Just take the top 10%.

In India and the US, "the top 10% of the consumers are holding up consumption," while "the others are pinching pennies, two different reports have argued." During Covid, "the revival of the Indian economy was achieved through aggressive government spending, it doubled the fiscal deficit between FY20 and FY21, eventually in a rise in money supply." This, along with surging personal credit, pushed inflation up. In the US, "the top 10% consumers now account for 49.7% of all spending," while others are cutting their spending because of inflation. ET. However, the economic impact of Covid was handled in diametrically opposite ways by India and the US. In India, the Rs 20 trillion stimulus was mainly in the form of loans and economists calculated that the actual cash outgo of the government was only Rs 2 trillion or 1% of our Rs 211 trillion GDP. DH. The Reserve Bank of India (RBI) allowed consumer price index (CPI) inflation to run at over 6% (RI) by keeping its policy rate unchanged at 4% for 24 months from 22 May 2020 (BT) till 4 May 2022, when it hiked the interest rate by 40 basis points in an emergency meeting (ET). The US government transferred a total of $814 billion directly to households in three rounds, in March 2020, in December 2020 and in March 2021. Pandemic Oversight. Annual CPI inflation rose to 3% in January from 2.9% in December (CNBC) while the personal consumption index (PCE) rose by 2.5% and the core PCE, excluding food and energy, was at 2.6% annually, down from 2.9% in December (CNBC). The year-on-year CPI inflation in India came in at 4.31% (provisional) in January 2025. pib.gov.in. The RBI's Inflation Expectations Survey of Households (IESH) in September 2024 showed that 74.4% of households expected inflation to remain the same or rise over three months, causing the middle class, earning Rs 50-100,000 per month, to cut expenses or switch to cheaper alternatives, wrote Deepa Vasudevan. Indian consumers have been borrowing to finance their spending, so that total borrowing of households has increased 56% to Rs 120 trillion by March 2024 from Rs 77 trillion in June 2021, from 41% of GDP to 42.9% of GDP. Rising interest payments and rising prices have subdued consumer spending. Mint. "India's fiscal deficit for the first 10 months of this fiscal year through January stood at Rs 11.70 trillion, or 74.5% of annual estimates," compared to 63.6% a year earlier. ET. To deal with the internal and external economic challenges, retired IAS officer Mr Shaktikanta Das has been appointed the second Principal Secretary to Prime Minister Narendra Modi. India Today. Mr Das was the Governor of the RBI from 12 December 2018 to 11 December 2024 (wikipedia) and helped the government during Covid by tolerating CPI inflation in excess of 6%. He was appointed shortly after the disastrous demonetisation of Rs 1000 and Rs 500 banknotes on 8 November 2018 which turned out to be "a failure of epic proportions" (BBC). Right man for the job. When India and the US are so similar.     

Obesity is also malnutrition.

"According to online forum Global Obesity Observatory, the economic impact of obesity in India in 2019 was estimated to be $28.95 billion (Rs 2.4 trillion), equivalent to around Rs 1,800 per capita and 1.02% of GDP." By 2030, that is projected to grow to $81.53 billion (Rs 6.7 trillion at today's exchange rate), Rs 4,700 per capita and 1.57% of GDP. In another 30 years, it could rise to $838.6 billion (Rs 69.6 trillion), Rs 44,200 per capita and 2.5% of GDP. TOI. India's per capita GDP was Rs 98,374 at constant prices in 2022- 2023 (pib.gov. in), having grown from Rs 86,668 in 2017-2018 (mospi.gov.in). Unless per capita GDP rises to millions, Indians will not be able to afford food and will lose weight automatically. The Economic Survey 2023-24 quoted figures from the National Family Health Survey 5 (NFHS-5) which reported that obesity in men aged 18-69 has increased to 22.9% from 18.9% in NFHS-4, and for women it has increased to 24.0% from 20.6% in the same period. ET. According to the NFHS 2019-21, 87% of men and 75% of women in India in 15-49 age group reported eating meat, fish or eggs. It was at least 40% across all major religious groups. HT. As people become more affluent they tend to eat more meat. "Richer people tend to have more diverse diets. They get a lower share of their calories from staples such as cereals, roots, and tubers and increase their consumption of fruit, vegetables, dairy and meat." Our World in Data. While over 20% of Indians have become obese, the Household Consumption Expenditure Survey 2022-23 reported that only "56% of the population had three meals a day while 43% had just two". HT. "Around 17% of children in the age group of 0-5 years are underweight, while 36% are stunted and 6% are wasted, the Women and Child Development Ministry said on 26 July 2024." The Hindu. Prime Minister Narendra Modi declared that 813.5 million people will be provided with free food grains for five years starting on 1 January 2024 at a cost of Rs 11.80 trillion over the 5-year period. pib.gov.in. A diet mainly consisting of cereals, but lacking in fruits, meat, fish and eggs, may provide enough calories but not enough nutrients for proper growth of children. Gluten is the main protein contained in wheat (Science Direct) and may cause an autoimmune reaction resulting in celiac disease in susceptible people. This may cause chronic diarrhea, weight loss and anemia. Mayo Clinic. "Purses such as lentils, chickpeas, black beans, and peas all provide a plant-based source of protein. Pulses typically contain 21-25% protein (dry weight) - almost double that found in cereals." eufic. It is more lucrative for farmers to grow cereals because state governments subsidise water and electricity, the Food Corporation of India buys cereals at a Minimum Support Price, which sets a floor under prices, and output per hectare in much more for cereals than for pulses, wrote Madan Sabnavis. How to tackle obesity along with under undernutrition. After all, obesity is also a form of malnutrition. Can't stop people eating.        

English essential.

"Citing 'inadequate' English language proficiency as a major factor affecting employability among youth graduating from public universities, the NITI Aayog has recommended these institutions collaborate with international language organisations to offer English and foreign language proficiency programs, with examples of success in Punjab and Karnataka." The Print. Not totally correct. Indian students going to Canadian or US universities have to pass the International English Language Testing System (IELTS) exam. "In Punjab, a whole economy has formed to tutor students," and "If you go to any major town in the state, you will see a street full of IELTS centers." "A year ago, there were 11,000 registered IELTS centers in Punjab." But with Canada and the US imposing restrictions, "Only 6,000 of them survive today," wrote Kudrat Wadhwa. Knowledge of English is also necessary for Indians migrating illegally to the US and Canada. The Pew Research Center estimated 700,000 undocumented Indians living in the US in 2022, but "The official government data from the Department of Homeland Securities (DHS)...reporting 220,000 unauthorized Indians in 2022." BBC. Prime Minister Narendra Modi visited the US on 13 and 14 February, during which he met President Donald Trump, "US Intel Chief Tulsi Gabbard, National Security Advisor Michael Waltz and tech billionaire Elon Musk." NDTV. When Mr Modi "dropped in on Donald Trump,.. there was none of the bear-hugging bonhomie that was on display at the White House Rose Garden in 2017. The hand-clasping bromance of 2019 'Howdy Modi' was also missing. The Indian prime minister came bearing trade concessions on Harley-Davidson bikes and Tesla cars, yet the US president met him wielding a fat stick of tariffs," wrote Andy Mukherjee. Every year top students from engineering and medical institutions leave India "with most of them not returning to India (750,000 in 2022, which went up to 1.33 million in 2024, as per the reply given by the External Affairs Minister in the Lok Sabha)." Also, 7,500 millionaires left India in 2022, 6,500 in 2023 and 4,300 in 2024 because of, "rampant corruption, poor state of urban infrastructure, high level of crime, traffic jams etc." DH. As per the 2024 Corruption Perceptions Index (CPI) released by Transparency International, India has dropped to 96 from 93 last year, out of 180 countries and territories, with a score of 38 out 100. HT. In 2024, India imposed 84 internet shutdowns, the highest among democratic countries. Pakistan recorded only 21 shutdowns, the highest ever recorded in the country. India Today. From the moment he came to power, Mr Modi "has wielded sloganeering as a tool to shape public perception - leading millions like a modern-day Pied Piper. Every election cycle, every economic crisis, and every governance failure has not with accountability but with a new slogan," such as, "Acche din, sabka saath sabka vikas, Atmanirbhar Bharat, Amrit Kaal and Viksit Bharat." DH. India regularly slams Pakistan as a terrorist state (BS) while visiting terror on its own citizens. We need a new slogan. Something like "NITI Aayog said learn English". For in and out.

Worrying math.

"India is home to 1.4 billion people but around a billion lack money to spend on any discretionary goods and services." "The country's consuming class...is only about as big as Mexico, 130-140 million people, according to a report from Blume Ventures." And, the consuming class "is not 'widening' as much as it is 'deepening'," which means "India's wealthy population is not really growing in numbers, even though those who are already rich are getting even wealthier." BBC. Partly because, "Successful corporate professionals and startup entrepreneurs are on the prowl for a new home - and, preferably, a new passport - somewhere in the West." They are buying into "'invest and migrate' programs in the US, Europe's rich neighborhoods and even the Gulf." ET. "Corporate India is riding a wave of record breaking profits," "with the profit-to-GDP ratio hitting 4.8% (in 2023-24), more than double the 2.1% recorded in FY 23." "But while corporate profits surged by a staggering 22.3%, employment grew by a meager 1.5%, leaving millions of workers out of the prosperity loop." Mint. While southern states like Tamil Nadu and Kerala have per capita incomes close to that of Indonesia, "Uttar Pradesh and Bihar are poorer than Nepal." But even in Tamil Nadu there is gross inequality between the rich and the poor, wrote Rathin Roy. CEO compensation in the IT industry has skyrocketed, with former CEO of Wipro Thierry Delaporte earning 1,702 times and CEO of Infosys Salil Parekh earning 700 times the median remuneration of workers. TOI. To mitigate the distress due to the lack of jobs, the central and state governments have rolled out a slew of welfare schemes. There are 323 Direct Benefit Transfer schemes from 54 ministries of the Central government. dbtbharat.gov.in. In addition, "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," wrote Vivek Kaul. The result of the prolific handouts is that, ""Labor is not willing to move for opportunities...Maybe their local economy is doing well, maybe it is due to various government schemes & DBTs (direct benefit transfers) available to them, but they are not willing to move," CEO of Larsen and Toubro SN Subramanyan said recently". Now President Donald Trump is forcing India to cut tariffs on imports from the US, which is going to be good for the country, according to Niti Aayog CEO BVRSubramnyam. TOI. The problem is that if the government cuts tariffs on imports it will have to cut goods and services tax (GST) on Indian products. The government lost over Rs 1 trillion in revenue in 2020-21 because of the reduction in corporate tax rate in September 2019. ET. Income slabs for personal income tax have been widened in this year's budget. ET. Lower income tax for individuals and companies, huge spending on handouts, lower collections from tariffs and, if GST rates have to be cut as well, where will revenue come from? Expenditure may need to be slashed. That will increase inequality. Worrying. 

The 'T' words.

"S&P Global Ratings...said several Asia-Pacific economies could face higher tariffs under the Trump administration, while India, South Korea and Thailand could be most vulnerable to trade retaliation." However, India and Japan are more domestically oriented economies and this could mitigate some of the effects of US tariffs. ET. Already, "India has reduced its tariff on bourbon whiskey from 150% to 100%" "a day after US President Donald Trump criticised India's 'unfair' tariffs on American goods, particularly in the alcohol sector." HT. That is lightning speed, indeed. Galvanized into action, "Negotiations for free trade agreements with the UK and the European Union (EU) are set to get a big push this week." "The UK is looking at significant cuts in import duties on goods such as whiskey, EVs, lamb meat, chocolate and certain confectionery items." NDTV. Talks with the EU are complicated by non-tariff barriers such as the CBAM. "A Carbon Border Adjustment Mechanism (CBAM) (also known as a Carbon Border Adjustment Tax, or CBAT) is a fee or tariff levied on imported goods based on the greenhouse gases emitted during their production." Brookings. The problem with reducing tariffs on imports is that goods produced in India will become relatively more expensive unless the government reduces taxes on Indian products as well. For instance, "Taxes are the biggest component of the cost of liquor in India." "The total tax burden on liquor can vary from state to state, but it is around 70-80% of the retail price." Zolvit. It means that taxes are 4 times, or 400%, of the total cost of production and retail. Passenger vehicles with up to 1500 cc engines are taxed at 45%, higher than 1500 cc are taxed at 48% and SUVs are taxed at 50%. SIAM. Goods and services tax (GST) is levied on everything Indians use for daily living. GST on products essential for health, such as fruits and umbrellas are taxed at 12%, toothpaste and soap are taxed at 18% while ACs and fridges, essential for survival in the searing summers of India, are taxed at 28%. cleratax.in. "Tariff does not protect any country and India needs to cut tariffs for its own good, irrespective of who tells India to do so, Niti Aayog CEO BVR Subramanyam said recently." TOI. Why now? Customs duties started increasing since the budget of 2018 (FE), apparently to help Prime Minister Narendra Modi's 'Make in India' initiative so as to create manufacturing jobs inside the country (wikipedia). It was supposed to increase the manufacturing sector to 25% of GDP, creating thousands of jobs, but, instead, manufacturing fell from 16.3% of GDP in 2014-15 to 14.3% in 2020-21 and then to 14.1% in 2023-24. "No major economy has grown 8-10% without opening up of market, and India should bring down tariff on industrial goods to 10%, Prof Arvind Panagariya said in January 2021." TOI. Did the Niti Aayog advise Mr Modi that his policy was wrong? "The Aayog's intellectual timidity has made it evade serious policy questions." "Several officials view the Aayog as the Union government's public relations and event management wing than a serious policy think tank," wrote Pramit Bhattacharya." HT. So Mr Subramanyam's sudden enthusiasm for lower tariffs could be a cover up for Mr Modi's timid surrender to Trump's demands. Pure public relations. And to protect the humongous salaries received by an army (niti.gov.in) of event managers? How servile. 

Selling same as outflow.

"In a move aimed at improving liquidity in the banking system, the RBI has said that it will conduct a USD/ INR buy/sell swap auction on Feb 28 to inject Rs 860 billion into the banking system." That means a "$10 billion swap with a three-year tenor." "The Reserve Bank of India's (RBI) outstanding net forward sales of the dollar have surged to $67.93 billion as of 31 December 2024 as the central bank intensified its efforts to stabilize the rupee." These swaps do not affect our foreign exchange reserves for now but will reduce our reserves in future because "the RBI is expected to repurchase the dollars in the forward market on the prescribed dates." TIE. "Despite these efforts, India's banking system faced a liquidity deficit of Rs 1.7 trillion as on Feb 20." On 7 February, the RBI cut its policy rate by 25 basis points (BPS) to 6.25% (Mint) which is expected to reduce borrowing costs for individuals and companies, increasing spending and stimulating growth. India's foreign exchange reserves fell by $2.54 billion to $635.721 billion as on 14 February. Our reserves reached an all-time high of $704.885 billion in September 2024. TOI. That is a fall of over $69.164 billion, which, along with forward sales of $67.93 billion, means the RBI has sold a total of over $137 billion to defend the rupee. When the RBI sells dollars it sucks rupees out of the banking system, forcing banks to increase their lending rates and undoing the intended benefit of interest rate cut. According to members of the Monetary Policy Committee, the reduction in policy rate does not cause an outflow of foreign currency but may cause currency volatility. Mint. But, the RBI is selling dollars to control the so-called volatility which results in a decrease of foreign currency. The result is the same. A 5% fall in the value of the rupee results in a 35 bps rise in inflation, which hurts spending. In 2024, the US Federal Reserve cut its Funds rate by 0.5% in September, 0.25% in November and by 0.25% in December. CBS. In its meeting in January 2025, however, the Fed left its policy rate unchanged at 4.25%-4.5% and signaled fewer cuts this year. CNBC. The dollar fell to $1.12 to one euro as the Fed cut rates in 2024 but has hardened to $1.02 to one euro in January 2025 as the Fed held back. In mid-2024, the yen strengthened against the dollar when the Bank of Japan (BOJ) raised interest rates for the first time in 17 years but the dollar has gained since January. usbank.com. Thus, changes in interest rates affect the values of the dollar, the euro and the yen, but, according to the MPC, the rupee is immune. Even if that were true, there was a reversion in the yen carry trade when the BOJ changed its stance on interest rates. 'Carry trade' is when investors borrow in a currency with low interest rate and invest in markets with higher returns. Investopedia. As a result of the panic in carry trade, India saw a redemption amounting to $437 million in one week in August 2024. BS. Changes in interest rates affect the value of currencies. Selling by RBI is the same as "outflow". So, why are MPC members denying it? Have they been instructed to do so? If so, by whom?  

Unorthodox may work.

"Democracy is under threat around the world," although "Elections are being held, and voters are casting their votes," "But too often, they end up electing politicians who serve only their own interests rather than those of their constituents," wrote Prof Kaushik Basu. Prof Basu is at Cornell University in the US (wikipedia) so he may be hinting at President Donald Trump. Prof Sanjoy Chakravorty is openly contemptuous of Trump. Trump has, "First, a deep antipathy for expert knowledge. Second, blatant racism. Third, a drive for territorial expansion." "But there is another version of state capture of democracies, as shown by Nazis in Germany less than a century ago." "Is this anarchy and arbitrariness of a Caligula or Nero," he asks from the safety of Temple University in the US (temple.edu). Trump called President Volodymyr Zelensky a "dictator" and immediately European leaders said Zelensky had been elected. BBC. Elections were due in Ukraine in March-April 2024, but were not held because Zelensky declared Martial law on 24 February 2022 (wikipedia) and has been ruling by decree since then. Trump officials have held talks with Russian officials to end the war in Ukraine. "Prime Minister Keir Starmer... offered British troops to help guarantee Ukraine's security as part of any peace deal, as he and other European leaders rushed to coordinate a response to Trump's opening of talks with Russia about ending the war in Ukraine." DH. Counting reserve and support staff, the British armed forces have a total of 185,980 personnel (wikipedia) and are no match for Russian forces. Starmer probably thinks that, as a member of NATO, Britain can invoke Article 5 which "commits each member state to consider an armed attack against one member state, in the areas defined by Article 6, to be an armed attack against them all." wikipedia. NATO is nothing without the US, so Starmer intends to precipitate a war between the US and Russia. What a scoundrel! Trump understands that China is the main enemy and that the US cannot confront China and Russia together. "The stakes are high for Xi, who for years has assiduously cultivated both a personal bond with his 'old friend' Putin and his country's relations with Russia." Could this be Trump's 'reverse Nixon'? CNN. "Donald Trump has recently announced his ambitious plans to take control of Gaza and transform it into a 'Riviera'." ET. This plan also means that all Palestinians living in Gaza will be resettled in neighboring Arab countries. Arab states have rejected the idea because no country wants Palestinians. But, "trying to devise an alternative plan have yet to tackle critical issues like who will foot the bill for Gaza's reconstruction - estimated by the UN at more than $50 billion - or how the strip will be governed." ET. Also, "Hamas has proposed a significant development in the ongoing ceasefire negotiations with Israel, offering to release all remaining captives in the Gaza Strip in 'one go'." NDTV. Hamas leaders know that once they lose the human shields provided by the hostages, Israel will come after them with a vengeance. But Arab nations will be worse. Much worse. Trump's unorthodox ways may force enemies to reach a compromise. But, for some unfathomable reason, European leaders want wars to continue. They are trying to stop Trump. Colonial mindset.  

Bad medicine.

"The domestic pharma industry may not be significantly impacted by potential US retaliatory tariffs as most exports to the US include low-cost, price-inelastic generics that remain in constant demand." "Indian pharma exports to the US, valued at $10 billion, mainly include oral formulations," as "India is a major supplier to the US, providing over 45% of its generic medicines, driven by an ageing population and demand for cost-effective healthcare.' TOI. Unfortunately, it's not all good news. "Generic drugs made in India are related to 54% more severe adverse events, including hospitalization, disability and death, compared to the equivalent generic drugs made in the US, a new study has found. The findings were largely driven by 'mature generic drugs' - or those that had been in the market for a long time." "About 93% of generic drugs from emerging economy countries are made in India." ET. Since these drugs have been accepted for a long time, it may have bred complacency, indifference or an attempt to reduce costs by cutting corners. "The Center for Drug Evaluation and Research (CDER), a division of US Food and Drug Administration (FDA), has expressed concern over the quality of drugs manufactured in India, asserting that it found violations at 11% of the facilities it inspected in the country, the highest in any other global region." BS. How shameful! It gets worse. Aveo Pharmaceuticals, based in Mumbai, "is manufacturing unlicensed, highly addictive opioids and exporting them illegally to West Africa where they are driving a major public health crisis in countries like Ghana, Nigeria, and Cote d'Ivoire, BBC Eye investigation has revealed." "On 5 October 2022, the World Health Organisation (WHO) announced that four cough medicines, made by the Haryana-based manufacturer, Maiden Pharma, were suspected to have caused the deaths of 66 children in the West African nation, The Gambia." They were found to contain the highly toxic poison diethylene glycol, wrote Priyanka Pulla. In 2021, injections of Remdesiver were found to cause high fever, rigors and a dramatic drop in blood oxygen levels in patients sick with Covid. "Only the Bihar regulator identified the cause." "Their testing found Cadilla's batch V100167to contain bacterial endotoxins" which can cause "life-threatening septic shock in humans," wrote Pulla. Medicines enter our bodies, as does food. And so, "In the three years leading up to March 2023, Indian authorities tested 43 million food samples. Turns out, one in four did not conform to domestic food safety laws. Of these, one in every six were either 'unsafe' or 'substandard'," wrote Sayantan Bera & Suneera Tandon. Indian companies are equal opportunity killers. Because they are never punished. Probably bribe their way out. And that has caused problems for one. "The US Securities and Exchange Commission has asked Indian authorities for help in its investigation of Adani Group founder Gautam Adani and his nephew over alleged securities fraud and a $265-million bribery scheme." BS. If India helps, Adani may have to go to the US where he may be arrested. If India refuses, the New York court could issue an international arrest warrant for him or even fine the Indian government. Very confusing.         

Economy has no innerwear.

"India is set to become a high-income country by 2047 with a projected GDP of USD 23 trillion to USD 35 trillion, buoyed by the services sector. a report has said. By 2047, the services sector is projected to make up 60% of India's GDP, while manufacturing will account for 32%, both becoming crucial drivers of economic growth." ET. That would be a miracle because, "For the past 15 years, incomes of ordinary Indians - those between the top 15% and 50% of the population - are stagnating. Over 120 mn people between 18 and 35 are neither in education nor looking for employment. The population 'employed' in agriculture is at its highest level, even as the share of manufacturing in GDP is at its lowest level in 30 years." "All of the above are markers of a failed middle-income country," wrote Rathin Roy. "India's dependence on Chinese raw materials for garment manufacturing, particularly in the innerwear segment, is hurting the domestic industry." 'Raw materials' does not mean rare earths which are very expensive to extract (wikipedia), but cotton yarn, spandex, synthetic fibers and elastic. Men's innerwear exports have dropped 24%, from $720 million to $548.28 million, women's innerwear exports have dropped 20.37%, from $627.74 million to $499.86 million, while exports of bras, corsets and suspenders have dropped 35.30%, from $95.14 million to $61.56 million, between FY22 and FY24. Mint. "India is the largest producer of cotton globally, accounts for 23% of total global cotton production." IBEF. "Today, India produces almost all the types of synthetic fibers, be it polyester, viscose, nylon or acrylic and hence we are at an advantage compared to any other nation across the world. Currently, India is the 2nd largest producer of both polyester and viscose globally." Ministry of Textiles. Why are we having to import from China if we are producing all the raw fibers? It means we are unable to produce high quality fabric. "The 2024-25 Economic Survey found that over 53% of graduates and 36% of postgraduates are employed in roles below their educational qualifications." msn.com. "Corporate India is riding a wave of record-breaking profits," and while, "companies are raking in their highest earnings in 15 years, wage growth and jobs are lagging far behind, sparking concern over rising income inequality and its impact on the economy." Mint. However, the construction industry "is expected to grow 11.2% to reach INR 25.31 trillion in 2024," and to continue growing at a compound annual growth rate (CAGR) of 9.6% to INR 36.58 trillion by 2028. BW. Construction is highly dependent on labor, but "L&T chairman says laborers are unwilling to work or relocate for jobs due to availability of welfare schemes and a preference for comfort." "He has noted a similar mindset in white collar professionals too." HT. "India ranked 96 out of 180 countries in the Corruptions Perception Index (CPI) for 2024 as its overall score dropped a point to 38, according to a Transparency International report." "India's rank in 2023 was 93." ET. And hence, "About 10,000 millionaires have left India in the last two years, according to data on millionaire migration from Henley Private Wealth Migration report." ET. Can't make innerwear. Naked underneath.

A chain reaction.

In 2019, "US President Donald Trump and Indian Prime Minister Narendra Modi exchanged warm words of friendship in Texas at a rare mass rally for a foreign leader." "The 'Howdy Modi' event was billed as one of the largest ever receptions of a foreign leader in the US." BBC. This time Mr Modi was hosted at the luxurious Blair House which is an extension of the White House itself. Mint. "Trump admitted that PM Modi is a 'much tougher negotiator' than him following discussions on a possible trade deal and tariffs with India." ET. Trump was simple and direct. He said to Mr Modi, "Here's what we're going to do: reciprocal. Whatever you charge, I'm charging." "He (Modi) goes, 'No, no, I don't like that.' 'No, no, whatever you charge, I'm going to charge.' I'm doing that with every country." ET. In addition, "The White House has posted a controversial video showing undocumented immigrants being shackled and led into a deportation flight from Seattle." NDTV. Three flights from the US carrying undocumented Indians in military aircraft have landed at Amritsar airport this month. DH. Perhaps to reduce costs, the US has tied up with three Central American countries to accept illegal migrants. "Costa Rica has announced that it will accept illegal migrants deported from the United States who are nationals of other countries, following similar agreements by Panama and Guatemala." TNIE. "Nearly 300 people, including Indians, are being held in a hotel in Panama as they wait to be sent back to their home countries after being deported by the US." Mint. These people cannot be allowed to roam free because they will try to sneak back into the US and the home countries must arrange flights to get their citizens home. "In 2023, 41,330 of the 67,391 undocumented Indians in the US, were Gujaratis." "No jobs, declining rural wages, a massively regressive tax system, have ensured an overall sorry state of the economy." The Wire. "A report on Dainik Bhaskar quotes some of the Gujarati families who spoke despite an unofficial order to not speak to the media. The father of a deported person identified as 'Aruna' told the paper on video that they were told not to speak to the media." The Wire.  Canada is also cracking down. Without mentioning Indians, Prime Minister Justin Trudeau said, "We're granting 35% fewer international student permits this year. And, next year, that number's going down by another 10%." BS. "Estimates suggest that around 427,000 Indian students are currently enrolled in Canadian institutions." Most of them are determined to become citizens and stay permanently. "Nearly 20,000 Indian students have not joined their respective colleges or universities after arriving in Canada."  TOI. These students attend coaching classes for the International English Language Testing System (IELTS). But, "1.4-1.5 million students took the IELTS exam in 2023; the number dropped drastically to 200,000-300,000 in 2024. A year ago there were 11,000 registered IELTS centers in Punjab. Only 6,000 survive today," wrote Kudrat Wadhwa. Even more unemployment and pressure to flee. In Australia, "Indian students working for more than the stipulated 48 hours have come under the scanner of the authorities. There have also been reports of visas of some students being cancelled." TOI. The website of the Tamil Weekly Viakatan was blocked when it published a cartoon of Mr Modi with Trump. TNIE. The US put us in chains. Our government gags us. The world laughs at us. 

Times are changing.

"Democratic-led states and civil rights groups filed a slew of lawsuits challenging US President Donald Trump's bid to roll back birthright citizenship...in an early bid by his opponents to block his agenda in court." "More lawsuits by Democratic-led states and advocacy groups challenging other aspects of Trump's agenda are expected." Reuters. "Fourteen US states, including two governors from Trump's Republican Party, have filed a federal lawsuit challenging billionaire Elon Musk's authority as the head of the new Department of Government Efficiency or DOGE, created by Trump for his second term." HT. "But a new court filing from the White House states that the Tesla CEO isn't an employee of DOGE, adding that Musk 'has no actual or formal authority to make government decisions himself'." "Mr Trump has suggested that Musk largely answers to him." CBS. If Musk is not making any decision then the case against him becomes moot. So, "A judge...declined to immediately block Elon Musk's government efficiency department from directing firings of federal workers or accessing databases." Reuters. In the last few days Musk "shared memes elevating decades-old conspiracies about the state of the US government's gold reserve at Fort Knox." Fort Knox holds 147.3 million troy ounces of gold valued at $435 billion. The US holds 8,133 metric tons of gold in its reserves. Forbes. What if Musk finds some discrepancy? If there is less gold than thought, will the US buy gold to make up the deficit? Gold was selling at $2,913.79 an ounce yesterday. "It hit a record high of $2,942,70 last week." ET. If the US buys gold, the price may skyrocket. Will currencies fall as a result? The rupee is trading at 86.89 to one dollar this morning. ET. A weaker rupee will cause prices to rise. Already, "The rupee's relentless decline against the US dollar has intensified chances of imported inflation as well as widening of the current account deficit (CAD)." FE. However, a weaker rupee could help exports but, "Trump's threat to impose reciprocal tariffs from early April is feeding anxiety in India's export sectors from autos to agriculture, with Citi Research analysts estimating potential losses at $7 billion a year." ET. "From April-January 2024-25, India's total exports is estimated at USD 682.59 billion," while "the total imports is estimated at USD 770.06 billion." Trade deficit increased to $222.99 billion. The Statesman. We cannot afford a worsening trade deficit. If, on the other hand, Musk finds more gold than predicted, will the US sell the excess? In that case, the price of gold could plummet, slashing the price of the Reserve Bank of India's gold reserves which stand at 876.1 metric tons (wikipedia). That, in turn, will reduce the overall value of our foreign exchange reserves which stood at $638 billion as of 7 February (ET). In his first term, Trump vowed to "Drain the Swamp" (wikipedia), but may have restrained himself because he had to run for a second term. This time round he has no need to restrain himself and seems to be draining the swamp in earnest. What this will do to markets we don't know. "The Times They Are A-Changing" Bob Dylan 1964. Prescient.   

Comfortable middle class.

"Studies conducted by Lok Foundation with the Center for the Advanced Study of India (CASI), University of Pennsylvania, came up with the surprising finding that about 49% of the respondents self-identified as being middle class," wrote Prof Dipankar Gupta. Literacy levels in slums for both men and women "are higher than the national average". "It is rather curious, but once a man's monthly income exceeds Rs 40,000, there is an uptick in the entry of the woman in the job market." Because, "The household can now employ somebody else to do the crouch and grunt chores." 49% may claim to be middle class but, "In 2021-22, there were 20.9 million...taxpayers. Population estimates for the same year pegged the Indian adult population at 943.5 million...So, taxpayers accounted for only 2.2% of the voting population." TOI. "An analysis of CBDT (Central Board of Direct Taxes) data reveals that of the 79.7 million returns filed in 2022-2023, only 9.882 million had returned income of more than Rs 1 million." "The announcement by Union Finance Minister Nirmala Sitharaman in Budget 2025-2026 to make incomes of up to Rs 1.2 million per annum tax free," will reduce the number of taxpayers to less than 15 million, wrote Subhash C Garg. "The net effect of the $12 billion (Rs 1 trillion approx.) in tax cuts announced in the annual budget will probably be a 10-20 basis points increase in the growth rate in the fiscal year starting April 1, Nikhil Gupta and Tanisha Ladha wrote." "Consumers will likely use part of the tax relief to reduce debt, which has risen sharply to 52% of income now from 35% a decade ago." DH. "The jobless rate for graduates was 29.1%, almost nine times higher than the 3.4% for those who can't read or write, a new ILO report on India's labor market showed." BS. "The Economic Survey 2024-25 suggested that India will also need to create 7.85 million new non-farm jobs annually, achieve 100% literacy, develop the quality of our educational institutions and develop high-quality, future-ready infrastructure at scale and speed." ET. Chairman of Larsen & Tubro (L&T) said recently that "Indian workers, including techies, are hesitant to move for jobs, creating challenges for industry." ET. He also said that "laborers are unwilling to work or relocate for jobs due to the availability of welfare schemes and a preference for comfort." HT. "Rather than promoting them to be a part of the mainstream of the society by contributing to the development of the nation, are we not creating a class of parasites?" asked Justices BR Gavai and AG Masih of the Supreme Court. NDTV. Less than 15 million pay income tax, 29.1% of graduates have no jobs, but monthly income of over Rs 40,000 needed to employ a maid and so 49% are middle class. If laborers are relaxing at home on freebies they are entitled to consider themselves middle class. Just increase the amount of freebies and they will be rich. No other country has thought of becoming rich in this way. Only India. Ingenious.  

Let them land at home.

The first batch of 104 illegal Indian immigrants deported from the US landed at Amritsar airport on 05 February. Of these 33 were from Gujarat and Haryana and 30 were from Punjab. "A video shared by the US Border Patrol showed the migrants being handcuffed and their legs shackled as they were forced to do a shuffled walk which is more commonly associated with hardened criminals." NDTV. Prime Minister Narendra Modi visited the US from 12-14 February (FE) where he was accommodated at "Blair House - a luxurious and historic guest lodging for the dignitaries visiting the White House" (TOI). The second flight of 116 migrants contained 65 from Punjab, 33 from Haryana and eight from Gujarat while the third flight of 112 consisted of 44 from Haryana, 33 from Gujarat and 31 from Punjab. India Today. Why Amritsar in Punjab? According to the composition of migrants, it would have been morally fair for the first and third flights to land in any city in Gujarat or Haryana, while the second flight could have gone to Punjab. But, Gujarat and Haryana are ruled by Mr Modi's party, the BJP, so in a shameless unscrupulous misuse of power the flights were diverted to Amritsar to conceal the sham Gujarat model of development. "In March 2024, the International Labour Organisation (ILO) in its report stated, the youth unemployment rate" in Gujarat has risen "from 5.6% in 2000 to 6.2% in 2012 and then increasing nearly threefold, to nearly 18% in 2018 and reaching around 15.1% in 2020." BW. As proof, "In 2023, out of 67,391 Indian illegal migrants in the US, Gujaratis were 41,330." "In 2023, the average daily wage for agricultural workers, at Rs 242, was the lowest in India, and far behind that in Bihar, one of India's poorest states," wrote Prof Christophe Jaffrelot. On 21 December 2023, French officials grounded a plane carrying 303 Indians, including 11 unaccompanied minors, at Vatry airport. 276 were repatriated to India while 27, all Gujaratis, remained in France and later made it into the US. Of the 96 Gujaratis repatriated "Within months of returning home, nearly 70 of them made their way into the US, while the remaining 26...are stuck in a hotel in Sharjah." TOI. According to Pew Research, there are 725,000 undocumented Indians living in the US but "Being the source of illegal migration isn't something anyone wants to advertise, least of all officials in New Delhi whose job is to tell the Indian public that everything is going swimmingly," wrote Mihir Sharma. Meanwhile, having already broken the law by entering the US illegally, Indian migrants are striving to stay as invisible as possible. India Today. Sneaking into the richest country in the world is not a surprise but shockingly Indians are desperate enough to earn $600-$700 per month in Lebanon (The Wire), where 39 Hezbollah members were killed and 3,400 wounded by exploding pagers and walkie-talkies in September 2024 (Reuters), and whose Gross Domestic Product (GDP) contracted 28% between 2018 and 2022 and "may further contract an additional 2.3% in 2025 and 2.4% in 2026 (UNDP). The US may be logical. But, Lebanon? Are these the 'Achhe Din' (good days) (wikipedia)we were promised?  

Anything is possible.

"FPIs have net sold $21 billion over four months through January end, as per data from National Securities Depository Ltd (NSDL). That's about 2.7% of their total equity holdings worth $782 billion as of January." Mint. On 14 February, "The Indian rupee logged its biggest weekly rise against the dollar in seven months, lifted by the central bank's heavy intervention in the foreign exchange market and kept speculators betting against the currency at bay." "DBS bank expects that the RBI sold $10 billion, while Goldman Sachs' estimate is close to $11 billion." Mint. "Net outflow by foreign funds on Friday (14 Feb) crossed the psychologically important Rs 1 trillion for 2025," "the total net outflow for the current month was almost Rs 255.70 billion. With a net outflow of Rs 780.27 billion in Jan, the aggregate net selling in the last one-and-a-half months is the year was nearly Rs 1.04 trillion." TOI. Foreign investors convert the proceeds from their sales into their currencies which results in an outflow of foreign exchange. But, by some amazing magic, despite the estimated selling of $10-11 billion by the Reserve Bank of India (RBI), "India's foreign exchange reserves rose sharply by $7.65 billion to $638.26 billion for the week ended February 7," and "This marks the third consecutive weekly increase, following a $1.05 billion rise in the previous week." CNBC. RBI's ability to create money means that, "Dividends the government may receive from the RBI and state-run lenders in FY26 are estimated at Rs 2.56 trillion," of which 80% will be contributed by the RBI. ET. The RBI transferred a record Rs 2.11 trillion in 2023-24. Infomerics. Naturally, more is expected this year. On 10 February, the rupee touched a high of 87.997 against the US dollar before closing at 87.469. Investing.com. "Since December, the rupee has depreciated 3% against the US dollar," and "According to the RBI, a 5% depreciation by rupee leads to 30-35 basis points (BPS) rise in retail inflation." The RBI estimates the rupee will average 87 to one dollar but retail inflation will be at 4.2% in 2025-26. FE. As the rupee fell close to 88 against the dollar cost of imports went up, so "While firms fear a surge in imported inflation on account of rupee depreciation, consumer electronics companies, for instance, are taking price hikes to protect margins." FE. The RBI is cool. On 7 February, the Monetary Policy Committee of the RBI nonchalantly cut the interest rate by 25 bps to 6.25% by unanimous consensus. ET. The US Federal Reserve is not so brave. Fed Chair Jerome Powell said that the Fed is in no rush to lower rates as the US economy remains strong (ET) as the annual CPI inflation came in at 3% in January, higher than the Fed's target of 2% (CNN). In summary, foreign investors are selling heavily, resulting in a depreciation of the rupee, which is supported by the RBI selling dollars and yet our foreign exchange reserves are rising, interest rate was cut and the RBI is expected to make a profit in excess of Rs 2 trillion. India can be a $55 trillion economy by 2047, said IMF's India Director Krishnamurthy Subramanian. Why not $100 trillion? Just square the circle (wikipedia). Simple.    

The Righteous Path.

"US President Donald Trump admitted that Prime Minister Narendra Modi is a 'much tougher negotiator' than him following discussions on a possible trade deal and tariffs with India." Honeyed words but pointless because, "The statement from Trump came hours after he announced a new reciprocal tariff policy for all trade partners of the US. Additionally, Trump also announced that US and India will have a new trade deal." Seems as if everything was decided already. "President Trump often talks about MAGA." Viksit Bharat translates to MIGA. "And together, the India-US have a MEGA partnership for prosperity," said Mr Modi. According to Mr Amit Shah, Mr Modi resorts to political 'jumla' (DH) and people believe him. The key takeaways from the visit are: "India and US set a bilateral trade target of $500 billion by 2030," "US would sell F-35 stealth fighter jets to India," "India is set to buy US energy of almost $25 billion," India "expressed readiness to take back those citizens living unlawfully in the US" and "US approved the extradition of 26/11 accused Tahawwur Rana to India." TOI. The F-35 fighter jet costs between $80-$115 million, each flight hour costs around $36,000 and lifetime expenses are estimated at $1.7 trillion. CNBC. Two of these would almost equal India's GDP in 2013 at $3.567 trillion at current prices (World Bank). That is surely a MEGA deal. "The big mistake commentators make is to think that the problem is a bilateral one of tariff rates." "A much bigger problem is the indirect impact of Trump's chaotic, unpredictable policies. Unpredictability will kill animal spirits of business across the world," wrote Swaminathan SA Aiyar. That will be cheered by the degrowth movement. "For some, particularly business leaders and investors, the concept of 'degrowth' (as the idea has been named) is anathema because economic expansion is believed by many to be essential to human flourishing and freedom." However, "The core of the degrowth argument is the historical fact that economic growth and emissions are inexorably connected." hbr.org. In fact, "Trump may have done Indians a big favor." "High and inconsistent tariffs prevented India's producers from entering global supply chains. Meanwhile, imports from China - the main vulnerability that officials wanted to address through import taxes - continue to grow. Economic resilience comes from productivity improvement and greater competitiveness," wrote Mihir Sharma. India exported goods worth a total of $87.4 billion to the US in 2024. ustr.gov. But, "Our exports of software will cross $250 billion and are so far immune to tariff action." "Inward remittances from non-resident Indians clocked $129 billion last year and are rising faster than our nominal GDP." Besides, "It is in India's interest to lower import tariffs, not only to please Trump, but to increase the productivity of domestic firms," wrote Ajit Ranade. Seems that India had strayed from the Righteous Path (Wisdom Library). Experts believe that Trump is guiding us back. Thank you, Mr Trump.

Do the math.

"Year-on-year inflation rate based on All India Consumer Index (CPI) for the month of January 2025over January 2024 is 4.31% (Provisional)." "It is the lowest year-on-year inflation after August 2024." pib.gov.in. Speaking in the Parliament, Finance Minister Nirmala Sitharaman said, "This is now closer to the lower end of RBI's inflation target which is in the range of 4%." CNBC. The FM is being really economical with the truth because, in 2021, "The government...asked the Reserve Bank to maintain retail inflation at 4% with a margin of 2% on either side...ending March 2026." ET. Class 3 math knowledge tells us that 4% is the target and 2% is the "lower end". The FM knows that according to the Annual Status of Education (ASER) 2024, "The percentage of Class 3 children who can perform at least subtraction at the basic arithmetic level was 33.7% in 2024, up from 25.9% in 2022 and higher than the pre-pandemic level of 28.2% in 2018." India Today. While this information is of great relief, it means that a vast majority will not catch the fake news. Of greater concern is the unexpected rise in prices in the US in January "with the headline CPI now at 3%, up from the 2.9% rise in December, and the core CPI at 3.3%, up from the 3.2% rise in December." JP Morgan. However, the Producer Price Index increased by 0.4% in January 2025 compared to the 0.3% estimate by Dow Jones. ET. JP Morgan analysts still expect the US Federal Reserve to "cut interest rates this year, but the recent strength of the labor market and higher-than-expected inflation may delay these cuts to the latter half of the year." On 7 February, the RBI cut its interest rate for the first time since May 2020 by 25 basis points (bps) to 6.25%. Reuters. In its meeting on 29 January, the US Fed decided to keep its Funds rate on hold at 4.25%-4.50%. CNBC. The difference between interest rates in the US and India is now less than 2%, whereas the rupee has depreciated by over 3% against the dollar in 2024 (ET). It therefore makes sense for foreign investors to shift their investments from India to the US. As funds withdraw from India the rupee comes under greater pressure forcing the RBI to sell dollars and buy rupees from the market. That creates a shortage of liquidity in banks and nudges lending rates higher. The RBI has probably sold $12 billion in the last three days and then has conducted Variable Repo Rate (VRR) auctions (InsightsIAS) to infuse more liquidity into banks. It conducted a VRR auction worth Rs 2.5 trillion, will conduct another worth Rs 750 billion today and possibly one worth Rs 2.75 trillion next week. FE. "The repo rate is the interest rate at which the RBI lends money to commercial banks for their short-term liquidity requirements. ET. By cutting its repo rate by 25 bps the RBI was making it cheaper for banks to borrow so that banks would lend at lower rates. But "its actions on the forex front had the opposite effect of what it was trying to do with monetary policy." The RBI thought it could ignore the Impossible Trinity which says that a central bank "cannot pursue an independent monetary policy, maintain a fixed exchange rate and have free flows of capital at the same time." Mint. As the rupee depreciates the cost of imports will go up and inflation will rise. FE. It was unwise for the RBI to cut its interest rate when the US Fed hit the pause button. The RBI should not listen to the FM when she says that 4% is the "lower end" of its inflation target. The RBI should do its own math. 

View from Blair House.

Prime Minister Narendra Modi landed at St Andrews in Washington DC for a meeting with newly elected President Donald Trump. HT. "Trump makes bold accusations" and "On the table, he offers temporary relief but seeks maximum concessions," wrote Ajay Srivastava. His advice is to confront Trump with facts. US companies, which are not allowed in China, are earning billions from services in India, Indian students are paying enormous sums of money to US universities and high tariffs do not help America. So do not cut tariffs on US products. The trouble with confronting Trump is that the US was India's largest trading partner with total trade of $119.7 billion and a trade surplus of $45.7 billion in the financial year 2023 -24 (FY24). CNN. China was at number two with total trade of $118.4 billion, with a trade deficit of $85.1 billion in FY24. Exports to China were a negligible $8 billion. US companies, Google, X (formerly Twitter) and Meta, are free for users in India. No Indian company will dream of offering free service. Baidu is the search engine in China while Google serves the rest of the world. Investopedia. While US companies are earning in India, they are also increasing our exports and creating jobs. Pune consultant Wizmatic estimates that 1,500 Global Capability Centers (GCC) of multinational companies "employ 3.2 million Indians (mostly engineers and scientists), generate revenue of $121 billion and export $102 billion," wrote Swaminathan SA Aiyar. Although Trump wants to India to reduce tariffs on American products and facilitate the return of illegal migrants from India, "Chances are that the Modi-Trump meeting will go smoothly," wrote Lisa Curtis. Trump wants India to buy US defense equipment, to be active in the Quadrilateral Security Dialogue, or the Quad (wikipedia), as a shield against China in the Indo-Pacific, and to cooperate in the Initiative on Critical and Emerging Technologies (iCET) dialogue (wikipedia). HT. As for Indian students, almost all go to the US to stay their permanently and become citizens if they can. Recently, 104 illegal migrants from India were deported in a US military plane. According to a report by the Pew Research Center, there are 725,000 Indians living in the US illegally. AP. "Indians seeking asylum in the US grew from 9,000 in 2018 to 51,000 in 2023, a 466% rise in 5 years, shows a study by researchers from Johns Hopkins University." India Today. Of the 96 Gujaratis, who were deported from France in December 2023, "Within months of returning home, nearly 70 of them made their way into the US, while the remaining 26 - who also embarked on a journey to enter America illegally - are currently stuck in a Sharjah hotel." TOI. Even as Mr Modi relaxes in Blair House, known as the world's most exclusive hotel, as guest of President Trump (HT), he will not see thousands of Indians trying to sneak into the US across the Mexican and Canadian borders dreaming of getting any menial job and building a life there. This is like sending hundreds of thousands of Indian beggars into the US. They will take anything. Because, we cannot be choosers (wiktionary).  

Viksit or Vibhitsa.

US President Donald Trump said that "he would announce plans to impose reciprocal tariffs on other countries over the next two days." "India has so far escaped Trump's tariffs. Yet they have already started hurting India. The exodus of foreign institutional investors (FIIs)" gathered pace, so that, "India benchmark indices closed lower for the fifth straight sessions yesterday, with the Sensex tumbling over 1,000 points and the Nifty 50 slipping below 23,100." ET. It's not just Trump." "The US Federal Reserve is in no rush to cut its short-term interest rate again given an economy that is 'strong overall' with low unemployment and inflation that remains above the Fed's 2% target, Fed Chair Jerome Powell said." ET. On 29 January, the US Fed held its Funds rate steady at 4.25%-4.50% in view of stubborn inflation. CNBC. Higher inflation concerns are reflected in US 10-year Treasury yields at 4.55%. CNBC. Attracted by higher yields, risk-averse investors are selling out on emerging markets. FIIs sold "Indian equities worth over Rs 780 billion in January 2025," and have sold worth Rs 73.42 billion till 10 February. Mint. As money flows out of Indian markets, the rupee fell from 86.200 against the dollar on 24 January to 87.960 on 3 February. Investing.com. On 10 February, the rupee depreciated to low of 87.95 against the dollar, prompting the Reserve Bank of India (RBI) to sell dollars to stop it from falling to 88 level. The RBI is believed to have sold $2-3 billion.  BS. India's foreign exchange reserves rose by $1.05 billion to $630.607 billion as on 31 January. It had risen by $5.574 billion in the previous week. BS. Forex reserves hit an all-time high of $704.89 billion as of 27 September 2024. ET. In total, our Forex reserves are down $74 billion and change. On top of that, "The government...projected a dividend income of Rs 2.56 trillion from the RBI and public sector financial institutions in FY 2025-26, as per the Budget." NDTV. Of this massive amount, the RBI is expected to contribute around Rs 2 trillion. Last year the RBI transferred Rs 2.11 trillion as dividend (infomerics.com), thus whetting the government's appetite. Arm twisting public sector banks (PSBs) is not very profitable because the government has to recapitalise them in case of shortage. "Loans written off by commercial banks between FY15 and FY24 totaled Rs 12 trillion." The share of PSBs was 53% at Rs 6.5 trillion. TOI. "India's banking sector will need to raise USD 4 trillion in capital over the next two decades o support the country's goal of becoming a developed economy, or 'Viksit Bharat' by 2047, according to report by HSBC Mutual Fund." ET. $4 trillion converts to Rs 358 trillion at 87.5 to one dollar. Looting the RBI and PSBs is the antithesis. Viksit Bharat could become Vibhitsa Bharat. Or simply bankrupt.   

Riviera or hell?

"Donald Trump has shocked the world by suggesting the US could 'take over' and 'own' Gaza, resettling its population in the process." "Trump believes that in their absence, an idyllic, American-owned 'Riviera of the Middle East' will rise from the ashes, providing thousands of jobs, opportunities for investment and, ultimately, a place for 'the world's people to live'." BBC. Yesterday, Trump added, "the two million Palestinian who would be resettled in neighboring countries under his plan to take over and rebuild the Gaza strip would have no right of return." BBC. Logical. If Palestinians return, Hamas will come disguised among them and soon the Riviera will turn into rubble. Is it possible to sustain a Riviera in Gaza? The answer is Dubai. Dubai has a GDP of USD 116.779 billion which, as part of the United Arab Emirates, gives it a nominal GDP per Capita of $51,290 (IMF), comparable to Belgium, Canada and Germany (World Bank). Dubai has little natural resources so, "In 2018, wholesale and retail trade represented 26% of the total GDP; transport and logistics, 12%; insurance activities and capital markets, 10%; real estate 7% and tourism 5%." "More than 90% of the population are foreigners." wikipedia. Dubai is on the Persian Gulf facing Iran (Britannica) but it thrives because it has no depraved villains like Hamas. Gaza faces the Mediterranean Sea (wikipedia) which borders southern European and northern African countries and would be an ideal tourist resort. However, there are problems with Mr Trump's plan. First, no Arab country wants Palestinians. In September 1970, known as Black September, King Hussein of Jordan attacked the Palestinian Liberation Organisation (PLO) led by Yasser Arafat after they started calling for the overthrow of his regime. PLO Fedayeen (guerrillas), based in camps in Jordan, were attacking Israel and, on 6 September 1970, hijacked three passenger planes "forcing their landing in the Jordanian city of Zarqa, where they took foreign nationals as hostages and blew up the planes in front of international press." wikipedia. Driven out of Jordan, Palestinians settled in Lebanon where they continued with terrorist activities, including the massacre of Israeli athletes at the Munich Olympics in 1972. Middle East Eye.That led to Israeli reprisals resulting in the Lebanese civil war lasting 15 years which killed over 100,000 people (Britannica) and a takeover by the Iran proxy Hezbollah. Secondly, Hamas can never allow Palestinians to be dispersed in several Arab countries as it will not be able to control the economy and use them as human shields. Most likely, any other country will disarm them and keep them under strict control. Israel will pick them off one by one. Not surprisingly, "Hamas...announced it would stop releasing Israeli hostages until further notice (ET), to which Trump responded that "Hamas should release all hostages held by the militant group in Gaza by midday Saturday or he would propose canceling the Israel-Hamas ceasefire and let 'all hell break out' (Reuters)." Hamas has two choices: release all hostages and hide or face an all out assault by Israel with US help. Reminiscent of the devil and the deep blue sea. An end of Hamas? We hope.    

A "handwaving" bubble.

"India's packaged consumer goods companies reported their best quarter in a year as smaller packs, lower grammage and price hikes helped them overcome a consumption slowdown that has weighed heavily on the sector in recent months." Mint. Increasing profits through a combination of inflating prices and shrinkflation which means reducing the amount of a product while maintaining its sticker price (Investopedia). "Biscuit maker Britannia Industries Ltd has started increasing prices to counter a surge in the cost of key ingredients, palm oil and cocoa." Mint. Increasing prices is an easy way of increasing profits so Indian companies are always begging the government to increase tariffs on imports so as to stifle competition. On the other hand, high tariffs on raw materials forces them to increase prices. In his first term, President Donald Trump labeled India "the king of tariffs". BBC. In 2017, "India's trade weighted average was 11.7%." Customs duties were increased on a range of imports in the Budget of 2018 "to promote the creation of more jobs in the country". ET. In 2021, "India's average applied import tariffs dropped to 15% in 2020, from as high as 17.6% in the previous year." FE. "The US trade-weighted average tariff rate is about 2.2%, according to World Trade Organization data, compared to 12% for India, 6.7% for Brazil, 5.1% for Vietnam and 2.7% for European Union countries." NDTV. Higher profits translate to higher dividends and share prices for companies. As a result, "India is now the most expensive equity market in the world, and 'no amount of handwaving' can justify its current valuation levels, according to 'Valuation Guru' Aswath Damodaran." BT. "India trades at a staggering 31 times earnings, 3 times revenue, and 20 times EBITDA in aggregate," he wrote in his blog. Foreign portfolio investors (FPI) withdrew Rs 73.42 billion from Indian equity markets in the first week of this month. The outflow in January was Rs 780.27 billion but they invested Rs 154.46 billion. BS. "The Nifty 500 Total Returns Index, a good overall representation of the overall Indian stock market, has fallen 11.3% since peaking on 26 September," wrote Vivek Kaul on 22 January. "The narrative built around certain stocks and sectors got many retail investors to invest in such stocks," and "mutual funds tried to cash in by launching new schemes around which narratives have been built," leading to a surge in prices. Now "regression to the mean is at work," so prices are dropping. "The US stock market now floats above the rest, with relative prices at a record since data began over a century ago," and "As a result, US accounts for 70% of the leading global stock index, up from 30% in the 1980s," wrote Ruchir Sharma. "But, mesmerized by 'American exceptionalism' analysts can talk only of how US has been the world's premium market for a century." But, "When flying in such thin air, it doesn't take long to stall the engines," wrote Sharma. "A much bigger problem is the indirect impact of Trump's chaotic, unpredictable policies." "I have long said that valuations in the US and India are crazily high, and in bubble territory," "This indicates that the Indian markets could fall by half and still be well above all others, save the US," wrote Swaminathan SA Aiyar. In February 2024, "Mutual funds and individual investors now have a bigger stake than FPIs in the Indian stock markets." CNBC. A sharp fall in markets could see panic selling and a massive erosion of wealth. That would reduce consumption and cause a fall in GDP growth. Creating bubbles through high prices and high tariffs is not a good idea. "Handwaving" will not work on Trump. So, now what?