People prefer greater reward for greater effort.

"There's a problem with the way we define inequality," wrote Bryan Lufkin. We know that 1% of the richest people owns 50% of the wealth of the entire planet. The richest 1% of Indians owns 58.4% of the nation's wealth, up from 53% last year and 40.3% in 2010. A few years back Prof Thomas Piketty took the world by storm with his book "Capital in the Twenty-first Century", which showed how inequality is increasing in every country as returns from capital are increasing fast, while productivity of workers in falling. Some researchers suggest that people prefer inequality, meaning reward should reflect the quality of work. In an experiment 6-8 year-old children gave equal reward for equal work but rewarded a boy who worked harder. Lack of inequality, meaning absence of greater reward for higher quality work, was probably the main reason why communism failed in the Soviet Union. So, some are now suggesting that inequality should be defined as a lack of fairness, rather than as a difference in possession of wealth. Prof Tyler Cowen suggested that a lack of mobility a arising from a lack of opportunities is really unfair. Megan McArdle struggles to find a way how governments can reduce inequality. Inequality is built into our society as some are born with more intelligence or some special talents. A government cannot make you more popular or improve your singing but can give money to the very poor. Just helping the poor to survive is unlikely to push them up the social ladder. So what of India? Everyone is agreed that inequality is increasing, even as the economy is growing. Some, like UD Choubey, want to go back to bad old days of command economy which had nearly bankrupted the nation in 1991, by sugar-coating it as state-capitalism. The 1991 crisis was actually caused by successive governments as they resorted to reckless spending, allowing inflation and deficits to spiral out of control. That forced the then Prime Minister, Narasimha Rao, to reform the economy, leading to faster growth. The economy has grown to over $2 trillion, foreign direct investment has increased and the stock market has soared, but agriculture is not doing well and job creation is pathetic. That led to the temptation of waiving loans to farmers to win the assembly election in UP, leading to farmers in other states demanding the same treatment. The total cost maybe in excess of Rs 2.57 trillion. This excess spending will show up in fiscal deficit of states even though the BJP government at the center, which was responsible for the waiver in UP, will show a reduced deficit. There are 2 types of people -- r and K types. The r type has many children and are poor parents, while the K type has few children and invests a lot of effort in their well-being and education. Sadly, India is full of the r type of people, producing a lot of children and depending on government handouts to survive, wrote A Nageswaran. Hence, the clamor for the equality of poverty.

What is the solution for the globalization of poverty?

"The future of work is the low-wage health care job," wrote Soo Oh. "The poor taking care of the poor are driving the new economy." "In 1970, 29 percent of workers were employed in the manufacturing industry. An additional 4 percent of workers were in production jobs in other industries..." They were highly paid as "nearly half the people employed in manufacturing or production earned within the top 40 percent of wages in the country". And, "Nearly all the production workers -- 93 percent -- never went to college." Unfortunately, "The manufacture industry now employs 11 percent of all workers, and only 6 percent of workers are in production." As the baby boomers get older an increasing number needs personal care so people without college education are taking these jobs. "A salary of $20,000 for a personal aide or home health aide is typical, with 90 percent of workers making less than $30,000." The eurozone economy is not doing so well either, wrote A Nageswaran. Portugal, Italy, Greece and Spain, dubbed PIGS by some, have double digit unemployment rates, credit is contracting in relation to GDP in these countries and Spain and Portugal have missed their fiscal deficit targets. Negative interest rate and bond buying by the ECB have created asset price bubbles. Britain is just not creating enough wealth, wrote Kamal Ahmed. Productivity fell by 0.5% in the first three months of the year, taking the ability to create wealth to below 2007 level. Wage growth is below the level of inflation and increasing labor costs are squeezing profits, so that tax receipts are low. The middle class in Britain has racked up 198 billion pounds of unsecured debt in credit cards, car loans and overdrafts, Bank of England figures showed. On top of this there is a mass migration from Africa and the Middle East into Europe, which seems unstoppable. A leaked German report has warned that there are 6.6 migrants waiting to cross over into Europe. Mass migration could lead to war, wrote Max Hastings last year. Unthinkable? Recently, Austria moved tanks and troops to its border with Italy to stop migrants from crossing over, leading to a furious reaction from Italy. Poverty in Africa and the Middle East is because of the age old problem of excessive birth rate, in excess of 5 children per woman. Girls are also married off at an early age. Brazil has passed a law restricting government spending for 10 years, to reduce government debt, but this will lead to a situation faced by Argentina in the nineties, wrote Professors Campante and Rodrik. What of India? A Pakistan economist once said that India has "ten percent socialism", meaning only 10% of people have secure jobs and benefits, while the rest faced a life of struggle. Now we have an elite ten percent doing great while the masses are suffering, so "We now have ten percent capitalism," wrote M Chakravarty. We have all the problems, but what is the solution?

It is about power, not just about money.

"Why growth has not hit corruption hard in India," wonders Shekhar Chandra. "India has been the fastest growing major economy in the world for the most part of the last few years. Foreign direct investment (FDI) in India increased 2.5 times from $24.3 billion in 2013-14 to $60.1 billion in 2016-17. However, economic progress has not seen a commensurate reduction in corruption." A survey last year showed that bribery rate is at 69% and 41% of people think that corruption is increasing. Perhaps, poor countries do not have the money to build institutions. India has a shortage of judges, the Central Vigilance Commission has shortage of 27.77% in group A posts and 28.57% in group B posts, while the CBI has a shortage of 1,584 officers. However, there is no guarantee that increasing the number of officers will reduce corruption. Politicians have no interest in reducing corruption because their powers depend on it. A lady police officer in UP who arrested BJP goons for obstructing traffic has been transferred. "In the developing world, corruption is public enemy number one," said World Bank President, Jim Yong Kim, vowing help in creating institutions to get rid of corruption. Corruption maybe more common in poor countries but there is no proof that eliminating corruption will improve productivity. A policeman may stop taking bribes but he maybe no better at solving crimes and a teachers may attend classes but may not teach, wrote Prof Ricardo Hausmann. Apparently, one million people have been punished for corruption in China by Xi Jinping, which does not explain how China became the second richest economy in the world before Xi became president in 2013. The drive against corruption has increased profits of some companies, for not having to pay bribes, but has hit share prices of alcohol companies. The doubt is that the anti-corruption campaign is designed to increase Xi Jinping's power by eliminating opponents, making him a dictator, which is a crime against the people. There is corruption even in the US, the richest country in the world. Lucy P Markus is optimistic that companies and governments are serious about tackling corruption. But Paul Krugman was angry that the "vampires of Wall Street" are trying to get rid of the Dodd-Frank Act, which regulates predatory lending by unscrupulous financial wheeler-dealers. Historian Robert Harris said that Julius Caesar died because he came to the senate despite suspecting a plot to kill him. He said that today's politicians hang on for too long until they are forced to go. A sentiment echoed by David Cameron who was forced to resign after losing the Brexit vote. Indian politicians will never dream of leaving because the returns are so huge. Corruption keeps them in power and they will kill anyone who tries to find the truth. The 7% growth is only in the top 7%. And it will not change. 

Don't let smoke get in your eyes, just put out the fire.

Couple of days back North Korea claimed to have tested its first Inter Continental Ballistic Missile, to coincide with American Independence Day. "A gift for the American bastards," exulted North Korean leader, Kim Jong-Un. The missile was launched at a steep angle and fell in the Sea of Japan. North Korea claimed that the missile traveled 933 kms while Russia says that it went 570 kms. Question is how far it will travel if launched at a shallow angle. Some say it can travel 6,700 kms while others say that it could reach as far as 8,000 kms. Any range over 5,500 kms makes it an ICBM and maybe sufficient to reach Alaska. The fear is that if they can reach that far they can easily add to it to target US mainland. North Korea has also been testing nuclear bombs and claimed that its ICBM can carry a large nuclear bomb. An impoverished nation, laboring under UN sanctions, this childish aggravation of the US seems entirely incomprehensible. So, why does it do it? Nuclear tests, missile launches and elimination of any perceived challenge are the ways the regime maintains its complete grip on the people. US Ambassador to the UN, Nikki Haley said that the US is prepared to use military force but "we prefer not to have to go in that direction". Russia advised patience and dialogue with North Korea, just as the US lectures India to hold 'constructive dialogue' with Pakistan after every terrorist outrage and continues to supply arms to that failed state. Why does the US care about what North Korea is doing thousands of mile away? Kim Jong-Un maybe a despicable tyrant but he knows how to survive. He knows that any attack on the US will mean total annihilation of North Korea and his own death. The problem is that South Korea is just across the border and Japan is only about 1,000 kms across the sea and tens of thousands could be killed by the North's missiles. Leftists argue that threats and sanctions are counterproductive because China is protecting the regime, and the best solution is to accept Chinese hegemony in Asia. China makes a pretence of trying to restrain North Korea but trade between the two countries increased by 37.4% in the first quarter of this year, according to Chinese customs data. In frustration Donald Trump tweeted, "Perhaps China will put a heavy move on North Korea and end this nonsense once and for all." China is the problem. An uncivilized nation of barbarians, China supports all that is filthy in the world. It is protecting North Korea, helping Pakistan in its terrorist program, and collaborated with the hated Pol Pot regime in Cambodia.  The solution is in Trump's hands. Levy a 45% border tax on Chinese imports, as he promised, and use the money to increase Social Security for the poor. The Democrats will scream that the poor are being harmed, the Republicans will scream about handouts to the poor, the Chinese economy will be hit hard and Trump will go down as a great president. China has huge debts and hitting its trade surplus could tip it over the edge. Way to go, Donald.

They may call it charity, but it is still just another tax.

"Who does business represent?" asked Prof Ricardo Hausmann. "The traditional view of the firm -- shared by both Karl Marx and Milton Friedman -- is that it is an organization owned by capitalists (shareholders), on whose behalf it is run. It hires workers and buys other inputs to maximize returns for those who put up the money. According to Friedman, the social responsibility of the firm is to increase profits. Any goal that does not directly benefit shareholders is just another distortionary tax." Indian politicians do not like businesses to make profits. They see businesses as a way to squeeze as much tax as possible and have imposed a Corporate Social Responsibility Law which forces companies to donate 2% of their profits for charitable work. It is a surreptitious tax and companies have spent money on whatever is easiest, but not vital, wrote A Karnani. Jawaharlal Nehru is reputed to have told JRD Tata, "Never speak to me of profit. It is a dirty word." If businessmen are restricted from making honest profits they will resort to underhand means. In a survey, 66% of Indians said that it is alright to pay bribes to win business and 80% of citizens think that businesses are corrupt. No wonder that only 2% of Indians invest in stocks, which forces companies to borrow from banks. Bank managers are not trained to understand business models or carry out due diligence. Public sector banks are loaded with bad debts, in some cases total loans are more then their net worth. Where there is money there will be corruption. Many bank managers succumbed to cash bribes or expensive presents. Philanthropy should be a personal choice -- from educating children to animal welfare to planting trees -- whatever seems most important to the person concerned. It is because of abject failure of the government in providing basic services, such as education, child health, or universal medical care, that there is a discussion of how philanthropy should be directed. When politicians get involved corruption spikes. There are over 3 million NGOs in India which was "mind-boggling" for the Supreme Court. "Most privately run philanthropic organizations do not understand their social responsibilities. 99% of the existing NGOs are fraud and simply moneymaking devices," observed Delhi High Court. In the US, universities have received billions in endowments but half of all Americans hate paying for Obamacare because it is enforced. The present ethos of "maximizing shareholder value" at all costs is hurting other stakeholders, like customers, workers and society, wrote Joe Nocera. It is time that business associations "gave voice to the network of stakeholders" and not just to shareholders, wrote Hausmann. In short good business practices are infinitely more valuable for society than enforced philanthropy. But, sly taxes please the vote bank.

How can we have effective policy in the absence of reason?

"No, Fed didn't make a mistake by Hiking Rates," wrote Mohamed A El-Erian. The Federal Reserve increased its Funds rate by 25 basis points last month despite core consumer price inflation at 1.7%, which is below the target rate of 2%. The Fed also signaled its intention of another rate rise later this year and for gradually reducing its balance sheet, by selling off $10 billion worth of bonds per month it had acquired during quantitative easing. The Bank of International Settlements supports a normalization of monetary policy by central banks. El-Erian raised 4 areas of concern. Although unemployment is down to 4.3%, which maybe considered 'full employment', labor participation rate has fallen by 0.2% to 62.7%, "an historically low level". If unemployment falls too low wages rise fast and inflation follows. Inflation is expected to rise but no one can say when. US economists are still debating the causes of the Great Depression of 1929 and some fear instability in financial markets which have become used to ultra-low interest rates. Lastly, there is the fear of "what if" the Fed is making a mistake, which will stop the recovery and create a financial meltdown. The danger is that loose monetary policy may create asset price bubbles which will ultimately burst, causing even greater chaos. "Put me in the camp of those who, when assessing the balance among the four cited factors, feel that the Fed's June interest rate hike was not a policy mistake, that another hike in the remainder of 2017 is warranted based on current indicators, and that policymakers should take seriously the growing risk of future financial instability, especially in the absence of a careful normalization," wrote El-Erian. This is refreshing because in India everyone wants interest rates to be reduced, the only debate being about by how much. The Chief Economic Adviser, A Subramanian expressed his disappointment at the Reserve Bank keeping interest rate steady at 6.25% last month. On the one hand the government boasts that India has the fastest growing economy in the world and on the other the CEA complains about a fall in real Gross Value Added. So, crow about GDP and whine about GVA, sounds as if they want it both ways. The RBI cannot make its policy decision from Indian figures alone, it has to keep an eye on what the Fed is doing. One reason why prices are increasing slowly is because the rupee is strong, which lowers cost of imports, especially oil. Low oil price reduces cost of transport, which has a knock-on effect on prices of most goods. The rupee is strong partly because foreign investors are buying government bonds to take advantage of higher interest rate compared to the US. Government policy should be based on careful reasoning and not parroting what politicians say. Perhaps, no one wants to lose his cushy job.

At least Indira Gandhi had the guts to be open.

Noted lawyer, Fali S Nariman wrote "Memories of another June", recalling the events of June 1975 when the then Prime Minister, Indira Gandhi declared a state of Emergency in India, abolishing parliament, arresting anyone daring to protest, and censoring all media. Forty two years on we have another majoritarian government which is forcing every citizen to provide fingerprints and iris scan for identity cards which we are forced to link with our phone numbers, bank accounts, to buy plane and train tickets, and even to file tax returns. This will provide complete information on every citizen to the government, exactly as the Stasi did for the communist government of East Germany. We will not know what they are collecting until they decide to use the information against us. During Emergency the Supreme Court let us down by refusing to invalidate laws passed by parliament when opposition members could not attend because they were detained by the police. "This was the first regrettable decision of the highest court -- only to be followed later by a still more regrettable one (ADM Jabalpur in April 1976), in which the majority decision of four out of five of the court's senior-most judges negated personal liberties granted by the Constitution," wrote Nariman. Today's Supreme Court has approved of mandatory linking of biometric identity numbers to filing of tax returns. The government is going ahead at full speed to get every citizen into its database without allowing any option to opt out. A foreign professor of law, Eben Moglen, is mystified by the Supreme Court's reluctance to form a 7 bench Constitutional Court on whether the government has the right to forcibly obtain private information on our bodies, without giving us any option of refusing. He wrote that the decision is vital for individual freedom, not only in India, but also in all other countries. In 1975-76 judges actively supported curtailing human rights, for which they are being criticized today. It seems that today's judges, by postponing any decision on the legality of government intimidation, are trying to protect their reputation while not wanting to take on a ruthless, predatory government. "Those of you who have not lived through them or read about them must know that dictatorial rule can only be imposed when a majoritarian government is in power; a majoritarian government was then in power with a strong energetic and popular prime minister..." warned Nariman. We have the same situation today with the BJP enjoying an absolute majority in the Lok Sabha, with a very popular prime minister. There is an outcry in the US because an 'election commission' wants name and address of every voter. We Indians are like goats, with no one to save us from the sacrifice of all our individual freedoms. A dark future awaits. 

Not just a choice between meat and veg.

Cities and towns occupy about 3% of Earth's total land area and 35-40% of land is used for agriculture, but 40% of food is thrown away. About 75% of agricultural land is used for growing feed for animals, that we then eat. The total population is expected to grow from 7.6 billion today to 9.8 billion in 2050. World population is rising by 83 million people every year, the same number as the total population of Germany today. About 4.9 billion of that will be in just 2 countries, India and China. By 2050, India will have 1.7 billion people, overtaking China to become the most populous nation on earth, wrote Prof Leela Visaria. We will need to grow more food to feed so many people but all these people will need housing to live in and jobs in offices or factories to earn money to buy food. If land is used up in construction how much will be left for agriculture? Agriculture has a devastating effect on the environment, as forests are cut down to provide land for growing crops or pastures for grazing animals, pesticides and fertilisers pollute water sources, and greenhouse gases, like methane, cause global warming. The total land area of Earth is 57 million sq miles, out of which 12 million sq miles are arable, which means fit for agriculture. That is just over 20%. In 2006, there was 1.15 acres of arable land per person in the world, by 2039 that will be down to just 0.53 acres. 38,610 sq miles of arable land are being lost every year, due to erosion of top soil, salinization and rising sea levels. One suggestion is for everyone to become vegetarian. Pastures would be converted to forests which will decrease greenhouse gases because of photosynthesis, and numbers wild animals will increase. The alarming thing is that if everyone becomes vegetarian, mortality will decrease by 7 million a year, and by 8 million a year if everyone becomes a vegan. That will increase the number of people to feed and the pressure on land will grow. If everyone becomes vegan, which means no milk or eggs either, what happens to the millions of livestock and chicken? Are they to be slaughtered or will they be set free, in which case methane production will continue. Trouble is that meat provides a lot more nutrition than fruits and vegetables, which means people will have to eat a lot more quantity, if they become vegetarian. Fruits and vegetables are perishable and so need processing to preserve. If that is taken into account then meat is more friendly to the environment. Since 75% of Earth's surface is covered in water it is no surprise that NASA has predicted increased rainfall in tropical areas, as temperature incresea. That may cause increased floods and destruction of crops. In the past, massive population growths led to periods of instability and collapse of sections of society. The world is infinitely more dangerous than it has ever been. Uncontrolled migration is already creating stress. How long before that leads to instability?

Capital, only a small part of it.

The same story every year. One rain shower and Delhi is under knee deep water with massive traffic jams. Out of 1,011 drains under the Public Works Department just 83 drains have been completely cleaned out. The PWD is under the Delhi government. One official said that they do not have regular staff like municipalities and so have to use contractors to get the job done. Talking about drains one official said, "These waterways are not meant to carry faecal matter and sewage. But we are forced to clean this sort of muck because the drains are connected to the sewers. There is a need to upgrade the sewer network in the city." What were they doing all these years? Delhi is a city with multiple governing agencies. How many? There is the central government with a 73 ministers and a Prime Minister, making a total of 74. The Delhi government has 7 ministers and a Lt Governor, appointed by the central government, to inspect everything that the local government wants to do, which often means that nothing gets done. Then there is the New Delhi Municipal Council, which looks after the center of Delhi, referred to as Lutyens Delhi, named after the British architect Edwin Lutyens, where our modern colonial masters live. There the roads are smooth, drains are cleaned and no one has to wade through filthy water. For the rest of us proles there are 3 Municipal Corporations, North, South and East, which are supposed to provide public services to the millions. For those of us fortunate enough not to have to sleep on pavements or to live in slums, most services, such as security, garbage collection, cleaning streets and maintaining parks, are provided by Resident Welfare Associations which collect subscriptions from residents. With so many authorities toiling away Delhi should be the cleanest, prettiest city in the world. In reality, it is filthy, with broken roads, piles of garbage, blocked drains and unnecessary traffic jams, because lights do not work, and the only duty of the traffic police is to collect fines from drivers. The authorities are apparently struggling to fix potholes on city roads. Why now? What were they doing in the dry season, from September to March? Because repairs are purely cosmetic and will break after one shower so that roads will need to be repaired again. That is where the money is. The High Court in Delhi noted that there are a total of 64,000 cleaning staff in Delhi but the city stinks. That is what the books show. What the court should be asking is how many are working and how many are ghost employees. Cases of Malaria have already been diagnosed, soon Dengue and Chikangunya will follow. Mosquitoes do not understand boundaries. If they infect some of our Lutyens masters maybe something permanent will be done. They are our only hope.

The protection of cash.

There is growing use of cash in Europe, except in Sweden and Denmark, which is puzzling economists, wrote Leonid Bershidsky. The share of cash relative to GDP is increasing, including in Japan where the shadow economy is small, at 10%. The use of cashless transactions is increasing all over the world and amounted to $617 billion last year, up from $60 billion in 2010. Prof Kenneth Rogoff has been arguing against the use of cash, especially high value notes. "Cash facilitates crime because it is anonymous and big bills are especially problematic because they are so easy to carry and avoid," he wrote. "A million dollars in $100 notes fits into a briefcase, a million dollars in 500 Euro notes (each worth about $565) fits into a purse." True. But the vast majority of the population do not possess a million dollars and cash gives ease of transaction, you avoid bank charges and it allows people to limit spending to what they can afford. Cash is still preferred in Germany, maybe because Germans are reputed to be thrifty. In the US families earning less than $25,000 use cash in 48% of transactions, and families earning between $25,000 and $50,000 use cash in 33% of transactions. Poor people are denied credit cards by banks, you have to pay charges for possessing a card and banks charge merchants for the use of cards, including debit cards, which is sometimes passed on to the customer. Using cards allows people to postpone payment, which gets them into debt. The middle class in Britain has racked up 198 billion pounds in unsecured debt on their credit cards. A lot of people do not trust banks. Details of our accounts are insecure because banks do not spend money on anti-virus software. Details of bank accounts of 10 million Indians are available for 20 paise each. Bank managers are seen as crooks. Even as banks are making huge losses they are paying massive bonuses to their managers. The Royal Bank of Scotland paid out 340 million pounds in bonuses despite incurring losses of up to 5 billion pounds in 2016. Credit Suisse paid more to its chairman despite making losses and despite opposition from shareholders. During demonetization the use of cash dropped because there was hardly any cash available. But as soon as cash was available the use of cash jumped by 78% in January, compared to December. "If governments were not so drunk from the profits they make by printing currency, they might wake up to the costs," wrote Rogoff. We are told by politicians that it costs a lot to print currencies but the government is actually making a huge profit from notes. This is called 'seigneurage'. Why would Indian politicians give up this income? Because it gives the government enormous power over the people by knowing what we are doing, wrote A Nageswaran. Cash is our only protection against these despots. If only the people understood.

We need optimism, the alternatives are terrifying.

"In 50 years, I predict that the world economy is likely (though not guaranteed) to be thriving, with global GDP growing by as much as 20% per year, and income and consumption doubling every four years or so," wrote Prof K Basu. From 1500 to 1820 the world economy was growing at just 0.32% "with large sections of the world experiencing no growth at all". The Industrial Revolution lifted "average annual global growth to 2.25% from 1820 to 2003". Why the optimism? "Today, it is the Digital Revolution that promises to lift growth to new heights.Indeed, we are in the midst of dramatic technological breakthroughs, with advances in digital technology connecting all corners of the world." Digital technology is also taking away every shred of privacy and freedom from individuals as it lays us bare to autocratic despots, wrote Chinmayi Arun. Vivek Wadhwa predicted,"Our future of unlimited growth -- and joblessness." Robots will take over all the jobs in manufacturing, driving, nursing and medicine while drones will do all the delivery work. One Carl Bass said, "The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment." Automation will make everything extremely cheap. But not free. Industrialists will still want to recover costs of manufacturing robots, paying for raw materials and buying land to set up factories. If there are no jobs how will people buy even the cheapest of goods? "Through improved education and training, as well as more effective redistribution, we can facilitate more creative work -- from art to scientific research -- which machines will not be able to do in the foreseeable future," wrote Basu. But, how? Is it possible for billions of humans to be trained to be engineers of Artificial Intelligence or to be able to write programs for robots that they will want? Starting at 8,000 BC the world population reached 1 billion by 1800, but by 2050 it will reach about 10 billion. That is a huge number of people with no jobs. So who is going to feed, clothe, educate and treat them when they are ill. We may have robot doctors but medicines will still need to be manufactured. Prof Tyler Cowen wrote that there can be no economic miracle, citing the example of Denmark which has been growing at an average of under 2%, with no recession. An economic history of the world, compiled by Angus Maddison shows that economic growth in the West has been faster for centuries, wrote M Chakravarty. Perhaps, because the West has been adept and making instruments of war with which to subjugate other nations and loot their resources. Digital technology will also be used for war. It only takes time.

What about GST on hot air and flimflam?

Prime Minister, Narendra Modi invited US businesses to invest in India, claiming that the Goods and Services Tax, or GST, will be a game changer. Even as Modi was waxing eloquent, an art he has mastered, four US lawmakers wrote a letter to President Donald Trump complaining about the difficulty of doing business in India. "While Indian businesses continue to benefit from open US markets, India has failed to eliminate, or even address concretely, multiple trade and investment barriers that have been the focus of recent bilateral and multilateral fora," they wrote. "At the same time, India has imposed several new significant barriers that have harmed US producers across all sectors or our economy, including services, manufacturing and agriculture. Prime Minister Modi's visit provides an opportunity once again to press India for results." Not everyone is impressed with hot air, it seems. In his radio address, presumably recorded prior to his visit to the US, Modi reminded everyone of the "dark night" of the Emergency imposed by Indira Gandhi 42 years ago. At least Indira Gandhi did not force every citizen to provide fingerprints and iris scans for biometric identity cards and did not force retired tax payers to stand in queues for hours to withdraw their own money from banks because of sudden banning of high denomination notes, known as demonetization. As for repression ask NDTV, whose offices were raided by the CBI without any valid reason. The real crime? NDTV was critical of Modi's government. When the government treats every citizen as criminals it is not surprising that India is at 130 out of 190 in the ease of doing business, according to the World Bank. A report in 'Foreign Affairs' said that demonetization was one of the most 'disruptive experiments' in history, was of no benefit to the economy, but was very popular because Modi was able to persuade the poor, who suffered enormously, that he was hurting the rich. The Economist was not impressed with Modi's reforms or the GST, although it praised his administrative ability and the lack of corruption in the upper ranks of government. Modi boasted that there has not been a single stain of corruption on his government. True, but not one high profile criminal has been successfully prosecuted. When 1.3 billion people are treated as criminals the real ones are lost in the crowd. Public sector companies have been ordered to pay for celebrating the third anniversary of Modi's rise to power and government owned oil companies have been 'directed' to pay Rs 2 billion for a statue to Sardar Patel. That is surely misappropriation of public funds. Modi has visited the US many times before so they will have a dossier on him. If only there was GST on flimflam India would be a rich country. Pity.

Why would the bums want to be thrown out?

People are voting against political parties in government all over the world, wrote Ruchir Sharma. "Right-wing reformers are rising where left-wingers ruled, progressives are rising where conservatives ruled, and unconventional populists are gaining where the traditional parties are especially weak," he wrote. "If there is a common factor driving voters worldwide, it is less a particular ideology than a deep but amorphous desire for change." Why the anger? "The voters anger stems from the wide and persistent slowdown that has taken root since the global financial crisis of 2008. The growth rate of the global economy has slumped to around 2.5% this decade, from 4% in the decades before 2008, undermined by weakening growth in both population and productivity. No major region of the world is growing as fast now as it was before the crisis." The US economy has been growing for 96 straight months, and unemployment is down to 4.3% but wages are not growing in step with economic growth, wrote Danny Vinik. Wages are growing slowly because of hidden unemployment, which is reflected in low inflation. A couple of weeks back the Federal Reserve in the US raised its Funds rate by 25 basis points to 1%. The Fed targets retail inflation of 2% but some economists are urging the Fed to set a higher inflation target, which means that they are asking for low interest rates to continue. These economists are concerned about increasing inequality and are hoping that low borrowing costs will encourage borrowing for new investments, which will lead to increased job opportunities for the working classes. A report from the World Economic Forum warned of increasing polarisation of society due to rising inequality. Most of the wealth generated is going to the top 1%. But, surely low interest rate is one of the main causes because it allows the rich to borrow cheaply to buy up assets? Low interest rate tempts people to buy on credit, gradually trapping them in debt that they cannot repay. The middle class in Britain has racked up 198 billion pounds in unsecured debt. The present global prosperity, enjoyed by the old, is based on debt which the young will have to repay, wrote Satyajit Das. "Central to the issue is that the rise in living standards and prosperity of the past 50 years has been largely based on rising debt levels, ignoring costs of environmental damage and misallocation of scarce resources." Ken Buck, a member of the US Congress, wrote that there should be term limits on elected representatives just as there is on the president of the US. In India there is no question of term limits. Politicians not only try and hang on for life but get their children, brought up with a sense of entitlement, financed by taxpayer money, elected so that succeeding generations can continue to loot. We vote to be looted. How stupid is that?

How do you measure the fear of suffering?

"The sharp fall in inflation in recent years has pulled down the growth in nominal gross domestic product (GDP)," wrote N Rajadhyaksha. Nominal GDP is measured in current prices while 'real GDP' measures growth with reference to a base year by eliminating rise in prices, or inflation. Thus, nominal GDP is what we see and feel as we shop while the real GDP is a calculated figure, which is irrelevant to most people. Nominal GDP in 2016-17 was Rs 152.51 trillion, while the real GDP was lower at Rs 121.65 trillion. Last year the real GDP was growing at 5% and not 7.1%, as claimed by politicians. "Employees who are used to large increases in nominal pay during episodes of high inflation feel cheated with the more modest pay hikes we see in these years of low inflation." Farmers are incensed at the fall in prices of their produce. "People think in nominal rather than real price terms. Price changes matter." Farmers want higher prices for their produce but low prices are good for consumers and low inflation is useful for politicians to bully the RBI for lower policy rates. Apparently, Irving Fisher coined the term "money illusion". "Indian workers, companies, investors, savers are so used to high inflation that lower nominal numbers because of the drop in inflation is a fact that they have psychologically not adjusted to." In short, people feel poorer because prices are not rising. So, are the farmers being irrational for demanding higher prices for their produce? Well reasoned articles explain why farmers have been hurt by the fall in food prices. Everything from a change from growing cereals to horticulture, imports of cheap produce from abroad, delay in paying farmers, to demonetization have been advanced to explain the fall in prices. But, most people tend to ignore the fact that input costs are rising. Prices of fertilizers and pesticides have risen because we import 60% of 'technicals' from China. So, our inflation calculations are probably based on the finished product, without accounting for the inputs. The Goods and Services Tax is set to impose a 12% tax on fertilizers, 12% tax on tractors and 18% tax on crop protection products, which means pesticides. There will be no tax on seeds. And so we come to loan waivers which are generating a lot of heat. Loan waivers mainly help rich farmers with big landholdings but not marginal farmers, who generally borrow from local moneylenders. Loan waivers will increase fiscal deficit of states which is reflected in the difference in yields between bonds issued by the states and the center. This may affect India's sovereign rating. However, Pronab Sen argues that agricultural loans are insured against defaults, farmers usually repay their loans and people should not be allowed to starve. Money maybe an illusion but suffering is real. There is no economic measure for the fear of suffering.

Buy F-16s to influence their thinking?

A couple of days back, in a display of unnecessary bravado, a NATO aircraft buzzed an aircraft carrying the Russian Defence Minister, Sergei Shoigu, over the Baltic Sea. A Russian Sukhoi-27 inserted itself between the 2 planes and tilted its wings to show its weapons, making the NATO plane flee. The NATO fighter jet was a F-16. Tata, an Indian multinational, is in talks with Lockheed Martin to build F-16 jets in India, which may result in Lockheed shifting its plant from Fort Worth in Texas to India. In a head to head comparison the Sukhoi seems no match for the F-16. The Sukhoi is capable of a top speed of 1320 mph, has an autocannon capable of firing 1800 rounds of armor piercing high explosive rounds per minute and air-to-air missiles capable of hitting targets 80 miles away at 4.5 mach. The F-16 has a top speed of 1553 mph, its guns can fire 20 mm bullets at 6,600 rounds per minute and it has missiles capable of hitting targets 111 miles away and Sidewinder missiles capable of hitting targets 22 miles away. However, we do not know how good it is in close combat and maybe that's why it fled. So, should we be wasting money on a plane which has reached the end of its shelf life? A Iyer-Mitra wrote that "less than 40% of the F-16 is actually Lockheed technology. The remaining 60% is proprietary technology owned by by hundreds of subsystems manufacturers spread across the globe", some of whom, like those in Turkey, will not transfer their know-how to India. "In the end, India gets a superb fighter and a few thousand jobs but nothing more -- not a monopoly, not innovation, not cutting-edge technology and, certainly not 'strategic autonomy'". Russia is also developing a hypersonic missile capable of flying at 4,600 mph, which is 5 times the speed of sound. The same scramjet technology will be used in Brahmos II that India is developing with Russia. India has a well developed satellite program. It should be possible to put up a chain of satellites which will monitor our borders constantly and link anti-aircraft missiles with the satellites so that they home in on any enemy aircraft crossing our borders. Russia is building a gas pipeline across the Baltic straight into Germany, and bypassing Ukraine. That will raise Russia's share of German gas requirement to 50% and Russia will be able to shut gas supply to Ukraine without affecting supply to its other customers in Europe. Naturally, European countries are unwilling to increase sanctions against Russia. Western sanctions forced Russia to sell cheap oil and gas to China to keep its economy going, so a direct pipeline to Germany may give it more bargaining power. Just as the British have not been able to clear cobwebs of their Empire from their brains the US seems to be locked in a Cold War mindset, unable to see that China is the greatest threat to the world and to the West. An alliance with Russia will make them to see off China+North Korea+Pakistan. That is what India should be whispering to them. While buying outdated planes. 

Is socialism about to die in India?

The Tata group, one of India's huge industrial conglomerates, with businesses ranging from steel to tea, from cars to IT, is in talks to buy Air India, India's national carrier. JRD Tata gave birth to Tata Airlines in 1932 and flew its maiden flight from Karachi to Mumbai. In 1953 it was nationalised when it was one of the best airlines in the world. Nehru apparently rebuked JRD saying,"Never talk to me about the word profit; it is a dirty word." How prescient! The company has cumulative debts of Rs 500 billion and the Comptroller and Auditor General reported that the company has been understating its losses. Tata already operates a domestic airline, Vistara, and taking over Air India will give it immediate access to foreign routes and landing spots. Tata must be careful. The merger of Air India with Indian Airlines in 2007 was a disaster, a fact acknowledged by its present CEO, Ashwani Lohani. Being a government company meant that corruption was endemic, and pilots were earning eye-watering salaries for little work. The government desperately wants to get rid of this drain on its revenues but is apprehensive about doing so. Professors Krishna and Dahejia have no doubt that Air India must be privatized right away because privatization of British Airways, Kenya Airways, Air Canada and Singapore Airlines turned them into profit making companies. "Disinvestment of Air India would send absolutely the right message, that India is now a market economy, not a planned economy in which the government clings on to the "commanding heights", and that the Modi government is serious about extending the disinvestment agenda to other potentially sensitive areas." It will not be easy. Any debt write-off will be claimed by Opposition politicians as a gift to Tata in return for kickbacks. And unions will oppose it vociferously. After all, when workers have been used to an easy way of life they will not want to give it up without a fight. But Air India is not the only one. Pubic sector banks are the walking dead of the Indian banking system, wrote Aparna Iyer. They have accumulated so much bad loans that the average bad loans of government banks amount to 75.53% of their net worth, wrote T Bandopadhyay, and in some banks bad loans exceed their net worth. So, these banks are unable to lend money for new projects. Already there are calls to privatize public sector banks but the Finance Minister did not agree with the suggestion last year. Ownership of banks gives politicians opportunities of using our money for dubious projects, such as farmer loan waiver. In fact, the government is proposing merging loss-making public sector companies with ones which are doing well, a very bad idea wrote R Chinchwadkar. Not easy to kill socialism, is it?

They feed the nation, but cannot feed themselves. Why?

"Farm crisis is really a jobs crisis in disguise," wrote R Jagannathan. Farmers are agitating against a fall in earnings due to a fall inf food prices. Retail inflation has fallen to 2.18% and wholesale price inflation fell to 2.17% in May. While prices of cereals are still rising prices of vegetables and pulses are actually falling. Indian farmers have been shifting farming practices, so that horticulture production is higher than production of cereals. The government sets a minimum floor price for 26 agricultural commodities, known as the Minimum Support Price, or MSP. The government stocks foodgrains, so large scale buying by the Food Corporation of India increase prices of these commodities. There is no MSP for fruits and vegetables and these cannot be stored because of a lack of cold stores and reliable electricity supplies. Prices of some products have crashed by as much as 13.64%. Farmers have been agitating for waiver of their bank loans resulting in the shooting to death of 5 farmers by the police in Madhya Pradesh. The BJP promised loan waiver for farmers in UP before the assembly election in February. This was followed by the BJP government in Maharashtra and then the Congress government in Punjab. The BJP government in MP is resisting, hence the deaths. The Maharashtra government has announced loan of Rs 10,000 for farmers to prepare for the planting season ahead, including to those who own vehicles worth over Rs 1 million. MP has announced a subsidy of Rs 9,541 on electricity bills for farmers. "The politics fuelling the agitation is obvious: With the Narendra Modi-led BJP pummeling the Opposition in election after election, the anger in farmland has come as a godsend to political foes and even allies," wrote Jagannathan. Why not? The BJP won an enormous victory in UP by convincing the poor that demonetisation had hurt the rich, by neutralising their black money. In damning irony, the punitive effects of demonetisation is still depressing farm prices, leading to a rash of suicides by debt-ridden farmers. Why are our farmers in such distress despite repeated loan waivers amounting to trillions of rupees. Because 69.4% of farms are less than 1 hectare, so that they do not earn enough to survive and another 17.1% of households earn a surplus of Rs 891 every month which is easily wiped out in a crisis. The poorest borrow from local moneylenders and are not helped by loan waivers. So what is the answer? "The farm crisis is really a jobs crisis in disguise. If the jobs growth problem is handled, the farm crisis will abate steadily." And therein lies the main problem. Number of jobs is not growing, in fact some sectors are shedding workers. Having created the problems fellows have no idea what to do, so they throw taxpayer money and claim credit. Congress or BJP, nothing ever changes.

Can you make anything easy by using force?

"Why care about the 'ease of doing business' (EoDB)?" asks Prof Vivek Dahejia. There is no direct correlation between EoDB and economic growth or a rise in per capita gross domestic product, or GDP. "However, in India and other formerly socialist economies featuring a very large overhang of a meddling and burdensome state, it is safe to take it as a working assumption that up to a certain point, which we are still far away from, what is good for business is good for everyone." Saurabh Ahuja tried to import a $600 3D printer for manufacturing drones in his Delhi workshop, he ended up spending another $900 in taxes and bribes and waited three months for it to clear customs. "If my business grows, the country grows with me. But the government won't let me grow," said Ahuja. No wonder the World Bank ranked India at 130 out of 190 countries in the EoDB. Prof Tyler Cowen wrote that the "Legacy of British rule is still holding India back". Whatever the British did was to increase their power and not to increase living standards of Indians. In Thailand, which avoided colonial rule, per capita income is $16,300, while it is only $6,100 in India. But, the worst legacy of the British is that we still have a colonial form of government - adversarial, distrustful and exploitative, enforcing its diktats through brute force. Demonetization and biometric identity cards, where the entire nation is held culpable for actions of criminals that the state protects, are prime examples. The Goods and Services Tax has over 5 rates and returns must be filed in every state every month, which makes it so complicated that companies will need an army of accountants and lawyers to obey the law. The cost of compliance will have to be added to the selling price for any business to survive. But, the government has armed itself with an 'anti-profiteering weapon' to punish companies for not reducing prices. The government forces citizens to deduct taxes from rent or sale of properties, submit it to the tax department and then provide a tax certificate to the payee, wrote Gautam Nayak. A tenant has to follow rules exactly and penalty for not doing so is Rs 200 per day. This when tax officers and politicians get huge salaries and perks, while taxpayers get nothing from the government. You get shot dead if you protest. At least the British left you alone if you did not revolt. Private sector investment is at a standstill and the economy is surviving on government spending and private consumption. If there is no investment there will be no jobs. Jobs are being lost in almost all sectors. Women are losing out. India is at 120 among 131 nations in the share of women in the workforce. Force can never make anything easy. EoDB is only for professors to write about.

Speed breakers are holding the nation back.

Over 30 people are killed in road accidents caused by potholes everyday in India. The obvious answer would be to build roads with concrete so that they do not break after one shower but potholes are a great source of extra revenue for municipal officials and their contractor friends. So, what is their solution to the problem of potholes? Build speed breakers, or humps, on roads every kilometer or so, to slow down traffic to a crawl. The logic is that if vehicles are hardly moving any accident is unlikely to kill anyone and making these humps also add to the earnings of officials and contractors. Genius. Except that speed breakers are killing around 10 people everyday across India. Last year the High Court in Delhi ordered removal of all illegal speed breakers from the capital. Has it happened? No. Instead, new ones have been constructed where none existed previously. Obviously they are not going to give up such a lucrative source of private revenue. In 2014, a total of 253 million cars and trucks were registered in the US. Last year Americans bought 17.55 million cars and trucks. In 2015, 23.85 million cars were registered in China and the total number of cars reached 172 million. Contrast that with India where the total number of registered cars, jeeps and taxis numbered a paltry 28.6 million in 2015, 5 million higher than the number of new cars sold in China that year. Total number of two-wheelers reached 154.3 million, less than the total number of cars in China. About 78% of our national highways have one or two lanes, so driving is hazardous at the best of times. Add potholes, speed breakers and animals, such as cows and dogs, wandering around and its a wonder that so few people die each day. India's economy maybe growing the fastest in the world but per capita GDP is not growing because of population growth, wrote Prof R Parthasarthy. Which means that wealth in collecting in the top 10% and the divide between rich and poor is widening. Mosquito borne diseases kill people every year during the rainy season. The answer is to clean the drains and construct smooth roads so that water does not collect. But that may not get votes because the poor may see it as pampering the rich. So blame car owners for pollution and legislate enormous parking charges. That pleases the poor while increasing tax collections. Official vehicles will naturally be exempt, so the charges do not affect politicians and senior civil servants. Such politics of jealousy was most dramatically demonstrated by demonetization, which was most harmful for the poor but was wildly popular, because it was seen as punishing the rich. India is a 'do something' nation, wrote R Jagannathan. Unfortunately that something usually makes us miserable.

Will others be able to live with Jio?

" 'Mommy, Ambani broke my business!' Or was it something else Mr Mittal, Mr Birla?" asked Andy Mukherjee sarcastically. He is talking about India's telecom companies which have been hit by the entry of Reliance Jio, which is offering free voice calls with free roaming throughout India with its data package costing Rs 303, less than $5, per month. Why is it a problem? Because, nearly 50% of revenues of telecom operators in India depended on voice calls and messaging. The sudden attack by Reliance Jio on this lucrative source of revenue has hit companies very hard. Partly, it is because of government policy. All resources in India belong to politicians and not to the people. So companies have to pay huge sums of money for spectrum and then have to pay a portion of gross revenue as additional license fees. On top of that we have to pay a service tax, which will go up to 18% under GST, on our phone bills. Business tycoons in India never risk their own money in the companies they control. Instead they borrow from banks. Bharti Airtel has raised 33 times more money from debt than through equity, which means huge interest outgo. Reliance Jio has 6 times more equity than debt, which would allow them defer dividend payments until they make profits. Reliance Communications has already defaulted on its debt payments, its stock price has collapsed by 40% and its junk-rated foreign debt is fetching 70 cents to the dollar. About 20% of loans at public sector banks in India have gone sour. Bad loans at some banks equal 75.53% of their net worth, in some banks bad loans exceed their net worth, wrote T Bandopadhyay. Banks have warned the government of the risk of default on loans to the telecom sector. That is why the government will do anything to stop RCom from going bankrupt, thinks Mukherjee. However, telecom companies are not entirely blameless. The telecom regulator asked companies to make all mobile numbers portable throughout India in 2009, which meant that users would not have to pay roaming charges. Companies were unwilling to give up such a lucrative source of revenue so after a lot of struggle they introduced their own interpretation of the order. People could change from one service provider to another locally but roaming charges were to continue. This is because India was divided into 22 circles and they had to pay for each circle separately. Vodafone and Idea have merged, but, in reality, Vodafone is selling out. In desperation the existing companies are accusing Reliance Jio of predatory pricing and are asking the regulator to fix a base rate for consumer charges. 'Jio' means 'to live'. Will Jio allow other companies to live?