Equally up or down?

"The 10,000 wealthiest individuals of the 92 million Indian adults own an average of 22.6 billion rupees ($271.91 million) in wealth, 16,763 times the country's average, while the top 1% possessing an average of 54 million in wealth," said a study by the World Inequality Lab. "By the end of 2023, India's richest citizens owned 40.1% of the country's wealth, the highest since 1961, and their share of total income was 22.6%, the most since 1922, said the study." DH. "From 1975 to 1995, urban inequality declined slightly to (Gini ratio) 0.390." It rose to 0.455 post-liberalization in 1995-2005. "Between 2005 and 2020, urban inequality peaked at a Gini ratio of 0.532." Post-covid, from 2020-2023 it fell sharply to 0.382, wrote Rajesh Shukla. The sudden reduction in inequality may be because of a fall in earnings of the middle-class along with higher subsidies for the poor. "Once the backbone of domestic consumption, India's middle class which represents 31% of its population, is cutting back sharply on daily and discretionary expenditure." For the FMCG sector, "urban volume growth in the June to September quarters was stagnant at 2.8% versus rural volume growth which improved from 5.2%in the June quarter to 6% in the September quarter." FE. However, "Despite challenges, one segment that continues to grow," are "luxury homes - residential units priced over Rs 30 million." "And after touching new highs in 2023, sales of luxury units have scaled a new peak in 2024, latest data shows." BT. How to reduce inequality? "Let's take cues from Piketty to raise India's tax revenue," wrote Madan Sabnavis. Increase taxes on luxury homes, high-priced hotels and first class air travel. This will presumably reduce wealth of the rich and provide more money to the government to distribute handouts. This is the old Communist slogan, "From each according to his ability, to each according to his needs," propounded by Karl Marx. wikipedia. By now it should be obvious that communism was a total failure and the rich have the choice of buying real estate abroad. Already, "Property developers in Dubai are receiving an increasing number of inquiries from residents of Tier 2 and Tier 3 India cities as apartment and villa prices in Delhi and Mumbai literally shoot through the roof." ET. How to increase national wealth? "India's geology is like resource-rich nations like Canada, South Africa and Australia." But, "50% of India's imports are on account of natural resources: oil, gold, diamonds, minerals and metals." The government should provide subsidies like the Production Linked Incentive (PLI) schemes (wikipedia) for manufacturing for resources, wrote Dhiraj Nayyar. In the US, individuals owning a piece of land are entitled to mineral rights underneath the surface of the land. Investopedia. Individuals and corporations can register mining claims in the United States as resources are privately owned. blm.gov. There is a long list of names of those who have become billionaires from oil and gas in the US. Forbes. In the US, national wealth is owned by the people, creating billionaires, in India everything is owned by the government which distributes handouts, creating beggars. The US is the richest country in the world while India is a failed middle income country (Rathin Roy). End of story. 

Rupee drowning in deluge of words.

India's "merchandise exports fell by nearly 1% to $38.01 billion in December 2024 while imports rose by 4.8% to $59.95 billion." Trade deficit fell to $21.94 billion from $32.84 billion in November. "Gold import bill for November 2024, which was reported at $14.8 billion, has been lowered to $9.8 billion. This is the sharpest ever correction in gold import data." DH. $4 billion would have bought just short of 52 tonnes of gold. calculateme. That is an enormous amount of gold. So was it an honest mistake, or...? The Reserve Bank of India (RBI) bought 8 tonnes of gold in November and a total of 73 tonnes in 2024, raising its gold holdings to 876 tonnes. ET. With a mark down of 52 tonnes of gold, it is no surprise that the rupee is feeling the chill. "The rupee weakened to its all-time low on 14 Jan, hitting a record low of 86.6475 before closing at 86.63 against the US dollar, down from its close at 86.5750 in the previous session." "The main reason behind a weakening rupee is strengthening of the US dollar amid improved macroeconomic scenario in the US." ET. "The government, in the forthcoming Budget, could consider levying higher tariffs on imports to check the significant decline in rupee value witnessed in the past three months, said EY Chief Policy Adviser DK Srivastava." As "higher import duties would curb the demand for dollars by importers," presumably by reduction of demand due to higher prices. ET. How much would higher import prices add to inflation? For instance, India "has registered a growth of 4.12% in overall imports of bulk drugs and intermediaries at Rs 377.22 billion during the fiscal year 2023-24, as compared to Rs 362.29 billion in the previous fiscal year." pharmabiz.com. People must buy medicines regardless of cost and imported components are used in manufacturing of many things. The average annual consumer price (CPI) inflation in India from 2014-2024 has been around 5% (RI) compared to an average annual inflation rate of around 2.5% in the US over the same period (US Inflation Calculator). Because inflation compounds over time, an article costing 1000 units of currency in 2014 would cost 1,710.34 in India but just 1,312.09 in the US in 2024 (investor.gov). Thus, the purchasing power of the rupee falls against the dollar over time. The rupee must depreciate to reflect that. Bond prices fell and yields rose in global bond markets in anticipation of higher inflation. "The US Treasury yields have shot up to 4.8% this January," and "India's 10-year bond yield has climbed to 6.9%," as foreign institutional investors (FIIs) sought higher returns in the safety of the dollar. India Today. When the RBI is unable to sell government bonds because dealers reject yields as too low they devolve on the underwriters. RBI auctions devolved eight times in 2022-23 but not even once in 2023-24 because of their inclusion in the Morgan Stanley Government Bond Index. FE. This year foreign fund flows will be lower. BS. Foreign investors are not interested in buying sovereign green bonds from Gujarat's Gift City because they are denominated in rupees. They want the bonds in dollars. Mint. The rupee has collapsed from 62 to the dollar in 2014, when Mr Modi first came to power (Bankbazar) to around 86.48 to one dollar this morning (xe.com). Mr Modi promised to strengthen the rupee mocked social media (Indiatimes.com). But then, when you spout jumla nonstop it comes back to bite you. Deluge of words to drown our brains. No respite. 

Inversely related.

"The Indian Economy is set to face challenges in 2025, with the International Monetary Fund (IMF) forecasting a slightly weaker performance despite steady growth." FE. Public sector bank, "The State Bank of India (SBI) sees India's GDP growth in FY25 to be 6.3% with a 'downward bias' due to several challenges affecting economic growth." ET. "India's economy needs a readjustment, and not just in fiscal and monetary policies." "As the finance minister readies to present her annual budget next month, she would hopefully no longer rely on a giant leap by companies." "The last time India faced a growth slump just before the pandemic - in 2019 - the government responded with a surprise reduction in the corporate tax rate." Didn't work. So, "It's the 1.4 billion consumers who need the government to stand next to them and say, 'Yes,you can do it'," wrote Andy Mukherjee. "India's gross domestic product (GDP) growth in 2029-20 revised to 4% from 4.2% estimated earlier," as "Nominal GDP grew by 7.8% compared with a provisional estimate of 7.2%." MInt. Companies have taken advantage of the cut in their tax rate to increase their profits. "Corporate profits have grown four times in the last four years, but real wages haven't grown, according to a report." "Private consumption is the biggest driver of the Indian economy, accounting for 60% of the country's GDP. What drives consumption is money in the hands of people." India Today. "Ahead of the upcoming Union Budget presentation, finance experts and industry leaders are voicing their expectations, urging the government to address India's high taxation structure, which they say is hurting the middle-class and causing a decline in consumption." BT. Instead the government is squeezing ever higher taxes out of taxpayers. "Only 6.68% of India's population filed income tax returns in 2023-24 fiscal," which means a total of 80.9 million in absolute terms. In 2022-23, a total of 74 million returns were filed of which 49.0 reported zero taxable income. ET. That means that only 25 million out of a total of 1,456 million (worldo-meter) paid any income tax. Yet, despite this minuscule number of actual taxpayers, "Net direct tax collection increased 15.88% year-on-year to about Rs 16.90 trillion till January 12 in this financial year (April-March)," of which personal income tax contributed Rs 8.74 trillion compared to corporate tax of Rs 7.68 trillion. ET. The government sets tax collections targets on officials. "The government will exceed the Rs 22.07 trillion direct tax target for the current fiscal, Central Board of Direct Taxes (CBDT) chairman Ravi Agarwal said." BS. Not satisfied with that, "The government is making a concerted effort to recover direct and indirect tax arrears amounting to over Rs 46.57 trillion." HT. True or fake, no one knows. Dividends for resident shareholders are taxed at nearly 50%. ET. Will the budget actually reduce our tax burdens. Not a chance. Instead, Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal have called for a cut in interest rates (India Today), even though consumer price index (CPI) inflation came down to 5.22% in December from 5.48% in November  (ET). Cannot consume if we have to pay sky-high prices after paying sky-high taxes. The GDP can go only one way. Down.

A different TINA.

"India's economic growth story has been impressive. Gross domestic product (GDP) is expanding, corporate profits are looking up and the country is asserting itself as a global economic powerhouse. But beneath the headline-grabbing figures lies a troubling reality: stagnant wages, biting inflation, insufficient jobs and growing inequality," wrote Ravi Venkatesan. He suggests that the government should increase minimum wage levels and company bosses should pay higher wages to their workers. In 1913, Henry Ford doubled wages of his employees from $2.50 a day to $5 per day and shortened the workday from 9 hours to 8.This allowed him to operate 3 shifts instead of two, increased productivity by 40%, so that "By 1919, a Model T car that sold for $800 in 1910 cost on $350. inc.com. India does not do such silly things. Instead, salaries of CEOs in the IT sector are now 500-1000 times the median wages of workers. TOI. The main reason for low wages is the law of supply and demand. India needs to create 90 to 115 million jobs to keep its economy growing. Manufacturing creates jobs but "India's manufacturing represents only 13% of GDP, compared to a quarter of GDP in Vietnam or over a quarter of GDP in China." "Less than half of the 950 million working-age population is actually employed, compared to 70% in other emerging markets." And, only 51.25% of college graduates are employable. hbr.org. If wages are stagnant and only half the population is working, consumption will be reduced and there will be no incentive for the private sector to invest in new capacity and job creation will remain subdued. Real GDP, or GDP at constant prices, grew at 7.7% in the first half (H1) of FY 2023-24 (April-September), while private final consumption expenditure grew at 4.5% in H1 of FY 2023-24 compared 13.6% in H1 of 2022-23 and gross fixed capital formation, which is a measure of investment, grew at 9.5% in H1 of 2023-24 compared to 14.7% in H1 of 2022-23. dea.gov.in. Thus, while the GDP growth was high, consumption and investment were slowing down. "According to central bank data, financial liabilities of households - borrowings - stood at Rs 77 trillion in June 2021, a year into the covid-19 crisis, and in the midst of a wrenching 'second wave'. As of March 2024, this had risen 56% to Rs 120 trillion. HT. Naturally, inequality is stark and increasing. "According to Oxfam's 2023 report, the top 1% of India's population controls over 40% of the nation's wealth, while the bottom half owns just 3%," wrote Navanita Varadpande. Faced with high unemployment and low wages, the government taxes the hell out of the middle class. "Personal income taxes, paid by less than 5% of the total population, pulled 19% of almost Rs 45 trillion total budget burden in 2023-24, or just over 30% of the total tax revenue and over half the direct taxes collected." "There is no alternative for middle India," wrote an angry Monica Halan. There is no alternative (TINA) was a slogan used by Margaret Thatcher. Investopedia. We have a different TINA. Much worse. 

A class action for us.

"Firefighters are in a critical stage of their six-day battle against deadly Los Angeles wildfires." "More than 105,000 residents are still under evacuation orders." "Authorities have confirmed at least 24 deaths, with 16 from the Eaton fire, eight in Palisades, but say it's not yet safe to assess the true total." "Questions over LA's preparedness for the firestorm have led to political finger-pointing even as the emergency response continues." CNN. Twenty-four deaths are nothing in India. Over 30 people were shot dead in Chandigarh in August 2017 when followers of Ram Rahim rioted after he was convicted of rape and murder. BBC. More recently, in July 2024, at least 121 people were killed in a stampede "at a satsang (a Hindu religious event) in Hathras District in Uttar Pradesh". BBC. "Helping drive the wildfires in the US city of Los Angeles are the so-called Santa Ana winds," (Barron's) which, "occasionally referred to as the devil winds, are strong extremely dry katabatic winds that originate inland and affect coastal Southern California and northern Baja California, (wikipedia)" California used to be a part of Mexico (wikipedia) and was forcibly grabbed by the US in 1845 by defeating forces under Antonio Lopez de Santa Ana, soldier and occasional president of Mexico (Britannica). Maybe Santa Ana is taking revenge, helped by California Governor Gavin Newsom (D) who "is foundering, blundering on facts and bumbling to avoid blame," wrote Seema Sirohi. Newsom ignored Donald Trump's warnings - in his first term - "on better water management and wildfire mitigation by cutting down dead trees and undergrowth." Instead he filed 122 lawsuits against Trump, which would have cost millions of dollars, and has earmarked a $25 million fund to block Trump's policies this time round. LA Mayor Karen Bass (D) was on a junket in Ghana ignoring the catastrophe. While Newsom and Bass are destroying California, Democrat President Joe Biden's vindictive orders to obstruct Trump in the dying days of his administration are causing problems for all of us. Biden "has announced sweeping sanctions targeting Russia's oil sector. This is a mischievous move to help the oil and defence lobbies in the US just days before Donald Trump re-enters the White House." FE. Already Brent crude has jumped to over $80 to $81.26 per barrel this morning. oilprice.com. In an effort to block peace in Ukraine, Biden "has allowed the first use of long-range missiles by Ukraine to intensify its strikes on Russia." TOI. In a sweeping pardon, a shameless Biden issued a presidential pardon for his criminal son Hunter Biden of all crimes against the United States. BBC. Indians will not forget or forgive the disorganized precipitous flight of US forces from Afghanistan leaving behind $7 billion worth of arms which have been used by terrorists in Kashmir. Because of Biden. NBC. Biden, Newsom, Bass, a trio of small-minded, self-serving, shameless, unprincipled rogues oblivious to deaths and misery. Perhaps, the people of California could file a class action lawsuit (wikipedia) against Newsom, Bass and the Democrats for compensation and damages. Make them pay. A little pleasure for us.   

Schemes and taxes.

In the Union Budget 2023-24, "Of the Rs 45 trillion total expenditure, Rs 10 trillion was allocated for capital expenditure, primarily for infrastructure, representing a 33% increase from the previous year." In contrast, healthcare got Rs 891.55 billion and education got Rs 1.12 trillion. Investment in infrastructure creates jobs immediately and is a great opportunity for photo ops which are useful for winning elections. But, "A population that is undernourished, poorly educated and unhealthy cannot fully harness the benefits of advanced highways or industrial parks," wrote Rajeshwari UR. That is not entirely true. While direct spending on education and healthcare may not look much, the Central and state governments provide a plethora of subsidies in direct cash transfers and in kind. The Centre's subsidy bill peaked at Rs 7.58 trillion (3.8% of GDP) but is expected to be lower at Rs 4.28 trillion this year. TIE. The Central government lists 320 Direct Benefit Transfer Schemes (DBT) from 54 ministries. dbtbharat.gov.in. As for the states, "The Economic Survey of 2022-23 had pointed out that as of December 2022 there were more than 2,000 such schemes run by state governments." Through DBT, "India is moving towards a universal basic income," wrote Vivek Kaul. The government finances these handouts through taxes and borrowing. In this year's Budget "the gross and net market borrowings during 2024-25 are estimated at Rs 14.01 trillion and Rs 11.63 trillion respectively." pib.gov.in. All this borrowing adds to government debt. The government's internal debt from market borrowing was Rs 163 trillion on 31 March 2024 and is projected to increase to nearly Rs 176 trillion on 31 March 2025. inidabudget.gov.in. The government can reduce its debt load by collecting taxes and by generating inflation. High inflation increases goods and services tax (GST) collections and direct taxes as workers demand higher wages. Also the value of debt falls. Economics Help. The Reserve Bank has been helping the government by tolerating consumer price (CPI) inflation at around 6%. RI. The government is constantly seeking to increase the tax load on citizens. Inflation indexation on capital gains from the sale of equities and properties was removed the Budget. ET. The Budget aimed to collect net tax receipts of Rs 25.83 trillion, thus setting a target for the tax officials. To meet their targets, officials resort to excessive demands and to harassment and bullying. No wonder Indians are groaning under the violence of tax terrorism. ET. "The government is making a concerted effort to recover direct and indirect tax arrears amounting to over Rs 46.57 trillion. HT. Whether these are genuine or an attempt to extract money under pressure is not known. While taxpayers are treated with contempt, Prime Minister Narendra Modi's government has written off Rs 16.11 trillion in unpaid bank loans in the last 10 years, wrote Jawhar Sircar. Cronies all? Those who can, escape. Around 4,300 millionaires were expected to leave India in 2024, less than 5,100 that left in 2023. Mint. Thousands of schemes and taxes by terrorism. By a scheming government.      

A partial RBI.

On 20 December 2024, "The rupee breached the 85 level for the first time...as the dollar gained ground against most currencies in the wake of the US Federal Reserve indicating that there would be fewer rate cuts in the future than expected." "According to Reuters data, the rupee's drop to 85 from 84 has taken place in about two months, while the decline to 84 from 83 took nearly 14 months." TOI. It has taken just 20 days from 20 December to 10 January for the rupee to find the 86 level as The rupee closed at 85.97 against the dollar yesterday, and "There were reports that the rupee crossed the 86 level in the non-deliverable forward (NDF) market." TIE. "India's foreign exchange reserves fell for the fifth consecutive week to a 10-month low of $634.59 billion as of Jan 3," as "The reserves declined by $5.7 billion in the reported week." "Reserves have fallen by about $70 billion from their all-time high of $704.89 billion in late September." Reuters. The Reserve Bank (RBI) sold dollars to slow the fall from becoming precipitous. As the RBI sells dollars it depletes the supply of rupees in the market. As a result, "Indian lenders have asked the central bank to infuse durable liquidity into the banking system," as "The tightness in liquidity, if sustained, is likely to keep borrowing rates of banks high, potentially impacting lending rates at a time when India's economy is cooling down." "Banking system liquidity has moved into deficit since mid-December, with the daily average deficit at around 1.5 trillion rupees ($17.47 billion) over the last five weeks." Reuters. So, yesterday the RBI "conducted its largest variable repo rate (VRR) auction in nearly a year with a notified amount of Rs 2.25 trillion. Cash-starved banks submitted bids totaling Rs 2.77 trillion, prompting a second VRR auction of Rs 500 billion." FE. The RBI resorts to VRR for short term lending to banks against collateral. This lowers borrowing costs for banks and, in turn, for the economy, wrote Govind Gurnani. These financial contortions are necessitated by the Impossible Trilemma which says that a central bank cannot have a fixed currency exchange rate, allow free flow of currency and also control monetary policy (Investopedia). The RBI tries to partially control each arm of the Trilemma. It forbids Capital Account Convertibility, which would allow Indians to buy or sell any amount of foreign financial assets. As of 2024, the rupee is not capital account convertible. Investopedia. However, Current Account Convertibility is allowed, which means the rupee can be converted to other currencies and vice versa for the purpose of international trade in goods and services. Medium. The RBI only partially follows its mandate to keep consumer price (CPI) inflation at 4% (ET), by holding its interest rate at 4% for 24 months from May 2020 to May 2022 (cleartax) while CPI inflation ran uncontrolled at over 6% (RI) in a partially futile effort to stimulate growth. And partially controls the exchange rate of the currency as it buys or sells dollars to keep the rupee depreciating slowly against the dollar. Why does the RBI exercise its authority only partially? Because, "Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the government of India." rbi.org,in. Hence, it just obeys orders. Yes Massa.