special status" while the Communist Party mouthpiece the People's Daily wrote, "The baton of sanctions that the United States is brandishing will not scare Hong Kong Kong and will not bring China down." Maybe not, but stab wounds from multiple sources may exsanguinate it to death. "The US government imposed new restrictions on Chinese tech giant Huawei on Friday, severely limiting its ability to use American technology to design and manufacture semiconductors produced for it abroad." UK Prime Minister Boris Johnson is to 'look again' at his decision to allow controversial Chinese tech giant Huawei to build more than a third of Britain's 5G broadband network, amid fresh concerns by spy agencies." "Your Aussie friends are baffled, Britain: Why escape from Brussels -- only to kowtow to Beijing," asked former Australian Prime Minister Tony Abbott. "A paradigm shift is taking place in relations between the European Union (EU) and China," wrote Mark Leonard, as "Europe has abandoned its previous ambition of a more closely integrated bilateral relationship with China." "China's factories are starting to hum again, but executives are worried that the rebound could falter on weak demand at home and abroad." India may not be as large a customer like the US and EU but is also trying to reduce its imports from China. China thinks it can bully other nations by cutting what it imports from them, but it has no friends so it is one against the world. China depends on trade and if other countries shift their trade away from it, its economy may collapse. A 'nothingburger' in trade could be the key to ending the Communist Party. And bring peace to the world.

Not many can shower in continuous love.

Prime Minister Narendra Modi completed one year of his second term yesterday. "In the first year of the Modi 2.0, the government has taken several key decisions including the abrogation of Article 370, criminalisation of triple talaq, anti-terror terrorism law, Citizenship Amendment Act and the Supreme Court verdict in the Ayodhya case as an incentive," wrote Abhinav Ranjan. "BJP president JP Nadda said on Saturday that the one year of the Modi government's second term had been a year of accomplishments, and unimaginable challenges that it faced with bold and timely decisions." Modi wrote an open letter to citizens on this anniversary saying, "Dear friends, in this journey of the last six years, you have continuously showered me with love and blessings. It is the strength of your blessings that has made the nation take historic decisions and progress rapidly in the last one year." Talking about Modi's six years in office, Minister Home Affairs, and a confidant from Modi's home state of Gujarat, Amit Shah wrote, "This time, in contrast to the anxiety, stagnation, and hollow promises of the pre-2014 era, the public has seen the ability to reach targets ahead of time with strong leadership, trust in people, their cooperation and self-confidence." Sadly, not everyone agrees with such eulogies. "When periodic labor surveys revealed rising unemployment, the government discontinued them. When the National Sample Survey warned of worsening poverty and malnutrition because rural Indians were cutting even their food expenditure, the government simply killed the survey citing technicalities," wrote former professor and Congress MP MV Rajeev Gowda. Modi is acknowledged as a master of jumla, wrote Ashok Swain. Modi's government is a dictatorship, wrote Siddharth Varadarajan. "Not since the emergency of Indira Gandhi have so many people across India spent so much time in custody for political reasons than in the past year, and never before has the sword of arrest and detention hung over more heads." "At the same time, never before in independent India has there been such impunity for those connected to the establishment." Apparently, Modi was able to evade arrest during emergency by disguising himself as a Sikh. He couldn't escape so easily now. Without any consultation or change of law, Delhi Police is using facial recognition technology against protesters. Facial recognition is widely used in China but is being banned in civilized countries. "Apologists for Indira Gandhi used to say, "at least the trains run on time'. Modi 2.0 is not even able to manage that, such is the shambles of six years of ideologically driven 'governance' have created." As the economy tanks and people die of hunger, will Modi declare an Emergency to hang on to power? Maybe, the fear of an exodus of foreign investors, a rating downgrade and a collapse of the rupee will stop him. We can only hope.

If 71% believe in our greatness, can they be wrong?

"Prime Minister Narendra Modi said India will set an example in economic revival before the world just like it has outperformed many developed countries in fighting the Covid-19 pandemic." "India reported 7,466 new novel coronavirus cases in the past 24 hours, Health Ministry data showed Friday morning. This is the first time more than 7,000 Covid-19 cases have been detected in a 24-hour period and follows seven straight days of more than 6,000 new cases per day." "In a shocking case of medical apathy, several dead bodies were kept at a passage inside the premises of Lok Nayak Jai Prakash Narayan Hospital (LNJP Hospital) in Delhi as the mortuary ran out of space. The LNJP hospital is one of Delhi's dedicated Covid-19 facilities." According to an epidemiologist, virus cases will peak around middle of July, though the surge will be lower because of early action. "Around 71 percent of Indians believe the government's over Rs 20 lakh crore (Rs 20 trillion) stimulus package will lead to economic recovery." "Over three-fourths of micro, small and medium enterprises (MSMEs) in the national capital region have cut employee salaries while nearly two-thirds are resorting to layoffs after seeing no rise in demand, a private survey showed. Forty four percent of respondents said the relief measures announced by the government earlier this week did not meet expectations and 86% wanted direct cash support from the government." "More people could die from hunger than the virus," said Ashwajit Singh, managing director of IPE Global. A study by the United Nations University estimated "104 million Indians could fall below the World Bank-determined poverty line of $3.2 a day for lower-middle-income countries", which will take "the proportion of people living in poverty from 60% -- or 812 million currently, to 68% or 920 million". "Indian banks may need to raise $20-50 billion capital in the next two years as bad loans and credit costs rise due to the Covid-19 induced slowdown in the economy, brokerages and rating agencies believe." "While the government has relaxed lockdown norms, as many as 8,917 projects worth over Rs 21.11 lakh crore across various sectors under execution in 108 red zone districts are at a standstill even now, a survey said." "Is it possible to survive on just boiled rice and rotis?" asked Sayantan Bera. "But most families are doing exactly that: consuming boiled rice and salt or wheat flatbread with chilly paste." "About five years ago, one curious metric in the US stood out as being significant. $1 and $5, both physical bills and digital amounts, were exchanged, on average, more than three times a day. By contrast, Rs 50 and Rs 100 currency were exchanged less than 80 times a year in India," wrote Ateesh Tankha. Shows how little Indians consume compared to Americans. However, in a great victory over Pakistan, after Balakot, India has captured a 'spy pigeon' from Pakistan. All hail Supreme Leader.    

If it is not a natural disaster what is it?

"The country's economy, which is likely to contract by 5 percent in the current fiscal, may expand by around 5 percent in the next financial year, former RBI governor Duvvuri Subbarao said". "The reason I say that is because this (Covid-19) is not a natural disaster. Our factories are still standing, our infrastructure and transport systems are still there." "Once the lockdown is lifted and the economy is given a green signal to restart, I am sure that we can ramp up pretty soon and reach at least 5 percent growth rate." One could argue that the coronavirus, being a living organism, is a natural disaster. And, our factories maybe standing but millions of workers have fled to their villages and the Reserve Bank (RBI) says that the economy will shrink this year, with consequent "collapse in demand since March 2020 across both urban and rural segments". The reconstruction of infrastructure destroyed due to World War II has been credited with reviving economies and making Europe the $18.8 trillion economy that it is today. Goldman Sachs predicted that the Indian economy will contract by 5-7% in this financial year so a 5% growth next year, as Subbarao predicts, will be purely base effect, the net result being zero. Actually, it would still be negative. If we started with a GDP of 100, a 5% fall will take it to 95, but a 5% rise on 95 will take it 99.75, and not back up to 100. "India has seen four instances of contraction in GDP since 1951-52," wrote Roshan Kishore, but, what is different this time, is that, "It is the non-farm sector which will see a contraction, while agriculture is likely to grow." "Even when GDP growth was positive, there was a significant section reporting a decline in incomes in the RBI survey." So the loss of over 120 million jobs because of the lockdown will surely result in a precipitous fall in incomes.  Household savings declined from 23.6% in 2011-12 to 18.2% in 2018-19, and is expected to fall sharply as people spend their savings to pay for essentials. "Analysis of income tax data shows that the top 5% tax payers paid almost 90% of income tax in AY 2018-19 (financial year 2017-18)," so if these people earn less, tax collections will fall. Because of the huge rise in taxes on fuel, prices are expected to rise by Rs 5 soon, as oil companies seek to make up their losses. "The Indian government's response to the economic and humanitarian crisis has been manifestly behind the curve, even though it was presciently early in enforcing a total lockdown," wrote Rajrishi Singhal. The GDP growth number for the quarter ending 31 March will be released today and is expected to be around 3.76%, although how they will calculate this figure, when travel restrictions started in early March and they could not give us the inflation data for April, is not known. How can we respond if we cannot see the disaster?

Will the economy trump the number of cases?

" We are about to see the best economic data we've seen in the history of this country," said Jason Furman, a top economist in the Obama administration and now a professor at Harvard, in early April when the economic carnage due to the coronavirus lockdown "seemed likely to doom President Donald Trump's chances at reelection". Although the economy will not return to the level before the pandemic, growth will soar once businesses start opening up and people return to their old jobs, giving Trump a bounce just before the November election. "The federal guidelines are taking a back seat in both Republican and Democratic states, as economic pain from the coronavirus lockdowns and the political pressure to lift them become too excruciating." "This is my big worry," said a former Obama White House official who is still close to the former president. He would prefer people to suffer than to see Trump winning. How mean is that? Protests against lockdowns have spread throughout the US, even in California which Hilary Clinton won with over 4 million more votes than Donald Trump in 2016. "More than 1,300 state and federal lawsuits have been filed over Covid-19 (lockdowns), including 240 dealing with civil rights, as of Friday, according to Hunton Andrews Kurth, a law firm tracking the cases." "Governors say strict rules save lives, but critics who are forced to stay home or shutter their businesses called the steps 'draconian' or compared them to 'house arrest'." "Within hours of President Trump's decision to restrict travel from China on Jan 3, top democrats and media figures immediately derided the move as unnecessary and xenophobic," "Nevertheless, this week, House Speaker Nancy Pelosi, D-Calif, accused Trump of endangering lives by wasting time," reported Fox News. "The United States was ranked the best-prepared country in the world to handle a pandemic in late 2019 by the Nuclear Threat Initiative (NTI) and the Johns Hopkins Center for Health Security (JHCHS) -- an assessment seemingly at odds with claims by Democrats that the Trump administration left the country vulnerable to the ongoing coronavirus outbreak." "Coronavirus lockdowns have failed to alter the course of the pandemic but have instead 'destroyed millions of livelihoods', a JP Morgan study has claimed." "In the new poll, 51% of registered voters nationwide back Biden, while 46% say they prefer Trump, while in the battlegrounds 52% favor Trump and 45% Biden." Presumptive Democratic candidate Joe Biden has a new nickname for Trump, which is "President Tweety". Which probably puns on Trump's habit of tweeting constantly as well as Tweety Bird, hoping to be Sylvester the Cat. He should remember that Tweety Bird always wins. In response, Trump said Biden "doesn't know he is alive". November is still far away, and a week, as Harold Wilson said, is a long time in politics.    

When they care in capital letters.

A poll conducted by the India office of YouGov reported that "urban India's middle-and upper-income classes overwhelmingly supported the lockdown," wrote Prof V Anantha Nageswaran. "Professor Sunetra Gupta of Oxford University told unheard.com in an interview that, "in reality, the lockdown was a luxury that the middle class was enjoying at the expense of the poor." The professor is not aware that the middle class was not consulted before the lockdown was announced with a notice of four hours and certainly never wanted the poor to suffer the way they did. When the word of suffering got round people rushed to provide food and water to migrants. This is not easy when local officials make their own interpretation of lockdown rules. The government apparently is unable to spend for fear of a rating downgrade if fiscal deficit goes out of control. Nageswaran recommends that rich people should donate a "tiny fraction of their of their wealth". Profs Devesh Kapur and Arvind Subramanian, who live in the US of A, recommend imposition of wealth tax and elimination of subsidies for the rich. Do they recommend similar taxes on their own incomes in the US where 38.6 million people have filed for unemployment benefits and there are long lines for packets of food? Middle class Indians are losing their jobs, finding it difficult to pay mortgages and school fees of children. Prime Minister Narendra Modi has set up a PM CARES fund, apparently to help the millions walking home to their villages from distant cities. If it is any consolation to these professors, industrialists, actors, sports people and citizens have been pouring billions of rupees into the fund. "Donations have been made tax exempt, and can be counted against a company's corporate social responsibility (CSR) obligations. It is also exempt from the Foreign Contribution (Regulation) Act, 2010, and accepts foreign contributions, although the Center has previously refused foreign aid to deal with disasters such as the Kerala floods," wrote Priscilla Jabaraj. "The PM CARES web page is opaque regarding the amount of money collected, names of donors, the expenditure of the fund so far, or names of beneficiaries," and queries under the Right to Information (RTI) Act have been ignored. Clearly the PM is contemptuous about any form of accountability. "In India, the government appears to have treated the lockdown as a policy end in itself," wrote Prof Shruti Rajagopalan. Instead of as a means to controlling spread of infection and improve healthcare. A complete paralysis of movement can have other uses, such as freedom to arrest anyone without photographs or interference. Or change labor laws to compel workers to work longer hours with less pay and no rights to form unions. "But over the past few decades labor laws have changed such that they are hardly among industry's top constraints," wrote Azim Premji. "Diluting these already lax laws will not boost economic activity, it will only exacerbate the conditions of low wage earners and the poor." Premji does not have to win elections by caring for the poor with taxpayer money. So much caring, but for what?

Is the RBI allowed to break its mandate?

"The RBI (Reserve Bank of India) Governor Shaktikanta Das announced a slew of measures aimed at further easing the liquidity conditions and providing relief to borrowers", by lowering interest rate by 40 basis points to 4%, to make it cheaper for borrowing, by deferring interest on working capital and by protecting defaulting companies from bankruptcy proceedings. Das announced similar measures in April apparently to mitigate the effects of the lockdown to tackle the coronavirus outbreak which had brought the economy to a standstill. However, it is not entirely the fault of the virus. Das carried out a Rupee/US Dollar swap worth $5 billion to inject Rs 350 billion into the economy in March last year when no one had heard of coronavirus. The economy has been sinking for two years and the lockdown just killed it off. "When snack makers start to lament that Indians can't afford to spend Rs 5 on biscuits, it's time to stop arguing over how much the nation's slowdown is cyclical and what part is structural," wrote Andy Mukherjee in August last year. "Apart from the rate cuts, the central bank has also announced Rs 8.04 lakh crore (Rs 8.04 trillion) worth of liquidity-boosting measures so far," wrote Deepthi Mary Matthew. "The idea behind liquidity is that people and businesses borrow more and then spend. As they do this, consumer demand will get revived, and businesses and overall economy will benefit," wrote Vivek Kaul. By putting extra money into commercial banks the RBI is trying to force banks to lend more. But this will not work. "Accept the reality that India's banks, burdened as they are by bad debt and hobbled as they are by the fear of incriminating investigations of credit decisions, are poor vehicles of financial intermediation," wrote an editorial in the Economic Times. Like the Federal Reserve in the US the RBI should set up a special facility to buy company bonds, says the editorial. But, does the RBI have the mandate to do that? "Two agreements were signed between the government and RBI in 1994 and 1997 to completely phase out funding through ad-hoc treasury bills. And later on, with the enactment of FRBM Act, 2003, RBI was completely barred from subscribing to the primary issuances of the government from April 1, 2006," wrote Matthew. This means that the RBI is forbidden from buying government bonds directly to prevent it from printing money to finance government spending, so how can it buy bonds from private companies, even through special vehicles? Despite injection of so much money into banks the amount of loans is shrinking, wrote Shayan Ghosh "Total outstanding non-food credit shrank by Rs 1.36 lakh crore, or 1.32%, to Rs 101.83 lakh crore on May 8 from March 27, data from the RBI showed." Banks are parking more than Rs 8 trillion in the RBI at 3.75% interest, rather than lend to businesses and consumers. If people could not afford biscuits at Rs 5 will they borrow money to buy air conditioners or cars? 

China asks for understanding from teacher India.

"Whatever else it may be, the current India-China stand-off/skirmish in Ladakh and Sikkim is not 'normal'. And we should not lull ourselves into thinking it is," wrote Indrani Bagchi. In direct interference in a sovereign nation, "China is making hectic efforts to protect Nepal Communist Party (NCP) led government in Kathmandu amid rifts within top leadership of the ruling dispensation." "On Friday morning, Ambassador Yanqi held an-hour-long talks with NCP Chairman Pushpa Kamal Dahal or Prachanda." As a result of malicious Chinese pressure Nepal has suddenly made claims on Indian territory near Uttarakhand. "Ever since KP Sharma Oli became Prime Minister of Nepal in 2015, Kathmandu has strengthened its ties with Beijing and the relationship has further strengthened after China made heavy investments in infrastructure development in Nepal. Nepal has also joined China's ambitious Belt and Road initiative." While engaging in open aggression against India how dare China ask for "support and understanding of India and other countries for its controversial decision to impose a new national security law on Hong Kong? Under the new law protesters could be charged with sedition and treason, resulting in long prison sentences. Because China thinks it is following India's example. Police in Delhi charged a protester with sedition "for his alleged role in instigating riots at Jamia Milia Islamia (JMI) by allegedly delivering a seditious speech during a protest against the Citizenship Amendment Act (CAA)" The Sedition Law or Section 124A of the Indian Penal Code (IPC) was drafted by Thomas Babington Macaulay in 1870 to keep Indian 'natives' under control. Another protester in second trimester of pregnancy was sent to prison on anti-terror charges. China actually takes India as an example. "An article in the People's Daily online has 'justified' internet shutdowns by citing India as an 'example'." "India recently ordered a shutdown of the internet in the states of Assam and Meghalaya to control protests over the controversial new Citizenship Amendment Bill. It means that shutting down the internet in a state of emergency should be standard practice for sovereign countries," the paper said. Who would have thought that China is following us? Hong Kong used to be a British territory and was handed back to the Chinese in 1997. China naturally feels that if India, which used to be a British colony, and boasts about its democracy, can still use a British law against its citizens, it is grossly unfair to criticise it for using a similar law in what used to be a British territory. In India, power has been seized by a bunch of callous, arrogant, self-serving autocrats eager to protect their privileges, rather than serving citizens, wrote Prof Ramesh Thakur. At the core is the Indian Administrative Service (IAS) with their "superior, arrogant and unwilling-to-change attitude", wrote Chetan Bhagat. China is eager to learn from India.

Losses are definite, benefits doubtful.

"The first two phases of the lockdown led to 14-29 lakh (1.4-2.9 million) COVID-19 cases to be averted while the number of lives saved in that period was between 37,000 and 78,000, the government said on Friday citing various studies, and asserted that the unprecedented shutdown has paid "rich dividends" in the fight against the pandemic." Possible, but that does not prove that such a stringent lockdown was necessary and other measures would not have worked just as well, or even better. When the lockdown was announced on 24 March the total number of confirmed infections stood at 564 and 10 people had died. According to a Stringency Index devised by Oxford University, India stood highest at 100. And yet, after 60 days of lockdown, number of new infections are rising by record levels, adding 6,767 confirmed cases in the last 24 hours. South Korea has been remarkably successful without a complete lockdown. "South Korea -- which in February had the largest outbreak outside of China -- used a combination of widespread testing, aggressive contact tracing, stern public health measures and digital technology to contain the coronavirus without having to impose widespread lockdown. It also maintained a strict quarantine regime." "India may witness Covid-19 cases peaking in mid-July if the current lockdown is lifted this month-end but expected to be a 'lower surge' due to strong containment measures in the past nearly two months, a noted public health expert and epidemiologist said on Thursday." To that extent, we can say that infections and consequent deaths have been postponed, and not prevented, as claimed by the government. According to the journal Lancet, "when we count the number of deaths from COVID-19 in each country 1 year from now, the figures will be similar, regardless of measures taken", wrote Ramanath Jha. Even without a lockdown, the South Korean economy is expected to contract this year. The effect on India has been disastrous, with Goldman Sachs predicting a 45% contraction in the July-September quarter and a 5% contraction for the entire financial year 2020-21. If we take India's nominal GDP as Rs 200 trillion then 5% loss comes to Rs 10 trillion. Even at Rs 4,500 per test, India could have tested over 20 million people. Mass testing should have been cheaper. This would have allowed confining only confirmed cases so that some economic activity could continue and loss to the nation reduced. More importantly, migrant laborers would not have to walk, cycle or pay exorbitant sums of money to try and get back to their villages to avoid starvation as they suddenly lost all income due to the lockdown. "Those who have lost everything and are still trying desperately to reach a place far away called home have been lathi charged, blocked at borders, cheated, sent to camps and generally treated as subhumans," wrote Manoj Joshi. This, by a prime minister who has been announcing one social scheme after another with taxpayer money, apparently to help the poor. Not surprising that the Prime Minister is hailed as the "jumla raja" or 'king of bluff'.

Long ago, men put a brake on toxic masculinity.

In dealing with the coronavirus pandemic "female leaders around the world, from (Chancellor Angela) Merkel to Jacinda Ardern of New Zealand to Tsai Ing-Wen of Taiwan, have won praise for their handling of the crisis", wrote Anna North. Women communicate better and "may feel less of a  need to live up to expectations of crisis management that are grounded in traditional -- even toxic -- masculinity". Psychological research has shown "conservatives are psychologically tuned to see threat, and so they fear change. Liberals are tuned to prize change, and so they downplay threat," wrote Ezra Klein. "But here we are, in the midst of a pandemic, and it's conservatives seemingly dismissing the danger, opening states and counties prematurely, refusing to wear masks," while it is "the liberals who're locked in their homes, who are warning the worst is yet to come". Political psychologists in the US think that it is because liberals are caring while conservatives are partisan and xenophobic. The Democratic Party, expected to be left-wing liberal, holds veto-proof super-majorities in both houses of California's assembly and imposed a lockdown early. "On March 20, when a statewide stay-at-home order was put into place across California (one had already gone into effect four days earlier in the Bay Area), about 1,000 cases had been detected in the state and about 20 people had died," wrote Kelsey Piper. "Now there have been more than 75,000 cases reported in California." Is it because Governor of California Gavin Newsom may be a Democrat but is a man? President Donald Trump has been blamed for the US having the highest number of cases with over 1.6 million infections and over 96,000 deaths. "A study has estimated there may have been 36,000 fewer coronavirus-related deaths had the US entered lockdown a week earlier in March." So was it toxic masculinity that stopped Trump from declaring a nationwide lockdown? According to constitutional experts the president does not have the authority to declare a national lockdown. "A national lockdown, I think, is pretty far out of bounds for the president," said Keith Whittington, William Nelson Cromwell professor of politics at Princeton University's Department of Politics and an expert in constitutional interpretation. The US Constitution was written in 1787 by men who were influenced by writings of men like John Locke and Baron de Montesquieu, at a time when married women were considered their husbands' properties and women were not allowed to vote. "The United States on Wednesday accused China of employing border clashes with India to try to shift the status quo, and encouraged New Delhi to resist." Donald Trump, Xi Jinping and Narendra Modi are all men. The combination is getting toxic.

Whatever the cause, the price is enormous.

"A bigger stimulus would have been the right way to address a crisis in aggregate demand. But that's not India's problem: Until we figure out the best way to reopen, the country needs less economic activity, not more," wrote Mihir Sharma. Prime Minister Narendra Modi announced a stimulus measure worth Rs 20 trillion on 14 May, but the package explained by Finance Minister Nirmala Sitharaman was all about trying to lower the cost of borrowing. "India's debt remains under control instead of exploding. Most importantly, Modi's government has not been foolish enough to reverse decades of painful institutional reforms and demand the central bank start monetizing its debt." Apparently, direct taxpayers are not pleased with reforms in agriculture because that may increase the cost of food, wrote Chairman of Economic Advisory Council to the Prime Minister (EAC-PM) Bibek Debroy. That seems counterfactual because the poor spend a higher proportion of their earnings on food, rural more than urban. A survey in 2017-18 showed that consumer spending declined for the first time in four decades, with people spending less on food. "In the case of the covid economic package, ironically, the government has displayed vision, 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," wrote member of EAC-PM Prof VA Anantha Nageswaran. "A key element of Modi's approach to economics is a system of incentives and penalties where all economic actors -- rich or poor, small or big firms -- are made to embrace behavioral changes. If his methods deviate from traditional economic advice, which is obsessed with monetary and fiscal measures, it may be because he doesn't give these as much importance as his own instincts," wrote R Jagannathan. It is terrifying that the future of a nation of 1.3 billion citizens is dependent on one man's instinct and not on any science or knowledge. What these erudite men do not explain is why Modi imposed a total lockdown on 24 May when the total number of confirmed cases were an insignificant 519, and is lifting it now when the rate of infections is rising everyday, with 6,088 new cases in the last 24 hours. Was it really to control spread of the virus or to stop protests against the Citizenship Amendment Act (CAA) that Modi effectively destroyed the economy? Fiscal deficit is likely to rise much higher than predicted in the budget because tax collections will fall, wrote Aparna Iyer. The Reserve Bank (RBI) has been buying government securities in the open market. This may be called quantitative easing but is monetizing debt indirectly. Recently the RBI bought government bonds and treasury bills from the secondary market in another sign of taking government debt on to its books. Whatever the reason, the lockdown has extracted a heavy price. We will pay for a long time.