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By Nitya Chakraborty

The political developments in Bangladesh including violence against any one opposing the fundamentalists are having dangerous consequences for India involving the security and geopolitical stability in the sub continent. According to this writer who has been following the churnings in the newly liberated nation since 1971, the outlook for India in terms of its relationship with its neighbour has never been so grimmer. India has been put in a situation now when the centre can watch the evolving developments in Bangladesh as an outsider with hardly any effective tools to influence the situation.

Why the developments in the last three days have more dangerous implications for India than any time during the last 53 years?. First India has no friend now in Bangladesh politics with whom they can have relations. The Awami League leaders are in jail or hiding. The grass roots workers are organizing sudden meetings, but then disappearing fearing backlash. A virulent anti-India section of the NCP is the main instigator of violence against Awami League, the Indian consulates and even the democratic minded BNP leaders.

Soon after Osman Hadi, a prominent leader of July 2024 movement’s death reached Dhaka from Singapore early this week, the worst type of propaganda against Awami League leaders, Indian government agencies, as also anyone who talked of restoring calm were attacked in the Facebook. pages of the NCP and Jamaat. The activists threatened many BNP nominees not to submit papers to the Election officials. A reign of terror is prevailing while the nomination process is going on. One BNP leader’s family house was burnt and his youngest daughter was killed and three others sustained burn injuries.

The problem is that the law and order machinery is under threat from both NCP and Jamaat activists. This has led to a dangerous situation during the nomination process. The entire process will be over by January 21 and from January 22, the notified candidates will be starting their campaign for the polling to be held on February 12. The nomination process can never be normal unless the interim government administration headed by Dr. Muhammad Yunus conducts impartially by restoring law and order and ensuring that those taking law in their hands, will not be spared.

The entire Dhaka media knows that this is not happening. Dr. Yunus also is playing a game and he is backing his favourite NCP contestants as also those in Jamaat who are close to him. For his own reasons, Dr. Yunus is maintaining a political distance from the BNP, though the BNP is expected to emerge as the single largest party as per the opinion polls. BNP chairperson Begum Khaleda Zia is critically ill in Dhaka. Her son Tarique Rahman is expected to arrive in Dhaka on December 25 and it is likely that he will stay back till the elections are over and give leadership to the BNP campaign in the absence of his mother.

Apart from virulent anti-India campaign and doing everything to destroy the legacy of the 1971 liberation struggle, the fundamentalist demonstrators are now targeting the cultural organisations and the artistes who are known for their faith in democracy and secular ideals. In 1971, just before the surrender of the Pakistan army on December 16, the rajakars carried out the killings of a large number of intellectuals of then East Bengal. This time, the killings have not taken place, but the fringe elements attacked and burnt the offices and full complex of two leading cultural groups of Dhaka Chayanaut and Udichi who have been active in the cultural arena of Bangladesh since its beginning. These two groups consist of the icons of the cultural world of Bangladesh.

Bangladesh Udichi Shilpigoshthi took to the streets of the Dhaka on Saturday morning staging a protest march and rally to condemn the arson attack on its central office—an assault that, the organisation says, has wiped out 55 years of cultural archives and struck at the heart of the country’s progressive movement.

The procession began at 11:00 am from Paltan intersection and moved steadily toward Satyen Sen Chattar, in front of Udichi’s central office opposite the National Press Club. Artists, cultural workers, journalists, and supporters joined the march, holding placards and chanting slogans that linked the attack on Udichi to a broader threat against freedom of expression.

Slogans such as “Udichi Te Hamla Keno, Jobab Chai,” “Muktijuddher Chetona Hariye Jete Dibo Na,” and “Baul-er Upor Hamla Rukhte Hobe” echoed through the streets, framing the arson not as an isolated crime but as part of a sustained assault on the ideals of 1971 and the spirit of cultural resistance. Amit Ranjan Dey, general secretary of Udichi said that there are not random acts. These represent a deliberate threat to freedom of expression and democratic rights.

On Thursday, the fundamentalists burnt the offices of media group publishing Daily Star and Pratham Alo, the most popular Bengali daily in Bangladesh. The offices were burning for three hours and despite repeated calls, the police and fire brigade came only after after the hooligans left. The media people said that the extremists gave threats to the media group but still the administration did not take action. A recent Swedish think tank study has said that in Bangladesh, 80 per cent of the journalists feel threat to their security under the present Yunus regime.

So what can India do at this moment? The election process has begun. In a recent interview, Sheikh Hasina’s son Joy Wajed has said that the February 12 elections are illegal without the participation of Awami League. At this stage, India may not be able to do anything on that. But what certainly, India can do is to impress on the western governments, especially the USA to ensure that the elections are held in a transparent manner and the parties get a level playing field. The western nations are monitoring but they have little stake in Bangladesh polls. They are all busy with Ukraine war. So it is in India’s immediate interest to organize global opinion in favour of holding polls on February 12 in a peaceful fair manner. The holding of elections in Bangladesh on February 12 should be of big interest to India irrespective of nature of formation. If the uncertainty prolongs in the neighbouring country, that will endanger India’s security further. (IPA Service)

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By Anjan Roy

Donald Trump’s high fees for H1B visas are a serious headache for India, not just for the sake of its impact on India’s IT sector and services exports to USA. This is a huge worry for the overall security environment and strategic- diplomatic scenario for India.

Among others, if China is able to capture a good number of the cream of top talent into that country, it should be able to more effectively wrest its defence technological lead over the United States in a shorter time. This could pose a problem not only for USA, it could be a more immediate challenge for India.

Referring to the crack down on immigrant scientist and technology personnel under Trump, CNN quoted a leading Chinese scientist who has since migrated to his homeland; “Chinese universities are bending over backwards to actively take advantage of this opportunity presented to them as a gift from a ‘perceived’ adversary. Already, overseas-educated scientists were returning to China and this was a “robust trend, perhaps an irreversible one.”

The initiate to develop indigenous science and technology base is being driven relentlessly by none other than the Chinese president Xi Jinping himself. He has been associated with encouraging and recognising Chinese scientists and researchers for a long time now. Chinese display of leading edge technology and high tech defence products at a recent military display recently is only the tip of the iceberg.

Basically, China has two major factors contributing to such a result. First is the political commitment to develop indigenous technology and science base for the country at the highest level. I is quoted as saying a nation thrives when its science and technology grows.

When USA is restricting entry of foreign talent through restrictive visa regime, China is supposedly introducing a new visa regime for prominent and young scientists and technology personnel through what is know as a “K” visa programme.

Secondly, China has a massive coffer from which to draw for encouragement of science and research even in esoteric fields which might not have immediate application but future potential. Chinese institutions and research bodies inviting applications from leading experts in areas like AI, robotics and network security are offering packages running upto half a million dollars.

With these clear directions from the top, China is seeking to offer lucrative positions and facilities to these talented people caught in Trump administration’s cross fire and anti-immigration psychosis. The short-sighted policy of the Donald Trump to impose high fees for H1B visas has created a scare among highly talented people, mainly scientists, engineers and mathematicians who are being sought by rival countries.

In the situation, instead of cribbing and whining about the actions and omissions of the Trump administration, India should review the entire situation on a war footing and place schemes and funds for attracting these talents if they seek re-location from the United States. This is because the effort to attract top talent could be extremely competitive and expensive as well.

Already, USA’s northern neighbour, Canada, is on the offensive. Canada’s new prime minister, Mark Carney, spoke before the Council on Foreign Relations in Washington this week and clearly mentioned that the change in the US visa regime have been noticed. He said, maybe, “we can take some of those” displaced.

Carney is pitching Canada as a natural choice for those affected by the visa changes as a new home and place to pursue their projects. The country has plenty of world class institutions and research organisation which would be happy to welcome those looking out.

Germany is another and hoped the top talent displaced from USA would consider his country as an alternative. The German envoy to India is particularly appreciative of the roles played by Indians in the development of the Silicon Valley companies and broadly in the research institutions, universities and elsewhere.

Of the countries now on the offensive to seek top talent, the country which is emerging as the most hot spot is China. This is because China has the money and the network of institutions across the country to accommodate scientists and engineers and those in the STEM sector.

China is primarily aiming for expatriate Chinese. However, it is equally welcoming to specialists of other countries. China is fearfully fast in developing its technology base in particular in defence related and military applications.

However, there is no alternative to this if India wants to remain as a player in the international scene, a major economy, and above all, as a centre for innovation and development. China had realised the importance of science and technology as the basic muscle for a progress of any nation and devised schemes to attract top talent and an institutional back-up for that.

India fortunately has a string of higher science institutions. India currently has the money to fund research projects for higher science and engineering. These could be leveraged to promote and fast pace the growth of technology and capacity. Admittedly, with an entrenched structure already in place it could prove difficult to accommodate those coming from overseas. However, lateral entrants could be placed in fresh positions and integrated into the system.

At any rate, efforts must begin to develop structures for absorption of talents thrown out of trumping cauldron. The younger entrants into the talent pool could at least be lured to stay back home than make an immediate beeline for some promised dreamland. (IPA Service)

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By Anjan Roy

The GST reforms introduced by the GST council at its September 4 meeting is a mega budget for the entire country. It will be the determining factor for the budgets of the central government as well as those of the states.

The goods and services tax, shorter form GST, had consolidated all the indirect taxes in an umbrella tax and now comprises a major segment of the total revenues of both centre and states.

The rationale for the wide-ranging ranges in the rates and attempt at reducing the slabs of the GST structure. Is it fulfills a promise of consolidation of slabs of tax rates.

This is part of the overall reforms of taxation that was undertaken with the introduction of the GST in 2017. At that time the country was divided into numerous tax jurisdictions of the centre and the states, which were consolidated into a uniform tax code —the GST.

At the time of its introduction, it was promised to have only two tax slabs. However, practical considerations allowed some four slabs, with a stated objective of arriving at a two slab structure in the future. The present exercise, virtually introduces a two-slab structure: 5%, 12%, 18% and an outlier 40% (called a sin tax).

On average, GST revenues are 44% of the total revenues of states and the centre. Taking a more focussed view, GST would account for even larger segment of the revenues of states. The recasting of rates could be expected to hit the state finances more than the centre’s.

Since the rates for GST could be fixed by the GST council and neither the centre or the states could unilaterally change these, the announcements made provide an iron-clad frame within which the budgets would have to be provided. With the latest announcement regarding the reformed GST, it will provide the basic frame for budgets.

The announcement of GST slab rationalisation —commonly referred to as GST 2.0— sounded very similar to former budgets. The budget announcements of tax adjustments used to be reflected in the prices of ordinary consumer goods going up or down. Cigarette prices would be up and bidis down; ACs up and diesel down and so on.

What is the logic of introducing these changes now? As such, the exercises were for slab reduction and other reforms all along. But the urgency of implementing these changes has a contemporary logic.

Hopefully, the slab restructuring and the lowering of tax rates of a wide number of articles is expected to boost consumption. This is particularly relevant as Indian exports to one of its major destinations are feared to hit serious roadblocks.

The Trump tariffs, combined incidence of which could be as high as 50%, might drive Indian products out of the US markets. For many major export items, such as, garments and textile items, are already feeling the crunch. Employment in these segments are falling drastically, according to some reports.

The tax cuts should primarily help in raising domestic demand for goods and thus compensate the loss of markets overseas. It is the same logic followed by many countries earlier, like the US itself in the time of Reagan presidency. American tax cuts had worked wonders for its economy then.

So, the finance minister, Nirmala Sitharaman, hopes that the tax cuts on a variety of products from motor cars to milk products should boost domestic demand. Prime Minister has also been harping on the same logic that the government was leaving more money with the people with its lower tax rates to spend on consumption items.

With higher consumption at home, it should have its own virtuous cycle. More consumption should bring forth larger investments by producers to meet higher demand and that should result in higher employment and again an upward cycle of growth and development.

Now the cynics might chip in. Taking into account the behaviour of Indian private sector and entrepreneurs, they say in the past higher demand did not necessarily translate into larger investment, employment and growth. Even in the recent years, private investments have been lagging behind and it is only public investment by government in large infrastructure projects which had buoyed up the economy.

In the face of rising demand if supplies do not match up, the inevitable result could be inflation. Higher inflation following greater consumption thrust could become a self-fulfilling vicious cycle and upset the overall balance. That is surely one of the possibilities, including its reverse.

In fact, there are reasons to believe that a deep cut in taxes on day to day consumables would really provide a leg up to the economy and private investment spur should result. More so in the current situation when the investments opportunities have been opened up and a bevy of foreign companies are all set to invest in the Indian market. Witness the recent spurt in investments from foreign companies in mobile phones to motor cars.

These global players are creating a new class of manufactures in the country of world standards and these are finding their own niche markets in the country as well as globally. They are also generating high income employment as well.

The present round of reforms in public finance structure should be viewed from this larger perspective than only tax reforms. These have also to be placed in the background of current geo-economics and their implications for the country.

From this point of view the changes introduced are well-timed and could be seminal forces for growth. Let us wait with our fingers crossed. (IPA Service)

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By Anjan Roy

The new governor of the Reserve Bank, Sanjay Malhotra, has taken to monetary policy formulation and the world of finance like fish to water. Within a short period of his taking over, Malhotra has got into his charge with a refreshing confidence.

RBI’s monetary policy, announced on Friday June 6, is surprisingly breezy and introduces a reset policy with aplomb. He says he has worked on the basis of a 5x3x3 matrix. That starts on a new and quite optimistic note.

He states: “This 5x3x3 matrix of fundamentals provides the necessary core strength to cushion the Indian economy against global spillovers and propel it to grow at a faster pace.”

The fundamental point is that the Indian economy presents “a picture of strength, stability and opportunity”. What are these. First, according to RBI, the strong balance sheets of five sectors, namely, corporates, banks, households, government and external sector.

Second, there is stability on all three fronts – price, financial, and political – providing policy and economic certainty in this dynamically evolving global economic order.

Third, the Indian economy offers immense opportunities to investors through 3Ds – demography, digitalisation and domestic demand

On the basis of these fundamentals, Malhotra has delivered a blockbuster combination of a 50 basis point reduction in repo rate and 100 bps reduction in CRR. With the back to back reductions in repo rates since February 2025, the total cut in repo rate would be 1.50 per cent.

The cut in CRR would release primary liquidity of about ₹2.5 lakh crore to the banking system by December 2025. Besides providing durable liquidity, it will reduce the cost of funding of the banks, thereby helping in monetary policy transmission to the credit market.

No finance minister could have expected a more helpful monetary policy move for easing his burden. Currently, the US president is fighting a daily battle with the US Federal Reserve chairman asking for a cut in interest rates. Donald Trump had often talked of even sacking the Federal Reserve chairman.

An earlier finance minister had asked for cuts in interest rates for providing fresh impetus to the economy. However, the RBI governor, Subba Rao, had then refused to yield and there ensued a tussle between the finance minister and the RBI governor.

For now, with so many upfront concessions, Reserve Bank seems to have exhausted its arsenal of policy tools. In case, things go a little wrong, the RBI would not be in a position to directly intervene with fresh policy tinkering.

RBI has admitted its helplessness in an unforeseen emergency. The governor has admitted that “under the current circumstances, monetary policy is left with very limited space to support growth.” Hence, the MPC also decided to change its stance from accommodative to neutral.

From here onwards, the MPC will be carefully assessing the incoming data and the evolving outlook to chart out the future course of monetary policy in order to strike the right growth-inflation balance.

In a way, the Reserve Bank seems to have disregarded one of the received wisdoms of traditional macroeconomics — the so-called Philips’ Curve. That is, the growth (employment) inflation dynamics where the two does not go in tango mostly. To maintain high growth, you might be compromised with some faster inflation and vice versa.

Malhotra seems to have taken his position that in India, you can have faster growth at the same time with stable or low inflation. Listen to Malhotra’s position on the growth-inflation dynamics:

“I would like to highlight that there is no tussle between price stability and growth in the medium and long term. Price stability preserves purchasing power, imparts certainty to households and businesses in their savings and investment decisions and ensures congenial interest rate and financial conditions, all of which foster consumption, investment and overall activity.”

We hope to be in a virtuous circles of demand, investment, growth and ever expanding supply line for maintaining a sable price level. I case of a sudden break in the cycle and then a flagging one of in the chain, the virtuous cycle can get reversed when corrective measures would be needed. It will be then the responsibility of the government to step in rather than expect the RBI to do the heavy-lifting.

These thoughts would admittedly be those of a nay-sayer, who would be the unwelcome guest in the room. But some such possibilities shouldn’t be altogether ruled out in an uncertain world like ours, particularly when you have Donald Trump as the president of the United States, which is the largest economy and sets the tone for the global economy.

Such a situation would really transfer the responsibility of further encouraging growth to the fiscal sector. That is, the government would be required to move in quickly to further encourage growth and buoyancy. Will the next budget be synchronised with the current monetary policy stance and introduce at least some measures for a leg up to growth. (IPA Service)

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By Anjan Roy

Just as Donald Trump’s tariffs had shaken the world and the financial markets, a sudden brake on their implementation had equally shocked leaders to market sloggers as much. President Trump had equally abruptly pushed back the time when his “reciprocal” tariffs were to kick in. He deferred it by ninety days and following that the markets had momentarily surged. He had stalled the tariffs for all countries, but China.

This entire spectacle underlined the total unpredictability and unrealism of the Trump administration. Even his closest associates and officials, including the US commerce secretary, had no idea that this deferment was coming. The sheer unpredictability of the Trump administration had again hit the financial markets and the upsurge was arrested.

But then what had triggered the implementation of his much vaunted tariff measures and beat him into a hasty retreat?. For retreat it was. Trump had boasted that his policy of trade war would not change. He would pursue the measures to the bitter end. He had also bragged that no less than 75 countries had entreated him do some deal and give respite from his augmented tariffs.

He boast itself was also equally ill-mannered using gutter-speak. As usual, Trump had boasted about the tariff measures. But then, in his inner circles the confidence and the spirit to go ahead with the drastic measures across all countries at one go was giving way to more sober thoughts.

According to reports, the US treasury secretary, Scott Bessent, had flown in to Trump’s private residence to underscore the conditions of the markets. The Treasury Secretary had emphasised that the US Treasury market had tanked and this was the pivot around which the Federal Government’s finances ran.

International news agency, CNN, had reported that the US federal government’s bond offer on Wednesday did not attract the immediate attention that it usually received. That is, in the wake of the tariff mayhem, the major buyers of US government debt, were no longer enthusiastic about these. That is, US government was failing to raise debts from the financial markets.

As is common knowledge, governments across the world never really pay up their outstanding debts. They merely borrow afresh to pay back the debts that fall due for repayment. Without this circular movements of funds, the governments would come to a dead halt.

The reciprocal tariffs and the financial markets bloodbath that had followed brought in this prospect of total freeze on the treasuries market. Hence, seeing this prospect Trump realised his folly and ordered an immediate freeze on his tariff plans. It is the state of the US bond market that caused the reversal and forced Trump to make a downright reversal.

Secondly, what had acted as a sober thought was the pouring in of what they call the “lighting of telephones”. That, there any number of telephone calls from business executives and industry leaders who had expressed their concerns over what was happening. Over their telephone calls, these business and industry leaders of America were advising against any further pursuit of these policies of Donald Trump.

The principal voice appears to have been the of Jamie Dimon, the widely respected chief of JP Morgan investment bank. He had predicted very soberly in his annual letter to the bank’s shareholders that US was sleep walking into a recession.

Many others had mentioned of this possibility, including Larry Summers, the highly noted economist and former treasury secretary, who had predicted a recession following the Trump economic package.

“Recession” is a scary word for Americans. It means automatically loss of employment and income. Large scale displacement of workers and financial market upheaval. These are the feared economic situation, far too well known since the 1930s Great Depression.

Even some of the Trump trusted allies and followers had been veering round to the view that America was sliding into a recession and once it triggered in, no one knew when and where it would stop.

Besides, other results were also being seen. The oil prices had slipped and oil exports are a major export for the US. The oil and gas industry were major chunk of US economy. Oil shipment from US to China had almost dried up and that would cause a glut in the market.

All in all, Donald Trump’s image has been dented squarely and he is licking his wounds, though posing as if he was commanding the situation from the success of his threats. Bad end of braggadocio. (IPA Service)

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By Anjan Roy

In the wake of Trump’s tariffs and restrictive trade practices, a global economic warfare has been sparked off, with all major economies working up stringent measures to teach the newly elected US prescient, Donald Trump, a lesson: Tariffs are a two way instrument. If you impose tariffs on others, others can impose similar or worse measures against you.

The result could be rising inflation, falling trade, recession in major economies, loss of income for people at large and high unemployment. The global economy seems set for such an outcome. It is difficult to imagine how the goal economy could avoid a radical contraction as all these measures start crimping production.

As the financial markets opened this Monday, after Trump’s imposition of the so-called “reciprocal” tariffs, there was mayhem all over the global financial markets. The stock market has entered the “bear market” phase, which means that investors would prefer to sell their holdings and keep cash rather than investing in scrip.

Japanese stock market, one of the largest, dropped by 8% on Monday in the wake of tariff warfare. India market dropped by over 2227 point, wiping out stock values of Rs14 lakh crore. Chinese markets too plummeted. European markets went into a tailspin by nearly 10%, resulting in loss of 1.7 trillion euros.

In the midst of the markets crash, the European Union of 29 countries on the continent announced its own set of tariffs in retaliation to Trump’s tariffs of last week. The EU proposed to levy tariffs on imports from US of $28 billion. EU trade commissioner announced the tariffs due to come into effect from April 9.

China, world’s second largest economy and considered enemy number 1 by Trump, had meanwhile announced tariffs on US imports of 34% plus. China is now considering to further increase its tariffs on imports from US and impose other restrictions like on exports of rare earths to the USA.

USA’s reciprocal tariff and other taxes including the basic tax of 10% takes the final tariff on Chinese products into America to over 54%. In fact, almost all countries from EU to China to Canada and Mexico — all major economies — are raising their tariffs on American goods. It will be difficult to imagine how the US can maintain its economy facing such concerted tariff actions against it. Donald Trump is getting a taste of his own bitter medicines.

Facing such rising adverse turn in the affairs, which is pushing up inflation and bringing in its train severe economic hardship, Donald Trump has asked the US people to put up with the inconveniences and difficulties for the time being for a much brighter tomorrow. Trump had thought of tariffs as one-way story, to be imposed by the US alone and accepted meekly by other countries.

Even influential and very conservative American business leaders are now coming out in the open and criticising Donald Trump’s economic policies. Jamie Dimon, chairman and head of the highly influential JP Morgan investment bank, hinted at the adverse impact of the current bunch of policy announcements of Trump second stint.

Dimon has expressed his fear that the USA had enjoyed a “special position’ in the global order based on its economic strength, military power and its “moral values” which included the espousal of freedom —in economics as well as in politics. These would be eroded, he feared, for the current basket of policies and moves take hold.

Dimon in his annual letter to the bank’s shareholders pointed out that the policies pursued by the administration should result in augmented price levels, withdrawals of investment, falling trade, and ultimately hike in the USA unemployment level and recession.

What could be the worst possible result is if the global financial markets take a deep crash. A financial crisis is far more deleterious than some sectoral slow down in industries. Finance is the vital life blood and when that stream clogs up, the entire system is grounded. This is what had happened previously during the global financial meltdown and this is what had happened in the years of Great Depression in the 1930s. We might be set back by a hundred years, for all one fears. But the originator of all these miseries remains impervious to the dangerous ends he was hurling the entire global economic order.

When facing questions from journalists on the crashing financial markets, Donald Trump was on his habitual offensive, described such questions as stupid and reiterating his observations that other countries have fleeced America for years and now his policies were reversing those injustices to America.

Trump claimed that as result of his policies billions of dollars were flowing into USA and shoring up the American economy. Trump took umbrage at Europe, stating that Europe has treated America badly and took American money and investments and then its factories. Now in response to Trumps tariffs they are imposing tariffs on their own. Trump likewise blamed China for its “panicky” reaction and its set of tariffs. He had thought, they all would lie prostrate in front of King Trump facing his uncontrollable ire.

But in his feverish delirium, Trump is blaming everybody else and the global economy is facing a huge earthquake. The future is completely unknown now. (IPA Service)

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By Anjan Roy

Russian president, Vladimir Putin, has already achieved a very big objective of his diplomacy — isolating Europe from the United States. Now with the US President’s latest statement from his clubhouse, Donald Trump seems to have dumped the traditional diplomatic tie up between Western Europe and America.

India must take lesson — don’t trust your allies. For fighting your war and for your existence, pursue relentlessly national military capabilities. Today, America might be paying India and Prime Minister Narendra Modi compliments – tomorrow they might just as well supply the most lethal weapons to Pakistan to teach a lesson. The world is now a sort of place, very much like a state of nature of Rousseau.

In pursuit of its avowed aim of bringing the Ukraine war to an immediate end, America is going alone to the negotiating table with Russia, without taking the Europeans. This has given the Europeans the jolt they badly needed. After all, they had outsourced their defence to the Americans and now the chickens are coming home to roost.

Donald Trump has now accused Ukraine of having started the war, and said that after three years it is still fighting the war instead of reaching some “deal” with the Russian president Putin. The American position must be under close examination of the Chinese president, Xi Jinping, and he must be feeling happy that he might also reach a deal with Trump isolating Taiwan.

If the war comes to end on the basis of present negotiating stance of the principal interlocutors (Russia and America), this will usher in a completely new world order. This will establish might is right rather than the former global regime which was based on rule of law and respect for sovereignty of nation states, whatever might be its limitations.

While the fate of Ukraine is being decided at the negotiations hosted by Saudi Arabia, the country itself is absent and far away from any of the talks. Russia is seeking to bamboozle its viewpoint in the negotiations, if only for the vanity of the new US president. Donald Trump had promised to end the Ukraine war immediately on resuming office.

The high representatives of the United States and Russia met in the Saudi Arabian capital Ritadh on Monday and set up committees for follow up negotiations. However, Russian ambassador to the UN, Vasili Nebenzya, has laid out conditions which are blatantly unacceptable to Ukraine.

His first condition is that the European Union and United Kingdom should have nothing to do with the talks for ending war in Ukraine. The Russian envoy has stated that the EU and UK have an attitude of “primitive Russophobia” and therefore could not be part of any talks.

Nebenzya has set out that the Ukrainian president, Volodomyr Zelensky, must resign and should not have anything to do with Ukraine after the end of the war or in the negotiations. Thirdly, Ukraine must cede more territories to Russia which are already under Russian control, namely, the four regions of Ukraine where Russia have captured on an average 75% of the land of the region.

Lastly, Russia is inviting that Ukraine should be “demilitarised” and should not be part of NATO alliance. This was not acceptable to Ukraine or the European Union. But Trump has already said that Ukraine President should forget about his NATO membership. Any agreement accepting Russian conditions would not be acceptable to Ukraine or its present day allies, namely, EU and UK. America has gone out of the way to force a agreement to end the war principally on its own calculations and diplomatic targets.

There is one report that the USA is keen to lay its hands on vast resources lying untapped in Ukraine and end of the war should enable it to lay its hands on these untapped minerals and resources. Trump’s big business friends are waiting for the opportunity, the same way Trump is talking of Gaza resettlement as a real estate paradise through the investment of the leading developers of the world. Trump’s own family business is based on real estate development.

The underlying objective of the United States in coming to the negotiating table is primarily to re-open the clogged lines of communications and diplomatic channels between America and Russia.

In an opening statement, the US representatives at the negotiations said that the end of war in Ukraine could open up huge opportunities of co-operation and collaboration between Russia and America. There could be “geo-political” opportunities for both countries across the globe.

All these developments are taking place without the European Union not being in the picture at all. Even the United Kingdom is now where to be seen, although the latter had always claimed a “special relationship” between UK and USA ever since the end of the Second World War. EU is desperately seeking to remain relevant in the talks as many of the EU Commissioners have articulated. (IPA Service)

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By Anjan Roy

The only big idea about the eighth budget of finance minister, Nirmala Sitharaman, is an announcement of an income tax exemption of upto Rs 12 lakhs. It is a big jump no doubt, from the exemption level of Rs 7 lakh earlier. There is a political catch in that though.

But in a way, this is a borrowing from AAP’s conception about Delhi electricity charge. That is, if income exceeds Rs 12 lakh by one single rupee, then there will be a progressive rate of taxation from Rs4 lakh income onwards.

With, say, an income of Rs 12 lakh plus one rupee, the person will be charged at 5% for income above Rs 4 lakh and onwards at a progressive scale. Presumably, hoping that the people earning upto Rs 12 lakh, will get the full tax exemption, the question is: “will this push up domestic demand’. That given, 85% of the current income tax payers should be exempted from payment of tax. The government concedes over Rs 1 lakh crore on this change.

This could be described as a middle class budget, singularly lacking in high ambitions and rhetoric. It does emphasise on fiscal prudence and mentions thrust on private sector investment. The overall flavour is of a conservative budget. Lack of rhetoric is reflected in the muted response of the stock market.

“Democracy, demography and demand” she had observed as the critical pillars. She had stated her basic objective at the outset, saying: “This Budget continues our Government’s efforts to accelerate growth, secure inclusive development, invigorate private sector investments, uplift household sentiments, and enhance spending power of India’s rising middle class”.

That way, she was looking for a rising domestic demand, domestic private investment and ground level domestic small and medium scale entrepreneurship. The budget has given importance on the small and medium sector.

This is the quintessential supply side economics. The classic example was when President Ronald Reagan had offered large tax cuts to Americans ad they returned with a massive jump in demand and pushed American economic growth.

By and large, leaving aside the jump in exemption, taxation rates have been left untouched. Would the income tax concession for the lower and middle class drive overall domestic demand and help India sail through the forthcoming Trump Storm tariffs and a tumultuous global economy.

In the Economic Survey released on January 31, this question was raised and sought to be answered. The Survey had argued that the global situation was deteriorating or at least globalisation was on the retreat. Hence, the need was for giving a further boost to domestic demand.

India has been growing primarily on the shoulder of domestic demand. Exports could be only residual. China has been hoping to get a breather through higher domestic demand, which it has not been able to achieve so far.

At the same time, the finance minister had sought to protect India’s export interests. She had done some changes in the customs rates and structures, which could be said to be initial posturing for a conditional negotiating stance with the threat of barriers from Trump’s America.

The excitement about tax aside, the budget speech sounded like an iteration of some small time projects and proposals for the farm sector, travel and tourism, health and mining. Not being highfaluting, could be eventually beneficial as well. How?

The finance minister has emphasised the farm sector as a first engine of growth. The finance minister has sought to encourage value added agriculture. Fish culture, fruits and vegetables and food processing industry are sought to be developed.

As for domestic industry, the budget pins its hope on creation of domestic demand, which alone could provide the push to fresh private sector investment. After all, if the fiscal deficit has to be maintained, government expenditure cannot go on rising. The budget has not announced large public investments in infrastructure projects or other public investments.

The government has looked for a major step in domestic manufacturing which has not materialised so far. Instead, the budget now looks forward to beefing up the small and medium sector and the more job creating activities for meeting the challenges of manufacturing as well as raising employment. The budget at least seeks to portray that vision.

A new kid on the block however is the so-called “modular nuclear power plants” and private sector participation in this effort. She is hinting at more liberalised overseas foreign direct investment in the molar nuclear plants. Smaller nuclear power plants could be a major player.

This could be a determining factor if India has to push ahead in artificial intelligence. AI could develop on the basis of easy availability of power.

The government is banking on public private partnership to increase investments in the infrastructure sector. The government has not gone big in announcing large public investments in infrastructure.

Sitharaman has pegged the fiscal deficit at 4.4% of GDP, against budget estimate of 4.8%. . This could be possible mainly on the back of buoyant GST collections. This kind of controlled deficit should leave larger playing field for the private sector to mobilise funds. In the end, every budget could not be big announcement one. This one seeks to move forward with the small steps to add up to a major leap. (IPA Service)

The article Just Tax Relief For Lower And Middle Class Not Adequate To Pep Up Demand appeared first on Arabian Post.

By Anjan Roy

The recent volatility in the exchange rate of the Indian rupee against the US dollar has given rise to a debate on how the central bank should react to the situation of progressive depreciation of the national currency.

To wit, the rupee appears to hit 90 to a dollar in no time, as some of the commentators and reports indicate. India’s leading bank, State Bank of India, has described the current gyrations in the rupee-dollar rates as “Trump Tantrums” in reference to what had happened earlier during the policy correction phase of the US Federal Reserve under its illustrious chairman, Ben Bernanke.

Bernanke was one of the influential economists and his work on the Great Depression of the 1930s placed him in a special position to handle the situation post the 2008 global financial meltdown. Faced with a situation in which the central bankers were at a loss to use monetary policy instruments like interest rate variation to influence the economy’s behaviour, the leading central bankers had introduced what came to be known as “Quantitative Easing”.

This involved releasing more liquidity into the system by purchase of financial assets and thus pumping in fresh funds. Well after the situation had stabilised, QE had continued and then came the time when these have to be stopped — a regime of policy reversal. Bernanke had started that process from the US Federal Reserve’s end which had led to global financial turmoil of the 2012-13.

What had happened then was that the reversal of policy stance led to a flight of funds from the emerging market economies and back into the US. As a result, the currencies of the EMEs faced a sort of run and exchange stability hurt the EMEs severely. The most affected were even given a name, the Fragile Five.

That phase had come to be known, among finance experts, as taper tantrums, because of the tapering of bond purchases by the US Federal Reserve system.

With the new US incoming president Donald Trump suggesting a battery of economic actions, a similar volatility is being manifested by the financial markets. It is nervousness, plain and simple. Donald Trump is threatening to impose tariffs across the board on countries which have export markets in the USA. Thus, Trump is saying he would impose tariffs on Canada, Mexico and above all, China on their products entering the US market.

Trump has not spared India either. He has often described India as the tariff King, pointing out that India often imposed tariffs on imports, including those from the United States.

The Trump tariffs are meant to limit imports from outside. An obscurantist autarkic regime in USA will obviously restrict imports and instead direct American demands for home produced items than from outside. This should hopefully restore or achieve what Trump protagonists and his acolytes have professed and hoped to achieve —Make America Great Again— the so-called MAGA action plan.

However, given the ground level economic situation in America and its trade partners, the tariffs restricting imports would create supply pressures inside America. As Barry Eichengreen, one of the well known professors of economics, has argued, because of the rigidities of manufacturing within USA, the American consumers would have to turn to imported items to overcome the domestic shortages. For this to happen, the US dollar will have to appreciate to make foreign products still cheaper to buy.

Thus, it appears that in the short term, the US dollar would come under heavy pressures for appreciation. The trading partners would face greater challenges in stabilising their economies. Already, many of the competing currencies, and most importantly the Chinese currency has shown lower levels against the dollar.

In a situation of such global readjustment to the new realities of USA with Trump presidency, it will be prudent to adopt a very cautious approach to calibrating the Indian financial sector to the new realties. What are the new realities and trends against which the Indian central bank should fashion its policies for the foreseeable future?

First, it is nearly impossible to really control the exchange rate of a currency against market forces. What happens is that the central banks blow up a massive amounts of funds to intervene in the market to stabilise rates. The attacks on the currencies recur immediately after intervention is over. This had happened time and again.

Secondly, the currency rates reflect in general the domestic strengths and weaknesses over a period. Thus, the trends in overall trade, the domestic price levels, interest rates and similar factors influence the long term prospects. These are almost given.

As for the Indian foreign exchange market, the rates are almost directly linked to the behaviour of the foreign institutional investors. If the FPIs sell in the domestic market and then withdraw their funds, rupee comes under pressure. This has been seen and written about in a paper published in the latest issue of the Reserve Bank of India bulletin. This trend is nothing new. It was observed during the post 2008 financial meltdown period.

RBI intervening heavily in the market to stabilise against such background is somewhat futile. Of course, these interventions do achieve its immediate goal —stabilising the rates for the time being.

But there is another aspect of the foreign exchange market — the strictly technical factors which often tend to get accentuated and needs a little fine tuning. One such factor is the overseas non-deliverable rupee trade trends. These are purely speculative and no really deliverable. It had taken some excessive importance when Raghuram Rajan had just assumed office of the governor of the Reserve Bank. Being a finial economist, he had moved very successfully to contain the overseas non-deliverable market.

The lessons of those days may be worth a re-look and some of the lessons could be instructive. However, a pronged and sustained programme for intervention for containing gyrations in the rupee exchange rate could be counter-productive and we might end up blowing up a good part of the foreign exchange reserve.

Trump regime promises to be turbulent for the global economy with his plans for America first. There ill for sure be volatile financial markets and large movements of capital across borders, which will leave many other parameters, let alone, exchange rates in uncharted territories. We should not let our guards down.

At any rate, the Reserve bank has very vital and useful institutional memory of handling exchange market in times of turbulence. The RBI knows how to to move in such a situation. (IPA Service)

The article Threat Of A Free Fall Of Indian Rupee Against U.S. Dollar In Initial Period Of Trump Regime Is Real appeared first on Arabian Post.

By Anjan Roy

Controversial equity research firm, Hindenburg, has closed down, all of a sudden. Disbanding the operations, the firm’s founder and short-seller said that this “was only chapter of his life” not the only one.

The news of Hindenburg closure immediately had a political twist in India. While, the ruling BJP had suggested that agents like Hindenburg were the “economic terrorists” who worked to destroy value in India, the opposition Congress denied that the event cleared the concerned Group of all allegations of corruption and its attempts at malpractices.

Hindenburg came under limelight in India after it published reports on the rising Adani Group of companies, observing that the conglomerate was burdened with huge loans which have not been properly provided for in its balance sheets. There were other allegations like Adani’s involvement in bribing government officials for getting crucial government clearances and contracts.

Taking up the Hindenburg cue, the US authorities had instituted enquiries into the affairs of the Adani Group as the Indian conglomerate had raised funds in the US. The US authorities had gone to the extent of issuing arrest orders on Gautam Adani his nephew. The Adani Group had sought to reclaim the situation by repaying some of the US funds.

Nevertheless, despite rearguard actions, the Hindenburg reports had wiped out massive value from the market capitalisation of Adani Group companies. While before the report was made public, Gautam Adani, the principal promoter of the group was adjudged one of the richest persons in the world of wealth, ahead of Mukesh Ambani, the publication of the reports eroded his wealth so much that he had slipped down.

Following the publication of Hindenburg reports on Adani group, the shares of group companies crashed and investors had lost large sums on their equity holding. However, subsequently the share prices have recovered though to the full extent.

Meanwhile, Hindenburg had done what is known as “short selling”, that is, when an investor expected price of a share to fall and thus sells in expectations of a price fall. These investors are called “short sellers” or investors who take a “bearish” position.

Hindenburg’s report on the Adani Group has resulted exactly this kind of situation and ordinary investors had suffered a lot. However, the research firm had come under enquiries in the United States as well as the Indian Securities and Exchange Board of India —better known as SEBI— also started enquiries.

Adani shares aside, the research firm had published similar reports on a number of other companies as well. The US securities oversight body, Securities and Exchange Commission (SEC) — had also started investigations into the firm’s practices and market manipulations through its reports.

Possibly, under pressure from all these investigations and in anticipation further disclosures, the firm decided to discontinue its operations. Hindenburg was also under the lens regarding its links with hugely embroiled currency trader, George Soros.

As the Hindenburg closure reports streamed in, there was jubilation among Adani Group employees and investors. Some had even mentioned that the Adani Group’s position of invincibility was vindicated. However, Congress spokesperson, Jairam Ramesh, had taken up on himself to emphasise that this did not meant a “clean chit” for the Adani Group. The Group is facing many allegations in the Indian market. Some are being investigated by the SEBI.

The government of Indi and its investigating agencies must do a proper job in ensuring that the Adani group companies follow the market principles and do not manipulate the prices of the stocks to hike its market capitalization. Indian people get influenced by the reports of the foreign agencies as they have doubts about the impartial functioning of the Indian agencies like SEBI. That should go. The Narendra Modi government has to ensure that the Adani group gets the same treatment from its regulatory agencies like any other Indian company. No preferences. (IPA Service)

The article Closure Of Hindenburg Research Body Must Be A Relief To The Adani Group appeared first on Arabian Post.

By Anjan Roy

Thirty-three years are half a lifetime. Thirty-three years ago, Dr Manmohan Singh stepped into a high-profile limelight, well after his formal retirement from a senior government job. When he died last Friday at the age of 92, he was considered India’s greatest finance minister and the architect of India’s modern economy.

There is currently a national effusion of love and recognition for Dr Manmohan Singh, which ironically was absent during his lifetime. On the contrary, often enough, scorn and insults were heaped on him.

As in everything, if Manmohan Singh’s life was marked by one quality, it was staying away from effusiveness. He was known for his measured response. To the criticisms, Manmohan Singh’s cryptic response was “history would treat me more kindly”.

An enthusiastic and committed economic reformer, even his approach to economic reforms was measured and never gung-ho like that of so many others who bore the torch of managing the finances of India. That saved India a lot of suffering.

Thirty-three years back in 1991, India’s situation was precarious. India was going through a period of deep political and economic uncertainty. The country faced problem of external solvency as the “coffers” were empty. On top of that, Rajiv Gandhi was assassinated by Tamil militants, creating a political vacuum.

In the 1991 general elections, the Congress was voted to power and P.V. Narasimha Rao was pulled out of retirement and made prime minister. The top priority of the new prime minister was to find a competent finance minister.

Prime Minister Rao’s first choice was Dr I.G. Patel, once RBI governor and a world renowned economist. Patel had then just settled down in his hometown in Gujarat after a peripatetic life and refused to budge from there.

Patel suggested Dr Manmohan Singh, who had by then occupied almost every possible position handling the economic policies of the government; from being RBI governor to member-secretary in the Planning Commission. He was also the economic adviser to ex-Prime Minister Chandra Sekhar.

Prime Minister Narasimha Rao contacted him through P.C. Alexander, woken him up from his sleep after a long flight from Geneva. Alexander had just returned after serving as chairman of the South-South Commission in Geneva.

Here was a new government led by two retired persons. Ironically, that team has put India on its new journey of growth and future eminence. The subsequent storyline could just as well be told in a single sentence: Two old men in search of a new dawn.

Referring to his choice as finance minister, Manmohan Singh had observed in the course of launching a book of a collection of his writings and speeches, that he was not only an “accidental prime minister’, as some people said, but an “accidental finance minister too”.

Such was the fluid scenario then, when on July 24 1991 Dr Manmohan Singh presented his maiden budget. Manmohan Singh’s 1991 budget had become the stuff of legend for economists, for the ringing commendation lines of his budget speech.

The Narasimha Rao government was sworn in on June 21. In the following month preceding the budget, some of the most seminal reforms were already introduced which has guided the course of the Indian economy since.

Some of these were critical steps for resetting the Indian economy. And devaluing the Indian rupee was not least of them. Devaluation of the rupee was a hypersensitive matter. An earlier devaluation in 1966 had proved it to be nothing short of a disaster. Anticipating trouble, Manmohan Singh cautioned his prime minister and warned Rao that the issue should not be referred to Union cabinet but should be passed right there and then.

For maintaining secrecy, Manmohan Singh prepared a handwritten note on devaluation and got it cleared from the Prime Minister, who had advised a gradual and softer approach. To soften the blow, Dr Singh suggested a two stage devaluation — the first relatively smaller and the next slightly bigger.

I still recall the flutter that the first devaluation had caused. We the economic journalists covering the finance ministry were given indications that the Prime Minister himself developed cold feet after the first stage devaluation and instructed his FM to hold back the second dose.

Manmohan Singh had called up the deputy governor in RBI in charge of foreign exchange, Dr C. Rangarajan, in the morning of June 3 to say that he should hold back the second devaluation. However, Dr Rangarajan informed Dr Singh that the deed was already done!

Dr Rangarajan and his department of exchange control had already “jumped”, Montek Singh Ahluwalia recalls most interestingly in his memoir. The effect of the combined devaluations would be that of a sledge-hammer blow in two directions.

First, a deep devaluation could finish off the extensive hawala transactions in the Indian rupee, which was rampant. Secondly, as a corollary, it would be a body blow to gold smuggling. Along with these steps, the finance minister had liberalised gold import norms for incoming international passengers.

Later still, when the immediate crisis was over, the exchange rate of the rupee was made fully convertible on the trade account; that is, for exports and imports. Making the Indian rupee exchange rate market determined made the greatest difference and its good effects are still working out.

The exchange rate reforms gave market-linked flexibility to India’s domestic economy with the rest of the world. Thus, incentives and scope for gains from extra-market manipulations disappeared and an automatic corrective mechanism was introduced.

On that fateful day when the rupee was set to float, it had depreciated from around 16 to a dollar to about 24 to a dollar by the end of the day. What it did was to make imports costlier and exports cheaper. Overall, the demand within the Indian economy shifted from external markets to domestic market.

Much later, during the taper tantrums in 2014, the flexible exchange rate insulated India from the worst financial fall-out.

Along with the exchange market reforms, the new finance minister and his team also opened up the secondary market in stocks and shares to overseas institutional investors. This started the inward flow of investment dollars. FDI was also liberalised.

The overall impact of these measures was that while in 1991 June-July, India had barely $1 billion reserve, enough foreign exchange reserve to meet just a week’s imports, in two years the country was seeing a problem of plenty in foreign exchange.

I remember a meeting in the Constitution Club on New Delhi’s Rafi Marg, where Montek Singh Ahluwalia, by then finance secretary, was discussing various ways in which the foreign exchange inflows were being sterilised to prevent overall rise in domestic prices.

Consider building up the picture of today’s Indian economy with a fixed exchange rate system, it would be impossible to accommodate any of the present features of the economy.

Along with the reform of exchange rate system, the 1991 package freed up the entire working of the economy. The industrial licensing system, which was an absurd set to controls on the domestic industry, was dismantled and the system of taxation was recast. The capping piece was Dr. Manmohan Singh’s 1991 budget which had captured the spirit of the times.

In his commendation line, Dr. Manmohan Singh had quoted Victor Hugo. It has since been recounted and retold so many times that one need not say it again. The wrap up line was and is that Dr Singh’s spirit permeated all that he did. (IPA Service)

The article How Dr. Manmohan Singh Reset A Floundering Indian Economy appeared first on Arabian Post.

By Anjan Roy

The real import of the US department of justice (DOJ) indictment of Indian billionaire, Gautam Adani, on counts of corruption and bribery has been somewhat lost on the wider public. It is the geo-economics of US dominion over the rest of the world that has to be taken note of. It is extension of US heft far beyond its backyard.

The US legal set up has issued an indictment and arrest order over an alleged crime committed in India by an Indian citizen for some projects in India. Remember this is coming from a country where a US cabinet pick of the newly elected president of United States has been found to passed on money for sex and have had sexual relations with a minor, where the winning Republican Party has refused to part with critical information on aspects of life of the presidential picks.

As such, the Americans have no jurisdiction over whatever is happening in India, bribery or otherwise, however detrimental these could be for the Indians and the Indian state.

Consider for a moment that an Indian court pronouncing judgments over the lapses in project implementation and bribery in the US over a project being implemented by an American company on American soil. This would simply have been ignored and laughed at with contempt. The idea would have been discarded as an atrocious enlargement of the jurisdictions of Indian courts.

However, US has a law on Foreign Prevention of Corruption Act under which Gautam Adani and his nephew have been indicted and ordered to be arrested. India might just as well pass some laws under which a convicted felon in a foreign country might be disqualified from elected office.

Be those as these may, the issue is that the United States has a certain sway which extends its swagger far beyond its own borders and legal jurisdiction. This is because if a commercial entity is seeking the US financial markets for raising funds these then automatically become applicable for protection of the monies invested by Americans in those entities.

Whether Gautam Adani has in fact bribed the Andhra Pradesh government and its officials and politicians is the subject of enquiry. Nobody in this country believes that large government clearances could be obtained without paying hush money. As the saying goes not even a pin could be sold to a government organisation without greasing the palms.

Even if the alleged crimes had been perpetrated, the Indian crimes investigation agencies should have looked into the allegations. Their record has for history been tardy and excepting for Lalu Yadav, hardly any other prominent politician has ever been convicted.

Notwithstanding glaring lapses in Indian law enforcement and crime prevention institutions and records, as a nation India cannot celebrate the triumphs of American law enforcement agencies in Indian cases. The Indian government agencies will take action against Adani and the others named by the U.S. if those are proved as a result of Indian investigations. US can not be allowed to arrest Gautam Adani or anybody Indian residing within this country on the basis of its own investigation. Gautam Adani is not a terrorist.

Where Gautam Adani and his organisation appears to have tripped is when Adani denied knowledge of US DOJ enquiries into the allegations when prima facie he had knowledge of the enquiry. Since he was raising funds from the US securities market, this constituted concealment of facts from the prospective investors.

Nobody is forcing an investor to part with his money. But not to present all information regarding the organisation and the instrument he was presenting for investment is certainly an infringement. Hence, to that extent Adani organisation is liable.

However, as long as the organisation is staying away from the US capital markets, whether a bribe has been paid or not is purely a question of law for the Indian authorities.

As for criminal obligations, one remembers the Bhopal gas tragedy. The head of the global organisation, which was responsible for the gas leak and the immense suffering from it, was allowed to leave India in apparent knowledge of the Indian authorities. Those responsible were never punished in proportion to the crime and the mutilated lives of people affected. The US laws did not subject them to criminal punishment, despite global condemnation of the negligence.

This is possibly because the suffering was of poor Indians and not American employees in an American plant. Conjure up a case in which a similar incident of grievous injuries to a local population had happened on American soil in the plant of an Indian corporate.

Bribery or no bribery, the fact should be established that in the case of a entity transgressing the laws of the land would face consequences here and not in some foreign land. Soon enough, there could be a demand for extradition of Gautam Adani from the American department of justice. India should be ready to respond to it assertively. The opposition leader including Rahul Gandhi should remember that Gautam Adani’s offences will be tried under Indian laws and he should avoid voicing the American DoJ demand for his arrest. Only Indian authorities have the right to arrest Adani group members if they are found guilty under Indian laws, not US government. (IPA Service)

The article Who Is DOJ Of US Government To Demand Arrest Of Gautam Adani? appeared first on Arabian Post.

By Anjan Roy

As president elect Donald Trump is edging towards taking over powers in America on January 20 next year, the country is lurching towards becoming a typical case of a plutocracy.

Money bags, as opposed to public spirited men and women who have devoted a life time in public affairs, are coming to power in the federal government. Insiders in the Trump camp are describing gleefully the scenes at Donald Trump’s golf club, Mar a Lago, thronged with hopefuls seeking to grab powerful government and policy making positions.

Donald Trump himself is a billionaire businessman having property interests in America and the world. Donald Trump’s company has developed several high end properties in multiple cities in India as well. He is a professedly extrovert billionaire at that and his private jet for personal transportation is in itself an object of admiration and envy among even the richest of the rich.

Trumping them all is the presence of one man — Elon Mask— owner of among other businesses, Tesla motor car company, who was a diehard Trump supporter in his election campaigning days. Since then, Elon Musk has become one of the insiders in the Trump set up, often seen seated at dinners with Trump at the highly sought after patio of Trump’s club.

The proximity is now so deep that Trump was seen holding calls with world leaders, with Elon Musk, by his side and sometimes Musk has been handed over the telephone in conversations with world leaders. Musk was for example on the line in course of Trump’s conversations with the president of Ukraine, Volodymyr Zelensky.

The presence of Musk aside, American economic policy is also seen lurching towards a 19th centre type free enterprise and buccaneering capitalism. That means least interference from government in the functioning of the private sector businesses and whittling down of the size of the government. While there are many social implications of this policy —like scrapping aided heath care system— this would be giving economic right to those who have economic might.

As in the 19th century, the American businessman, famously described as the “Robber Barons” almost always had their ways in determining government attitude towards control and directions and they got away with transgressions and would barge in with outright force to get their way right.

America already has its share of the super rich of the modern world. But with Trump’s support and policy push, there will be twenty-first century editions of the Vanderbilt, Rockefeller, Rothschild, and so on.

In course of his election campaign, Trump has put forward his economic policy components which resemble classical capitalist state. Least regulation and withdrawal of government from control of the economy or government presence in economic activities. But there are critical differences between now and the nineteenth century which can create policy conundrums and contradictions. The critical difference being the volume and extent of fiscal deficit of the American government.

Trump is proposing minimal taxes on businesses, which would surely be welcomed by the private businesses. But that would certainly have large implications for government’s financial situation.

A substantial and meaningful tax cuts, coupled with a failure to immediately slash government expenses and public debt, could result in a situation in which the administration would be at loggerheads with the central bank, the US Federal Reserve bank. The point of first friction could be over interest rate policy.

The obvious spark could be a demand from the administration to cut interest rates which the Federal Reserve could, in its own judgement under a very conservative central banker, Jerome Powell, refuse to comply. Already Trump’s campaigns had indicated a demand for a interest cut.

However, given the inflation trends as well as the continuing demands for funding ,the federal government could in fact point towards a rising interest regime. It would be a difficult choice for the government as well as the central bank. In an extreme situation, the administration might bay for the central banker’s blood and throw him out.

As such, the US economy is already heated up. Employment and growth had continued to remain robust despite contractionary policies of the US Fed for fighting inflation. The economy has recovered smartly from the COVID days and is poised for strongest performance amongst the developed ones. To raise the economy to further hyped up levels could become counter-productive.

Professional economists and forecasters are apprehensive that Donald Trump would surely introduce a deep recession in the American economy with his policies of further ramping the US economy to a higher level of activity to push up employment and growth.

As such, American economy is heated up and further pumping of an already heated up situation could result in catastrophe. The stock markets are for example keeping their fingers crossed about what Trump could mean for the US economy in the medium to long term. These reactions are paring the initial hyperactivity, and expectations.

Besides, prominent billionaires who had teamed up with Trump, could drive policies for their personal gains. These could mean America turning into a cosy world of crony capitalism. This generally leads to a crash in the medium to long term and informed quarters in America expect the nation’s economy to get into a full-blown recession in one and a half to two years.

China might welcome a weakening US economy as part of its of its overall policy. But this could mean bad news for the rest of the world. A volatile and failing US economy should usher in financial market upheaval across the globe and the emerging and the weaker economies would suffer most. So gird up for a possible storm sometimes within two years. (IPA Service)

The article America Under Trump 2.0 May Turn Into 19th Century Buccaneering Capitalism appeared first on Arabian Post.

By Anjan Roy

Never before, an American presidential election evoked such widespread interest and concern across the world. This is because the presumptive president has given rise to fears and concerns about America’s policies which do not promise to follow the scripted lines. There is a sense of uncertainty all the way in the power circles in Beijing to the NATO headquarters in Europe and to the Middle East capitals.

The expectation is that Trump will usher in a new era of gains and losses, devoid of any moral values and permanent friendships or enmities. India should not sleepwalk into a situation believing Trump is friendly to India and Narendra Modi. Instead remain vigilant.

Early reports indicate that India is not taking things for granted. A team from union commerce ministry is reportedly preparing position papers on trade and investment and even thinking of briefing Indian embassy in Washington about the Indian position on the ground.

In his last term, as well as when out of office, Donald Trump had railed against India for using tariffs to presumptively keeping out American products. He had once cited the case of the iconic Harley Davidson motor cycles. Trump had alleged that India had imposed 100% tariff on Harleys which kept the motorbike out of Indian markets.

The fact on the ground was Harley had a plant in India and when it imported its components and parts in knocked down condition, the Indian Harley operations paid a nominal 10% duty. Not briefed, Trump had often described India as the “Tariff King”.

Donald Trump has proposed spikes in its tariff rates against imports in search of what is rather innocent thinking that exclusion of vital imports through imposition of prohibitive levels of tariffs should result in larger American production. The fact is America had long ceased to manufacture of these products and present day rigidities in the American economy would act against their production again.

Trump had promised in his election campaign speeches to levy at least 60% tariffs on Cheese imports. Similar levels of tariffs and non-tariff barriers would be slapped on imports from other countries as well, including presumably those from India and America’s NATO allies in Europe.

Such tariffs would hurt the American consumers and the inflation rate should shoot up. More so, because Trump has also promised large tax cuts within the country, which should jack up demand. He also promises to ensure that American blue collar workers got a better deal and hikes in wages.

Such fiscal stimulus should result in larger demand as more of their incomes would be with the hands of consumers. Coupled with tariffs, which should make imports from overseas limited and costlier, would push up the price line in general. The options should be either to organise alternative supply lines or a significant jump in domestic production.

Rising prices internally should on the other hand push the central banking authority to pursue an anti-inflationary policy. That means the Federal Reserve should increase the policy interest rates. The whole gamut of promises thus result in a big mess..

That should not have bothered people in other counties a bit, while leaving the American consumers to stew in their domestic rut. But the state of the American economy invariably changes the reality for other countries. A turgid American economy can influence its financial markets and financial flows across the world.

The queer economic policies promised and the inevitable result of pursuing these on the ground might just as well make the newly elected president go back on his promises. Then he loses his credibility.

The economic policy prescriptions apart, Donald Trump’s other promises could equally be disruptive. There is a strong feeling that Trump would promptly withdraw support to Ukraine and the Ukrainian resistance should crumble within a short period. A clear and quick collapse leading to Russian victory might bring an end to manslaughter and violence, but it will certainly set a very different kind of precedence affecting relations with Western Europe and NATO.

Such an outcome should embolden China in pursuing its strong arm tactics over a wide area. Risk would be Taiwan and its independence. China would like to bulldoze over Taiwanese resistance and seek to establish its own authority across the Taiwan Straits.

In pursuit of its own aggrandisement, China might choose to do a deal with USA to free itself to follow its own strategy. Since Donald Trump is exactly the man to do deals, he might just as well go along with China in the interest of its promoting its own goals.

India in this instance must remain wary of Trump and his antics. While praising the Indians in the run up to his election, Trump might just as easily forget all that and follow his own MAGA goals. He will as easily dump India for his deals than follow a path of consistency and moral commitment.

For the world, it will be far better to play Trump in his own game. Do deals with him and never expect any permanent commitment from the American president. Never trust Trump, but play along your own game. (IPA Service)

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By Anjan Roy

Although ice has apparently been broken between India and China over conflicts and confrontations in Demchok and Depsang areas in eastern Ladakh, tensions have not been eliminated fully.

The hurriedly announced agreement, in the hours before BRICS summit in Russia’s Kazan on October 22-24, was directed more at the international audiences than for the two countries. This agreement should be seen more in the context of international strategic contests than a bilateral easing of tensions.

The agreement between India and China, announced with some fanfare, is more for the optics than really defusing the border imbroglio. It was in the context of the BRICS summit at Kazan in Russia, to build the base for an understanding to be arrived during the meeting of prime minister Narendra Modi and Chinese president, Xi Jinping.

China’s track record in the past has been one of ignoring past commitments. China had followed the strategy of cheese slicing, that is, usurp and take control of small areas and then move ahead again. In many areas, China has taken away claimed Indian areas and even built full scale villages.

None of those conflicts have been resolved or even addressed. The current agreement addressed only a small stretch of the international border where the countries had clashed resulting in the death of 20 Indian soldiers. In many other sectors, Chinese incursions have not been addressed.

Apart from amassing huge number of soldiers and vehicles, and other military gadgets and guns by both sides, the immediate threat of another conflict has receded. India will have to take a series of steps to deal with China.

When China’s economy is sliding seriously and its industries in some segments are shrinking, Indian moves against Chinese businesses and investments in India had started biting its interests. The context of the entire moves and countermoves has to be kept in mind to assess the overall compulsions.

China’s exports were being stalled by major western countries, including USA and EU. Chinese electric vehicles were sought to be kept out with high tariff barriers in the EU markets. America was making fresh moves against Chinese EV makers. China has huge stakes in pushing their EVs across the globe.

Additionally, America has imposed a complete blockade against transfer of critical technology and items to China which in many ways have crippled Chinese industries. America has excluded China from supplies of high end industrial chips and this is hurting Chinese industries at least for the time being.

China is the largest producer of steel and it is dumping its steel across the world. The fact is that China does not have the capacity to absorb the humongous amount of steel it produces every year. Many of the developed countries are seeking to shut out China from their domestic steel markets.

China has stopped releasing many vital information to hide the real state of their economy. For example, China’s statistical bureau has stopped giving figures of youth unemployment, for example, to hide the large youth joblessness..

This was the ideal moment for pursuing a policy which could hurt China really hard for any process for normalisation of relations. India should have worked for larger concessions from China. This was our time as economically India was in a far sound footing than China as of now.

Additionally, China is facing a western coalition of forces on its moves in the South China Sea and over Taiwan. No littoral state around the South China Sea is on board with China. It has conflicts with Philippines to Malaysia. In some ways, China is being viewed suspiciously by a host of countries in south-east Asia.

But both China and India had compulsions for the show. India was being corralled by the west, spearheaded by Canada and partially USA, over alleged involvement in killing a Sikh militant. China is facing a huge push from the US on multiple fronts.

Above all, the host for the Kazan meet, Russian president Vladimir Putin, tried to put up a show of strength against the combined front of the western nations for its war in Ukraine. The BIRCS meeting, attended by the world’s two most populous countries, alongside Saudi Arabia, Egypt and Iran, is a demonstration of the failure of the combined western bloc to isolate Russia.

There are internal tensions among these countries and their priorities are different. However, all these countries played into the hand of Russia showing its ambit of operations inspite of western sanctions.. This was the best manipulation of Vladimir Putin against the combined strength of the western coalition led by the USA.

India has to monitor closely the follow up moves of China on the disputed areas. China has a policy of two steps forward and one step backward as regards to India in border areas. China’s part withdrawal from the disputes areas is being shown as India’s victory hiding the fact that some new areas are remaining in China’s control. India should be firm in getting back the land which rightly belongs to the country. (IPA Service)

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By Anjan Roy

The Chinese economy is seeing deflation —that is, prices are really falling in real time— for 23 months straight. This has really raised the concerns of the Chinese political bosses which was reflected in the central bank move on Tuesday.

The central bank cut its policy interest rates by the most ever seen from the monetary authority. The Chinese central bank has also unleashed large dose of additional liquidity by paring down reserve requirements for commercial banks. Additionally, rates for existing mortgages have been cut to give boost to home purchasers.

But it looks this kind of factory gate deflation shows some structural rigidities in the economy, which economists feel could hardly be fought with simply monetary policy tools like a cut in interest rate or liquidity infusion. Data also showing little improvement in the employment trends and prospects.

Current malaise in Chinese economy is too deep and widespread to be addressed with only some financial boosts. Some ingrained rigidities and imbalances in the real economy are being addressed with doses of liquidity and interest cuts in the financial economy.

Three basic problems had plagued the Chinese economy. First, China had until recently depended on giving push to economy through heavy doses of investment for capacity creation. Large investments have created huge surplus capacity, which the domestic economy could hardly match up to.

Secondly, the Chinese policy makers had depended heavily on housing industry for the overall performance of the economy. House purchases and buildings created large cities, which now look highest towns. The housing sector has got into a rut as large property developers have gone bust, failing to deliver houses to buyers for which they have fully paid up.

The bulk of Chinese savers money had gone into housing investments, and the bust of the property companies and large stocks of unfinished and unsold new houses have depressed house prices. The savings of the people have suffered a hit and the wealth effect of a rising housing market has disappeared. This had badly hit consumer sentiments.

Here we come to the third factor for the current slide in the Chinese economy — basic problem is that consumer sentiments are low and with falling prices, consumers are not confident about making large purchase commitments like buying new houses or even costly consumer durables. Earlier in the heady days Chinese authorities had imposed various restrictions on house purchases to cool down a overheated market. These have now backfired.

Besides, broader policy changes were introduced recently when security concerns had played the uppermost over hard core economic issues. Such changes in overall policy framework is now coming home to roost and economy is going soft.

The successive policy reversals and strictures on the technology sector barons, attacks on high flying bankers and financial institutions, Communist Party’s heavy-handed interference in corporates have all combined to depress the Chinese markets and the sentiments of major players.

Now that the economy was in a free fall, various policy bodies like the Chinese central bank to the securities authorities are swinging into action to combat the economic decline and sentiments.

The Chinese central bank — PBOC— had introduced a massive stimulus running into one trillion yen (equivalent to $142 billion) on Tuesday to stop further slides in prices and encourage consumer spending. The stimulus package has come in the foreground of Chinese holiday season.

The economic authorities in the country are worried that government’s avowed GDP growth target may not be hit this year with just three months left in the year. The Chinese authorities had set a 5% growth target for the year.

The problem now is one of over supplies. The successive policy framework which relied on investment and capacity creation has generated more capacity and housing stocks than the economy could absorb. The overall policy had come to be reliant on ever increasing housing market and land sales by local authorities to fund their budgets.

But there are limits to which these policies could help. For sometime now, the Chinese economic policy makers had tried to help the housing markets. But these are not working and housing stocks are still large.

The other leg of the policy intervention has been to raise the stocks markets. The stocks are somewhat up for the present. But the market players are fearing the stocks might tank once again in the absence real time improvements in the real economy.

Successive cuts in policy rates like repo rates have released some 18 trillion yuans into the system. This is hoped to push up consumer demand as well as leave its imprint on the financial markets. The fingers should be kept crosses. Already the foreign exchange market has reacted and the yuan had recovered to its highest recent levels against the dollar. But only these changes might not buoy up the overall economy and bring it out of its slump. (IPA Service)

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By Anjan Roy

The US Federal Reserve chairman, Jerome Powell, has given a clear message from Jackson Hole, Wyoming, that the American central bank is all set to enter a rate reversal cycle. The Federal Reserve at long last would usher in a regime of lower policy rates.

This was picked up immediately by the financial markets and the US stock markets have risen once again, after a slide in recent days. One can expect that once the Federal Reserve initiates its policy reversal, the financial markets would further start adjusting.

When the US Fed speaks up, the world’s other central bankers have to listen. This is because the markets would enter a new phase of dynamism. No doubt that the Reserve Bank of India would raise its antenna and look for the changes in the Indian markets.

One can expect that in sync with the global markets, the Indian stocks would also rise as happens when the broad spectrum interest rates are lowered. The stocks markets should show further upsurge in the coming days. Along with that, the bonds markets would also seek fresh levels. One can also expect money to flow from the overseas markets to advantage of the surge.

Against this background, how should the Reserve Bank reset its broader policy measures? Obviously, the guiding factors should be the overall price stability in India as well as the growth potential and performance of the Indian economy.

In its last monetary policy committee review meetings between August 6 and 8, the PC decided to hold its policy parameters unchanged. The policy rate was left untouched, though two of the committee members strongly argued against the decision, according to the latest release of the proceedings of the committee.

The factors that should weigh in for the RBI are the inflation trends and the potential for a pick up in price trends. The prices have shown sober trends in the last few months. In the latest monthly economic report released by the union finance ministry, this week showed a fairly comfortable picture.

Overall, retail inflation slowed to 4.6% in the first four months of the current financial year April to July 2024, against 5.3% in the same period last year. More specifically, month-to-month July showed a sharp deceleration in prices.

“Retail inflation based on Consumer Price Index-Combined (CPI-C) eased from 5.1 per cent in June 2024 to 3.5 per cent in July 2024, the lowest since September 2019.” The finance ministry ascribed this to a significant fall in food inflation.

Food inflation “declined to 5.4 per cent in July 2024 from 9.4 per cent in June 2024. The substantial fall witnessed in food inflation was helped majorly by a decline in vegetable inflation from 29.3 per cent in June 2024 to 6.8 per cent in July 2024.” However, this runs counter to the anecdote price levels in markets around the country, particularly the prices of vegetables.

Now the question is whether this price moderation is transitory or a poster to a longer trend.

If this sudden monthly drop is reversed in the short run, then the RBI should not budge from its anti-inflationary stance. If otherwise, and the prices seek lower levels then there is room for the RBI to reset its policy rates. As of now, it is difficult to really look through the haze and predict how the prices should trend in the coming months.

Two considerations are important in any such assessment. First, the historical trends. It has been generally seen the food prices, particularly, those of the principal two cereals and fruits and vegetables, tend to rise in the summer months through the monsoon periods. These then drop in the post-harvest season from October onwards.

Going by experience, maybe, we are over the price hump and the trends in the coming months should become more and more comfortable, barring unforeseen bumps. The other favourable factor is that the monsoon is progressing well and the prognostication is that it should remain at the normal levels this year.

Hence, the fears of a bad monsoon and a possible hit to food production could be cast aside this season. The price situation, particularly, food inflation could remain stable for now.

Finance ministry sums it up thus: “With moderate core inflation and positive progress in monsoon, the headline inflation outlook is positive. Assuming a normal monsoon, CPI inflation for FY25 is projected at 4.5 per cent by the RBI, with Q2 inflation at 4.4 per cent.”

On the other hand, the finance ministry’s monthly report takes note of the adverse consumer expectations in the midst of the otherwise favourable economic data.

The finance ministry notes that amidst “favourable developments, consumer confidence in the current economic situation, employment, price level, and income has declined, as reflected in the Current Situation Index of the RBI’s Consumer Confidence Survey. Households’ optimism about economic conditions for the year ahead has declined from the previous survey round.”

Further, “lower optimism on the general economic situation, employment and prices led to a moderation in the future expectations index of the Consumer Confidence Survey.”

Typically, economic models give a major importance to the consumer’s inflation expectation as a guiding indicator for future inflation. Once inflationary expectations get anchored, then the future course of prices are influenced by this.

Look at the apparent contradiction. The consumers and the basic economic units are pessimistic about the future, though gauging the present situation it is not bad. How come this contrarian evaluation. ?

Maybe, the people do not have enough confidence in the governance structures. It is lack of confidence in those who are in the drivers’ seat.

But, then, consider the Reserve Bank’s problem in its formulation of policy. It is facing a “riddle”. Introduce an accommodative policy stance and you stoke the inflationary fire, but if you don’t you miss an opportunity to let growth go in its full steam. (IPA Service) 

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By Anjan Roy

The latest inflation data, released by the union government on Monday, shows price rise at a lowest clip since 2019. This is good news. But it raises a series of questions as well. The last figure shows overall inflation rate of 3.54 per cent in July 2024, which is far lower than the inflation rate of 5.1 per cent in June.

Even the core food price inflation showed lower pace in July suddenly at 5.4 per cent overall for the country with notable decreases in vegetables, fruits and cereals. But this is rather surprising, given the experience of food prices in the retail markets. And the trends in food prices in April-May as well as in June 2024.

The sharp drop in inflation rate appears to be a kind of riddle and contrary to what the Reserve Bank expected in its last monetary policy statement. While it qualified its expectations saying that food inflation rate should show favourable trends in July following a base effect of close to 3 per cent compared with the same period last year.

It is only later in the year, in the fourth quarter of the financial year, when the favourable south-west monsoon on the farm sector would have worked itself out that food prices were expected to soften.

As a matter of fact, the policy statement noted with sharp focus the trends in the latest food price inflation, as put out by the department of consumer affairs.

High frequency food price showed to a month on month increase in tomato prices by 62.1 per cent in July, onion prices by 22.6 per cent and potato prices by 18.0 per cent. Prices of key pulses also increased in the range of 0.4 to 4.3 per cent in July.

Let us look at the disaggregated food price inflation rates closely as given in the last monetary policy statement.

Headline inflation, which was at 4.8 per cent in April-May increased to 5.1 per cent in June.

Food inflation surged to 8.4 per cent in June from 7.9 per cent in April-May. Contribution of food to headline inflation increased from 74.7 per cent in April to 75.2 per cent in May and 76.3 per cent in June. The contribution of food was 44.8 per cent in June 2023.

CPI tomatoes increased by 48.7 per cent (m-o-m) in June, CPI onion by 24.2 per cent (m-o-m) and potatoes by 12.2 per cent (m-o-m), resulting in a year-on-year inflation of 29.3 per cent for vegetables. Overall, vegetables with a weight of 6.0 per cent in CPI basket contributed 34.9 per cent to inflation in June.

Cereals inflation increased to 8.8 per cent in June from 8.6 per cent in April. Fruit inflation increased to 7.2 per cent in June from 5.2 per cent April. Pulses inflation at 16.1 per cent in June, recorded 13 consecutive months in double digits.

The riddle is how could food price inflation have dropped so drastically in a single year. It calls for more detailed studies.

Food inflation averaged around 8 per cent during November 2023-June 2024. In the context of high food price inflation, RBI chose to maintain its monetary policy stance than revise it downward as some of the members of the monetary policy committee had strongly urged.

The RBI governor Shaktikanta Das, noted in his statement that the public perception of inflation is coloured by food inflation rates and the inflationary expectations are formed on that basis. Hence, the importance of food inflation in formulating overall monetary policy stance.

Why that is critical is because if the inflation expectations of people at large get skewed towards a high long term expectations of prices, then inflation tends to get “sticky”. In such a situation controlling inflation through conventional monetary policy tools becomes difficult if not at times ineffective.

Since November 2023, the decline in inflation expectations has halted, the RBI had noted in its policy statement. Three-month and one year ahead inflationary expectations rose by 20 bps each in the July 2024 round of the survey over the previous survey round (May 2024).

The ochre riddle in the current inflation scenario is the divergence between core inflation and food inflation. Excluding food and fuel inflation, the overall rate of inflation is showing softening trends. Deflation in fuel is (-) 3.7 per cent in June. CPI excluding food and fuel moderated from in 3.2 per cent in April to 3.1 per cent in May-June 2024, a new low in the current CPI series.

One explanation for this apparent contradiction and divergence between core inflation and food inflation is possibly the supply side shocks to the food items and, maybe, bottlenecks in supplies.

Against this inflationary scenario, the overall economy is doing rather fine. That is, in the growth-inflation dynamics, there is reason to be optimistic about the pace at which the economy is growing.

GST revenues, which can be taken as a proxy for overall economic activity, atRs. 1.82 lakh crore rose by 10.3 per cent and toll collections expanded by 9.4 per cent during July.

Domestic air cargo and port cargo posted a healthy growth of 10.3 per cent and 6.8 per cent respectively, in June 2024. Aggregate bank credit posted a growth of 15.1 per cent as on July 26, 2024.

Sale of consumer non-durables rose by 2.3 per cent in May 2024, while two-wheeler sales expanded by 21.3 per cent in June. The demand under MGNREGA declined by 21.7 per cent in June 2024 and 19.4 per cent in July, reflecting improvement in farm sector employment. Tractor sales registered a turnaround by recording 3.6 per cent growth in June.

Consumer durables posted a growth of 12.3 per cent in May 2024, and sales of passenger vehicles increased by 4.9 per cent in June. Domestic air passengers rose by 6.9 per cent in June 2024 and 6.0 per cent in July, on the back of a very high base as it increased by 19.2 per cent in June 2023 and 26.3 per centin July 2023.

Steel consumption rose sharply by 14.6 per cent in July 2024. Cement production increased modestly by 1.9 per cent in June 2024. Imports of capital goods expanded by 11.6 per cent during June 2024, while capital goods production increased by 2.5 per cent in May 2024.

Capacity utilisation in manufacturing sector at 76.8 per cent in Q4:2023-24 is the highest in 11 years.

As such, these figures would have warranted a cut in the interest to further encourage the level of economic activity, only if the price situation was a little more stable for the long term. It does not appear so. (IPA Service)

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By Tirthankar Mitra

Reduced to a single Lok Sabha member from West Bengal post 2024 elections, the state Congress unit is busy picking up the pieces of the jigsaw which would help it arrive at the causes of its dismal state and chart its path of revival. Apart from an organisational rejig and the search for a state unit chief, senior Congress leaders at the state and the national level are contemplating a course correction.

Defeat of state Congress chief, Adhir Ranjan Choudhury at Murshidabad Lok Sabha constituency in 2024 polls has worsened matters for the party. Not only does it end Choudhury’s winning run, it raises a question mark about his policy of remaining in close touch with CPI(M) led Left Front. Choudhury has submitted his resignation from state presidentship. It is now up to the Congress high command to choose the new president.

Several Congress leaders together with the party rank file are wondering aloud if Choudhury’s departure from the seat of power puts a full stop on opposing Trinamool Congress. After all, ever since Congress and CPI (M), political rivals for decades joined forces, both outfits lost no opportunity in criticizing the TMC-run state government in general and its chief, Mamata Banerjee in particular.

After Choudhury’s defeat in Behrampore, there has been an improvement in floor coordination between TMC and Congress in both Houses of the Parliament. Both being part of the INDIA bloc coalition had earlier run into rough weather post Choudhury’s stinging criticism of Trinamool Congress before the Lok Sabha polls.

And Choudhury being the leader of the Congress Parliamentary Party in the Lok Sabha his words could not be brushed off by the central Congress leadership With TMC’,s principal critic no longer in the scene, Congress -TMC relations are likely to be better in the days to come. Nothing is more welcome to the national Congress leadership. The portents look like a new bonhomie between Congress and TMC has begun.

The firebrand TMC MP from Krishnanagar Mahua Moitra supporting a point raised by Rahul Gandhi in the Parliament is arguably an early indication. After all, Rahul Gandhi is a part of INDIA coalition, Moitra had signed off when asked for her attitudinal change.

Clearly both the leadership of Congress and Trinamool seem to be in a hurry to bury the hatchet. Both have a lot of ground to cover, especially the Congress many of whose leaders resent the fact that the floating of TMC and its increasing acceptance by the masses have pushed the state Congress into political irrelevance.

Organisational muscle turning into flab in the state Congress can be traced to the point of time when the TMC came into being. Projecting itself to be genuine opponents to Left Front “misrule”, it was a winning formula for the fledgling party state Congress stalwarts including Somen Mitra, stated to be Mamata Banerjee’s principal rival before the party had split , joined TMC and became its MP.

If Mitra returned to the Congress fold, other leaders like Subrata Mukherjee and Sougata Roy stayed put in their new political outfit. Congress had joined force with TMC to defeat the Left Front in 2011 Assembly elections but walked out of the new coalition government seeing its activists changing loyalty while TMC taking over many of their party offices.

An electoral alliance with Left in 2016 Assembly polls helped Congress reap a rich political dividend. Though there were defections from Congress, the unusual alliance often pinned down the TMC in the Assembly and away from it. CPI(M)’s number in assembly was less than the Congress after 2016 polls.

But post 2019 Lok Sabha and 2021 Assembly elections, the Congress and the Left were on further downslide. Broadsides and pot shots continued to be taken at TMC though such onslaughts were no longer as stinging as before. A moment of truth seems to have arrived for the state Congress. Its leaders have to make up their mind whether they will stay with the Left led by the CPI(M) or opt for a new innings in alliance with the TMC. Since Adhir Choudhury is no longer state president or even a Lok Sabha member, the Congress leaders who are looking for their own interests will look for a tie up with the TMC.

The Congress high command, in its meeting on Monday in Delhi has sought the opinion of the senior Bengal leaders on the choice of new state president as also what should be the strategy on alliance in the state. It is expected that the new state president’s name will be announced early next month.

Just not the Bengal Congress leaders, the state CPI(M) is waiting anxiously for the decision of the Congress high command on the new state president. The last president Adhir Choudhury had a good relations with the CPI(M) due to his anti-Mamata stance. Congress and the Left had an electoral alliance before the 2024 Lok Sabha polls and it worked well. The Congress workers worked for the Left candidates in many constituencies. The CPI(M) is interested in continuing this alliance as on its own, it has become irrelevant in Bengal politics now.

The Bengal CPI(M) is holding its plenum in the last week of August to go into the details of the factors that led to the disaster in the Lok Sabha polls. Preliminary review has shown that the party has no firm base among any section of people, workers, peasants, women and above all among the minority community which constitutes 27 per cent of the state’s population. Also the review reveals that the Congress has still organized base in some districts which the CPI(M) does not have. It is better for the CPI(M) to continue alliance with the Congress to fight both the TMC and the BJP in the state.

The state CPI(M) expects that the Congress high command’s decision on new state president will be known much before the party plenum. That should help the party in carrying discussions in the plenum on the nature of alliance. In any case, the CPI(M) is preparing itself for a situation under which the Left led by the CPI(M) will go alone in 2026 assembly polls if the Congress finally ditches the Left Front and allies with the TMC. (IPA Service)

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By Anjan Roy

Nirmala Sitharaman’s budget presented to Parliament on July 23 is a deeply political statement post the polls, containing though sound economic logic as well. As it is by now amply clear to the public, the Union finance minister, has laid out a development budget for Bihar and partly for Andhra Pradesh, while incidentally she presented as the union budget for the 2024-25 as well.

Underlying the budget is a political statement of the government, taking into account the electoral outcomes of the recent Lok Sabha polls. The general budget is, at the same time, based on common sense and is macro-economically sound, leaving untouched the present fiscal structure and tax regime by and large in tact. It does not have any great glamour or surprises, rather dull, but is rather solid

There are a few redeeming features of this budget which need to be taken note of. These are: First, sound fiscal situation. Given the ample fiscal buoyancy provided by the healthy collections of direct taxes (mainly income tax) and indirect taxes (GST) the finance minister has conceded a small tax benefit of Rs 7000 crore.

That she could still maintain a falling trend in fiscal deficit of the union government could be ascribed to the healthy clip maintained by the Indian economy and not exactly because of any government sleight of hand.

Take a look at the figures. For 2024-25, the total receipts and the total expenditure are estimated at Rs 32.07 lakh crore and Rs 48.21 lakh crore respectively. The fiscal deficit is estimated at 4.9 per cent of GDP.

The finance minister assures: “we aim to reach a deficit below 4.5 per cent next year. From 2026-27 onwards, the fiscal deficit each year should be such that the central government debt should be on a declining path as percentage of GDP.

This should leave sufficient room for the private sector to mobilise funds from within the economy. This also could be the base for a resilient and growing economy of the future.

It seems that the benefits of the GST system of taxation have started flowing in as it has reduced the compliance burden and logistics cost for trade and industry, at the same time, enhanced revenues of the central and state governments.

Finance minister has claimed “It is a success of vast proportions.” The minister promised to further “simplify and rationalise the tax structure and endeavour to expand it to the remaining sectors.”

Secondly, a reiteration of the commitment to pursue the next stage of reforms. Surely, this is a sound economic policy stance. Within that happy macro framework, the minister has proposed to set out the government’s medium to long term economic goals and reforms programmes.

Finance minister has promised that the government will “formulate an Economic Policy Framework to delineate the overarching approach to economic development and set the scope of the next generation of reforms for facilitating employment opportunities and sustaining high growth.”

In this effort, the finance minister refers to some reforms which have not so far been attempted and these crucial reforms have been put in the back burner, that is, factor market reforms, in technical economist’s terms.

“Our government will initiate and incentivize reforms for (1) improving productivity of factors of production, and (2) facilitating markets and sectors to become more efficient. These reforms will cover all factors of production, namely land, labour, capital and entrepreneurship, and technology as an enabler of improving total factor productivity and bridging inequality”.

Thirdly, promise of financial sector reforms. For meeting financing needs of the economy, the government would bring out a financial sector vision and strategy document to prepare the sector in terms of size, capacity and skills. This will set the agenda for the next 5 years and guide the work of the government, regulators, financial institutions and market participants.

The rules and regulations for Foreign Direct Investment and Overseas Investments will be simplified to (1) facilitate foreign direct investments, (2) nudge prioritization, and (3) promote opportunities for using Indian Rupee as a currency for overseas investments.

Fourthly, the budget addresses some glaring policy lacunae. The current government has been criticised, in course of the last general election, for its failure to generate jobs, particularly for the youth. The budget proposes a series of steps to promote employment in the country. In this strategy, the budget admits, rather widely, that the government can do little to crease fresh jobs.

Jobs must come from the private sector and therefore it provides a bouquet of incentives to the private sector to create fresh employment. Besides, it also offers some facilities to employers to take in terns and apprentices for which the government promises to carry a part of the costs as well.

Among many of these a few deserve mention specifically. To bolster the Indian start-up eco-system, boost the entrepreneurial spirit and support innovation, the finance minister has proposed to abolish the so-called angel tax for all classes of investors.

Secondly, there is tremendous potential for cruise tourism in India. To give a fillip to this employment generating industry, the budget proposes a simpler tax regime for foreign shipping companies operating domestic cruises in the country.

Thirdly India is a world leader in the diamond cutting and polishing industry, which employs a large number of skilled workers. To further promote the development of this sector, we would provide for safe

Lastly, to negotiate more effectively the open trading system of a globalised world, the finance minister has proposed a series of customs duty recalibration.

She explained that the proposals for customs duties intend to support domestic manufacturing, deepen local value addition, promote export competitiveness, and simplify taxation, while keeping the interest of the general public and consumers surmount. (IPA Service)

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By Anjan Roy

China has just concluded its “third plenum” (from 15 to 18 July) which traditionally re-examines and gives fresh directions in the country’s economic policy. The all-powerful Central Committee of the Chinese Communist Party generally holds seven plenums in five years, of which the third is devoted to looking at economic issues and policy challenges before the country.

The most celebrated third plenum, held in 1978, gave an altogether new direction to China’s economy when it departed sharply from policies pursued so far under Mao Tse Tung. The third plenum of 1978, under Deng Tsiao Peng, diverged from Chinese past under Mao and introduced a market oriented economy, liberalisation of policies that allowed private and foreign investments and private ownership of means of production.

With those changes, and fortunately, alongside these economic reset, the whole hearted embrace of China by the USA, had resulted in decades of unprecedented growth that lifted a poor undeveloped country, mired by widespread and deep poverty, to emerge as a modern economic powerhouse, challenging the dominance of America.

The just concluded third plenum, under Xi Jinping’s leadership, was billed as possibly another of the milestones in changing the course of Chinese economy. However, following the closure of the plenum, the official communique disappointed most China observers.

Instead, of new ideas and sharp departures from following the current practices and policies, the plenum seems to have rubber-stamped a “same as before approach”. It has effectively only reiterated faith in Xi’s political and economic thoughts in abject surrender to the ironclad hold of the supreme leader over the present political set up.

But it should have been otherwise, particularly in the context of the crisis through which the Chinese economy is currently passing. This third plenum was being held in the shadow of a slowing economy, severe headwinds for China in major overseas markets, rising unemployment among the youth, deep crises in the country’s property sector and worsening debt crisis for the regional governments and municipalities.

The principal commitment of the assembled top leaders has been a reiteration of the 5% growth target for the country. The ground level reality does not buoy up such an ambition. The Chinese economy has been witnessing a lower rate of growth on the back of low domestic consumer demand. The plenum has paid some attention to this fact, though the document does not elaborate on it.

The bane of the Chinese economy has been the deepening crisis in the country’s property sector. The Chinese economy had come to depend too much on the growth of the property sector and steady rise in property values. Based on these buoyant sectors, the local government institutions have been feasting on the profits from sale of land to property developer companies and earnings from the real estate sector. When the property developers started defaulting on their commitments, the entire superstructure of mutual benefits collapsed.

The local governments had resorted to large scale borrowing from the capital markets, and their load of accumulated debts is unsustainable. Alongside, banks which had liberally provided funds to the property companies are also facing threats to their survival. Worst of all, the ultimate buyers of property and real estates, the ordinary Chinese, are facing the prospect of their life time savings wither.

In such circumstances, who will spend money on consumption, rather than keeping funds aside for the rainy days. This has emerged as a fulcrum of current economic crisis: lack of domestic demand to sustain China’s massive production capacity.

Problems do not come alone. China’s domestic economic woes are being compounded by the geo-political threats that are emerging from all sides. The United States has identified China as enemy number one and imposed tariff and non-tariff barriers. Not satisfied with that, the Americans have imposed a virtually a technology embargo on the Chinese ad banned exports of key technology and inputs to the country.

Presently, the European Union, which has so long been rather expansive towards China, has started hardening their attitude. The EU has just slapped stiff tariffs on imports of Chinese electric vehicles into its market. China has been banking on the EV sector and had undoubtedly scored major victories over all else in EV and battery technology. The sudden clamp down on EV imports by a large market like EU is a shock to the Chinese EV makers.

The hype created around the third plenum in the Chinese state media had generated expectations that the assembled leaders — close to some 400 of them — would brain storm on these issues and come out with radical new ideas.

But the single biggest outcome appears to be the formalisation of the ouster of a senior leader —Qin Gang— erstwhile foreign minister, from the official hierarchy of the Chinese Communist Party. There was no trace of the senior leader anywhere around the third plenum proceedings. Besides, several other top leaders have similarly been absent and disappeared without trace like a former defence minister.

Some optimists have drawn consolation from the fact that the plenum has not come out with fresh boost to the state sector and cramping new restrictions. Already, under Xi regime the Chinese private sector, particularly those in technology industries, have been ostracised and ring fenced.

There is some hope otherwise. In the past, following the third plenum, the apparatus had come out with detailed policy prescriptions in subsequent days. Possibly, there is some lingering hope that some such initiatives might emerge out of the cavernous system of the CCP. (IPA Service)

The article Third Plenum Of Chinese Communist Party Maintains Status Quo On Economic Policies appeared first on Arabian Post.

By Anjan Roy

Taxation of the super-rich is becoming current coin in International deliberations on the global financial structure and funding of development.

In a recent multi-nation deliberations organised by the Heinrich Boll Stiftung of Berlin, Indian participant Rakesh Mohan, former deputy governor of RBI, drew attention to the fact that while the World bank has a paid up capital of $22 billion, Elon Musk’s compensation last year was $46 billion.

Elon Musk and his ilk across the world have huge wealth in stocks in the world’s most valuable companies. But as the share prices zoom and they gain, none of that could be taxed until sold and the gain is booked. This is attracting attention of taxmen and public finance specialists as well as governments.

If the World Bank capital is raised by infusing some $10 billion its borrowing capacity would rise by $50 billion and that much more funds would be available to the multilateral development bank to push for the development of the least developed countries.

Dr Mohan said that taxing the super rich by even at 5% would raise humongous amount of resources for fruitful utilisation in the cause of development of the least developed and push ahead with the MDGs. True. But Dr Mohan also underlined the real hitch in the proposal.

The Musk salary is mostly in the form of stock options. Until Elon Musk converts those options into real transfers and realises his gains by selling his stocks, there is no provision for taxing such enormous wealth.

All over the developed countries, as well as the more prosperous emerging market economies, such build up of massive wealth is taking place. As the stock markets are rising, the super rich are becoming richer without flexing a single muscle.

Consider what is happening in India. The stock markets are behaving as if there is no end to a climb. It is going up and up, the bulls are charging with full force. This means that the India super rich are becoming so much richer.

Take an instance, Infosys founder and principal mentor, N. R. Narayanamurthy, gifted his newly born stocks worth $293 million. This little child is already immensely rich before he leans to toddle. But this amount cannot be taxed as the child is exactly not in a hurry to sell.

Ambanis and Adanis are getting richer by the day and they are splurging on luxuries which are eye-popping even for their compatriots around the world. In the run-up to his marriage, the Ambani family had organised fascinatingly “interesting” parties where the Bill Gates and Bezos. Anant Ambani had sported a wristwatch which cost Rs66 crore, and it caught the eye of one of the richest men of America.

However, none of these families are paying taxes on these mind boggling caches of wealth. They are prospering without paying taxes than ordinary folks are paying through their nose.

Consider, once again. The government is tom-tomming about the sky rocketing GST collections month by month. The union government could have a comfortable fiscal deficit. The states are collecting their share of GST bonanza. But who are paying the GST. The poorest of the poor are paying GST on their each and every purchase.

The humble biscuits are attracting taxes, the “tent-walla” charges service tax on a flimsy shamianas put for marriages of even poor people. And if you are going for a little food at a restaurant for celebration of the good results of your son or daughter, the central and state government also join in as uninvited guests when you pay the bill.

The issue of taxation of the super rich is turning into a thought provoking subject. The Economist had picked up this fiscal enigma, following up US President Joe Biden’s talk of taxing the billionaires for garnering money for social schemes.

The Economist has cited some reports which indicate that unrealised capital gains (rise in wealth from say rise in stock market valuation) amount to $6 trillion of the $11 trillion in wealth held by the super rich. Owner of Nvidia, world’s most valuable company now, saw rise by $100 billion since the artificial intelligence frenzy took hold. Nvidia chips are essential part of AI operations.

The tax law is that as long as the gains are not realised and become accrued income, these cannot be taxed.

The new government is in the midst of its exercises for formulating its budget for the full financial year, 2024-25. In the current season, there is reason to believe that some exercises should be started to look into ways of tapping these massive gains.

But there is an issue.. After all, stock valuations are as transistors water drops on a duck’s back. The valuations are rising but these might just as well plummet. So you tax the rise, what happens when the gains vanish and turn into losses.

But these can be taken care by providing for adjustment of losses when these happen. Because the inflated values of one time might lose ground later cannot be a reason for not charging taxes on astronomical gains. (IPA Service)

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By Tirthankar Mitra

KOLKATA: Roundly defeated by ruling Trinamool Congress in recently held Lok Sabha elections, BJP, Congress and CPI(M) leaderships in West Bengal have gone into brainstorming sessions to find out the cause of their respective electoral reverses. Though all the three parties are seeking to strike deeper roots with a larger section of the people, the game plans to hit the “come back trails” differ.

With 12 candidates of the BJP winning from this state, the saffron camp is chalking out plans to consolidate these victories with an eye on the 2026 Assembly elections in the state. Meeting a larger section of the people in all these Assembly seats making up each parliamentary constituency and propagating the BJP’s political philosophy in a language which they can understand will be the cornerstone of this policy, it was learnt from state BJP sources.

The language in which the people are to be addressed needs to be freed of Hindi words which are unfamiliar to the ears of the Bengali voters. Both meetings at local levels and social media interactions will be the twin tools to reach out to the voters. . An internal analysis showed that in 2024 Lok Sabha polls, the BJP led in 90 assembly segments out of the total seats of 294 as against77 won in 2021 assembly polls. So that way, though the Lok Sabha seats had gone down by six in 2024 polls, the prospects in assembly polls in 2026 look slightly better.

Zeroing in on the words of the saffron lexicon which are unfamiliar to the people of West Bengal, it has been pointed out that Bengali equivalents of these words are to be used to embed the saffron camp ideology in the mindset of the people of the state. It has been suggested instead of “karyakarta”, the word “neta” or leader should be used.

Instead of “suchana”, it is advisable to state that a person would be informed of a specific issue, it was learnt. Apart from this, campaigns highlighting achievements of the BJP-led NDA and shortcomings of TMC dispensation should be conducted statewide.

Such campaigns are to be marked out by its widespread nature and frequency. Several national level BJP leaders have pointed out that the party could have retained the 18 constituencies it had won in 2019 Lok Sabha elections and added a few more this year had a more vigorous campaign been carried throughout the past five years instead of being active only in pre Lok Sabha polls months.

Financial probity of several leaders have come under the scanner after complaints from candidates and booth level activists reached the national leadership of the BJP after the Lok Sabha polls. Several activists manning polling booths alleged that they did not receive the sum promised to them.

Things have come to such a pass that BJP nominee for Krishnanagar, Amrita Roy alleged she was clueless about spending of party funds in her constituency during election though she was made to sign several cheques. Roy was one of the few BJP nominees in the state when Prime Minister Narendra Modi rang up to encourage.

The attendance of huge crowds in the rallies of Prime Minister, Modi and other senior BJP leaders not being reflected at the ballot boxes have raised queries about the organisational skills of the state leadership. Several state leaders have been grilled by their national counterparts in BJP on this issue.

With the strong presence of central para-military forces before and during elections, the plea of terror tactics of some TMC backed goons preventing BJP supporters from casting their votes lack credibility, it was pointed out. In this backdrop, the state leadership has been asked to beef up the organisation both in terms of motivation and numbers with an eye on the 2026 elections, sources stated. The central BJP leadership is expected to make its own review of Bengal party’s performance shortly and on that basis, the state BJP will adopt future programmes to fight better in 2026 assembly polls.

As regards the Congress, an electoral alliance between Congress and the Left read CPI(M) in West Bengal is under scanner as national leadership of Congress is playing ball with TMC to corner BJP. Though most of the state Congress leaders are opposed to TMC, their position has weakened after PCC chief Adhir Ranjan Choudhury whose opposition to TMC is well known, was defeated in his pocket borough Behrampore.

The CPI(M) which is staunchly opposed to TMC is also having second thoughts about continuing its alliance with Congress. Ever since the alliance came into being in 2016, Congress has reaped the most advantages from it. . In 2024 Lok Sabha polls also, the Congress got one seat while the CPI(M) and other parties of the Left Front got no seat just like 2019 Lok Sabha polls.

But as things stand now, the state Congress will be launching agitations against the BJP-led NDA government at the Centre, sources said. It will however, steer clear of stirs against the Trinamool state government.

Congress-TMC ties received fresh wind in it’s sails after a closed door meeting between chief minister Mamata Banerjee and senior Congress leader P. Chidambaram at Nabanna, the state secretariat last week. The leaders remained tight-lipped though Banerjee is reported to have received a request to campaign for Priyanka Gandhi at Wayanad.

The Congress is seeking a proactive role from TMC against BJP at the Centre. Though both CPI(M) and TMC are part of the INDIA coalition with Congress, the Congress seeks to downplay it’s proximity with the Left in the days to come.

With only the Malda (South) seat in it’s kitty after the Lok Sabha elections, the Congress national leadership wants its counterpart in the state to cement its alliance with TMC at the state level. There has been reports of a drop in the animosity between Congress and TMC activists in the wake of Chidambaram’s visit.

With its influence on the downslide in West Bengal, the state Congress unit has ridden on the crest of organisational strength of the CPI(M) all these years. Despite central leadership wooing the Trinamool Congress at the national level, the state Congress is continuing its tie up with the Left in the coming four assembly by polls. Since Adhir Chowdhury may be replaced as the PCC president shortly, the future of the Congress-CPI(M) ties will be decided only after the takeover by the new president.

As regards the Bengal CPI(M),, there was total gloom in the post-election meeting of the state committee held last week. There was no light at the end of the tunnel..The leadership took no lessons from the 2019 Lok Sabha polls as also 2021 assembly elections. The same reasons were mentioned .- the party was the victim of the TMC-BJP binary. However, te party leaders at least agreed that the CPI(M) has lost its political base among the most marginalized sections of the people in Bengal. who stood by the party in substantial number even up to 2016 assembly elections. The downturn of the CPI(M) has been unstoppable in the last eight years. For the Bengal CPI(M), the party is still not reconciled that Mamata Banerjee has hijacked the Left agenda and implementing it vigorously. The CPI(M) has to work for fresh agenda and carry out massive organizational rejig if the Party wants to come out of the Zero syndrome in 2026 assembly elections. (IPA Service)

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By Anjan Roy

The United Kingdom is facing a dilemma. It is not able to issue, for the time being, the regimental badges for its military service personnel bearing the imprimatur of King Charles. The reason: Chinese supplies. The UK issues the badges worn on berets, with their sovereign’s imprint on them, indicating the regiments they belong to. The officers are given embroidered cloth badges and ranks are given metal badges. These are supplied by a native British firm.

However, the British firm buys components from a Chinese firm. The suspicion is the Chinese can implant tiny, undetected chips in the badge as components which would then be able to detect their location, opening the possibility for a serious security breach.

The alternative is new suppliers have to be nurtured and developed within the country. But that will take time and the new sovereign’s imprint would in turn take time to appear on these badges. London’s Financial Times, has reported on this imbroglio in its weekend edition. This might be a small coin of a problem for the UK. But this is symptomatic of the mental state of Europe and the entire western bloc over China. They are suspicious about China and its intentions as the country acquires greater heft both economically and consequently in its defence capabilities.

There has been a running battle between China and the United States over the operations of a major Chinese company, Huawei, a telecom equipment giant which is threatening the technological superiority and stranglehold of leading American and European telecom giants.

It all began when Huawei’s supplies of telecom components for the 4G and 5G networks were detected to have spying capabilities. These telecom equipment were thought to be enabled to allow Huawei and Chinese state’s intelligence arms to snoop on rivals and other countries.

Major western countries thereafter imposed bans on use of Huawei-supplied components. This was a major setback for the western telecom networks. Huawei had made major strides in 5G technology and the western networks were keen to deploy these products to achieve their 5G objectives. Additionally, these products were much cheaper than those supplied by western companies. Adopting these western products and hardware meant that technology was at times of an older generation and then these were costlier.

Notwithstanding these objections, the entire western world had shifted from Huawei technology and components fairly fast. This affected Huawei commercially and its operations were virtually strangulated. China remonstrated. America also banned exports of sensitive items like chips to Huawei and the entire spectrum of Chinese technology companies. Denial of the most advanced chips meant severe setbacks for the company and China.

President Xi Jinping had denounced the American moves to deny such advanced technology to China and to Chinese companies as a violation of the principles of free trade. American sanctions against the Chinese have been rather heavy handed. All western companies handling sensitive technologies, including what is commonly referred to as dual use capable technology, were strictly instructed not to send any of their advanced products to China.

China responded with the entire Chinese state backing its companies to develop the latest technologies on their own. However, this is not easy. The basic blocks of any technology development are the latest leading edge industrial chips, used in everything, from a computer to ordinary equipment. Denial of these could forestall all activities.

But chip development is not only a question of money and outlays, it is also a question of developing capabilities in the underlying basic sciences. China has, therefore, adopted a strategy of developing science and scientific capabilities and has earmarked huge funds for these science based activities and learnings.

The Chinese had started well in advance and now they look like they’re in a winning position. Many of the Chinese learning institutions, research bodies and universities are global class sources of new research and findings in fundamental sciences. And, as if there is no dearth of issues, the latest flashpoint is over electric vehicles.

Europe is scared to death of the prospect of huge invasion of Chinese electric vehicles into the European market. Taking the cue from Tesla, the Chinese had concentrated on developing its own capabilities in this green technology. With lightning speed, Chinese companies have emerged as leading edge producers of EVs. And because of the early start as well as massive state funding of the electric vehicles companies, their prices are rock bottom. The Europeans have found that it is impossible to fight the Chinese EV in the open market. European Union authorities and the trade commissioner have imposed stiff import tariffs on Chinese EVs.

But even with the high tariffs, Chinese vehicles are still competitive. Therefore, some more measures are needed if the European car markets are to be protected from Chinese incursions. Where the Chinese have clearly gained over their European rivals, or for that matter any competition, is their ability to produce high quality and cheap car batteries.

Car batteries are the most important determinant of the viability of any electric vehicle project. And the Chinese are the undisputed kings. The Chinese also have a virtual monopoly over supplies of critical inputs, like rare earths, which are the essential ingredients of any battery project. They have large indigenous supplies as well as mining rights in some other countries.

The West is now ruing its earlier strategy to wean over China from its Communist ways and replace it with what is commonly termed as “Liberal western democratic system”. The West, principally led by the United States, had gone overboard to accommodate the Chinese into the global economic system.

The Americans had campaigned and literally held China’s hand and inducted them into the global trading system. From day one, China took full advantage of the situation and went on pursuing its goal of China specific development and gaining economic might. Along with that. China developed its military capabilities, bluffing all the way and transgressing every international norm. Now that China has gained its muscles, it is launching a full scale war on the so-called America led “global order.” It is using Russia as a pawn in this struggle. A full scale confrontation could be imminent. If that happens, India stands to gain as a bystander. (IPA Service)

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By Anjan Roy

Whatever you have thought about Nirmala Sitharaman and the budget she presented earlier this year, one point you have to concede. She is an honest person. After presiding over the government of India’s expenses, running over into lakhs of crores, the finance minister admitted she did not have enough money to fight a parliamentary election.

Indeed, Indian elections are horrendously costly and it is a wonder how these are fought so lavishly by so many of the contenders. Election funding has always been a tricky subject and there have been twists and turns over the years.

Where would the money come from, really. There was a time when corporate contributions were legal and corporates were expected to contribute openly and legally, This was cut short by no less a person than Indira Gandhi, who banned corporate contributions to political parties and elections. Subsequently, the ban was scrapped by her son.

In pursuit of a transparent election umpteen number of proposals were mooted. One of the top line one was state funding of elections. That was not immediately embraced for fear of unwrapping of government finances for ransack by political parties. Even now, the two Communist Parties are favouring such a funding mechanism.

Leaving the two Left parties, most political parties are queasy about political funding as they embrace money making on the sly. While the BJP is assaulting the concept of illegal money making, it has accepted electoral bonds. But if anything, the mystery about election funding has become even more deeper with the proceedings around whatever we know about electoral bonds.

A lottery king remains the Lord of the Ring of donors to electoral bonds. Who he benefits, is not yet clear. But obviously, under the smokes screens of matching contributors to beneficiaries, it is still possible to guess who is contributing to which parties — these have to be between the regions of a contributors principal operation and the dominant parties in that region.

It stands to reason that the south based lottery king should benefit some of the overwhelmingly popular Southern parties. In the east, the electricity distribution company, enjoying a monopoly in the city of joy would bring mirth to the local political boss rather than a distant entity in UP or Chattisgarh.

The lion’s share going to BJP is not the last wonder either. But some of the regional war lords have made away with consequential booty. Consider as an example the small arithmetic: BJP has to cater to 543 seats along with its allies across the country and collected Rs 8250crore. So collections under electoral bonds per seat it will contest would be around Rs 16 crore if it is taken that BJP will contest in around 500 seats leaving the remaining to the allies. This electoral bond mount is only a small part of the actual amount the Party will be pending for its party candidates.

In the same way, the Trinamool Congress has collected Rs1600 crore and it has to cater to roughly about 42 seats, plus/minus a few more. So it has a respectable amount of Rs38 crore per seat for the contest. Not bad for the smaller party.

Leaving aside the individual details, which might not be very pleasant for many, the dance of democracy in India is a costly affair. Even with its understated snooty attitude to anything outside of the Western Hemisphere, The Economist magazine of London admits that the current year’s Indian general election could be the world’s costliest. Unbelievably, larger than even the US presidential election.

The last general election in 2019 is estimated to have cost around $8.6 billion, according to a Bloomberg back of the envelope estimate. The current one, is expected to deliver a bomb at around $12 billion. With a $3.5 trillion economy of the country, the general election should be a hit to the extent of only about 0.15% of the GDP. Small change, most will think.

Not so, indeed, for two reasons. First, a general election invariably pushes up the prices. Since most of the expenses will be at the ground level, and the money goes into the hands of those ground level operatives, it introduces within a small time span some more disposable income.

Percentages apart, infusion of such money all on a sudden into the lowest levels result in a little spurt in demand. In a situation when the prices have been rising steadily for some time, the guardians of the price line must be a little cautious in the situation. Any hopes of a more accommodative monetary policy would be a little out of context.

Secondly, most of the expenses will be in hard cash. Consequently, the expenses will be what can loosely be called in black money. Donors and spenders all will revel in expenses where pan numbers will not be the first point of enquiry. A spike in black money circulation will have its implications.

Presumably, I believe, another round of demonetisation would not be on the policy-makers horizon. (IPA Service)

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By Anjan Roy

Japan, once the most highly rated economy, is officially in recession, with its GDP shrinking for two consecutive quarters. United Kingdom, currently a pale shadow of its past glory and long discounted as a major economy, has also just landed in recession posing questions about Prime Minister Rishi Sunak’s economic policies.

Underlying all Japan’s problems is its shrinking population. Japan is showing the changes that overcome a country when population is shrinking rapidly. The once dominant industrial sector is facing shortages of hands. An ageing population is also showing falling domestic demand. Domestic consumption is down by close to 1% year on year in the last quarter.

The Japanese yen is eroding. It went down by 6.6% over last year, against the US dollar. Since the country is dependent on imported oils and gas, the costs have risen, even if the global prices have remained the same. In the same way, imported food items constitute 63% of total consumption. The rising yen would impose a fresh costs on consumers.

Germany, which is currently number three economy in the world in terms of its GDP size, is facing deep uncertainties on many fronts. German economy is rather uncomfortably dependent on exports for its survival. Its benchmark industry, automobiles, is facing existential threat from Chinese auto makers.

As the world is drifting fast towards electric vehicles, the big German cars are ill-suited to change over to electric traction from internal combustion engines. The electric cars demand better technology for energy storage and these need specialised metals. Battery technology so far is not one of the strong points of the German automobile industry.

Germany is demonstrating a basic shortcoming which is more or less evident in all the developed economies in Europe. These countries are facing a twin problem of lacklustre domestic demand as well as shortages of working hands and skilled personnel.

These countries are ageing fast and as a result, they are facing shortages of workers. Some are seeking to overcome these shortages by liberalising immigration. Former German chancellor, Angela Merkel had followed particularly liberal immigration policy, but popular sentiments have turned adverse giving rise to far rights parties. Germany, in particular, is facing this shift in popular sentiments more acutely now than others.

The principal road block giving rise to all Germany’s woes is the uncertainty about energy supplies. Ms. Merkel had banked on cheap natural gas and other energy supplies from Russia. In pursuit of that strategy, she had even gone to decommission all nuclear power plants, making the country abjectly dependent on Russian supplies. Now that supply had snapped, leaving the country facing a dire energy crisis.

Above all, China, which had long established itself as the second largest economy of the world, and romantically viewing the prospect of becoming the number one in the shortest possible time, is suddenly in the throes of a deep self-made crisis. Its property sector is dragging down the entire economic super-structure.

As if there was nothing better to do, the Chinese supreme leader, Xi Jinping has been seized with the idea of cutting its economic tsars to size. The widely successful technology entrepreneurs of China, starting from Jack Ma, have been virtually throttled by the Chinese Communist Party. Jack Ma had proposed the largest IPO, which had to be jettisoned for comments he made which were not liked by the Chinese communist leadership.

Many other company chief executives have been punished by the top leadership.. Every now and then, chief executives of top firms vanished and then, long afterwards, reemerged as ended personalities unable to lead their former charges.

The latest in the punishment schedule has been the head of the securities markets in China. The Chinese stock market was going through a rough patch and the markets slid. That created deep uncertainties in the economy. The foreign investors had also withdrawn funds from the Chinese markets. No wonder that the market should tank.

However, the blame fell on the market regulator. Xi Jinping himself had taken a meeting to soothe, so to say, the investors. Instead, summary sacking of the regulator had further fouled up the investment prospects. The markets are expecting some big sops from the government. But little has been done so far to stimulate the economy and the steps taken did not make much of a difference either.

The acts of omissions and commissions of the Chinese government, rather the Chinese Communist Party, had spoiled the confidence of the foreign investors in China and funds are being withdrawn. This stands in sharp contrast to the merry days when foreign investors were competing with one another to invest in the country.

China being such a big economy and a large market for industrial raw materials and commodities, its dire straits mean bad news for many economies across the globe.

Nonetheless the world economy is continuing to grow and fairly steadily. The global GDP growth is estimated to notch up to 3% in 2023, which is remarkable in the present context. Unemployment rate is also inexplicably low and employment growth is robust in USA. The latest estimates put creation of fresh employment in America at 355,000.

America, the principal engine of growth for the rest of the world, has what “The Economist” described as the gravity defying growth. The US central bank had followed a high interest rate policy to fight rising prices. It had swung from an excessively accommodating monetary policy following financial crisis to a step by step hikes in the policy rates.

Every economist worth his name betted on America entering into recession. But USA has chugged on notwithstanding without stumbling into a recession. US domestic demand is buoyant.

Even in the midst of an early recession, the observers believe the Japanese economy will climb out of a recession shortly. Nikkei, the Japanese stock market index, is at a record high at 38k and the index is rising still.

There is currently every reason why the global economic situation should turn turtle and nosedive into a deeper fall. After all, wars are raging in Europe and in the Middle East. The principal route for global trade, via the Red Sea and through the Suez Canal is increasingly unusable given the Houthi rebels threat at international shipping.

America and China are having skirmishes in the South China Sea and over Taiwan. Sometimes these are looking too close for comfort. Any war between the two super-powers could be disastrous. Russia-China nexus is a cushion and support for Iran, which is always seeking ways to settle score with America and the West. Any heightened clashes could flare up into a larger confrontation.

Some analysts of the scene are describing that the world is facing a “Poly Crisis”, some are describing it as the “New Global Disorder” and so on.

The defiant growth of the globe is a riddle which some of the economists are now seeking to explain. One study indicates that any adverse news is worn out in course of a couple of months and the major players adjust to its downside effects. It looks that this is the way for survival and maybe we are entering the era of a new chaos economics. (IPA Service)

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By Anjan Roy

The interim budget presented on February 1 is a hopeful document, pinning its faith on the continued buoyancy of the Indian economy.

At the outset, the finance minister, Nirmala Sitharaman, should be complimented for presenting the shortest and a crisp budget speech, instead of a meandering one of at least one and a half hours.

Following tradition of desisting from major announcements and changes in an interim budget, the finance minister principally laid a vote of account for carrying on government expenses.

But even within that limitations, the budget statement makes some clear points. Her speech shows the Indian economy in robust health. She could assume higher earnings for the government even without any hikes in rates, and a revenue buoyancy such that her borrowings targets next year were anticipated to be lower than the current year even in absolute terms.

Secondly, even within the constraints of an interim budget, she has proposed an ambitious research and development fund, with long term lending to start ups and other research and technology based units, for as long as fifty years. These are virtually grants for such activities rather than loans.

Supposedly, in the current environment of far reaching technology and research products, the government is seeking to place India at the forefront of such activities. It is not only the traditional manufacturing growth than the prime minister had been talking about for some years now, the government is setting itself targets and objectives of even more sophisticated AI and technology driven growth.

Coming to the hard core of the budget proposals, the finance minister has kept her entire tax structure unchanged, leaving the rates where they were, kept the capital expenditure at an ambitious level, and yet anticipates the fiscal deficit to come down significantly. Fiscal deficit in the 2023-24 fiscal year has been bettered at 5.8% of GDP, against the budgeted level of 5.9%. This is set to go down to 5.1% of GDP in 2024-25.

With lower estimated borrowing requirements, the finance minister said that both gross and net borrowing for the next financial year, 2024-25 would be Rs14.13 lakh crore and Rs11.75 lakh core next year. These would be lower than such borrowings in the current year. This could be singularly novel development.

In response to these announcements, the bonds markets in India have softened as with the prospects of lower government borrowings from the market, the interest rates could e expected to remain softer.

This could be possible only if the economy maintains a high growth traction yielding ever larger revenues to allow the government increase capital expenditure and at the same time peg the government deficit at a much lower level 5.1% of GDP.

With this underlying assumption of a high growth rate, the finance minister has announced a jump in public capital expenditure by over 11% to Rs 11,11,111 crore. It was immediately clear if the FM’ s fascination with “eleven” had some mystical qualities for self fulfilment.

Giving the budget mathematics, it is roughly true that the FM’s wishes could be easily fulfilled if Indian economy could hit a double digit growth rate, close to that magic figure of 11or thereabouts. That is a tall claim, but neighbouring China had for sometime grown by double digit.

Going by the recent trends, it is not a very unreasonable expectation as India continued to grow fast even when the rest of the globe economy was showing signs of slowing down, particularly our large neighbour, China.

As for the other features of the current interim budget, the finance minister has stuck to the anticipated political script.

By way of her idiom for the budget, Ms Nirmala Sitharaman has tried to appease the vote banks. She has kept four segments of the population in sight for special attention, whatever that could mean in practice. The budget aims to address the development needs of four broad segments of population: the poor, the youth, women and farmers.

All governments work towards the development of the poor and bring relief to them. Years back, Ms Indira Gandhi had brought to the fore this issue with her “Garibi hatao” programme. Till today, the poor is still there high on government’s populist menu. No exception is the current government.

She has claimed credit for lifting 250 million people from under the poverty levels since 2014. The government, she says, would like to move away from entitlements politics to making the poor a part of the entire development process. She has claimed that the direct benefits transfer policies had worked wonders.

Women entitlement is the second plank of the populist appeal of the budget when a general election is just months away. Since a half of the population are women, it is reasonable strategy to follow policies for women entitlements.

As for the youth, the finance minister has recounted the initiatives to provide better schools and education. She has recounted the setting up of new IITs, IIITs, business schools and other bodies. Additionally, the youth being given scope for achieving better skilling and expertise.

However, the finance minister does not make references to youth employment trends and schemes. After all educated youth unemployment is a major issue and scores of educated youth are not getting the kind of jobs they aspire to.

Of course, these are not unique to India and fast-growing China has been facing similar problems about youth employment, so much so that the Chinese have stopped putting out figures on youth unemployment in view of the surging numbers.

Farmers are always a critical section for all governments. Institution of an electronic national farm products trading platform has helped farmers to go directly to the market and get a better price. Better schemes for crop insurance and other cushions to meet with the uncertainties have also been instituted.

Not surprisingly, the finance minister had set her budget as a milestone statement of the achievements of the current Modi government in sound economic management. As of now, things are looking good and the economy is doing fine.

In fact, the Indian economy has the resilience to grow and develop on its own, provided the government does not do anything harming the economy and its rhythm. The stunted growth record has been mainly the handiwork of governments, mostly unwittingly. (IPA Service)

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Congress president Mallikarjun Kharge on Friday said anyone having faith in Lord Ram can visit the Ayodhya temple any day and added the BJP was attacking his party over the decision to decline the invite to the January 22 consecration ceremony as part of “a conspiracy”.

The Congress has never hurt any religion or guru, he said, adding it will not fall for the BJP’s diversionary tactic and will continue to raise people’s issues such as inflation and unemployment.

Kharge and top Congress leaders Sonia Gandhi and Adhir Ranjan Chowdhury have “respectfully declined” the invitation to attend the Ram temple consecration ceremony on January 22, accusing the BJP and the RSS of making it a “political project” for electoral gain.

The BJP has criticised the decision and dubbed the Congress “anti-Lord Ram”.

To a question on the BJP’s attack, Kharge told reporters here, “As far as attending the function, those who have faith (aastha) can go tomorrow or the day after. I have made it clear on January 6 itself. It is not correct to attack us and this is a conspiracy of the BJP.” He also said this is the reason why the BJP has been raising the issue again and again. “We do not want to hurt anyone, any religion, any guru. This is not our issue. Our only issue is what (Prime Minister Narendra) Modi ji has done for the people on unemployment, inflation, border issues and on the Chinese (intrusions) and what is their foreign policy.

“The poor who have been destroyed and are harassed…we are concerned about them and are asking him about them rather than this,” the Congress president said. In a post on X, Kharge said the Congress will not fall for the BJP’s diversionary tactic and will not stop raising public issues.

“Our only issues in 2024 are What work has the Modi government done for the unemployed youth? What steps should be taken regarding inflation? What did you (govt) say about Chinese infiltration on the border? We are concerned about Dalits, tribals, backward classes and poor sections of society, which the BJP is not,” he posted. The BJP earlier shared a post on X alleging, “Congress’ tradition is of opposing Lord Shri Ram.” It also shared a 35-second video and a poster which read “Ram Virodhi Congress”.

The 35-second video carries the statement of Rahul Gandhi where he stated that “if you don’t believe in past life how can you believe in Ram.” The BJP also said in the video that the Congress termed the Ram Setu imaginary, rejected the very existence of Lord Ram, raised questions on the Supreme Court verdict on the Ram temple and turned down the invitation to the consecration ceremony.

With inputs from News18

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By Anjan Roy

After fiddling with the Indian economy for years, Raghuram Rajan, former governor of Reserve Bank of India, finds himself in a kind of Hamlet moment. Rajan had observed that India would be lucky to reach a 5% growth rate during the current fiscal year. He was heaped with criticism for his pessimism and downside projections.

Rajan is admittedly one of the most level headed and conservative economists who does not make wild kind of statement. However, there are probably some chinks in everyone’s armour and occasionally even the most astute lands in quagmires.

Rajan has landed himself in such a situation.. While he was taking of a sub-5% performance for the Indian economy, it turned out to be plus 7.2% growth in 2023-24, as revealed by the figures given out by the national statistical office. The difference between a sub-5% and plus-7% performance is immense for a large economy like India.

Rajan over enthusiastically sought to explain the more than expected performance of the Indian economy in terms of sheer luck. In an interview he sought to explain this robust growth performance to certain global developments over which India had no control. But these were nonetheless hugely positive for the Indian economy.

Of these, Rajan took two to explain the more than expected turn out. First, that the industrial economy of the developed countries did not land in a soup and recession as was widely being expected. Instead, they are merrily growing and showing healthy rates of employment growth. These should have generally buoyed up India’s exports and economic activity at home.

Secondly, Rajan referred to the slip shod functioning of the Chinese economy and the “muted” demand for commodities from China. Thus, China being the second largest economy in the world, its lacklustre growth and performance meant lower demand for everything and thus somewhat depressed prices in the global market. The Chinese situation had translated into lower commodities, particularly for oil, helped India majorly.

But looking a little closer, it will be noticed several factors are at play, not just the luck factor. The two principal points raised by Rajan. First, that the developed world did not melt down and thus helped India. However, India’s exports in the current year (2023-24) were not particularly buoyant, in terms of the GDP trends. These in fact flattened out at the same level. Maybe, that these did not drop, itself may have been helpful. But it does not typically work out that way.

As for oil imports, the oil prices did after all rise. Over last one year, the oil prices had inched up and in between, when the Israel war had raged, there were moments when the markets expected the oil prices to shoot. India, admittedly, got a rising part of its crude requirements from Russia and fairly at price levels. However, the oil prices and the total import bill has been rising.

If one looks at the GDP figures there are several trends. There is broad based and robust growth trends. The construction sector has grown by 10.7% during the last year, and this has critical importance. Construction creates the largest number of employment and additional economic activity. Double digit growth in the sector must have been an engine of growth.

The three major sectors of the economy have all shown resurgence. Agriculture grew by close to 2%, mining grew by over 8% and manufacturing by 6.5%. These create the ground for ripple effect for broad based growth.

Until now, several leading economists have warned against India’s growth engines. They had pointed out that India was riding on a single engine for growth — that is, domestic consumption expenditure. What we see in the national income statistics is the tapering trend in the consumption expenditure.

Private final consumption expenditure as a percentage of GDP slipped from around 58.5% in 2022-23 to 56.5% in 2023-24. This means that private consumption is less of a lever for the GDP. There is further development. While per capita GDP has grown by the same margin in 2023-24 as previously, but per capita private final consumption expenditure has grown by a much smaller extent.

So is the private consumption spurt slowing down comparatively? In that case, gross savings and investment should rise. Gross fixed capital formation (GFCF), which is a proxy for overall investment in the economy, has risen from around 32% in 2021-22 to close to 35% in 2023-24. This steady rise in the investment level in the economy must be contributing to the growth.

In this context, Rajan has referred to the stepped up infrastructure investment of the government. He has pointed out that this is going right and thus pushing up the growth potential of the economy. True, because infrastructure is an enabling condition which allows economic activity to granulate. Roads and bridges make it easy for products flow from say the farms to the markets and vice versa.

But then, there are other factors at work, as well, which have not been taken care of. A major contributing factor seems to the digital stacks.

If you are going to a market and buying vegetables or any other thing in the market, the small vegetable vendors or stationery seller would possibly ask you to pay “on-line”. Previously, none of these smallest of the small businesses asked for anything other than cash. They took the cash from buyers and rolled it over for the next day’s fares.

These trades or businesses until now never entered the formal channel. Now, these are entering the informal economic accounting world. This is no small measure of contribution. The aggregate volume of business of all these tradespeople are being captured in the official GDP enumeration now which never entered the stream until lately.

Secondly, these tradesmen are entering the formalised banking stream. Once the banker knows the banking net worth of these people, they would qualify for credit and other business facilities. Their turnover could rise several fold and taking the small-town and villages economies to the next higher level.

The credit-worthiness of the small businesses and their bankability is creating a new paradigm for the economy. The basis for the operation of the economy is structurally getting changed. It is transcending to a new higher level.

If nothing, this rising formalisation and the bankability of the smaller businesses is creating a situation which will further give boost to the prospects of the Indian economy. We can thus look forward to growth, when even the global economy might be under a cloud.

What we need is a ring-fencing of the Indian economy from the possible adverse turn in the global economy. Out economic managers are no strangers to handling such situation. The RBI had very effectively put guard rails to protect the Indian to a large extent during the global financial melt-down.

Maybe, we should expect such Chinese walls in the coming days when the global economy may face severe challenges. (IPA Service)

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By Anjan Roy

Economic forecasting is always hazardous. It is more so in the current scenario. There are always any number of uncertainties about the future. But currently these are multifarious. No one really knows, including the dramatis personae, what will happen in the next week, let alone in course of the coming year.

Take a sample. It is no way possible to divine how the Gaza War will shape. Will it erupt more generally over the Middle East theatre or the present war will lead finally to a permanent solution.

Similarly, uncertain is the drift in Ukraine war. Russia has suddenly stepped up its air raid on Ukraine. Maybe, this was prompted by the devastating attack on naval installations in Crimea by Ukraine which sank one of the warships of Russia. At the same time, the ground war is going nowhere and neither Russia nor Ukraine is making any significant progress.

The Chinese economy is showing clear signs of deceleration. The economy is in the throes of a crisis over the extensive stalling of its housing and real estates sector. There is fear that the massive systemically important housing finance companies would default.

As if to add to the Chinese worries, the fear over Taiwan is mounting. China is stepping up its campaign and making every effort to influence the poll outcomes. Encouraged by the latest Russian successes in bamboozling Ukraine, China might also play its threats to Taiwan, involving American responses and involvement.

Any of these black swan events can trigger forces that could upset the current balance and pace of growth of the global economy. That is the prime worry for the central banks as well as the policy makers.

The first victim of a wider war in the Middle East would be a consequent turmoil in the oil markets. In case, any of the major oil producers get sucked into the Israel-Hamas it will have a ripple effect on oil production and supplies. Disruptions in the oil production and supplies will jam up prices and influence overall price levels.

In many ways a fresh upswing in inflation will be the most potent blow to the global economic prospect. Inflation has been rising, particularly, in the United States after almost a decade of stable and low prices. Many economists had spoken of inflation as a past worry and that low inflation age had dawned.

American inflation was rising and the US Federal Reserve had started a rising rate cycle in the face of define inflation trends. Inflation in US had inched up to 5%plus and for a while it had touched 8%. Such levels of inflation were not seen since the end of war. Then, with rising rate cycles and some other factors, inflation began abating.

So much so, that the Federal had initiated talks about reversing the rising cycle and start easing up a bit. Any inflation reversal at this point of time will mean the Federal Reserve could again start its inflation fight with a hike in interest rate.

For some time now, the talk among economists had been whether with rising inflation and Fed’s anti-inflationary package, American can escape a recession. In fact, it is the recession word that is the most widely used word among economists now. Will the US be able to avoid a recession following the fight against inflation.

It has been seen that monetary tightening cycles for anti-inflation purposes is invariable followed by a recession after a gap of fifteen to eighteen months. As such, the Federal Reserve had started tightening cycles, which is now seeing moderate inflation. But will a recession follow.

A recession in American would invariably rip the prospects for the global economy and big to sell everybody would be affected in an interconnected world. Fortunately, so far, USA had avoided a recession and labour unemployment is even now at a very low level. Economists are trying to define how US had avoided recession and yet interest rates have been raised.

The explanation being offered that the US might in the end avoid and hard landing with a recession on hand. The US would achieve a soft landing, which has not happened since post war. That would be a miracle in policy formulation and economic management.

The second threat for the global economy is from China. Chinese economy is slowing down. Forget those days of sing along Chinese enemy growth of 8% and above. Now the Chinese economy is estimated to grow by less than 5%.

Far worse, China had so far flourished and grown on an economic model which had factored constantly rising investment. Whenever the Chinese economy sagged, the authorities let loose a spate of large scale investment which then crated fresh demand for everything from steel to household goods.

That model has seen the end of its run. It is no longer possible to kick up investment into capacity creation as huge capacities have already been created over the years. There are new towns on fresh areas which remain unoccupied. Entire housing colonies have remained deserted and often the promoter companies are in deep debts which they are no longer able to service.

To add to a worries, the Chinese Communist Party (CCP) under Xi Jinping is reassuring party authority over everything, including now the corporates. Entrepreneurs have been threatened an in many cases chief executives of key Chinese companies have simply disappeared.

These official moves have throttled the entrepreneurship spirit in China. The moves have worst affect the Chinese technology sector where some of the key promoters have been cut down and their initiatives stalled.

What we see now, is that both the economic super-powers are facing some serious structural problems which are not going to go away easily. Their combined economic impact mean a lot for the global economy and the prospects of growth in 2024 and beyond.

Any of these black swan events might set in reactions in the financial markets and result in large scale flow of funds. Uncertainty in US would invariably result in withdrawal of funds from the emerging and developing economies. Such capital flights could have multiplier effects in the developing economies through foreign exchange markets. End result would be economic melt-down.

Hopefully, such fear mongering should be merely kite flying. These would never come to pass. But then, it is better to be informed of the challenges and threats than be complacent and smug.

After all, laxity resulted in the worsening and compounding of the woes of the pandemic. Let us think hard how the emerging economies can be ring fenced from the worst slippages in the two economic giants. (IPA Service)

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Backed by government spending on infrastructure, building, and construction, domestic steel demand is expected to remain strong in 2024. Realisations in the domestic market are expected to remain strong, even though imports could remain elevated. Eports will remain stretched across key markets, beyond Europe, in view of the global slowdown in demand.

Market sources peg domestic demand to be in the double-digit range, while research firm Crisil expects Indian imports “elevated around the 6 million tonne (mt) mark this fiscal.”

Crisil said in a report that steel imports were around 5.6 per cent of domestic demand at 6.7 mt. “We expect imports to be around 5.5 per cent mark this fiscal year.

Ranjan Dhar, CMO, ArcelorMittal Nippon Steel India (AM/NS India), told businessline, that the Indian steel sector is currently grappling with import-induced headwinds, “but the long-term outlook looks positive.”

Reversing a near-three-year trend, India, currently the second largest crude steel producer globally, turned net importer of steel in November this year by 0.3 mt.

Traders, primarily, imported 4.3 mt across categories like coated steel, etc. (up 14 per cent y-o-y) between April and November, compared with exports for the period that stood at 4 mt (declined by 6 per cent y-o-y). This marked a drastic change in India’s competitive landscape.

According to Dhar, for the past one to two months, market prices have been trading at a discount to mill prices. “However, with global prices on the rise, we expect market correction, leading to price hikes in the coming weeks,” he said, adding that the influx of imports from China, Vietnam, and Indonesia is hampering India.

Most of the imports came in from China, as per initial data available with the Steel Ministry. Vietnam, once a key export market for India’s mills, is now one of the largest sellers to Indian traders.

“If we remain open to imports and the domestic demand is good, then exporting countries will continue to participate, a challenge for Indian mills,” Dhar said, adding that “to ensure sustainable growth and expand capacity, maintaining healthy margins remains crucial for domestic producers.

The changing market dynamics have also made the Ministry and Centre take note, as they have begun initiating discussions with the industry on the imposition of possible safeguards and their legal tenability — tariff rate quotas, port-side surveillance and testing, removal of the lesser duty rule, among others.

China, the world’s largest producer of the commodity, is yet to pick up on expected lines post-opening after Covid-induced closures.

However, oversupply has led to subdued prices. Over the past few months, Chinese mills have been facing margin pressure, mainly due to high raw material prices and a depreciating yuan. Although the Chinese government is trying to keep demand afloat with infrastructure spending and relaxing policies on property ownership, real estate continues to be in a recessionary phase.

In the meantime, Chinese mills have started pushing volumes into the global market at highly competitive prices.

“Between January and November this year, exports from China have increased 35.6 per cent to 82.7 million tonnes — the highest since 2016,” Crisil said in its report.

Unable to compete at such low prices, Indian exports have kept export offers on hold since mid-September, apart from to the EU.

According to Jayanta Roy, Senior Vice President and Group Head, Corporate Ratings, ICRA Ltd., the external environment remains challenging in most of the large global steel-consuming and producing hubs.

“However, given the aggressive deleveraging during the previous upcycle, the industry’s leverage (total debt to operating profits) is still expected to remain at a comfortable level of around 2.0–2.5 times in FY24,” he said.

Since exports play a crucial role on domestic steel prices by balancing supply with demand, this development has been keeping domestic mills on tenterhooks.

Strong growth momentum has supported steel prices in India.

Coking coal, a key feedstockfor steel making, shipments coming in are at a five-year high at 38.14 mt, indicating improved steel demand here.

“India has clearly bucked global trends,” said a senior Steel Ministry official, pointing out that capacity utilisation across India’s steel mills are a high 83 per cent.

Production of finished steel (April–November) increased by 13 per cent y-o-y to 88.9 mt; consumption stood at 87 mt, up 15 per cent y-o-y.

Crude steel production was at 94 mt for 8M FY24, up 15 per cent y-o-y, compared with83 mt in the year ago period. Pig iron and hot metal production stood at 4.7 mt and 56.78 mt, up by 19 per cent and 8 per cent, respectively.

Although global prices increased in November by 23 per cent in the US and 6 per cent in Europe, a few domestic steel mills have cut prices by ₹1,500 per tonne for December deliveries from the November list prices with an eye on local demand.

Global steel demand, which has been subdued since the onset of the Russia-Ukraine conflict, is expected to grow 1.6 per cent in 2023, after a sharp fall of 3.3 per cent in 2022.

According to Miren Lodha, Director, Research, Crisil, the recent recovery in European and American steel prices augurs well for Indian flat-steel producers.

“European steel prices, after remaining subdued for 5-7 months and hovering at €550–600, have started recovering since November, leading to a pick-up in export bookings from India. This follows a period where European steel prices fell below domestic steel prices for the first time in a decade,” he said.

Source: The Hindu Business Line

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By Anjan Roy

If you have a political bent  opposed  to  the Prime Minister  you might just as well sniff a sort of complicity between the Narendra Modi government and the International Monetary Fund (IMF).

Particularly in the context of the parliament incidence involving some youth protestors, clamouring for decent jobs, and the cavalcade of criticisms from the opposition members for failures in economic management, the latest IMF review of the Indian economy will be a salivating piece of document for the government.

The IMF has just concluded its standard article four consultations with India .. IMF, under its agreement with the member countries, conducts an yearly review of the member’s economy and places these before its board of directors for approval. The procedure has just been finalised, in consultation with the union finance ministry officials.

Given the context of the global economy and virtual turmoil almost everywhere, the findings about the Indian economy are flattering. Excepting some divergences in opinion on the exchange rate regime followed by India, it is difficult to find fault with the IMF observations.

IMF forecasts for the Indian economy are ebullient. Overall growth is predicted to be 6.3 per cent in 2023-24 and 2024-25. Prices, which remain one of the big worries for the Reserve bank of India, is expected to converge towards its tolerance band. In 2023-24, the prices should show a rise of 5.4 per cent and next year by 4.6 per cent — both coming within the 4 per cent plus/minus 2 per cent of the central bank.

This is of critical importance. It sets the overall parameters for the central bank’s monetary policy. With prices remaining  benign, RBI could at least follow a more proactive and encourage growth. Reserve Bank had earlier noted with some concern the trends in prices in its report. Price inflation was at 7.1 per cent as close to July-August this year. Since then, prices have shown softer prints.

However, it is prudent to note that the overall prices show a sobering trend in the post harvest winter months when food articles inflation show lower tendencies. Surely, by the time summer sets in next year, the prices should start firming again.

The IMF review is in line with the reserve Bank on another score: the overall savings and investments are showing improvements. This is important since savings and investments would determine the growth of the economy.

Gross savings are stable at around 30 per cent of the GDP while investments are mildly creeping up. Investment rate is expected to touch 32 per cent next year from around 31.5 per cent this year. RBI, in its report, had noted the robust investment figures. It took as proxy the equity prices of capital goods industry companies, which have shown healthy rise.

RBI had noted that the capital investment buoyancy is primarily due to stepped up public sector outlays, both by the centre and the state governments. The IMF seems to have concurred. At the same time  IMF has commended the emphasis on sustainable fiscal profile. Fiscal deficit is set to come down to 5.8 per cent of GDP next year from 6 per cent in the current year.

In IMF’s views that the government has successfully followed a policy of “accelerating capital spending while tightening the fiscal stance.” That is too good to hear. This remains the crux of any macro-economic strategy.

While acknowledging that India’s debt composition helps mitigate debt sustainability risks,  the IMF directors recommended “ambitious medium-term consolidation efforts given elevated public debt levels and contingent liability risks”.

The buoyant revenue collection figures should help achieve his apparently irreconcilable goal.  Spending efficiency would allow for continued improvements in digital and physical infrastructure and improve the effectiveness of the investment outlays. Directors also encouraged the authorities to put in place a sound medium-term fiscal framework to promote transparency and accountability and align policies with India’s development goals.

On the external front, the situation is stable and moving towards being comfortable. Current account deficit is by and large stable at 1.8 per cent of GDP. The high point is the inflow: taking foreign direct investment and portfolio investments together, the country is expected to get around $80 billion in 2024-25 from around $63 billion in the current year.

However, given the developments in the US economy and also in China, these figures might turn out to be gross under-estimates. The US Federal reserve is indicating possible rate cuts. In early indications, the stock markets are rising and investors are moving from debt instruments to equities. In signs of these developments, Indian secondary markets are o course to receive substantial chunks of foreign institutional investments. The Indian equity market is soaring and soaring.

These developments will have major policy implications. The reserve Bank might have to intervene in the foreign exchange markets to stabilise the rates. After all, too much oscillations in response to quick money flows and outflows can undermine overall stability. This could call for interventions. Already, RBI’s foreign exchange reserves are running at a high plateau of $619 billion as of now. Next year the forex reserves are predicted to run close to $700 billion.

At these rates, the inflow should also contribute to money creation and pressure on assets prices primarily. These create an artificial sense of abundance and expansion. It is important to play the cautious note in these circumstances.

The question is will the government be dispensed to caution in the face of an approaching general election. The tendency would be for the authorities to exploit the sense of “ebullience”. Indeed, the government could not have got a better report on it has acquitted itself than the current IMF consultation feedback.

IMF Report Card for the Indian Economy

(IPA Service)

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By Anjan Roy

The Indian stock market is looking like unstoppable, for now. The equity markets are scaling new heights and along with that, the investors are reaping riches. The BSE Sensex has increased by close to 1000 points in intra-day trading on Friday. The NSE index has climbed by close to 300 points.

The questions that inevitably follow such starry eyed spurts is will the upward trend be maintained or there will be a reaction and some corrections. Maybe, the latest AI models might be asked to give a kind of answer. But it looks as though even the AI wizards would be flummoxed at such questions.

Going by overall reactions to the rise, some of the market experts at least feel that a correction could be on the way later in the month. But that still remains anybody’s guess.

The more relevant question could be what factors are driving such optimism in the financial markets. One does not have to look far and wide in search of the answers this time. There is a favourable coincidence this time and the rally could last for a while. Low inflation after a long time could be the principal positive development recently.

A low inflation feeds on the expectations of an easier money policy and downward revisions of the policy rates. Here, the Reserve Bank governor has not said much about beginning a rate cut cycle. Rather there is a note of caution and watchword is the RBI is monitoring closely the inflations prints.

But then, the big brother among the central banks, the US Fed chairman, Jerome Powell, has indicated the possibility of rate revisions cycle rather faster than the markets anticipated. That had acted as a heady cocktail for the market.

But then most immediately for here and now, such wild upswings are too much of a good thing. These imitate a feed-back channels which promote a kind of euphoria, even though such things tend to be short-lived.

Although stock markets investors are none too large, but such widespread upward swings in the market creates a kind of “feel-good” factor which works towards strengthening consumer sentiments. This will at least leave a wealth effect with the investors and could surge consumption demand.

When the BSE Sensex had touched 70K, it looked high. Now, it is sailing past 71K. Look at the pace at which these things are happening. While it took 93 sessions for the Sensex to climb 1,000 points, it took just a day reading to rise from 70K to 71K. Rationally speaking, this is precarious. When mood swings are that sharp the reactions could be equally strong. But, leave that for a moment, let us examine he factors giving such boost and how stable these could be.

Primarily, this is a reflection of some global trends which are influencing funds flow across boundaries.

The American central bank, the Federal Reserve, as we had mentioned, had indicated earlier this week that in view of the softening of US inflation rates, there might an unwinding of the restrictive monetary policy and a possible cut in interest rates might be ushered in. US inflation slowed from 7.5% last year to around 3.5% now. That is a robust development.

How far this is expected to be maintained.? Could there be a return of stronger price trends. This is unlikely as US wage growth has been running faster than inflation prints and these are now anticipated to flatten out. Secondly, oil prices are also leaving sobering marks.

The Fed chairman’ s statement had sent waves of enthusiastic responses and the US financial markets became enthusiastic. The US stock market had witnessed huge buying of stocks by investors and in consequence the US market climbed.

On the other hand, in anticipation of the US rate cuts, investors reviewed their options and are looking for opportunities in other financial markets. Bond market investors found future earnings possibilities pared and hence they are obliged to look for other markets and other products.

Why the funds should be coming into Indian markets?. This is because the alternative markets are looking unattractive. China, until recently the largest market other than USA, used to attract funds. However, the Chinese market itself is sagging and the political bosses are seeking to control every development in the Chinese economy.

The market sentiments in China have been severely affected by the political moves of the Chinese Communist Party and senior executives of large number of companies have been arrested. Companies in China have informed the Chinese stock market authorities of missing chief executives. The news have resulted in sagging in Chinese stock markets.

In turn, the Indian markets have continued to rise. Firstly, the macro-economic situation in India is favourable. Until recently, the prices were rising and threatening the positive sentiments. The Reserve Bank had to intervene with higher interest rates.

However, recently, the prices have softened. The consumer price index has given a lower print, although some spurt has been witnessed. The prospects of rising interest rates in India appear remote. Hence, the investment prospects are bright.

Experts are anticipating strong funds flows from overseas and this is pushing up the stock market. According to official figures, foreign institutional investors have been pouring in average Rs4000 crore per day in the first ten days in December.

In the previous month, the foreign investors have invested Rs.9000 crore. All these are before the US Federal Reserve’s announcement of possible interest rate cuts.

These are indicative of the positive sentiments about investments in India and this is likely to continue. The investors are reaping the benefits of staying invested. The next year is likely to be an investor’s year for those who can garner resources and courage to invest in the Indian equities. (IPA Service)

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By Sushil Kutty

Parliament attack ‘mastermind’ Lalit Mohan Jha is in police custody. Four of his underlings – if he is ‘mastermind’, indeed – have been charged with terrorism under various sections of the UAPA, supposedly one of the toughest anti-terror legislations anywhere in the world. Does that mean, Neelam Devi, Sagar Sharma, Manoranjan D., and Anmol Shinde, along with Lalit Mohan Jha, are deemed terrorists and “saffron terror” is god’s own truth, not the figment of some dervish imagination?

The Bharatiya Janata Party and its ideological parent, the ‘Sangh Parivar’, has always objected to the nomenclature “saffron terror” and gone down hard on the Congress for allegedly coining the term. Naturally, the Congress was diffident. Congress stalwarts like Sushil Kumar Shinde, a Union Home Minister, were accused of forwarding the idea of “Hindu terror”, which the Sangh Parivar insisted did not exist.

Now, Jha is the “mastermind” and he leads a bunch of Hindu names. Agencies tracking perpetrators of the December 13, 2023, Parliament attack have had it easy so far. Lalit Mohan Jha could have done a Shaista Parveen – gangster Atiq Ahmed’s widow – on the investigating agencies just like Shaista Parveen has been evading Uttar Pradesh Police and could be anywhere, from Prayagraj to Nepalraj.

Jha, however, is a different kind of oddball – he, like his accomplices, is courting name and fame with arrest. He and his four accomplices have been charged under the draconian UAPA. From the outside, UAPA sounds glamourous, even chic. But Neelam Devi, Sagar Sharma, Manoranjan D, Anmol Shinde and Lalit Mohan Jha haven’t heard the half of it. Also, the Delhi Police Special Cell has the reputation of pulling the innards out of a long gutted corpse. Jha and Co., must be singing like talkative canaries.

But Jha destroyed the mobile phones, and destroyed crucial evidence. That did not stop the Delhi Police from charging them under the stringent UAPA. Attacking Parliament with intent is terrorism. Running rampage inside the Lok Sabha is blatant and brazen terrorism. Triggering canister smoke bombs in closed and cloistered quarters is terrorism. Scaring the living daylights out of elected MPs is terrorism.

Jumping into the well of the Lok Sabha points to “terror training”. What if the canisters carried poison gas? What if Sagar and Manoranjan D were trained to kill with bare hands? The possibilities are endless and imagination can kill. Neelam Devi and Anmol Shinde — protested outside. Lalit Mohan Jha surrendered. In fact, he wanted to be caught; wanted to surrender, why? Will Union Home Minister Amit Shah admit in Parliament that this was “Hindu terror” based on the names of the six people identified as perpetrators of the attack on Parliament?

The Modi government cannot ignore the possibility; nothing should be discounted. If it is “Hindu terror”, so be it and address any such likelihood head-on. Like somebody in the Congress tweeted, “What if the names were Muslim?” Sure, what if the names were Muslim? The answer is, nobody would have raised an eyebrow even if Muslim names are defaults for terrorism and for nobody’s fault, too.

This is the first time UAPA has been slapped against Hindu names under the head “terror”. Of course, like always, “terror does not have a religion”. But, what the hell, this is happening at a time when the Bharatiya Janata Party is spearheading a Hindu-first election campaign for ensuring a third-time in a row BJP government at the Centre. Does the Modi government even know the ramifications of charging Hindus under a terror law and then not be labelled “Hindu terror”?

Islamic terror comes easy off the lips but even the mere mention of “Hindu terror” was frowned on and the Congress almost always got bashed for doing the unthinkable. For instance, way back in 2015, then Home Minister in the first Modi government, Rajnath Singh, went ballistic on the Congress, accusing the UPA government of Prime Minister Manmohan Singh of coining “Hindu terrorism” and alleged that this “weakened” India’s fight against terror.

Stating that the Modi government will “never allow such a shameful situation”, Rajnath Singh had in 2015 said that “terrorism is terrorism, it does not have any caste, creed or religion.” If so, what has happened now, nine years on, why have people with clear Hindu names been charged with an act of terrorism, and why have sections of the stringent terror law UAPA been slapped against them?

How can India accept this? The opposition INDI-Alliance should forthwith reject the Modi government premise that educated but unemployed youth, for no fault of theirs but because of the Modi government’s failures, have been charged under the UAPA law and branded terrorists. The Modi government must come clean on “Hindu terror”, admit whether there’s “Hindu terror” or not there? Also, make clear why Sagar Sharma, Manoranjan D, Amol Shinde, Neelam Devi have been accused of committing a terrorist act? Are they terrorists or not? If they’re terrorists, is it proof that “Hindu terror” exists? (IPA Service)

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By Anjan Roy

It was a contradiction in terms. One of the largest producers of fossil fuels, UAE, was hosting the UN talks on limiting use of such fuels to cut down CO2 emissions and thereby help keep earth’s temperature rise within the stipulated 1.5 degrees above pre-industrial levels.

At the end of the talks a sort of agreed document to achieve this objective has been hammered out. But this is more in form than in substance. The COP28 Dubai Summit has now yielded a document that all participating countries would follow set guidelines for “transitioning from fossil fuels in energy systems”.

At best the outcome is a pyrrhic victory; at worst this bodes ill for the world. The basic problem of actually limiting use of natural fuels has been left untouched apart from a pious declaration that efforts should be made to move away from use of such fuels.

That piece of rhetoric means that participating countries promise to cut down and then move away from using oil, gas, coal and similar fuels to limit their carbon emissions. Burning these fuels lead to emission of carbon dioxide and other gases which cause global temperature to rise. There has been no agreed mechanism for implementing the cuts in fuel consumption earlier agreed in the Paris Summit.

The pulls and pushes and the internal contradictions were strong and strident. The divergences in the interests of participating nations were flagrant. The secretary general of OPEC, the cosy club of oil producing countries, had issued a confidential letter to its member countries, urging them to stymie the move towards any cut in consumption of oil and natural gas.

After all, the OPEC countries survived and were flourishing by selling fossil fuels and charring ever higher prices. The media leak of this confidential letter amongst the oil producers had nearly rocked the entire talk.

The other contradiction was the tug of war between the developed countries and the developing ones. The developed countries had begun using fossil fuel in ever rising quantities much earlier than the developing ones. They bear a much greater responsibility for fouling up the earth’s atmosphere than the poorer countries. However, important western politicians, including former US president Donald Trump, had rejected outright any idea of climate change and he repudiated the US commitments at the earlier Paris COP Summit.

These groups of developed countries are now refusing to shoulder a higher burden for cut in fossil fuel consumption than the present poor countries. After all, for the development of the poorer countries, they need to use more fuels now. A system for a cut in fuel consumption based on the current base would be iniquitous.

The use of fossil fuels began to rise as countries came to depend on these for energy needs after the Industrial Revolution. Industrial Revolution first began in Britain and spread first to other European countries and then in the post colonial era in the rest of the world. It has grown to such an extent that the existence of the human species and other flora and fauna on planet earth is now threatened with extinction by a global heat exchange.

As CO2 emissions are rising which envelop the planet like a gas chamber, the planet’s heat is rising. Already the temperature is showing palpable signs of rising and its deleterious consequences are apparent. Now we are fast facing a situation when temperature rise could cause the globe’s climate to change drastically.

The issue has been flagged for decades now and rigorous scientific studies have been made showing how fossil fuel burning and CO2 emissions are causing changes. Two of these immediate changes could be seen as the snows of the Himalayas and other high mountains are melting fast. Many of the glaciers are receding and their retractions is stupendous.

The second change already witnessed is the rise in sea levels which are engulfing islands and low lying coastal areas. In fact, the delegations from these island nations, from the Pacific islands to those in the Indian Ocean, have registered their protests at Dubai. They feel the basic document adopted at the conference was competed when their representatives were not in the room.

The Climate Summit in Dubai was being held in the context of the worst climate in known history. The current year is the hottest one so far and already the results are getting manifest with unseasonal rains to extreme heat and wildfires to floods and fury of nature, and whatever you can think of.

The COP28 dialogue of some 195 countries was as critical for humanity and planet earth as its very existence. Popularly known as the climate talks, there have been many rounds of it, the most significant landmark being the Paris Summit where all participating country agreed on principle to cut their consumption of fossil fuels to control carbon dioxide emissions (CO2) which was contributing to rise in temperatures.

In the last few decades, climate science has become a major discipline and a huge body of rigorously scientific work has been one showing how exactly the earth’s atmosphere is changing and what disastrous course it was set to take in the absence of clear efforts to cut down fossil fuel consumption on the ground. The scientific studies also have discovered which areas would be prone to the adverse effects of climate change and bear the brunt of the changes. Many of the developed countries are also seeing the disasters at home. But no real change is being seen on the ground.

The world has bought wholeheartedly the western concept of “conquering nature” for human exploits instead of harmonious living with it. In this sense, Dubai talks are no different from earlier situation. Humanity is acting in haste, only possibly to repent later if it survives. (IPA Service)

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By K Raveendran

It may not have been as high-profile as the ‘call of national duty’ press conference by the four senior most judges of the Supreme Court about six years ago. But the renewed controversy about the master of the roster, prompting two senior advocates of the apex court to write to Chief Justice D Y Chandrachud encompasses as profound issues as those raised in the previous instance.

Activist advocates Dushyant Dave and Prashant Bhushan have shot off angry letters to the CJI over abrupt change in the composition of benches supposed to hear sensitive cases. Their immediate provocation was the de-listing of petitions challenging the invocation of the anti-terror law UAPA and criminal charges against journalists, advocates and others from a bench headed by Chief Justice Chandrachud and their reposting before other judges. They are peeved by the fact that the cases mostly related to human rights violations, freedom of speech and democracy. Their contended that this was in violation of the established rules. There have been rulings in the past that related matters should be tagged and heard by a bench headed by the CJI.

The complaint added further bite by quoting a remark by Justice Sanjay Kishan Kaul, the second most senior judge in the Supreme Court, who is set to demit office later this month, about how a matter related to delay in the appointment of high court judges on the part of the Centre was deleted from the list of cases assigned to the bench headed by him. In fact, Justice Kaul said, “Some things are left best unsaid,” obviously expressing his displeasure over the change. The chief justice is aware of this, he had added.

The infamous press conference by the four judges in 2018 was about the same issue of alleged bench hunting, which means that the problem is still persisting. The historic presser, though failing to achieve much of what the judges sought, had prompted certain actions to bring about some order in the work of the roster. The four judges had staged a virtual revolt against the then chief justice Dipak Misra by asserting that things were not in order with the apex court and that the practice being followed would destroy Indian democracy.

A couple of months before the press conference, they had written to the CJI alleging ‘selective assignment of cases to preferred judges’ and that ‘sensitive cases were being allotted to junior judges’. They resorted to the unprecedented step of going to the press as the letter did not elicit any positive response from the CJI. The provocation was the exclusion of the four seniormost judges from a bench that was supposed to hear a petition demanding an independent enquiry into the death of Justice Loya, who was hearing a case in which Union Home Minister Amit Shah, who was at that time the BJP president, was accused of murder. That was clearly a case of bench hunting, the judges suggested.

“It’s an extraordinary event in the history of this institution. The administration of the Supreme Court is not in order. Many things that are less than desirable have happened in the last few months,” said Justice J. Chelameswar, leading the four judges. The other judges were Ranjan Gogoi, Madan Lokur, and Kurian Joseph. They have all retired from the apex court for long, but the issue raised by them continues to dog the functioning of the highest court of the land.

At the centre of the latest controversy is a petition challenging the terror cases registered at Agartala police station against Mukesh Kumar, an advocate who had published a fact-finding report on communal violence in Tripura, and a journalist who had criticised the Tripura government’s alleged inaction towards protecting Muslim citizens during the violence. The petition challenges the validity of the controversial UAPA law, which is increasingly being used to target critics and political adversaries of the Modi government. Prashant Bhushan is appearing on behalf of Mukesh Kumar and is worried about the change of bench from the one headed by Chief Justice D Y Chandrachud to the one headed by Justice Bela Trivedi.

In a tone similar to what the four judges had presented at their press conference, proclaiming that they would be failing the nation by not raising the disorder in the highest judiciary, advocate Dushyant Dave said in his open letter to the CJI that while he holds CJI Chandrachud in high esteem he will be “failing in my duty imposed by the Supreme Court itself when it held that, the lawyers are supposed to be fearless and independent in the protection of rights of litigants” and “what lawyers are supposed to protect, is the legal system and procedure of law of deciding the cases”. (IPA Service)

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By Anjan Roy

One of the most powerful global credit agencies, Moody’s, has downgraded China’s economic outlook to negative from stable. This has major implications for a country in the financial markets and as a reliable destination for global investors.

Immediately, this change might not affect China’s investments or borrowings. But a downward revision of outlook is a matter of prestige for a country. It implies that the prospects for the Chinese economy are none too bright and that could stall flow of fresh funds into China.

China’s finance ministry has contested the Moody view and pointed out that China has reserves of finance and reforms could be launched to give fresh boost to the country’s economy.

Admittedly, Moody’s has not as yet cut China credit rating. It has retained A1 rating for its sovereign bond rating, meaning that such bonds are good investments and could be repaid. Credit rating change is an indicator that the entity concerned might not be in a position to repay its borrowings.

Moody, one of the two global credit rating agencies whose words are taken as gospel truth by investors and lenders, influence a lot the rate at which an entity (that is a commercial body) or a country could borrow. A lower rating would obviously attract higher interest rate.

The immediate provocation for Moody’s to revise China’s outlook in the immediate future are several adverse trends noticed for sometime. The most important factor is the deep slide in China’s property market and its implication for the financial health of the country.

As such, overall growth of the economy has slackened. China had grown by world-beating pace for decades at 8% or above. The fast paced development has reportedly lifted hundreds of millions of people from below abject poverty to economic well-being. The middle class has surged and is one of the largest in the world.

However, since the pandemic the economy is slowing down. The draconian lock-downs implanted under the direction of the country’s supreme leader, Xi Jinping, had literally strangled the economic activity in all spheres. It had crippled many sectors and the human costs have been huge. It was only after large scale protests in different provinces that the top leaders saw the extent of the damage and some corrective measures were taken.

But then, the opening up has been as much abrupt and bewildering as the lock down stringencies. The sudden withdrawal of all restrictions and carefully crafted segregation had resulted in a fresh spurt in covid cases. The early deaths from covid as well as those after opening up imposed a telling cost on the country’s economy..

Like in some cases for individuals, China is suffering from the after effects of a long covid. The symptoms of a longer term impact from the covid excess are apparent. The growth rate of 8% and above has sagged to less than 3.5% in between in the immediate aftermath of the pandemic. But now, growth is reviving albeit haltingly.

Moody’s has projected China to grow just about 4% in both 2024 and 2025, and average at 3.8% a year from 2026 to 2030. Structural factors, including weaker demographics, could drive a decline in potential growth to around 3.5% by 2030, it added. Officially, China hopes to grow by 5% during the current year.

A sudden deceleration in growth means a shock to domestic demand. In the absence of the robust growth of exports, due to global slackness and an adverse geo-political environment, China was hoping to kick up domestic consumption demand and thus surge on the back of domestic demand. IN its new strategy, that should have compensated for sagging exports. However, that is not exactly what is happening..In one critical sector of Chinese economy, demand has abruptly gone down

The real estate and housing construction industry constituted almost a third of the country’s economy. The massive construction boom seen in the past has been fuelling the domestic economy with additional demand for everything from cement, steel, other construction materials to sectors like electrical goods to furniture.

For years, China has built new towns and cities across the country. In fact, this has buoyed up the economy ever since the Chinese economy opened up and began its ambitious reforms programme. Increasing urbanisation and house purchases acted as a lubricant for a large sector of China industry.

But, there is a limit to buying new homes and commercial properties. Reports have been trickling in of new towns with residential houses lying unoccupied and vacant. The country has ghost towns and empty housing estates all across. This was a case where the same economic growth trigger has been overexploited and for years.

A series of high flying real estate and construction industries have gone under. As real estate prices slumped under pressure from excess housing and commercial property stock, the biggest developers came under pressure. The biggest of these companies, Country Garden, had payments problems and could not honour commitments. Some others followed suit.

Their failures had resulted in widespread protests and sit-ins across provinces. For a dictatorial regime, such spectacles were abominable. Many of these protestors were removed by police or shut out from public views. Nonetheless these had left their mark and further accentuated the confidence in the economy. The crisis in the housing and real estate sectors had collateral damages spiralling into larger spheres.

China has a massive non-banking financial sector, which is called the “shadow baking sector”. These are, like India’s large NBFCs, somewhat informal in nature and provides the grist to the overall mill. They provide finance to consumers as well as other corporates.

Many of these Chinese NBFCs have large exposure to the real estate and housing sector. They are the aggregate purchasers of large property stocks as well as provider of funds to the property sector corporates. A trouble in the property firms means trouble for the NBFC or the banking sector. Only last week, China’s largest NBFC had gone down under.

The whole situation is morphing into building up of a financial sector crisis. To tell the truth a financial sector crisis is the worst nightmare in that these financial sector entities have link-up throughout the economy. If the financial sector is in trouble, these are transmitted fairly fast into the real economy.

Something like this is happening. The troubled housing and real estate sectors have stopped buying fresh lands from the Chinese local governments and municipalities. These bodies had depended heavily on their sales of land stock to these builders and promoters of new township. Once the sources for funds from sale of lands snapped for the municipalities and local bodies, their finances have got choked up.

The central government has proposed several rescue measures for the troubled real estate companies as well as the government as to bail out the beleaguered local governments. That means the government’s fiscal situation could become more leveraged.

In fact, one of the reasons cited by Moody’s for its downgrading of the economic outlook is a possible threat to fiscal situation of the Chinese federal government. But then, as the Chinese finance ministry has claimed, it has a massive treasure chest to draw upon. It is promising to introduce fresh reforms and release massive doses of funds to the real estate companies to tide over the current crisis. Maybe, that is true.

But the fundamental approach of these Chinese authorities to for ever pump up the economy through artificial creation of capacity is bound to run into problem some time or other. That’s why Chinese high growth period is over for the time being, tough the country will be continue to remain the second largest economy of the world, retaining its position much above India. (IPA Service)

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By Anjan Roy

China’s is staring in the face of a possible financial sector crisis, with its largest privately owned non-banking financial company unable to meet its obligations. Zhongzhi financial company, having widespread exposure to China’s real estate sector, has failed to honour its obligations to its investors and defaulted.

As such, the bankruptcy of a company in a country is of little interest to the outside world. It might just as well go down into liquidation. But everything to do with China is problematic for the global economy because of its sheer size. In China the numbers are too big, like often in America.

Zhongzhi as the largest privately held non-banking company has its tentacles spread through China’s non-banking financial industry. Its collapse will spread tremors throughout China and then could spread across. Hence, the world is watching the fate of Zhongzhi financial conglomerate.

Following reports of the default and protests from its investors and clients, the Chinese government has launched a “criminal” probe into the activities of the conglomerate. It has preliminary reports about serious irregularities in its investment and loan operations.

The group is otherwise an important player in China’s amorphous non-baking financial companies network. In China these are considered part of its huge “shadow banking industry” which is as large as an estimated $3 trillion. Of these, Zhongzhi is an important part.

Zhongzhi controls no less than some fifteen investment and wealth management firms. These are into consumer financing to real estate funding. One group company alone controls investments running into $85 billion, concentrated mainly into real estate operations.

China’s real estate sector is a principal driver of the economy now. With large scale infrastructure investments already made, there was little scope for making bit time investments into infrastructure. There is thus some emphasis on real estate and housing sectors.

In these sectors as well, sustained investments over the last three decades have built up massive excess capacity. Large townships created on virgin lands lie unoccupied as these have not been sold to the final takers. Even when these homes have been purchased, these have not been occupied.

Hence, the housing stock is remaining unsold, clogging up the finances of the housing companies. Already, several of the largest housing and real estate companies are facing liquidation, including the largest of them all, Country Garden real estate. The government is keen to help these beleaguered housing and real estate companies.

Xi Jinping himself has taken initiative to now bail them out, contrary to the earlier stance of letting them face the situation. Because of real estate and housing is so important in the overall macro-economy, the government had to reverse its stance and float ambitious rescue plans. These are being initiated, but already the insolvency of the real estate sector has left a trail of damages along the way.

One of these collateral damages has been the shadow banking industry. While Zhongzhi’s woes are primarily related to souring of its large portfolio of investments in real estate and housing companies, there are reportedly some serious irregularities reported as well. The Beijing Police is looking into it.

In a way, when firms get into a troubled spot stemming from overall macro situation, they most often try to wriggle out via some short cuts. These are often caught on the wrong side of laws. The initial reports indicate that since 2021, the companies have strayed into these subterranean worlds.

When macro-economy turns sour, the non-banking sector gets into knots. The case of Zhongzhi immediately reminds the Indian observer of what had happened in the largest Indian non-banking company, ILFS Ltd, couple of years back. ILFS had funded many of India’s private sector infrastructure companies.

While the projects were sound, they were a financial deadweight around the neck. The problem of funding long-term infrastructure assets is the mismatch between assets maturity and liquidity. Often enough, the maturity is long drawn out while these have been funded with short-duration funds. Hence, the repayments comes on hand, there is a funds crunch for the provider of loans.

Fortunately, the crisis within ILFS came out in the open fast enough and corrective measures were initiated. ILFS overcame its crisis and now appears to be back in the black.

What is important for maintaining the overall financial stability is monitoring and initiating early action. The financial sector is prone to periodical turmoil as operators tend to gather moss in times of growth. A culture and atmosphere of complacency creeps in and watch over the details flag. In this context, one must watch out for the moves of the Indian banking regulator.

Only in the course of its last monetary policy statement on October 6, the Reserve Bank governor, Shaktikanta Das, had mentioned of some untoward developments in Indian non-banking financial sector.

He said ‘The financial indicators of non-banking financial companies are also in line with that of the banking system as per the latest available data for June 2023. Certain components of personal loans are, however, recording very high growth. These are being closely monitored by the Reserve Bank for any signs of incipient stress. Banks and NBFCs would be well advised to strengthen their internal surveillance mechanisms, address the build-up of risks, if any, and institute suitable safeguards in their own interest.’

Following up the governor’s observations, Reserve Bank introduced new norms for risk recognition for consumer loans of non-banking entities as well commercial bank loans to the NBFCs.

RBI had raised the risk weightage of consumer credit of commercial banks as well as non-banking financial companies have been raised by 25% from 100% to 125%. Risk weightage of commercial bank loans to NBFCs were similarly hiked and credit card receivables risk weightage was further increased.

These would surely restrict flow of funds for consumer credit and thus affect the level of consumer demand for various consumer durables from cars to fridges or washing machines. In the current phase of incipient growth of demand after the decrease in the activity levels in the wake pandemic, the overall consumer demand might be affected.

However, some caution in the more comfortable phase of growth is handy to avoid a possible crisis in the next phase of some correction. One has to admit the strong hand of the regulator and constant monitoring are reassuring for the health of the overall economy. (IPA Service)

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By Anjan Roy

Sam Altman has become globally known overnight not because of what he had achieved already, which was seminal, but because he was summarily sacked by the board of directors of the startup firm he had established.

Sam Altman had become a legend at his young age for his role in developing software for artificial intelligence, known as large language model (LLM). On that base, his firm, Open AI, had developed “ChatGPT”. This is a versatile AI model which was the wonder of the brave new technology regime.

And now, virtually the creator of this system was thrown out by the board of directors of the company which he headed and had produced the ChatGPT software. On the face of it, this was a personality clash between the head of the firm, Altman, and its chief scientific officer. The reason given for sacking Altman was that his communications with the board were misleading and did not provide adequate information.

Sacking Sam immediately resulted in tanking of the share prices of Open AI. The investors turned wildly against the board and asked it to recall Altman into the company. Other staff members were also upset and in a letter they demanded that let Sam Altman be brought back. The board was humiliated so to say.

But then, by the time the investors and staff reacted, something else had happened. Microsoft, which had backed Altman’s OpenAI, reacted with lightening speed to the news and directly recruited him to run an in-house AI team within Microsoft. Sam Altman was announced the CEO of Microsoft’s own AI outfit.

That was a double-edged sword for Microsoft. The software giant had earlier spent $3 billion to prop up OpenAI as a start up and had eagerly snapped up ChatGPT software to provide, along with its more traditional and long-established software products.

There is an issue for Microsoft. Even after spending as much as $3 billion on this company, was Microsoft sleeping while the storm was gathering in OpenAI. Such a major investor in the company did not have a whiff of a idea of what was happening in the company. Microsoft investors would certainly raise the issues.

The fierce gale winds over removal of a single man is indicative of the nature of the emerging high technology world we are now witnessing. This is the post-industrial world we are entering. Here it is not the assembly line products like making of a car. This new world order is centred around individuals and ideas. A single idea can change the familiar world. A single idea can have mind-blowing commercial value.

All AI is, at the root, statistical recession analysis. If you are a smart phone user and writing a message. You will be constantly promoted to write the next word by the software embedded in your smartphone. More often than not, if you are using a high-level one, the prompt word would exactly be the one you would have thought of or is most appropriate.

How does the machine prompt you so. It does because underlying the software in the phone, it has gone through a huge base of words which are used in written or spoken language. Based on its statistical analysis of the words it has studied, running into millions, the language model had calculated the likelihood of the next word coming into the sequence.

Sam Altman’s firm, Open AI, has perfected this technology to such a level that the software system can just not only predict the next word to be used. It will be able to give you, say, the answer to a law examination question (in one case, the American Bar Association entrance exam) so perfectly that the software could pass the examination with ease.

Normally, this examination has been found to be so tough that only a handful of people could qualify after very long preparation. ChatGPT of Sam Altman’s firm could pass in no time. That exemplifies the power of the system which had been developed by tis firm under its enigmatic leader, Sam Altman.

When the ChatGPT product was announced and released it has created sensation throughout the tech world. Nothing similar in its raw power had been developed so far. The system can be useful for a variety of uses, including, say, in medicine. Because, the system could master the entire knowledge in a specific area, say, pulmonary diseases, available thus far and relate these to massive data base of case studies and then diagnose an individual case promptly.

Journalists had felt threatened once ChatGPT was released. The fear was that the AI system could be asked to produce an article on, say, climate crisis by a journalist A. ChatGPT would be trained to ingest the style and manner of writing of a journalist, along with what else had appeared so far, and then could produce an article in no time that a journalist could take much longer. In that case, newspapers can get rid of the journalists and bring out a paper without having any journalists.

In fact, it did lead to a prolonged industrial action in Hollywood in America. The actors and screenplay writers had stuck work for months until only recently fearing that their existing contracts could be tweaked to produce screenplays or even acting clips without the screenplay writers or actors having ever written of acted those parts.

This should be possible with AI software which will gorge on the earlier works of the writers or actors identified and should then pour forth newer items based on the study of the past performances. All that the AI system needs is some former clips of the writers’ or actors’ works.

In fact, we recently had a nightmare demonstration of the powers of such AI. View clips of a well-known actress were used to produce a “fake” scene in which the actress was acting or saying things which she never did. At the same time, it was so perfect that nobody could have detected it was fake and produced by an AI system.

These kinds of AI could play havoc. It can destroy an entire political set up. Imagine, a leading politician’s past clips are used and then on that basis a speech is crafted fomenting fire against some people or causes or issues. It could be ruinous.

AI is thus crafting a dangerous new world. Many experts are wondering that AI can eventually surpass human intelligence and create havoc with our known world. These need to be regulated. In fact, one critical issue which led to the rift between Sam Altman and the OpenAI board was that the funder promoter was not open to considering the tragic consequences of the possible monsters AI was creating. (IPA Service)

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By Arun Srivastava

Prime Minister Narendra Modi grows more desperate and aggressive by the day as he feels the perception of power slipping away from his vice-like grip. For Modi, retaining power and continuing to occupy the office of the prime minister has acquired such an obsessive dimension that instead of facing his opponents politically, he has started resorting to coaxing. Latest victim of this manipulation has been the deputy chief minister of Bihar, Tejashvi Yadav.

Tejashvi is being cajoled to distance himself from Nitish Kumar; else he would be arrested and old cases against his father, RJD chief Lalu Yadav, would be reopened. For quite some time, the political grapevine has been agog with wild speculation that Tejashvi would have to go jail in the cash-for-land case. The rumour was basically floated in the political circles by BJP leaders and the pliant section of media in the state.

Nevertheless, realising the amount and nature of damage this strategy was causing to the party and eroding the image of Modi amongst the backward caste voters, Modi and Amit Shah amended it. Instead, they started putting pressure on Tejashvi himself. The duopoly nurses the impression that Lalu out of jail would prove to be a major stumbling force. The two leaders in fact hold Lalu primarily responsible for formation of INDIA. It was he who motivated Nitish and also persuaded leaders of other regional and opposition parties to respond to Nitish’s initiatives.

Modi’s unhealthy obsession over Nitish is so acute that the latter’s ghost continues to haunt him even while busy with electioneering in Rajasthan. He called upon the people of Rajasthan to defeat Congress as it was with Nitish. His hatred for Congress, Nehru and Indira has been an open secret, but now it appears he has also added the name of Nitish Kumar to his list of most-hated politicians.

Lalu and Tejashvi are unfazed with Modi and Amit’s machinations, but Tejashvi is certainly concerned with the health of his father. Tejashvi has a point; they can’t risk Lalu’s life and safety. Lalu has suffered a lot at the hands of the vindictive BJP leadership. He was implicated in the fodder scam at the instigation of the senior BJP leaders of that time, who were angry with him for his stubborn secularism. But Lalu even today is not worried of the BJP machinations and Modi-Shah threat. Instead of joining hands with the BJP to evade his imprisonment, Lalu chose to go to jail, despite his age and health issues. Moreover, Lalu is the bulwark of secularism who is deeply respected by the tallest opposition leaders in the country, such as Rahul Gandhi, MK Stalin, Mamata Banerjee, among others.

Modi’s renewed targeting of Nitish and Tejashvi primarily owes to their carrying out the caste census successfully and raising the percentage of reservation for OBC and EBC. This has acquired a national dynamic. Other than the BJP ruled states, almost all other states have been busy working out the modalities to implement caste census in their respective jurisdiction. With Rahul Gandhi making it a national agenda and succeeding in catching the peoples’ imagination, the political turf for Modi has turned so rough that he is finding it tough to negotiate.

If somehow he succeeds in his mission to force Tejashvi to keep his mouth shut on this issue, in that case, the BJP may hope to get some seats in Bihar and Jharkhand. Political circles also believes that the BJP might salvage some of its ground in UP. The BJP leadership has been realistic in its assessment that notwithstanding unwillingness of Samajwadi Party president Akhilesh Yadav to support the caste census, a major section of the poor Yadavs and backward castes support Nitish’s move. As per sources, even a section of the Yadav’s family members nurse the view that it would be a potent instrument for the party to expand and consolidate its position amongst other OBC castes.

With Nitish and Tejashvi holding their fort, Modi and Shah are not left with any other persuasive issue which could attract peoples’ attention. They have been working on their plan to coax Tejashvi simply keeping an eye on the possibility to marginalise Nitish.

In his desperation, Modi is willing to go to any extent to malign Nitish. Significantly, through his actions and speeches, Modi has sent a clear message to the people, especially that Nitish, the leader of the backward caste people, has been his most potent opponent. Else there, was no reason that he should resort to all means to marginalise and show him in poor light. Modi has even been using his lieutenant Amit Shah to denigrate and humiliate Nitish for a while now.

In Rajasthan, while Modi took sole credit for the passage of the women’s reservation bill, he was criticizing Nitish and describing his recent remark in the assembly on women as “ghor apmanjanak” (deeply insulting).Significantly, while the educated women and girls appreciated Nitish’s remark and described it as a part of the sex education, Modi continues to find fault with it. It was the wide support from women of Bihar, that BJP’s women leaders dropped their agitational programme against it. At the rally Modi lamented, “No Congress leader came out to condemn the remarks.”

That Modi has been running short of ideas and issues is also evident from his rhetoric of attacking Congress of being ‘the most corrupt party’. Projecting his own frustrations on Congress has become Modi’s compulsion. His knows it well that the much berated and ridiculed “Pappu” has succeeded in transforming the Congress and the narrative. In 2009, Rahul Gandhi who tried to project himself as a rebel by tearing the UPA’s ordinance to protect the guilty politicians, has after 14 years has been spearheading his reformist mission in a more effective and gutsy manner. His Bharat Jodo Yatra was a strategic move to project his image from being a rebel to a true pioneer of secular, inclusive reform. Modi knows that the Congress of 2023 is not the same Congress of 2009, when the ‘corruption’ allegation was not a spent force, thrown around wantonly and used as a pretext to harass the political opposition.

His accusing the Congress of being obsessed with corruption, appeasement and nepotism and urging the people of Rajasthan to wipe out the ruling party from every corner of the state is the manifestation of this deluded strategy.

During his campaigning, Modi has therefore tried to project a new form of Hindutva, which according to him, is anti-corruption. However, even Modi’s staunchest supporters don’t buy it, since Modi and Amit Shah have welcomed in the most corrupt turncoats from other parties, often replacing the trusted old BJP cadres and leaders. It’s glaringly obvious that the corrupt are controlling the party and dictating the traditional committed cadres.

Modi is still trying to play the polarisation card. At his public rally in Rajasthan, he accused the Congress and its INDIA bloc partners of trying to eradicate “Sanatan dharma”. He also strived to win over female voters by claiming that the Opposition parties have an anti-women mindset. He said: “The Congress and its allies want to destroy Sanatan. You all are well aware of what all they have said against Sanatan and I don’t need to repeat them. Destroying Sanatan means destroying the culture of Rajasthan.” (IPA Service)

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By K Raveendran

Confidentiality versus anonymity is a central issue in the consideration of the petitions against the electoral bond scheme as it exists today and may well have a bearing on the verdict by the five-member constitution bench under Chief Justice D Y Chandrachud, which has reserved the judgement.

The petitioners, who include the Association of Democratic Rights (ADR) and the CPI-M have argued that the scheme allowed ‘non-transparency in political funding’ and as such legitimised electoral corruption at a large scale.

In 2019, a bench led by the then Chief Justice Ranjan Gogoi had refused to stay the scheme on the ground that ‘such weighty issues would require an in-depth hearing’ but directed all political parties to submit details of donations, donors, and bank account numbers in a sealed cover to the Election Commission. In a continuing struggle, the opponents of the scheme approached the Supreme Court multiple times to seek a stay. But a bench led by the then CJI S A Bobde once again refused a stay in 2021, and the present petitions were filed in response to that decision, pleading for early hearing so that there is a decision before the 2024 Lok Sabha elections.

Last month, a bench led by Chief Justice D.Y. Chandrachud, with Justices JB Pardiwala, and Manoj Misra referred, referred the case to a five-member constitution bench after noting the ‘importance of the issue’, which has since held three days of hearing of pleas by all parties involved and reserved its judgment.

The petitioners have argued that the electoral bonds scheme increased corporate funding, black money circulation, and corruption and that the voters have a right to information about political parties’ source of funding, as it informs the policies and views of that party. The Union government, however, contended that the scheme was designed to guarantee confidentiality and the right to privacy of the donors, who were otherwise exposed to retribution from political parties that they didn’t fund.

The opponents of the bonds are lamenting the elimination of transparency in electoral funding, making it impossible for the Election Commission and the citizen to know the source of the flow of funds to political parties. Also objected to is the elimination of companies’ internal disclosures of political donations, making shareholder and regulatory oversight impossible. They assert that the new scheme has put in place an asymmetrical information regime, where the only entity, other than the donor and the party, with knowledge of the funding is the State Bank of India, which in effect means the central government.

A persistent criticism about the new scheme is that it has reopened the cash channel, by making donations to political parties of up to Rs 20,000 not liable to be reported. And the political parties are not required to disclose whether they received the funding in that lot or lesser amounts. For the purposes of tax exemptions, parties are likely to show the receipts in smaller bands, thereby ensuring that the availability of cash to political parties or the ability of individuals to give cash to political parties has increased. At one stage, the Chief Justice observed that a cash-based scheme and unaccounted scheme proceeds on anonymity.

The petitioners point out that while the government says the objective was to limit black money or cash money coming to political parties or to reduce it, cash donations have not been choked off. Electoral bonds were introduced because many individuals or companies do not want to be known that they are the donors to these political parties because they fear victimisation. The judges acknowledge, however, that change has ensured that the accounted transactions have been brought under the normal bank funds.

But the bond opponents assert that this is no big deal. Even the RBI has gone on record that the object is to make political funding go through banking channels, there are existing instruments of cheques, drafts, bank transfers, etc. which are available.  This makes the need for anonymous instruments redundant.

It has been argued on behalf of the bond opponents that the electoral bonds are meant for a political party to be in power in perpetuity because the amount of money collected through these means will empower that party through capital to influence everything. This is the most unconstitutional, undemocratic, unfair scheme that destroys the very basic structure of the Constitution. (IPA Service)

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BENGALURU: Top Indian information-technology (IT) services companies are betting on large and mega deals, which enable them to sharpen their focus on clients, leading to higher revenue, faster growth, and more cost savings in the long term.

Typically, IT companies consider deals at or above $100 million as large ones while those at or above $500 million are categorised as mega deals.

Wipro Chief Executive Officer (CEO) Thierry Delaporte said during the recent earnings meet the company was getting out of deals with smaller, unprofitable clients and focusing on winning more large contracts.

Wipro ended the second quarter with 22 accounts of above $100 million, almost double what they were in FY21. Its total contract value (TCV) of large deals stood at $1.3 billion, the highest in the last nine quarters.

“We have increased not only the number of deals but also the size. We won two half-a-billion-dollar deals this quarter … In terms of what is driving these deals, a year ago we would see a lot of large cloud-transformation programmes. Today the deals are more cost-driven,” Delaporte told Business Standard.

Infosys’ TCV of large deals in the second quarter (Q2) was the highest ever at $7.7 billion, 48 per cent of which was net new. Consequently, the TCV of large deals for the first half (H1) of FY24 stood at $10 billion, which exceeded the contracts for large deals in FY23.

“Our Q2 large deals include four mega ones. It does not include the MoU we signed and announced for $1.5 billion. We see that with our large deal wins in the past two quarters, we are winning market share in the area of cost, efficiency, automation, and artificial intelligence,” said Salil Parekh, CEO and managing director (MD), in a post-earnings analyst call.

Infosys Chief Financial Officer Nilanjan Roy said: “Delays in decision-making continue. Our strong large-deal signings and pipeline will help support growth in the medium term.”

Analysts say a few large and mega deals offer IT companies more benefits than a number of smaller deals.

“IT vendors pursue mega deals with clients because they offer substantial revenue, long-term commitment, and the opportunity to showcase their expertise. Furthermore, mega deals can also lead to cost efficiencies and foster strategic partnerships, and innovation, which can enhance the vendor’s reputation as well as its competitive edge among its peers,” said Biswajit Maity, senior principal analyst, Gartner.

“As mega deals accelerate growth more effectively than a collection of smaller deals, they are laser-focused on mega deals. There is negativity, which may not be realistic and based on speculations,” added Maity.

HCLTech signed 16 large deals worth a TCV of $3.9 billion during Q2. In August, it won a six-year deal with Verizon Business for an estimated TCV of $2.1 billion. This was the largest ever deal for the company after the $1.3 billion Xerox renewal deal in 2019.

Tata Consultancy Services (TCS), India’s largest IT services company, reported an order book TCV of $11.2 billion, the second-highest in a quarter. This includes two large deals of $1 billion each from Bharat Sanchar Nigam Ltd and JLR.

“Strong deal momentum delivered us a very large order book in Q2 — our second-highest TCV ever in a quarter, and good pipeline. The resilience of demand for our services, our clients’ willingness to commit to long-tenure programmes, and their continued appetite for experimentation with Gen AI and other new technologies give us confidence in our longer-term growth prospects,” said K Krithivasan, CEO and MD, during the Q2 earnings meet.

Although the revenue growth guidance has been muted for most IT companies, their large-deal pipeline has been strong, indicating that clients continue to spend on essential technology projects.

Maity said: “Despite all geopolitical and macroeconomic uncertainties, organisations recognise strategic IT investment is critical in remaining competitive. Organisations often differentiate between investments that are essential to their competitiveness and those that can be delayed. As of now, there seems to be a good pipeline for the providers but the providers feel discretionary spending covers a good part of their revenue and profitability. Providers are pessimistic about the forecast but optimistic about the opportunity, which indicates a mixed feeling in the market we see.”

Source: Business Standard

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By Tirthankar Mitra

Come late September and October, kash flowers are in bloom in parts of Maidan in Kolkata together with a few more spots in the city yet to be invaded by concrete jungle heralding the arrival of the biggest festival of West Bengal – Durga Puja. Yet the fact remains preparations for the puja continue all the year round in the clubs holding community pujas.

These pujas, once known as barwari pujas meaning a culmination of the effort of 12 friends to hold a puja involving all the residents of the locality. But barwari pujas exist only in name these days; senior political leaders having emerged to be the driving forces of these pujas have reduced them to one-man shows.

Time was when leading lights of Bengal politics used to be associated with community pujas to strike roots among the populace and inculcate nationalistic feelings. Long before being dubbed Netaji, Subhas Chandra Bose was one of the chief patrons of Simla Byam Samity in north Calcutta.

After having parted company with Congress and floating Forward Bloc, Bose did not quite lose his popularity base especially in south Kolkata where he lived. A puja organised by Forward Club is still going strong not too far from the residence of chief minister, Mamata Banerjee.

Incidentally, one of her siblings is a key organiser in it, a pointer to the ongoing trend of associating politically influential persons with community pujas. It is not that their political importance which adds an extra sheen and shine to a puja but the moolah that the name brings in terms of door to door subscription and corporate advertisement in the puja souvenirs and placards which are part and parcel of a beautiful pandal housing the goddess and her entourage.

The trend of politicians actively associating themselves with pujas for name, fame and more can arguably be traced to the ’70s in Kolkata. It started after Ballygunge MLA Subrata Mukherjee then the youngest minister in Siddhartha Sankar Ray’s Cabinet associated himself with Ekdalia Evergreen Club off Gariahat in south Kolkata.

He was the prime mover of this community puja which he took to great heights. Even as other puja organizers burnt the midnight oil to think of themes ranging from Kuwait war or some such headline news, it was Mukherjee’s proud contention that his puja had nothing to do with themes but followed rituals and rites of worship of the goddess as per the book.

Another Congress stalwart, Somen Mitra too was associated with the community puja at College Square off Calcutta University’s College Street campus, though his involvement was not as thick as that of Mukherjee. The name of Priya Ranjan Das Munshi crops up almost automatically with the two other Youth Congress leaders spearheading the party’s revival after its split.

Das Munshi brought out Dakshinee Barta magazine on the eve of the pujas. Replete with advertisements and write-ups of the leading authors it underscored his cultural credentials which set him apart from other members of the party.

The trio is no more. But their pujas espousing traditional values continue to burn bright till this day. Pujas were not quite the event which Left Front leaders felt comfortable to be associated with. Though stalls selling “party literature” were set up in different puja pandals by CPI(M), its agonistic ideology did not quite gel with religion, though Subhas Chakraborty was an exception.

A mass leader, who never lost his following in life and death and had a legion of admirers in the political parties opposed to him, Chakraborty was a frequent and welcome visitor to many puja pandals. The community puja at Sreebhumi organized by his lieutenant Sujit Bose, enjoyed Chakraborty’s blessings.

Bose is now a minister in the Trinamool Congress Cabinet headed by Mamata Banerjee. His puja continues to be one of the biggest crowd pullers owing to the uniqueness of the theme of its pandals every year.

Community pujas literally took a giant leap forward after Trinamool Congress replaced Left Front as the ruling dispensation in the state. Let alone Kalighat Milan Sangha off the chief minister’s humble tiled home in Harish Chatterjee Street who states boldly in a placard that she is its chief patron, many a member in her Cabinet organise pujas which have gone a long way in securing the worship of the goddess in Kolkata secure a heritage tag from UNESCO.

There is Ajeya Sanhati organised by Partha Chatterjee, education minister and TMC secretary general now marking time behind the bars at Presidency Correctional Home for his alleged involvement in cash for teaching jobs scam. But this puja in Naktala, once a southern suburb of the city and now a booming locality will celebrate puja with the usual pomp and paegantry.

It is scheduled to have a visitor from Brazil, the ace footballer Ronaldinho. It is indeed a coup on part of this club to get this august visitor who is also scheduled to call on the chief minister and present her with a jersey he dons.

Suruchi Sangha puja in New Alipore is organised by state power minister, Arup Biswas. This puja is a by-, word in innovativeness and taste as is underscored by the number of prizes it wins every year. Chetla Agrani’s puja at Chetla, not far from the CM’s residence, is organised by city mayor Firad (Bobby) Hakim and stands out among all the pujas as the eyes of the idol are drawn every year by Mamata Banerjee.

She is known to lend her hand in making the bhog, the offering of cooked food to the goddess in this puja. When a portion of Majherhat bridge collapsed a few years ago threatening a major drop in the foot fall in Biswas and Hakim’s pujas, the state government set up a Bailey bridge to facilitate the passage of pandal hoppers.

Themes abound in the city puja range between women’s menstruation at Pathuriaghata Pancher Palli Sarbojanin Durgotsab in north Kolkata to acid attack victims at SamajSebi in south Kolkata to name a few.

Chetla Agrani focusses on class division and social struggle in its theme Je Jekhane Dariye. Abol Tabol the title of Sukumar Roy’s evergreen book of nonsense rhyme is the theme of Hatibagan Nabin Palli.

Some pujas centre around religion and Kedarnath temple is the theme of the community puja at Md Ali Park in central Kolkata. Ram Mandir of Ayodhya is the theme of a puja at Nebutala Park which is scheduled to be inaugurated by Union home minister, Amit Shah. BJP president J P Nadda who can speak Bengali, will be in the city also to inaugurate a puja.

Surrogate mother and saving the girl child form the themes of Shyambazar Palli Sangha and Sovabazar Burtola Sangha respectively. Kolkata being a foodie’s haven, phuchka being the theme of Behala Natun Dal raises no eye brows.

If Tin Chakar Galpo, the auto rickshaw story is the theme of Hazra Park Durgotsav, a stone’s throw away from it Yuba Moitri focus is on hand pulled rickshaw and it’s neglect. It may be recalled it was Balraj Sahni essaying the role of a peasant who on losing his land becomes rickshaw puller in the big city, had shot some of the scenes of Do Bigha Zameen not too far off this community puja.

Chaina hote Uma is the theme of Kashi Bose Lane puja committee. It highlights child trafficking. Bhatkapar, a take on the domestic help is the theme of Behala Nutan Dal.

Time was when a paint company was the sole giver of best puja prizes. There has been a major change of scene especially with emergence and proliferation of television news organisations and print media making prizes galore these days

Of course, some of the recipients of the prizes have already been decided and there are no prizes for guessing. But even amidst this unequal contest and competition where some are more equal than others, quite a few of the deserving community pujas will carry away the honours they deserve so richly.

There are some pre-puja takeaways too with the TMC state government giving a sum of Rs 70,000 to every community puja. Not to be outdone, the principal Opposition party in the state, BJP is not lagging behind though it’s recipients are only 500 community pujas and its offering going up to one lakh rupees. BJP is far behind TMC in organizing the number of pujas, though the party clams to be Hindu centric. It is apparent that during this period of festival in Bengal starting from Mahalaya on October 14 to Dassami on October 24, the TMC is the dominating the cultural life in Bengal with BJP trying its best to perform as distant second.

Chief Minister is the brain behind organizing the puja carnival on October 27 when all the major durga idols will pass through Red Road attended by the CM and the other VIPs in a spectacle that few Kolkatans afford to miss. The white kurta draped men along with the women with red bordered sarees proceeding in rows along with the tribal men and women with dhols portray a scene of religious and social harmony. The puja festival organisers belong to all social classes ranging from a CEO and a successful businessman at a salt Lake puja to a auto driver in a locality in Garia. There are many pujas which are organized by only women. One puja organized by women this year had made a muslim girl for kumari puja defying the sanatan dharma tradition of restricting pujas to only Hindus..

For the coming four puja days, Bengal with its towns and villages as also Kolkata will be witnessing puja pandals hopping by millions including people of all provinces and religions who will be mesmerized by the variety of the themes of the pandals and the making of the idols and compare who is the best. The shop owners and the street vendors will have a field day during puja days as their sales reach the peak. The Durga pujas in Bengal benefit the state’s economy. One estimate is that in 2022, the puja economy totalled Rs. 32,000 crore. The amount will be much more in 2023 as there are no covid restrictions. While the common people will be busy in enjoying the pujas, the political leaders of the TMC and the BJP will start weighing how much mileage they get from the festival five month before the crucial Lok Sabha elections. (IPA Service)

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A video of Congress leader Adhir Ranjan Chowdhury riding a bike, without a helmet while his hands were off the handle, went viral on social media for all the wrong reasons. As the netizens called off the Congress leader’s irresponsible road safety behaviour, Chowdhury said “There was no one there.”

In the video, Adhir can be seen riding a Royal Enfield as his entourage was also on their bikes. The other man in the passenger’s seat with Chowdhury is also seen without a helmet.

When social media users slammed Chouwdhury for not following road safety protocols, the Congress leader, “If the police penalise me, then there is no problem. But there was no one at the place where I was riding the bike.”

The video was recorded during the inauguration of a bypass road in Berhampore. Only a few riders accompanying Adhir had their helmets while Adhir wore a cap and he also once took his hands off the handles to adjust his cap.

The Berhampore MP was also seen greeting people on the sides of the road from his bike.

However, Adhir Chowdhury is not new to controversies. In the last monsoon session of Parliament, Adhir was suspended over misconduct after he criticised PM Modi on the Manipur issue.

A few days back, Chowdhury blasted the government alleging that it is a gospel truth that social media is being used and misused by the ruling dispensation.

Speaking to the media here at the party headquarters, Chowdhury, who is also the Leader of Congress in Lok Sabha said, “It’s a gospel truth that the social media is being used and misused by the ruling dispensation. Certainly, those who are in charge of those media should be intimated and accordingly, our views have been ventilated to them.”

With inputs from News18

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By Anjan Roy

Ukraine war and more immediately the Hamas-Israeli conflict had driven many things from out of the public view. One of these is the Nobel Prize in Economics in this year to a not widely known academic.

Claudia Goldin is only the third woman to get a Nobel prize in economics. That itself is a measure of what Goldin had pursued all her life to find out — gender gaps in pay and why women were being paid less than men over their career.

Ironically enough, the prize came to Claudia Goldin the same day that America’s National Bureau of Economic Research, one of the most fruitful platforms where the latest and the most significant researches into the discipline are often presented. The NBER had that day released a paper by Claudia Goldin titled “Why Women Won”. The Nobel had come to her shortly thereafter.

If you want to be impish, you might as well say Claudia Goldin’s life revolved around the contraceptive pill and in defining greed in an economists way. She was interested in many other topics before arriving at her life-time vocation: why women fell behind in their income or career compared to men who were equally capable.

In doing this, she did not just put up some intellectual construction with elaborate and so-called rigorous proofs to explain the phenomenon. She dug deep into economic history to find out the reasons. In her treatment, history and archival research turned out to be like the work of the detective. Her husband, who is also her intellectual colleague, referred to her capacity for digging out historical facts where others had simply given up.

In this she was the treading the path of Robert Fogel, her doctoral supervisor who had developed the use of the historical method in economics like no one really had sought earlier. Until then, the economic history mostly meant the story of the development of countries and nations like conventional historical chronicle.

Additionally, there were admittedly some scholarly work which had sought to understand the phenomenon of some countries achieving quantum leaps in development compared with laggards who were struggling despite similar kind of circumstances and resources.

But in Goldin’s hands it was different. She had intuitively come to an understanding that the conceptive pill was a major factor in deterring women’s participation in the labour market and the career path for women.  However, she wanted a concrete sort of proof of the hypothesis and the factors which influenced these. Let us try to understand this in simple terms.

She thought of finding out the availability of contraceptive pills to women. In many of the states of America contraceptive pills were not available to women under the laws. When things started changing in this respect, she found that the states where the pill was easily available women participation in labour market was higher.

More significantly, the career paths of women in the liberal states were qualitatively better than in those where these were not easily available. Over years, she studied the historical facts of women gender pay gap as well as their employment levels and came to the conclusion that the pill made the difference.

The availability of the pill had made the difference to the expectations of women about their future career. When the pill was available, women could optimistically plan for a longer career and more paying one while at the same time hoping to start a family with kids in future. They could thus decide on “investing” a few more years in a “law course or a medicine degree” than would have been otherwise.

This is a decision on marrying later and postponing having kids in a near future and concentrate on career objective in the present. She had given examples. Consider a woman who is equally brilliant as her husband. Both can join a law firm and work for several more years when the woman could get a better and higher paid job as the husband. This the pill had made possible, as otherwise a boyfriend in college would have resulted in a family much earlier.

Now comes Claudia Goldin’s other concept — that of “greedy” jobs to explain gender pay gaps or women might land in a worse paying jobs than a man. A couple, both being equally brilliant, joins high-paying consultancy jobs or some service sector ones like law firm or medicine. There comes a point when they realise that for the sake of raising children it might become difficult for both to contuse with the same demanding jobs, paying higher salaries. One has to go for a less demanding career to devote to children.

The reason this happens is because in many of the quality jobs, pay is influenced by the time spent in office or devoted to the work. Hence, if one decides to opt for a less demanding role, will suffer over the career path in overall pay.  One of the couple has to stay in the high paying demanding job while the other opts out. These jobs Goldin described as the “greedy” jobs. The pay shortfall is not necessarily a discrimination by the employer but a result of the choice.

Goldin’s findings are the result of a life time devoted to historical data mining and archival work on aspects which are not plain in the first place. She had studied the phases of women employment and found out how the dynamics worked out. She had come to her famous “U” shaped women employment curve.

That “U” happened because of the change in the organisation of production. She pointed out the loss of employment and women participation following industrial revolution. This was because with industrial organisation, productive units shifted away from homes and organised in large industrial areas. At home, women could very well participate in the production and business which she could no longer pursue when it was moved away.

Goldin through her rigorous studies of women employment figures found phases when women employment spurt compared with those when these lagged.

Claudia Goldin’s work has particular relevance for India at the current stage of our development. Soon enough, the sweet spot of having a bulge of working age population will be over. Increasing participation of women in the jobs market, particularly in high quality areas where skilled talents will be needed, India should have more women come forward to work. Goldin’s wisdom would be invaluable for Indian policy makers to woo women out of their confines in participate in the nation’s development. (IPA Service)

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By Anjan Roy

Not unexpectedly, Israel-Hamas war has sparked off a battle of words and ideas between two mainline political parties in India.

The prime minister’s statement on the Hamas attack as a terrorist act and full support to Israel came face to face from criticisms from the Congress. In its statements, India’s grand old party has recalled the traditional Indian stance on the Middle East crisis and indirectly slammed the government’s approach.

Prime Minister Modi’s statement and the Congress criticisms could not be really apprehended without going through the nuances of Indian foreign policy from the creation of the state of Israel and the subsequent history of the Arab-Israeli conflicts.

The process for creation of the state of Israel was kicked off by a resolution issued by the British prime minister, Arthur James Balfour in the 1920s in the aftermath of the first World War. After the Second World War, with the experience of the Holocaust and torture and killings of Jews n Europe, it was decided to carve out a patch of land around Jerusalem to create a new home state for the Jews.

The new state was created in 1948 in the land around Palestine immediately after the Second World War by the American president Harry S. Truman with an understanding with Ben Gurion, Israel’s first prime minister. Ever since, the Muslim Middle East felt this was a state created by uprooting the locals in that land and vouched to wipe it out.

In fact, this is a thousand year old war and conflict. The Israelis were driven out from Egypt and all around the Palestinian lands a thousand years ago when the Israelis —or Jews— spread all over the world, particularly in Europe.

However, persecution of the Jews and stigma attached to the Jews was a persistent trend in European history. Anti-Semitism was all pervasive and the Jews were literally hated by the Christians in Europe. The Jews were persecuted and often enough burnt alive.

Even enlightened liberal European intellectuals were not above the intense anti-Semitism, the most loud and often witnessed one is the well-known drama by Shakespeare, Merchant of Venice. In the drama, Shylock the Jewish merchant asks for a pound of flesh from a loan defaulter.

As if from a sense of guilt, the Europeans felt this new state offered an opportunity for absolution from their millennial sins. Maybe, it was also a good riddance of the Ashkenazi Jews in various European countries. The Europeans could force such a solution as they were powerful then.

However, the Middle East countries could not accept that European solution and trouble started from the very inception of the new state. War and confrontation became endemic in the region. Even today, the Iranians are the most die-hard and openly espouse annihilation of the Jewish state. Other more realistic Middle East countries, have however, accepted Israel’s reality.

In the process of rejection and hostility all around, the Jews of Israel learnt pretty fast the techniques for survival. They developed formidable military capability as well as a highly sophisticate intelligence network, which until it was blasted by the Hamas with the current blitzkrieg on Israel.

Independent India’s foreign policy, crafted under first prime minister Nehru, had championed the cause of the underdog and those countries which were under colonial domination. This was a normal response after winning independence from the British.

India gave recognition to Israel on September 17, 1950 within two years of the founding of the new state. Pandit Jawaharlal Nehru who was then the Prime Minister said that India should have given recognition to Israel earlier but there had been a delay.

The Palestinian Liberation Organisation (PLO) had easy camaraderie with Indian leaders, including Indira Gandhi, who had hosted the firebrand and legendary PLO leader, Yasser Arafat. Much later, when Atal Behari Vajpayee had become prime minister, he also showed his sympathies to the cause of the Palestinians.

India’s relations bloomed fast with Israel only after the BJP came to power in 2014. The relations developed with closer security and defence relations. Israel, with its deftness in military hardware production, became a major supplier to India of strategic weapons systems and technology.

With India under constant terrorist threat from our neighbourhood, and military threats from China, Israel had become a major source of hardware and intelligence systems. No wonder, that hard core interests have promoted a re-orientation of the external policy stance.

Prime Minister Modi’s statement close on the heels of the Hamas attack, expressing support for Israel and the ghastly nature of the Hamas killings, has to be seen as India’s anxiety in case of such a terrorist action.

Prime Minister Modi’s open support for Israel in the face of a ghastly terrorist killings of civilians, hide India’s anxiety against terror attacks on our homeland. The Bombay killings —better known now as 26/11 as also attacks on Parliament in 2001 — is a reminder of what had happened to India earlier. This was not the only example of terror attacking in an open society.

The heinous crimes of Khalistani militants in an earlier period and a sudden outburst of revenge killings against it also underlines what terrorism can do to a stable society and polity. Western sympathies have a duplicity around it — a terror attack at home is highly condemnable and one afar is atoned in the name of democracy and liberalism. Western nations said nothing against Israel when in the last nine months of 2023, the killings of Palestinians in Gaza strip took place.

The Hamas- Israel war has all the potential of turning into a holy war if the global powers including the United Nations do not effectively intervene. For India also, eternal vigilance against terrorism has become imperative. (IPA Service)

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By Anjan Roy

This is all about what a super is. An internal politicking in the American capital —Washington— results in the overthrow of the US House Speaker and it puts countries across the world in a flutter.

US House speaker, Rep Kevin McCarthy, was thrown out of his position as House speaker by a thin margin of just two votes and that resulted in a freeze of the US legislature. This is unprecedented and apparently there is no one who knows what to do in this situation.

For outsiders it was an incomprehensible political event. Rep Kevin McCarthy was defeated and ousted from his post by fellow members of his own party, the Republican Party, which is more commonly referred to as the “Grand Old Party” or GOP. What a grand show of internal strife was the lead up to the ouster of its speaker.

In the history of the United States there has never been a constitutional crisis of this kind when the House is virtually headless without a speaker. While leaving after announcing his defeat in the vote, Rep McCarthy did not even adjourn the House and a Protem speaker had to adjourn it later.

But after that no one knows how to do get over the situation, according to reports appearing in leading US media. While some names are cropping up, there is little agreement for the next speaker. As a result, no legislative functions could be undertaken. This has resulted in multiple uncertainties.

The former speaker, Kevin McCarthy had to leave because of an agreement he had concluded in his tenure about continuing of the US government. He had agreed to a funding of the US government for another 45 days with the Democrats.

This had infuriated the Republicans because Rep McCarthy co-operated with the Democrats without insisting on deep cuts in government expenditure that is staple demand of the Republicans. But the agreement had one clause: that any of the representatives could bring in proposal for ousting the speaker.

Admittedly that is only on the surface. There are fierce subterranean clashes happening in the American polity ever since the phenomenon of Donald Trump appeared on the scene. This is really a clash of culture of Right-wing extremism with the moderate centralism of the mainstream.

Another crisis for the American is set to break open in November when the current agreement for funding would expire. But before that American polity must fill up the vacant seat of the speaker so that normal legislative functions could be resumed.

Without a speaker, another extension of funding the US government could not be worked out as the House cannot function without a speaker. Thus, the US government might be forced to shut down with consequences all over. The eventuality of something like this happening could lead to crash a of the financial markets.

Actually, it need to come to that. Only the uncertainty of a crisis could be enough to depress sentiments of the markets to torment the markets.

When the world economy is facing uncertainties, such an event could result in a crisis spreading quickly. The worst sufferers would be the poorer countries, already burdened with debts and shortages of food. The turmoil in financial markets could quickly spill over into large scale funds movements and gyrations in the exchange rates of currencies, which bring in the worst kind of disruptions.

But if one single person is elated with these developments, it is the beleaguered Russian President, Vladimir Putin. He is hoping the crisis in US constitutional functioning continue, with funding of the Ukrainian government from United States thrown out of gear.

Sensing this crisis, US President, Joe Biden, has already assured the Ukrainians of continuing support. However, that holds little water. When his government itself is facing a crisis of unprecedented dimensions about its funding, such comforting words do not give much of support. He has still given some funding out of US defence budget to tide over short term straits.

Seeing his opportunity at long last, Putin is heightening his aggression against Ukraine. He has stepped up pressure on Ukraine by mounting more fierce and unforgiving attacks on Ukraine. On Thursday, Putin’s war machine made some of the worst attacks on Ukrainian civilians.

The possibility of wavering support from America is bringing far greater pressure on the European Union to maintain its united front. Already, an extreme right wing candidate has been voted the next prime minister of Poland who had promised to “send not a single more bullet to Ukraine”. Poland has been one of the first to give full support to Ukraine against Russian aggression.

A topless US legislature, protracted foot-dragging by USA and fractures among the democratic front in Europe would embolden Russia which is pursuing its plan for reviving the old Soviet empire. That would also egg on China to pursue its professed games of pushing its boundaries out.

It is this last possibility that could also touch India and put fresh obstacles to the path being followed by the country. A Chinese push to unsettle the borders could drain away funds from more urgent work programmes like stepping up outlays for education and health care.

These issues could then act as a drag on the country’s growth and overall development. What will happen to India going more than a $5 trillion economy before 2030? All uncertain, because of the petty fogging games being played by narrow politicians inside Washington Beltway. (IPA Service)

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By Anjan Roy

Behind all the rhetoric and claims of red lines for negotiations, some underlying geo-political realities had resulted in the consensus at the G20 meet in Delhi held on September 9 and 10. The final document is full of compromises from all sides. It is a success of the middle of the road approach, which offers only the second best solutions. It is sure-footed gift for an imperfect world.

The entire proceeding was marked by a tussle between the western bloc, on one hand, and Russia and China on the other. The west wanted a strong line on Russian aggression in Ukraine. The Russians, supported by China, did not want anything of that sort.

In between had come the handful of the so-called global south bloc of countries, including Saudi Arabia, UAE and others, joined in by the African Union. All these countries, the third dimension in the G20 formation, are becoming more important in the global chess play.

It is this group of countries, spearheaded by Saudi Arabia, which are becoming more important in the global pecking order. The Middle East countries, in particular, are increasingly powerful because of their straggle hold over liquid fuel. Their take from exports of fuel oil is rising and their heft over the affairs of the world getting more robust.

All the important players are seeking to wean them over. China has been seeking to forge stronger relations with these countries by virtue of their domination on the global oil market as a buyer.

China is increasingly becoming a more important player and the country is having a profound influence over the developing and emerging market nations. China is giving them funds, loans and infrastructure.

At the same time, Chinese economics is alienating these countries as well. So, the G7 member countries, which until now were the principal power brokers, were seeing the threat from China and Chinese wooing away the upcoming nations.

It is in that context that the developed nations saw in India an effective counterweight to China. A successful conclusion of the Delhi round of G20, ending with a consensus declaration, would boost India’s position. In short the developed world wanted India to be successful in the Leaders’ Summit.

The western world thus came down to make that critical compromise on the Ukraine texts and language. While Ukraine was important, some toning down of the rhetoric was acceptable, so long as the final document did not altogether absolve Russia of the responsibilities.

On the other hand, Russia was looking forward to avoiding an outright condemnation on account of its Ukraine war. This was for Russia the best of a bad bargain. In plain language it got away with a light castigation.

Thus, two factors were responsible for the consensus in declaration. First was the need to counter increasing influence of China among the upcoming developing countries. The second was to stall Russia from altogether upset the applecart in case of an outright condemnation. After all, India had always maintained that words would never bring an end to the war. Parleying would. The upshot is that while everybody is welcoming the final document, under the breathe no one is really happy.

Ukraine has castigated the G20 declaration in the strongest terms. The west is not exactly jubilant because the declaration did not use stone language against Russian aggression against Ukraine. Russia is happy that it is not condemned but it had to witness some strong language against its war, without being named. The European Union has been marginalised and its voice was really unheard.

China has already accused India of hijacking the G20 platform for its narrow objectives and one of its think tanks has severely criticised the declaration for fomenting further trouble in the international arena.. But later the Chinese foreign ministry officially welcomed the Delhi declaration.

China’s Belt and Road Initiative has been challenged with the G20 proposal for a trans-Asian railway and post bridge between Europe and Asia. China must be regretting its decision to skip the meeting. Xi’s absence gave the United States the entire podium to expiate on the virtues of democracy and push forward the American agenda.

The Delhi G20 has become a hugely important opportunity for India. Fortunately, two chance events further opened up the ground for India. The absence of China in the meeting gave the entire field open. So also the absence of Russia has spared India embarrassment of having to deal with an international pariah. Instead, India has the satisfaction that it got an opportunity to woo the middle order Middle East players, apart from the consensus document, though full of compromises. (IPA Service)

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By Anjan Roy

The strong GDP growth in the first quarter of the current fiscal year is a hopeful augury, though there are some intriguing aspects in the detailed figures as well.

The quarterly growth has hit 7.8% which in itself is remarkable for a large economy. At the same time, one swallow does not make a summer. The buoyant first quarter may not be the benchmark for the whole year. In a world which is marked by serious trouble, any adverse development can have its impact on India as well.

Take for instance any escalation of the Ukraine war. It can queer the pitch of oil market as well as the food markets all over the world. The poorer countries could be badly hit by further escalation of hostilities in the Black Sea area which could disrupt grains exports of both Russia and Ukraine.

A fiercer chokehold on Russia and its oil exports similarly would have a major impact on the global oil markets. As such, Saudi Arabia did not pay heed to the American requests for maintaining oil production. It did cut oil output to keep pressures on the oil markets. Such a development could also mean higher oil prices and a consequent squeeze on resources for the rest of the world.

Chinese economy looks like getting into knots with every move of the authorities. The more authoritarian the Chinese Communist Party is becoming, the more the economy going into a freeze. Xi Jinping has come down heavily on the Chinese technology companies and their natural life swing has evaporated. This is having a clear impact on the overall investment sentiment.

The Chinese are exporting less, as world demand for Chinese products have faltered or have faced higher tariff walls. Global companies are withdrawn from China. There is some advantage here for India as well. Some of these investments are seeking to come into India. Some have already come in. But the extent India can take advantage of the situation, looks somewhat limited.

Here lies the rub. The manufacturing sector has even now proved to be the Achilles heel for the country. The latest figures show manufacturing growth to be at a sluggish 4.7%. This is slower than the 6.1% in 2022-23. This is the drag factor. Manufacturing in India has proved to be the laggard despite every effort at policy level. The PLI scheme has made some impact and attracted investment. But what we need is a manufacturing revolution.

Many of the critics of the government have pointed out that the PLI scheme have been somewhat successful, but the level of value addition has been meagre. Raghuram Rajan has argued this in a recent publication. However, the argument is more for the sake of argument than is a poster to a serious shortfall.

Higher value addition in India is indicative of the extent of additional manufacturing activity in the country. But if PLI scheme leads to higher production based on imported inputs, this also paves way for greater manufacturing activity. After all, the Chinese manufacturing revolution started that way as the Chinese had initially depended on the volume of production than just value addition.

But there is no gainsaying that manufacturing must rise many folds if India is to hit the benchmark development goals being set out for the country. India cannot possibly become a $5 trillion economy, or even more, unless manufacturing increases much higher than the floor levels now.

Unless the manufacturing growth hits close to double digit figure we cannot have sustained growth at a high pitch. Manufacturing growth is also a critical test of the effectiveness and actual implementation of policies on the ground level. We need to streamline, for example, the issue of land for industry. Even now, this remains a critical listing factor.

The hopeful signs are that the state governments are now making a more proactive stance in this respect than previously. Politicians still seek to make a political capital of land acquisition. However, at the level of the state governments there is a realisation that unless the issue is handled pragmatically, the development process will get stalled.

The second shortfall remains that even now, the Indian economy is riding on the basis of domestic demand. Again, many economists had pointed out the limits of depending on only one engine for growth.

Even now, domestic consumption constitutes just around 35% of the Chinese national income. For a large economy, this is abysmally low. America’s domestic consumption constitutes over 60% of the economy and this is the principal source for continued expansion of the American economy.

Of course, American economy has other sources for growth. American high technology industry has huge markets all over the world. Its major corporations have growth triggers which are defying gravity. Their activities span the world, at the same time provides the impetus to the domestic sector.

India’s exports have remained rather timid. The latest GDP figures show that both exports and imports have shrunk compared to last year. At just about 21% of GDP exports do not constitute a major activity for a large economy like India’s. This has to rise. So are imports. These have fallen from 27% in 2022-23 to just 23.8% now.

Thus the leverage of the external sector is showing some fall and this is what constituted the principal growth springs for the south east Asia economies when they were growing fast.

Once again, these are interconnected and Indian exports cannot rise without a real manufacturing revolution. After all, our exports are services. The global services economy is changing and reshaping. In this context, depending so heavily on services exports exposes us to newer vulnerabilities.

Against the background of India’s spectacular achievement in moon landing, we are currently basking in the reflected glory of that event. The moon-landing illustrates that with very, very focussed attention we have achieved some extremely critical capabilities in high technology production for such ventures as in space. We could not have achieved this success without those domestic production capabilities for satellites manufacturing to building rovers for moon trot.

The question is now why can’t we broad base these achievements into much more humbler manufacturing. This will be the critical test for Indian industry to government. That is the insight that the latest GDP figures are throwing up and calling for immediate and concerted efforts. (IPA Service)

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By Anjan Roy

Now that India has soft landed on the south pole of moon, the dust it will raise will travel from moon surface to the earth.

The landing of a rover vehicle will kick up lot of moon dust —called regolith for its typical characteristics— which is minute and sticky and will cover the entire lander for a while which will is expected to cut off communications for  some time.. Only after the dust subsides, will the moon rover roll out from the lander and start its movement across the surface after a while.

The fact is that only four nations have so far been able to soft land on the moon itself bears testimony that this is not an easy achievement. Were it so, many others would by now have landed there.

By placing its rover on the moon and conducting scientific experiments, India immediately gains recognition as a space super power. In fact, many of the global media is referring to India as such. This is a major recognition. There are larger implications of this achievement.

India’s successful landing on moon surface, more particularly after the failure of Russian landing bid just couple of days back, puts India on a geo-political plane which would be vastly changed. It gives some clear diplomatic gains and prestige which are multi-dimensional.

India is only the fourth country in the world to put its lander on the moon, that too in an area which is of critical scientific importance. The Vikram lander has arrived at the lunar south pole where sunlight does not reach mostly. So it is surmised if moon has water, it would be in the form of ice particles in the southern polar region.

The technical success in the lunar arrival vests a kind of geo-political hue on the country. India had earlier signed up to the American Artemis programme, which seeks to create a regime for moon research and lunar governance for the future.

This assumes importance as a host of countries are seeking to land on the moon in the immediate future. These include, Israel, Japan, and the traditional space powers, including China, America and Russia. Until now, the United Nations had resolved that no one country can claim exclusive national sovereign claim on any part of the moon.

China, joined by Russia, have however not joined any of the international efforts for governance of moon research and territorial rights. If anything, China has refused to fall in line with the international position on no national claims on the moon.

India on the other hand is in tune with the current international doctrine disallowing national territorial claims and as a vindication joined the Artemis programme for joint explorations and non-national ownership of any part of moon.

The space, willy-nilly, is fast becoming an extended stage of rivalry among the major earth powers. Russia, in its fallen status, has aligned fully with China as the latter had  displayed its capabilities by making three landings and more particularly on the other side of the moon which is not visible to earth bound observers.

The US, on the other hand, although had placed its astronauts on the moon half a century ago, has not undertaken much activity recently. The only other country which had placed its rovers in the twenty-first century is China.

In the situation, American agreements on moon research and exploration with India is a strategic achievement. India would be a valuable resource for America’s renewed moon exploration bid. In this joint effort, several other democracies, like Canada, Japan and South Korea, are also joining in.

That means, you have the newly emerging geo-political alignment — the so-called democracies, on the one hand, with the authoritarians on the other.

Because of Chinese behaviour on the Himalayan borders, India firmly remains outside of any joint effort with China. India is on the other side with America and the west in space related activities.

The lunar landing has happened at a critically favourable time as well when the BRICS summit is being held in South Africa. Already, Prime Minister, Narendra Modi, had pitched the achievement as not just of India but for humanity at large.

India will have a far higher profile at the BRICS summit now that the space capability has been so acutely demonstrated with the picture perfect landing. China’s preponderance as the final space power would be challenged and the global south nations will take India so much seriously.

This achievement will give boost to India’s hard technological image, as well as, its soft power influence over the global south. Prime Minister Narendra Modi has already sought to capitalise on it by proposing a broader BRICS-level space initiative. These are diplomatic gains apart from the sheer scientific achievements of the whole endeavour. These are no less important in the life of a nation.

Simply put, India now stands much taller in the comity of nations than when the lander was making its still critical descent on moon surface. One wrong move from mission could have changed all that. (IPA Service)

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By Anjan Roy

China is walking into a  real financial crisis. A major part of Chinese financial architecture, the shadow banks, are facing serious liquidity problems and they have not paid their investors the amounts of returns they promised. This has raised doubts over their future.

Three real estate companies, which placed their funds with Zhongrong Trust, the Chinese shadow bank which manages over $87 billion investments on behalf of its clients, have complained to the stock exchanges about Zhongrong not paying their promised returns. In turn, this will affect their own liquidity and funds position.

Many of the major property firms have their funds locked up in these shadow banking companies for earning higher returns. As it is, the Chinese real estate sector is under siege as sales have plummeted and their projects have come unstuck with many of the largest companies saddled with unsold housing units.

On top, any liquidity freeze coming from such illiquid investments could spell disaster for them as well as their home and property buyers. The freeze could spread and spark off a full scale crisis, some experts fear.

Zhongrong, one of the largest of these shadow banks, not paying its promised returns and defaulting, and this has spread worries about contagion in the entire financial sector. In the context of the importance of the company involved, experts are wondering if China is facing its so-called “Lehman moment”.

It may be recalled that Lehman Brothers, one of the largest investment banks in the USA, had faced payments difficulties during the start of the global financial melt-down in 2008. Without support, the 150 year old company, a bastion of US banking industry, had collapsed.

In a way, the crash of Lehman was instrumental in setting off a crisis of confidence which spread throughout US financial sector and erupted into the financial meltdown of that year.  Lehman collapse has since remained the milestone in the history of capitalism and financial crises.

China’s shadow banks are really like India’s non-banking financial companies in much larger shape. They manage assets and investments for corporates as well as wealthy individuals. Even some retail investors have put their savings into these asset management companies.

These shadow banks could attract funds for their clientele’s management by promising to pay high returns. Zhongrong is not only one the largest such operators, but it is part of a much bigger conglomerate which operates in mining, manufacturing and other businesses. For such a large entity to face funds crunch and unable to meet its promises mean the crisis is worse than just ankle deep.

Worse, Zhongrong has refused to clarify its position either and angry investors are protesting in front of their headquarters in Beijing. Investors have gone into social media accounts and have raised a veritable storm of protest and enquiries about Zhongrong investment management.

These shadow banks, or non-banking financial companies, have tentacles spread across the economy. In case, these companies face a liquidity crunch and refuses to honour their commitments, these would affect the overall economy as well. Their freeze would directly affect consumer behaviour as the investors would become risk averse and domestic consumption would be affected.

The latest Zhongrong episode has come in the wake of troubles with another very big Chinese home building company, Country Garden, which is facing severe problems over its survival. The Hong Keg stock exchange authorities are removing the company stock to contain any possible contagion over its illiquidity.

Coming one after another, the confidence in the financial markets have been shaken and global investors are moving to ring fence their massive stakes in the country. There is as yet not much scared withdrawal, but if things do not improve these kind of nervous reactions might set in. The Chinese Yuan is also under stress and losing against the US dollar.

These  kind of developments go against the very grain of China overall economic policy now. Xi Jinping is seeking to boost domestic Chinese consumption for giving a stimulus to the sagging economic fortunes. Chinese economy has disappointed and growth has stalled.

While previously the authorities could pump in more funds and encourage in fracture and housing construction, the scope has become limited. Already, the economy is saddled with unsold hosing stocks and scarcely utilised humongous infract facilities. Further encouragement of such investments could become a drag.

The Chinese supreme leader, Xi Jinping, is not helping matters stabilise. Xi is throwing in an increasingly combative stance upsetting the sensitivity of foreigners. In response to the trilateral meeting of US President, Joe Biden, in his country retreat, Camp David, Xi stepped up Chinese military movements around Taiwan.

The Chinese Navy ships are circling around the island on its own. The airforce is flying ever closer to Taiwan air space and even distant islands in South China Sea is witnessing active Chinese military moves. The geo-politics combined with sheer ground level problems are combining to make Chinese financial crisis more serious. (IPA Service)

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By Anjan Roy

One misses Atal Behari Vajpayee sometimes. When price of tomatoes is going through the roof, we hardly hear any of those ringing metaphors. No one is turning puns on tomato prices as effectively as Vajpayee had once done on onion prices.

A general election is fast approaching and prices are a basic feedstock for electioneering. It is normal to expect politicians to go into overdrive with prices, particularly with sensitive ones like onion or, lately, tomatoes. Incumbent governments have to leave on price situation.

In his latest monetary policy statement on August 10, the Reserve Bank governor, Shaktikanta Das, has used a clinical phrase in describing price shocks in sensitive items. He described these as “idiosyncratic price shocks”, thereby taking out the sting in the tail.

As a technocratic guardian of financial architecture tasked with maintain stability of prices, his defanging description is apt. He suggests that these would have to be looked through and the gaze have to be fixed on the overall price trends. However, at the same time, he reiterates that if the “idiosyncratic trends” show persistence then we have to “act”.

The Reserve Bank is the custodian of price stability. It has been empowered to maintain price stability. However, at the same time, the RBI’s actions have deep repercussions throughout the economy, including the pace of the economy and its overall growth. Hence, the task has twofold responsibility: maintaining price stability without hampering overall growth.

This calls for a very much layered and nuanced response from the monetary authority. This is what the Reserve Bank governor appears to have set for himself.

In conventional macro-economics the brand spectrum anti-biotic for price control is a hike in interest rates to curb demand. But that also impinges on the pace of the economy and introduces a sluggishness. In effect, the US Federal Reserve is faced with this stark choice. It is raising interest rate to rein in somewhat defiant US prices.

The fear is that any relentless pursuit of inflation control through monetary policy should bring in a sort of recession and push up unemployment. The US employment levels are at historic high and despite several rounds of interest hikes to, once again, a historic high, unemployment has not increased. But the experts anticipate this should happen in a short time.

The RBI governor cannot really afford to this. It is not practical to raise the blunt interest rate instrument for price control, through inducing a kind of slack in the economy. The pace of growth will suffer. The choice is more hazardous here. We have to maintain prices in a framework of rapid growth.

As the governor has put forth, the problem before him is that the price spurts in select items, like tomato now or onion in an earlier period, are believed to be short term. The policy statement of the RBI makes it plain upfront. He states:

“Headline inflation projection for Q2 of 2023-24 has been revised up substantially, primarily due to the price shock from vegetables. Given the likely short- term nature of these shocks, monetary policy can look through high inflation prints caused by such shocks for some time.”

However, the dilemma is that such price shocks gives rise to an endemic inflation expectation. That is, people start believing that prices should rise in the immediate future and starts behaving accordingly. This becomes a self-fulfilling cycle.

The frequent incidences of recurring food price shocks, however, pose a risk to anchoring of inflation expectations, which has been underway since September 2022, the monetary policy points out. The way out could be supply side economics in the current situation.

“The role of continued and timely supply side interventions assumes criticality in limiting the severity and duration of such shocks.” This is the specific policy prescription of the central bank, it appears.

Hence, the RBI has set store by supply side interventions, instead of blunt demand control measures as a corrective for “idiosyncratic price shocks”. For all one knows this is might prove to be good economics as well as good politics. Why?

In a situation of general election, a government cannot face electorates with a sagging economy. At any rate, the incumbent government’s entire stance is that it has re-energised the Indian economy. Prime Minister Narendra Modi opening gambit is that in his third term India will become the third largest economy in the world. That’s a tall claim and to achieve it, India must grow at a steady pace throughout.

The dilemma is  a government cannot face electorates with shooting prices either. For achieving this twin purpose one has to properly look into the nature of current price trends. The consumer prices are rising no doubt because of the sudden spurts in vegetables, more particularly in a few items. The vegetable prices generally soar in the summer months and then slump post October.

To tackle the tomato prices, for example, the finance minister has announced imports from Nepal which in itself is not a bumper producer of food items. But, nevertheless, whatever is available from wherever. But there are more sinister price dynamics as well. There are fears of some spurts in food grains prices — rice and wheat.

There are severe shortages of these all over the world and the global prices of food grains are rising, mainly consequent upon the war in Ukraine. Geo-politics is influencing price behaviour. India should not much worry over such inflation in food grains prices. We have large stocks of food grains, much in excess of the buffer stocking norms.

Yet, already steps have been initiated — there is some restrictions on exports of rice. India is a major exporter of rice to the global markets and hence the price of rice is rising all over.

Secondly, although we are more than comfortable in wheat production and at times the buffer stocks are bountiful, India is securing imports from Russia. This is impinging upon attenuated global supplies. But nonetheless, the government is more than acutely aware of the need for plentiful supplies at home.

From the standpoint of overall political economics, the RBI and the government seem to be on the same page. This does not happen most of the time. Hopefully, with the favourable constellation of stars, we will see overall price stability in a growing economy. (IPA Service)

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By Anjan Roy

Morgan Stanley, a widely respected global investment bank, has upgraded India’s rating. This essentially means the bank now is now arguing it is worthwhile investing in India on the basis of the macro-economic data on the performance of the Indian economy.

At the same time, Morgan Stanley has downgraded China and even the United States. China has been slowing down for a while and despite its wide range of stimulus measures, now and then introduced by the Chinese government, the country economy has failed to show any marked transition to its famed fast paced growth.

Because of the highly inflated property sector, where the largest property companies of China are looking down at defaults and massive loan burden, the overall economy is getting depressed. The burden of loan losses for large banks is also looming, although the deep coffers of the state is intervening to shore them up.

On the other hand, the American economy is growing, although its dragging problem with price rise, is egging the central bank — the Federal Reserve— to hike interest rates. The Fed’s basic policy rate is now at its decades long peak at 5.5%. This is feared to eventually lead to a recession in America.

In the circumstances, the continuing India growth story might attract the global investors’ attention. What can be expected is a flow of funds into the Indian financial markets — both equity and the newly emerging debt markets.

We have already witnessed a buoyant trend in the stocks markets. The Sensex and the National Stock Exchange Nifty are scaling hitherto unseen peaks. Money is pouring into the Indian secondary markets and the indices are rising consequently. The question is   for how long?

Earlier what we have seen is that the decades long double digit growth of China had attracted funds into the country from global investors. These investments were in both the secondary capital markets as well as in green field ventures. While the financial investments built up the sinews of the Chinese economy over years.

Its manufacturing industries got investments from the largest corporations and these had also brought in world class technology into the country. The prospects of a huge market had attracted large investments into manufacturing which in turn resulted in massive jump in Chinese exports from these same global corporations.

Will India be able to attract similar investments from global corporations. These are early days for prognostications. However, we are seeing the initial indications that such decisions from multinational corporations might bring in funds into India. The South Korean manufacturing giant, Foxconn, has announced its decision to invest in India. Foxcom had introduced a new kind of organising manufacturing by setting up some of the largest factories for specific products.

Apple has also indicated its decision to diversify its production base away from China. It is looking for alternate locations for its factories for either the marquee iPhone or other products. Tesla has promised investment in India for manufacturing electric vehicles, although Elon Musk has not been very trustworthy about his investment decisions.

Like China, India is an attractive market for the size of its domestic market. As the economy is growing, the purchasing power is rising and domestic demand is ever buoyant. Almost everything is in demand. Take the example of iPhone. Despite its price, the instrument is selling so much so that Apple is now expanding its chain of exclusive high end commercial outlets. The future looks too good that iPhone’s owner Apple’s Tim Cook himself flew down to Bombay to inaugurate the flagship outlet.

IN short, India is in its sweet spot. The question is will India be able to convert this opportunity into its winning bid. Because, these perceptions are volatile. These swing between extremes.

Solid economic steps and reforms are still needed. The biggest of these are the reforms in land laws. If we are to attract large scale investments in manufacturing industries —like a huge Foxconn factory, a facility for manufacturing aircraft parts and components and eventually the whole aircraft, or a electric car battery manufacturing unit— we have to quickly allot land for these projects. The convoluted land laws stand in the way. We have to develop a smoothly functioning land market.

Similarly, the bureaucratic rigmarole around licences and permissions still needed to be straightened. The state level reforms regarding clearances must be tackled on a emergency measure. Labour laws are also rather complicated, although these have been to a large extent met. In many states, even without going for neat labour law reforms, the authorities have taken a more realistic approach and these laws are now implemented with an eye on ease than on ideological grounds.

Above all, the fierce competition among the more forward looking states for the investment wallet is ensuring that the former state level hassles are being minimised. The state governments are voting for the prestigious projects and they themselves are far more investor field now than before.

The laggard states in these matters are lagging further behind and there is definitely a clear demarcation of rising ones and the backward ones. The divide is getting deeper, which is not good for the country as a whole.

At the same time, there are increasing fears that the party might be  spoiled by extra economic factors. The  global press is full of  coverage  on incidents  of violence  in Manipur.

The extensive coverage of the Manipur atrocities, even after a month, is sullying India’s image as a stable reliable society. The European parliament had commented on these incidents and several countries have drawn attention to these.

Now, the communal clashes in Haryana have been taken  note  by the global media. Especially because these clashes have now close to the cynosure of all eyes, Gurgaon, which had emerged as he latest show-stopper. Host of multinational corporations have chosen Gurgaon as their home in India.

Te swanky offices and innumerable corporate headquarters for even Asian operations constantly put Gurgaon in the focus of attention. The clashes have spread to Gurgaon’s posh localities even and employees have now been instructed to operate from their homes.

As if it could not have come at a worse time, these widely reported clashes are happening in the foreground of the G20 Summit in the national capital. Some comment from the summiteers at the G@ conclave can spoil the golden image of India as portrayed by the investment banks.  If the centre does  not take   steps  to maintain  communal harmony   by controlling   the   fringe  groups   of   the ruling   party    at   the centre, the  India story  may  not  be  that sweet despite   all  the potential.(IPA  Service)

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