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.     

Consumption, not calculations.

"India's GDP is projected to grow 6.4% in 2024-25, down from 8.2% in 2023-24, due to reduced investment, impacting fiscal and monetary policies ahead." HT. In January 2021, "India's gross domestic product (GDP) growth in 2019-20 revised to 4% from 4.2% estimated earlier," while "Nominal GDP grew by 7.8% compared with the provisional estimate of 7.2%." Mint. So, in 2019-20, the nominal GDP was revised upwards while the real GDP was revised downwards, meaning the GDP deflator (Investopedia) was increased to compensate for high inflation. As recently as in October 2024, the Reserve Bank of India (RBI) projected GDP growth at 7.2% and headline inflation at 4.5%. BS. The State Bank of India, a public sector bank, is now projecting growth rate at 6.3% with a downward bias. TNIE. The Household Consumption Expenditure Survey (HCES) released in February 2024 showed that, "Indians are spending less on food, particularly staples like rice and wheat, and more on discretionary items such as processed food, as well as durables like televisions and fridges, government data showed." Reuters. Since the low GDP growth is because of inflation and food and beverages contribute over 50% to the consumer price index (CPI) basket (pib.gov.in), "The government is reportedly considering reducing the the weight of food items in the CPI basket to address inflation concerns (BS) in view of the changing consumption habits of Indians. What if changing the consumption basket actually shows an increase in CPI inflation rate? While fresh vegetables and unpacked food grains are not taxed, processed food and fruits carry a goods and services tax (GST) at 12%, ice cream and pasta at 18% and consumer durables such as AC and fridge at 28%. cleartax. GST on bakery items such as cakes and cookies is at 18%. My GST. Pizza eaten in a restaurant is taxed at 5% while one delivered to the customer's home is taxed at 18%. cleartax. "The traditional nutritious home-cooked meals in Indian households are increasingly being replaced by processed and packaged food items." "According to the HCES, the monthly per capita expenditure on beverages and processed food has risen from 8.98% and 7.9% (2011-12) to 11.09% and 9.84% (2022-23) in urban and rural areas, respectively." DH. If people ease their hunger with anything legally edible, it may be described as food. And, since pre-cooked and packaged foods are much more expensive, often with very high GST added on, the share of food and beverages in CPI inflation could actually increase even if their weightage is reduced. A report by Nuvama says "The income outlook for both rural and urban households remain bleak for FY26," and "rural consumption may increase as it was weak for few years but urban consumption may further slow down." ET. As a result, "Calls for middle-class tax relief have been growing louder." BT. High taxes are hitting consumption and high inflation is bringing the Real GDP lower. Changing the base year may not help. Lowering taxes may send the fiscal deficit shooting skywards. The world is watching.  

Possibilities are bright.

"The crisis facing multilateralism has been years in the making.'' Reforming the UN is critical because, "Historically, the five permanent members of the UN Security Council (the P5) - the United States, Russia, China, France and the United Kingdom - have been reluctant to support meaningful reforms to the multilateral system. These powers built the current world order and have a vested interest in maintaining it," wrote Kanica Rakhra. The US is ranked the richest and the most powerful country in the world, followed by China, Russia, the UK and Germany, with tiny Israel coming in at number 10. "As of November 2024, India ranks 12th on the list of most powerful countries." Forbes. Naturally, what the US President says has a lot of weight. Although Donald Trump will not be sworn in till the 20th of January (NDTV), he has been "sending shock waves around the world (DH). Donald Trump has said "his administration will focus on ending the Russia-Ukraine war, as he lamented the killing of people in the conflict." ET. Ending the Ukraine war should be relatively easier as all President Putin wants is that Ukraine should not join NATO. Trump said "he sympathized with the Russian position that Ukraine should not be part of NATO," and "blamed outgoing Democratic President Joe Biden for allegedly changing the US position on NATO membership for Ukraine." The war in the Middle East will be much more difficult to end. Trump has promised "there would be 'hell to pay' in the Middle East if hostages held in the Gaza Strip were not released prior to his Jan 20 inauguration." "Around half of the 101 foreign and Israeli hostages still held incommunicado in Gaza are believed to be alive." Reuters. This war could also end, mainly because Iran, the supporter and supplier of Hamas, has weakened very much. "Iran's economy has already been crippled by a mix of bad management, corruption and existing sanctions." "Iran's currency - a bellwether of economic sentiment - ended 2024 at a record low of 821,500 rials to the dollar, down 40% from where it started the year." Mint. It has fallen from an official rate of 42,000 in 2020 to 767,550 in 2024 in both the grey and the official markets. wikipedia. Exploding pagers and walkie talkies killed at least 32 people and injured thousands of Hezbollah operatives in September (BBC) followed by the killing of Hassan Nasrallah in a heavily fortified bunker located over 60 feet underground in southern Beirut (NDTV) has severely depleted Hezbollah. This frightened Iran so much that Ayatollah Ali Khamenei was moved to a secure location, meaning he is in hiding. Reuters. "In a speech last week, Iran's top general in Syria said the Islamic Republic was 'defeated very badly' by the fall of Syria's Bashar Al Assad." Times of Israel. "I would not be surprised to see the Iranians turn to Russian President Putin to broker an agreement with Trump." "Though it may seem counterintuitive, there is a chance that the region could become more stable in the coming year," wrote Dennis Ross. If there is a change of regime in Iran, Hamas, Hezbollah and Houthis will be rendered highly debilitated, the Persian Gulf and the Red Sea will become peaceful, sanctions on Iran may be lifted, oil will flow and the global economy will boom. Can Trump do it? We hope.  

Tackling the impossible.

"In November 2024, central banks globally added a combined total of 53 tonnes of gold to their reserves," while "the RBI's additional 8 tonnes in November raised its total gold holdings to 876 tonnes. This brings the RBI's year-to-date gold purchases to 73 tonnes, securing its position as the second-largest buyer of gold in 2024, behind Poland." TOI. "Former Reserve Bank of India (RBI) Governor Shaktikanta Das's term was marked by efforts to staunch currency swings, as he sought to impart predictability to foreign investors as well as local exporters and importers." As a result, "the rupee's inflation-adjusted trade competitiveness, or real effective exchange rate (REER), rose to a historic high of 108.14 in November, suggesting an overvaluation of about 8%." ET. The rupee has depreciated from Rs 83.2295 to one dollar on 1 January 2024 to Rs 85.5772 on 31 December 2024. Exchange Rates. One dollar buys Rs 85.83 this morning. xe. com. While the RBI watches the rupee's exchange rate against the dollar, our merchandise trade with China is the highest compared to any other nation. India's goods trade deficit with China rose 13% to $57.83 billion during April-October 2024 compared to $51.12 billion last year. Imports increased to $65.90 billion from $60.01 billion while exports fell to $8.06 billion from $8.89 billion. Mint. No wonder, the rupee tracked the Chinese renminbi which depreciated 3% against the dollar in 2024. CNBC. However, it's the dollar/rupee exchange rate which affects every aspect of the Indian economy, wrote Prof Ajit Ranade. "Whether it is food prices that have an embedded transport fuel or fertilizer cost element, or domestic steel facing import competition, everything is influenced by that rate." "Former chief economic advisor Arvind Subramanian and Josh Felman find that for past three years, the REER has been kept much higher than the average for the previous two decades." This was achieved by the RBI selling dollars. "From February till October 2022, RBI sold or lost a whopping $105 billion of its stock." This achieved two purposes. First, selling dollars at a price higher than its buying cost the RBI made profits which it passed on to the government. In FY 2022-23 the RBI paid Rs 874.16 billion and in 2023-24 it handed over a record Rs 2.11 trillion. Infometrics. By engineering a higher REER the RBI sought to control the cost of imports and thus keep the consumer price index (CPI) from rising too high which would have forced a higher interest rate. Thus the RBI kept interest rates on hold at 4% from May 2020 to May 2022 (bankbazaar) while CPI inflation ranged above 6% (RI) which is the upper limit of CPI inflation allowed by the government (ET). From 15 March 2020 to 16 March 2022, the US Federal Funds rate was 0.00-0.25% (wikipedia), which means that the difference in interest rates between the US and India was a full 4%. From 16 March 2022 the Fed increased its Funds rate to a high of 5.00-5.50% on 26 July 2023 but has lowered it to 4.25-4.50 since 18 December 2024. The RBI too increased its interest rate in tandem with the Fed but by smaller amounts so that it is now at 6.50%, higher by just 2% than the US. "Foreign flows into Indian government bonds are set to decline in 2025, after spiking a record in 2024," as "Overseas investors net bought 1.24 trillion rupees of Indian bonds under the so-called fully accessible in 2024." Reuters. So, what will the RBI do? Keep selling dollars to keep the REER high which will restrain import prices, hurt exports, result in higher trade deficits and give eye-watering payouts to the government? Or will it stop selling dollars which may result in a fall in the rupee, a flight of foreign funds, higher prices of imports and a fall in handouts to the government? All central banks have to face an impossible trilemma (wikipedia) but the RBI may have a quadrilemma. Or even more.     

Too late now.

"Under growing pressure from his own party, Canadian Prime Minister Justin Trudeau has announced he will step down and end his nine-year stretch as a leader." "Trudeau's personal unpopularity with Canadians had become an increasing drag on his party's fortunes in advance of federal elections later this year." BBC. In July, "Rishi Sunak said..he would resign as Prime Minister and Conservative Party leader after losing heavily to Keir Starmer's Labour Party, leaving with an apology, a tribute to Britain, and a call to protect 'kindness, decency and tolerance'." Reuters. In India, no one resigns because politics provides the semi-educated incompetent with luxury and perks (ET) that billionaires would envy and a safe refuge for hundreds accused of serious crimes "including rape, murder, attempt to murder, kidnapping and crimes against women" (BS). Losing an election would result in the loss of undeserved opulence paid for by taxpayers. After resigning as Prime Minister of Britain in 2022, "Boris Johnson has registered an advance payment of nearly 2.5 million pounds (1 pound buys Rs 107.30,xe.com) for speaking events, in his latest declaration of outside earnings. It brings the former prime minister's declared income since leaving office last September to almost 4.8 million pounds." BBC. After paying income tax and national insurance like all citizens, the UK prime minister earns 75,440 pounds (NDTV) so earnings multiply after leaving. India's hatred of Justin Trudeau dates back to his father Pierre who was Prime Minister of Canada from 1968-1979 and again from 1980-1984 (wikipedia). In 1974, Ottawa's experts were outraged when India conducted nuclear tests, suspecting that the Canadian designed and collaboratively constructed CIRUS reactor was used." India was furious after Air India Flight 182 was blown up by a bomb on 23 June 1985 by Khalistanis masterminded by Talwinder Singh Parmar. Pierre Trudeau denied Parmar's extradition request. TOI. However, Indians celebrating Justin Trudeau's departure should remember that there have been two Conservative prime ministers in Canada before him - Brian Mulroney 1984-1993 and Stephen Harper 2006-2015 - but foreign policy did not change. Rishi Sunak's government offered 500 million pounds incentive for India's Tata Motors to set up a 4 billion pound ($5.2) factory to manufacture car batteries. ET. Sunak is a Conservative of Indian origin and a practicing Hindu. wikipedia. Ouch! Et tu, Brute? wikipedia. Trudeau is gone, but Trump is coming. In September, "Prime Minister Narendra Modi, who was on a three-day visit to the United States, returned to India...without meeting former President Donald Trump days after Republican nominee announced a meet at a rally in Michigan. This comes after Republican candidate Trump referred to India as an 'abuser' in terms of import tariffs." TN. Trump is now the President-elect and will remember the snub. And, the US is no Canada. "Nations have no permanent friends and no permanent enemies, only permanent interests, - old British adage." reddit.com. We should have learnt from the Brits. Now it's too late.

Turning Chinese.

"China is now a country where a high-school handyman has a master's degree in physics; a cleaner is qualified in environmental planning; a delivery driver studied philosophy, and a PhD graduate from the prestigious Tsinghua University ends up applying for to work as an auxiliary officer." Youth unemployment figure was 16.1% in November 2024. BBC. In India, "The International Labour Organization estimates 29% of young university graduates were unemployed in 2022. That rate is nearly nine times higher than for those without a diploma, who typically find work in low-service or construction jobs." ET. According to a government report, unemployment has dropped from 6% in 2017-18 to 3.2% in 2022-23." "A separate report form Azim Premji University in Bengaluru published last year, meanwhile, found that more than 40% of college graduates under the age of 25 were unemployed, compared with just 11% in the same group who were literate but had not completed primary school." International Banker. However, a graduate is not necessarily useful. According to a report in December, "the employability among Indian graduates has seen a steady rise, reaching 54.81% as per a recent test." ET. Which means 45% are not fit to be employed. "For the first time in Nov, services exports were provisionally estimated by the commerce ministry at $35.7 billion, higher than merchandise exports of $32.1 billion." Software services contributed 47% of the total, with a rising share of Global Capability Centers (GCCs), the in-house centers of multinationals. As per Wizmatic, "over 1,500 GCCs employ 3.2m Indians (mostly engineers and scientists), generate revenues of $121 billion, and export $102 billion," wrote Swaminathan SA Aiyar. "India is on track to host 2,100-2,200 GCCs, creating 2.5-28 million jobs by 2030, said a Zinnov-Nasscom India GCC Landscape Report." The Hindu. So, "An American graduate degree continues to be highly sought after by Indian students despite worries about a rising number of them returning home after failing to secure decent jobs," and "Although 65-70% of graduating students secured jobs in 2022, the figure declined to 60% in 2023, with projections for 2024 even more somber at 55%." ET. "The Canadian government officially ended the Student Direct Stream (SDS) visa program on November 8, which had allowed Indian students to fast-track their study permit applications." About 60% of Indian students applied through this route. India Today. In addition, "Indian students studying in Canada have been left reeling after receiving emails from Immigration, Refugees and Citizenship Canada (IRCC) requesting the resubmission of crucial documents, including study permits, visas and educational records such as attendance and mark sheets." TOI. "View: India shouldn't let its data turn Chinese," wrote Mihir Sharma about the economy. ET. Since economic growth creates jobs, rosy growth must create rosy jobs. But, are they rosy? When in doubt, fake it.

Quality starts with the assessor.

"Driven by high growth in exports of 'aircraft, spacecraft and parts' and 'ships, boats and floating structures', Indian engineering exports continued its growth run for the seventh straight month to November 2024." Engineering goods exports grew 13.75% to $8.90 billion in November compared to $7.82 billion in 2023 and from April-November exports stood at $75.47 billion as against $69.32 billion in 2023. ET. "Commerce and Industry Minister Piyush Goyal...said despite global economic uncertainties, India's exports of goods and services are expected to cross USD 800 billion this fiscal, which will be a record." It was $778 billion last year. ET. "From plywood to door hinges and from footwear to furniture, ceiling fans, tyres, copper and steel products, there are over 200 items on which govt agencies have decided to impose QCO (quality control order), which are nothing but standards to ensure that goods are of international quality, both produced locally and abroad." TOI. "QCOs are apparently innocuous demands that imports into India satisfy quality standards. In practice, however, they have become over the past two years an instrument to restrict imports and minimize competition." "This country has had decades of experience with such import restrictions before liberalization," and "The inevitable consequences include inflation, the growth of monopolies, failing small businesses and a collapse in productivity and competitiveness," wrote Mihir Sharma. This is borne out by, "A bunch of top companies is hanging on to almost Rs 1 trillion of free cash that it has yet to find a use for," and an analysis of "the top Sensex 500 companies - with a few exceptions - shows that 66 of these companies collectively held Rs 2.7 trillion in cash and equivalents at the end of FY24," wrote Nehal Chaliawala. The average monthly per capita consumption expenditure in rural areas rose to Rs 4,122 in 2023-24, from Rs 3,773 the previous year. It increased from Rs 6,459 to Rs 6,996 in the urban areas." "Adjusting for inflation, consumption grew at 3.5%, but it should be noted that this was much less than the GDP growth rate of 8.2%." DH. With prices rising inexorably, goods and services tax (GST) collections hit Rs 1.77 trillion in December, 7.3% higher than Rs 1.65 trillion in December 2023. BS. "A pani puri (a street snack) seller from Tamil Nadu has gone viral on social media after receiving a GST notice for online payments of Rs 4 million in 2023-24." Zee News. At Rs 50 for 6 pani puris, it amounts to a sale of 2,000 pani puris every single day for a year. Seems a tad incredible. And if pani puri selling is so lucrative, selling pakodas (HT) should be in billions of rupees. Finance Minister Nirmala Sitharaman has been asking for more investments from the private sector (ET) but private companies will expand capacity only when they see rising consumption and consumption is being eaten up by inflation. Sure, goods must have quality, but the orders have no quality. A case of cart before the horse. Can only go backwards.           

Whose actual control?

Since a sudden, unexpected, brutal attack by Chinese soldiers, killing 20 Indian troops at Galwan Valley in Ladakh on 5 May 2020 (BBC), "The two countries dug themselves into adversarial positions." India's "Regulatory action focused on imports from the mainland," "Chinese investment into India was banned as well. Visas for Chinese citizens to visit India dried up." "Oddly, "India was importing more from China in precisely those sectors - such as electronics - where it also seemed to be improving its own competitiveness, and exporting more to the West." "If these new jobs in electronics exports need India to share supply chains with China, that might be a price worth paying," wrote Mihir Sharma. Last month, a Ministry of Defence statement said, "India and China achieved a broad consensus to restore the ground situation in certain areas along the LAC (Line of Actual Control). Both countries have been holding talks...As a result, a broad consensus was developed on the basis of equal and mutual security." BS. Does it mean that all is sweetness and light between us and China? No chance. At Pangong Tso in eastern Ladakh, "a July report based on satellite images has said that China had completed and operationalised a bridge connecting the north and south banks of the lake," and that "the PLA had constructed underground bunkers for storing weapons and fuel, along with hardened shelters for protecting armored vehicles, at a key base in the area around Pangong Lake, indicating that China was digging in for the long haul in the region." BS. Now, "China has approved the construction of the world's largest dam, stated as the planet's biggest, on the Brahmaputra River in Tibet near the Indian border." It will be an enormous and permanent danger for India "as it not only empowers China to control the river's water flow but also poses the risk of flooding border areas by releasing large volumes of water during potential hostilities." TOI. In the east, "Amid growing diplomatic strain, Bangladesh army chief Waker-Uz-Zaman," said that "ties with India is based on 'give and take'," while China is a "partner". FP. Meanwhile, "The Washington Post continues its series on, what it calls, the shadowy secrets of India's intelligence activities abroad," and writes that the Research and Analysis Wing (R&AW) has deployed "a methodical assassination program to kill at least half a dozen people deep within Pakistan". The Print. "India has categorically dismissed allegations made in a recent Washington Post report that claimed the Maldivian opposition sought $6 million from New Delhi to facilitate a plot to impeach President Mohamed Muizzu." ET. Apparently, "India's foreign policy in 2024 showcased a bold stance, with India asserting its influence not only in its immediate neighborhood but also on the global stage." ET. Foreign policy may seem bold but it seems that dangers are surrounding us from all sides. Perhaps, it's just as well that the picture of the 1971 surrender of Pakistan's army has been replaced with one depicting "Krishna guiding Arjun's chariot" in the office of the Army Chief. India Today. We need divine help. Urgently.    

Just convert to dollars.

"The average Indian's monthly spending increased 9.2% to Rs 4,122 in rural areas and 8.3% to Rs 6,996 in urban regions in 2023-24 compared to the previous year," as "The National Statistics Office's Household Consumption Expenditure Survey (HCES) showed poorer classes increased spending at a faster rate while expenditure by the richest declined even in nominal terms, leading to reduced consumption inequality." Rural India spent 54% on food. HT. One US dollar buys Rs 85.77 this morning. xe.com. Taking a rate of Rs 85.5 to $1, rural India spends $48.21 per month, or $1.61 per day, while urban India spends $81.47 per month, or $2.72 per day. "The last change was in September 2022, when the World Bank adopted $2.15 as the international poverty line using the 2017 PPP." unstats.un.org. "The poverty line is usually calculated by estimating the total cost of one year's worth of necessities for the average adult." By this metric, the poverty line for a lower-middle income country like India is $3.65 per day in PPP. wikipedia. So, according to the government's own figures, average Indians in both rural and urban areas are living in abject poverty. "The expenditure on social services has increased from 6.7% of GDP in 2017-18 to 7.8% of GDP in 2023-24." As a result 135 million Indians are estimated to have escaped from multidimensional poverty and the National Multidimensional Poverty Index has nearly halved, according to the Economic Survey 2024. pib.gov.in. Distributing handouts may improve the poverty index but net household financial savings (flow) during 2023-24 "stood at 5.3% of gross domestic product (GDP), up slightly from 5% in 2022-23. In 2019-20, they stood at 8.1%." Income growth has slowed, higher spending on food because of high prices and more loans to pay for consumption resulted in a lower savings rate, wrote Vivek Kaul. "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." FE. The Union government has increased investment spending to stimulate growth, "But fresh private investment continues to remain subdued. These companies are probably waiting for consumption to pick up to a level where the expansion of capacity becomes a necessity." The Union Budget should aim to boost consumption and "The fastest way of doing so is through tax cuts," Kaul. "net direct tax collection grew 16.45% year-on-year to over Rs 15.82 trillion till December 17 this fiscal," which "includes corporate tax of over Rs 7.42 trillion and and non-corporate tax mop-up of Rs 7.97 trillion." BS. Individuals are paying more income tax than the corporate sector. "The net goods and services tax (GST) collection grew marginally by 3.3% year-on-year to Rs 1.54 trillion in December," while the gross GST collections rose by 7.3% to Rs 1.76 trillion. BS. Consumers pay the gross collection while companies get the refunds. They can't reduce taxes because handouts are essential to maintain the fiction of falling poverty rates. Just convert to dollars. And every average Indian becomes poor.

No danger to the community.

"At least 15 people were killed and dozens injured when a driver rammed a pickup truck into a crowd during New Year's celebrations on Bourbon Street in New Orleans early Wednesday morning. Authorities have identified the suspect as Shamsud-Din Jabbar, 42, of Texas who is an army veteran." CNN. "Federal officials and local law enforcement in New Orleans said that Jabbar did not act alone and that they are looking for accomplices. The FBI said Jabbar had an Islamic State flag on his truck and view the attack as a potential act of terrorism." Reuters. "Weapons and potential IED were located in the subject's vehicle. Other potential IEDs were also located in the French Quarter." FBI. "A Tesla Cybertruck that exploded outside the Trump Towers in Las Vegas early Wednesday, killing one person in the vehicle, is being investigated, as a possible act of terrorism." Sheriff Kevin McMahill said, "gasoline canisters, camp fuel canisters and large firework mortars were found in the back of the vehicle after the explosion, which occurred 15 seconds after the vehicle pulled in front of the building. It's still unclear how the explosives were ignited." CBS. However, not just the Islamic State, it seems that the US is a storehouse of loonies determined to blow themselves up and take as many unsuspecting people as they can with them. "The FBI says it has discovered more than 150 bombs during a raid on a farm in Virginia - thought to be the largest such cache seized by the law-enforcement agency in its history. Brad Spafford was arrested on 17 December in Isle of Wight County." "Mr Spafford had allegedly used photos of US President Joe Biden for target practice and expressed hope that Vice-President Kamala Harris would be assassinated." But, "A lawyer for Mr Spafford denied he is a danger to the community and is seeking his client's release from pre-trial detention." BBC. Spafford lost three fingers of his right hand in 2021 while making a bomb. Either the lawyer is equally bonkers as his client or bomb making is a normal hobby in the US and so not considered "a danger to the community". Is bomb-making now taken as a corollary to the Second Amendment which states that "A well regulated Militia" will "keep and bear arms" (US Constitution)? Over time "A well regulated Militia" has come to mean an individual has a right to possess an arsenal of deadly weapons. "There are approximately 398.5 million arms in the US,"  (Consumer Shield) for a total population of just over 346 million (Worldometer). "The US recorded 491 mass shootings as of Dec 18 - the lowest since 2019." This is 25% less than in 2023 which saw 656 mass shootings, the second highest since Gun Violence Archive began tracking mass shootings. Forbes. Motor vehicles are legal, guns are a right and bombs no danger to the community. Who would want to go to such a place? Between 1 October 2023 and 30 September 2024, 90,415 Indians, at an average of 10 Indians per hour, were arrested for trying to enter the US illegally through Canada and Mexico borders. DH. Perhaps, a greater danger to the community.