This is a kind of economic collapse

JNU professor Himanshu says the economic slowdown is not the result of a one-off event like demonetisation, nor a technical problem but the slump began almost two years ago. This is a kind of economic collapse. The first step to tackle it is to acknowledge it.

• The economy is in a trough. GDP growth dipped to 5.7%. The Index of Industrial Production for July came in at 1.2%. Consumer Price Index showed that the inflation rate had risen to a  high of 3.4%.
• While Finance Minister Arun Jaitley acknowledged that the GDP numbers for the April-July quarter were of concern, BJP president Amit Shah told that the slowdown in the economy was due to “technical reasons”.
• These numbers might be an early warning of possible stagflation with low demand, high unemployment, decline in GDP and persistently high prices.
• There are many reasons for the collapse of domestic demand and the economic crisis India is facing and the government has limited room to manoeuvre and bring the economy back on track.
• RBI has confirmed, what all of us knew, demonetisation caused much pain without any gain. But demonetisation was not the trigger for the economic collapse one is witnessing today.
• It is a kind of economic collapse. The data is clear on this. Since 2015-16, growth rates have been going down. These numbers represent a very serious set of problems with the economy that have been neglected for a long period of time, which is why they have come to bite us today.
• Some of these problems started in 2013-2014. Wages had started turning negative in real terms since 2013. The problem of non-performing assets had appeared by then. The global recession was visible. These factors were well-known. The one big trigger was in August 2014, when primary commodity prices collapsed following a fall in oil prices. This hit farmer incomes hard.
• The droughts of 2014 and 2015 were difficult to deal with and agriculture GDP contracted and these factors severely dented agricultural incomes. With wages going down, rural demand collapsed by 2015.
• Jobs were not being created and wages were turning negative in real terms – growing slower than the rate of inflation.
• The government neglected the severe depression in rural demand for a long time that eventually spilled over to other sectors. Exports had been falling and the government ignored the trouble spots. Private investment has slowed down and credit growth is at its lowest.
• Construction has been the bulwark of employment in the non-agricultural sector in the past 10 years. But the government was in denial till chief economic advisor accepted the possibility of demand deflation in the economy. But this admission should have come earlier.
• In a normal monsoon year in 2016 after two consecutive droughts, when the situation was improving, demonetisation broke the back of the informal economy. It acted almost like a drought does on the economy. Demonetisation delayed hopes for the revival of the economy, and demand deflation was extended.
• Surely, GST has impacted the informal sector in terms of taxes and cost of compliance, which basically means hiring consultants. If it hits the unorganised sector, then manufacturing will be in deeper trouble in the coming quarters.
• The current scenario is uncertain about the next two to three quarters with no signs of private economic activity reviving. Worse, agriculture will make a very low contribution to growth with food grain production remaining flat. The livestock sector has been hit by political beef controversy that could contract the livestock sector as well. Excluding cotton, all major kharif crops have shown a decline in acreage.
• This year even though monsoon was good but its distribution is unlikely to contribute much to GDP in the next quarter.
• There are no visible signs of green shoots right now in the economy. The SBI has already pared down the growth rate for the entire year to 6.5%. There is almost a consensus emerging that the mess in the economy is far more serious than what people had assumed earlier.
• Farm loan waivers by nine states have sucked up the resources of state governments – there is a decline in capital formation in the states. That is telling us that state government expenditure towards investment is going down. The spending capacity of states has been squeezed quite dramatically and total fiscal deficit of states has increased. This impact the government’s ability to ramp up expenditure in the coming months to revive demand. By the end of June, the Central government had already reached 92.4% of its fiscal space. So, there is not much manoeuvring room left for either the states or the Centre.
• Government might have to breach the fiscal deficit target to revive demand. The government is hoping to collect more from non-tax revenue sources. It had a lot of hope for one source initially – dividend from the RBI which has been dashed. Two other sources the government is banking on are telecom auctions and disinvestment of PSUs. Both depend a lot on market conditions. Even though it has floated the idea of selling off Air India, it may not materialise soon. Given the market situation and the heavy squeeze on the telecom sector caused by the launch of Reliance Jio these decisions could get delayed.
• This is similar to what happened during the time of the AB Vajpayee government (1998-2004). At that time, too, the government failed to recognise that there were problems. The “India Shining” slogan came out of not recognising the economic situation. Inflation was low, wage rate growth was low, agriculture had almost collapsed. Foodgrain production on per capita basis had turned negative. This is true with this government also. Foodgrain production was 265 million tonnes in 2013-2014 and it has been projected up to 276 million tonnes for this year. So in four years, it has gone up by just 10 million tonnes, the lowest in the last 15-20 years. This is lower than the rate of growth of the population. In terms of per capita, that means foodgrain growth is negative. Incomes are negative in real terms. Agricultural investment is negative. This is similar to the NDA government period 1998-2004.
• But 2008 was different because the problems that hit our shores spiralled out of a global crisis. We had one of the best runs of growth between 2004 and 2008. The government distributed a lot, it earned a lot. The agriculture sector was clocking around 4% growth. Incomes were rising. Global commodity prices were rising, so terms of trade shifted in favour of the agricultural sector and farmers benefitted. Construction and manufacturing were growing at their fastest rates. That gave us the cushion to go in for a fiscal stimulus and revive demand.We were not so directly exposed to the financial crisis in developed economies and domestic demand was the prime driver. Right now, the engine of the economy – domestic demand – has collapsed.
• 2018 will be the last Budget the government will be presenting. In 2019, it would be a vote-on-account. The first thing is to acknowledge the gravity of the problem. The government has played blind for long to what has been happening in the economy. The finance minister has come on record to say that these are of concern. That is the first time the government has acknowledged such concerns. But if they actually have a very good idea of the magnitude of the problem is unclear. Right now the engine of the Indian economy, domestic demand, has collapsed.
• The share of private final consumption expenditure as a share of gross domestic product, it was roughly 62% during the third quarter of 2016-2017 – this is the festive season, so private consumption is usually high. Then, mid-way through this quarter, demonetisation happened and sucked out buying power. Compared to the third quarter of 2016-2017 with severe disruption in its second half, the share of private final consumption expenditure in gross domestic product has come down now. in the last quarter, it was down to 57%. That should be a worrying sign.
• There have been too many disruptions in the economy at the same time. What is needed is somebody who can work hands on with the economy.
• The entire economic policy-making group including the RBI in it. The policy-making is never one individual, it is a collective effort. Unfortunately the government’s ability to tap into a pool of economists and experts is very limited. Niti Aayog is in transition now, RBI is already under fire, the chief economic advisor may change now. There needs to be a point where experts, economists and policy-makers come together.
• Differences are bound to be there. No two economists are going to have the same opinion. This government has far less differences than the previous one and that is its problem. Somehow the government must seize the moment and act fast. If this continues for long, it will take a disproportionately greater effort to recover to what is now considered a normal 7% growth rate.

The Wire: Wide Angle: Episode 10: Demonetisation Anniversary

Modi govt's new cattle slaughter rules, SC orders nationwide stay

My View:
By ordering nation wide stay on Modi's senseless cattle slaughter rules, Supreme Court, in fact has bailed out Modi from embarrassment of violation of constitution, jeopardizing millions of jobs, loss of over $4bn beef export revenue and saving Leather Industry, mostly run by Muslims. Kerala CM Vijayan has rightly described Modi as stooping to new lows and causing a national tragedy. Above all lynching by 'gau rakshaks' will come to an end. SC also saved fragile UP's economy, in doldrums with farm loan waiver etc. Above all Modi's henchmen will now see a reason to be law complaint, going forward. Had SC kept quiet, Modi would have lost his face undoing all his non sense things at the expense of his already dented image. Modi must thank SC Chief Justice JS Khehar for his nice & timely gesture. SC should have admonished perpetrators of this kind of constitutional violations so recklessly and casually. Attorney General & Ministry of Law must have been told to discharge their duties properly and correctly.

Modi's Minimum Government, Maximum Governance

• By definition "minimum government, maximum governance" is meddling with citizen's lives as less as possible and maintaining taxation at essential minimum levels while delivering citizen services effectively & efficiently. It is not just small size of cabinet and abolishing infructuos committees or institutions.
• World Bank's perspective of good governance is “the manner in which power is exercised in the management of a country’s economic and social resources for development”.
• In 2014, as most of the Indian elite supported the BJP during the Lok Sabha elections to its slogan: minimum government, maximum governance. Apart from this slogan, there seems to be little or no understanding for Modi & BJP what small government meant.
• Two years after Modi was sworn in as prime minister, it’s more than obvious that minimum government, maximum governance was simply a slogan meant to woo a rather small – and ultimately politically useless – section of the Indian elite.
• In recent months many have expressed their disappointment in the Modi government’s ability to live up to the promise of minimum government, particularly when it comes to running the economy. And in the bargain, we’ve ended up with more government in places we least expected—telling us what to eat and how best to be patriotic.
• Modi government’s so far has largely focused on using technology to monitor bureaucrats and streamline business processes to ensure files are pushed faster and decisions taken with speed. Important as these reforms might be, they are neither substantive nor radical enough to achieve the goal of maximum governance.
• The centralization has resulted in destroying the bureaucracy’s ability to take decisions as bureaucrats at the highest levels who simply wait for signals from PMO. 
• From increased taxes to controlling what Indians will eat, watch or speak, the government seems to be getting more intrusive.
• During Modi's 10-year stint as chief minister of Gujarat, there is no evidence of reduced spending or examples of unneeded government functions being jettisoned are provided.
• Since 2014, size and function of the government has been decided by a number of political factors no different from how the Congress or any other state party would do it.
• After the November 9, 2014, reshuffle, Modi’s government had 65 ministers which was 14 more than the last government with a majority in the Lok Sabha: Rajiv Gandhi’s 1984 ministry.
• On taxes, the government introduced two new cesses since 2014. Eating out, to take one example, now means shelling out a fifth of your bill to the Union government.
• Even worse, the Modi government isn’t even passing on this extra money to the state governments (who do the actual work of running development projects even as the prime minister organises yoga soirees). A transfer to the states of 6.3% of the GDP was budgeted for 2015-'16, the Union government only passed on 6.1%.
• During his 2014 campaign Modi mentioned that government has no business to do business. But none of the PSU's were privatized or divested so far. The Indian tax payer under Modi still continues to subsidise the government’s efforts to run loss making airlines, hotels and banks.
• Indian public sector banks are running crony capitalist dacoity, offering terrible loans to politically connected industrialists which were never paid back. In 2015, SBI wrote off a whopping Rs 21,313 crore in bad debts.
• Modi said in an interview to the Wall Street Journal in May 2016. “You can’t suddenly get rid of the public sector, nor should you." It is clear that after becoming PM, Modi has made a U-turn on his “government has no business to do business” point-of-view.
• Free market economies work best when the government makes a broad set of rules and lets private capital do the rest of the work. 
• Modi government went to the trouble of laying down detailed rules for matrimonial sites. 
• New aviation policy is attempting to directly control airfares, capping fare for flights of less than an hour duration at Rs 2,500. 
• Government’s draft Geospatial Information Regulation Bill proposes near-draconian controls on business and individuals, making and using maps of India which was described as a return to the License Raj.
• Trying to control what people see, eat and speak. BJP bringing in a stringent law outlawing the consumption of beef in Maharashtra. Modi’s government announced a new scheme to promote Hindi in areas such as North East and South India, another addition of responsibility.
• Citizens surveyed on Modi Government's satisfactory performance after completion of three years stands at 61% is down from 64% that was last year and 68% at the end of first year of Modi Government.
• The failure to deliver is a consequence of an obstructionist political opposition and an over-reliance on bureaucrats who constantly block new ideas. But this narrative will not take the Modi far. Voters want maximum action not maximum blame. 

My View:

Modi has no habit of walking the talking. His reluctance to appoint SC & HC judges as recommended by collegium, believed to be non-BJP loyalists resulted in 40% judge positions vacant for over two years greatly effected justice delivery system, which is contradictory to "minimum government, maximum governance" is one example. Modi suffers from worst possible type of corruption; an insatiable desire for personal glory at any cost; an extremely deep moral and spiritual corruption. Modi belongs to the line of autocratic ideologues rather than the western tradition of revolutionary neo liberalism, or marxist rationalism. He also represents the worst aspect of democracy: a demagogue who caters to an irrational populace’s cravings for self-identity and release from self-responsibility. He might not have taken any bribes in recent years but there is no way he could have risen to his position without having made massive and horrendous economic & moral compromises ... as described by Jayant Bhandari in www.acting-man.com

What army is doing in Kashmir?

Army's role is primarily to secure frontiers from external threats and police to maintain internal law & order.

• Kashmir valley's population is over 9 million of which 96% are Muslims. 60% of the Valley’s population is below the age of 30 with shrinking job avenues. 
• Notwithstanding other achievements of Narendra Modi, Kashmir will be the scene of his biggest failure unless a dramatic breakthrough in the near future. Such a feat will justify J&K Chief Minister Mehbooba Mufti's belief that only Modi can solve the state's problems.
• The low polling percentage of 7% in last month's Srinagar parliamentary by-poll was a sign of the erosion of popular faith in the electoral process since 2014, when the assembly polls registered 66% voting, a 10% per cent jump from 2008.
• Everyone is feeling choked because the political system has failed to deliver. After PDP tied up with the ultra-nationalist BJP, the space has shrunk even more for the youngsters who have gravitated towards militancy.
• Today, the Army is a part of daily life in Kashmir. New generations of Kashmiris have grown up living next door to military camps while the army too has learnt more about dealing with the Valley. The army lives in the self-belief that it has won the hearts of people in insurgency-hit areas. 
• Kashmir remains the most militarized zone in the world.
• Anywhere between 6.5 lakh to 7.5 lakh [security personnel] are there in Jammu and Kashmir. If you take the Army’s total strength, half of it is there. 
• The ground reality in Kashmir is that in 2013, 31 local youths joined militancy, the number for 2015 (till Sept) jumped to 66, according to police records.
• In Kashmir, security forces are regularly targeted by militants to intimidate people and discourage local youngsters from joining the government forces that have been fighting insurgency that broke out in 1989 and has since killed more than 40,000 people.
• The ratio of police to people is the highest in Kashmir, than any state. 
• It is like a prison-like reality in Kashmir and expect its people to be silent.
• There were only 150 militants in the state last year. Do we need 7 lakh soldiers to fight 150 militants?
• The total number of militants killed in Kashmir since 1990 is 21,000. Of them, only 3,000 were foreign militants.
• If people were told the truth that Kashmiris don’t want to be with India, and the struggle here is sustained by them primarily, and there is very limited external support – the public opinion in India too would change. 
• Not to allow the public opinion to change, campaign about Pakistan-sponsored proxy war are told. Indian electronic media is a part of India’s military strategy in Kashmir.
• The State Human Rights Commission said in an ongoing case that 570 people buried in the three districts in North Kashmir as foreign militants were later identified as local Kashmiris.
• There are at least 8,000 families which claim their members disappeared over the last 25 years. 
• Many Indian soldiers have raped Kashmiris. In the last 25 years, there have been hundreds of women who came forward to file cases of rape. It is very difficult to persuade them to file cases for fear reprisals from the Army. There are also issues of social stigma and non-deliverance of justice. 
• Sexualised and gendered violence cases are about 7,000. This include boys being sodomized, male rapes as well. It would be very difficult to prove a rape. You can hardly call it sex with consent by sex workers, when someone has a gun in his hand and asks a woman to have sex, and she agrees.
• So far there have been no conviction for encounter, rape, custodial killings, disappearances or torture in Kashmir.
• Army using a ‘human shield’ tying a militant in front of Jeep, similar to that of LTTE using children as human shields, and later army justifying and commemorating this action further widens the alienation. This is in gross violation of human rights.
• The utterances of senior BJP leaders are having a direct impact on the ground situation here. Beef was never an issue here and is hardly consumed but after the Haryana CM told Muslims they could live in India provided they stopped eating it, anger is growing and people are fearing the rise of the BJP. Muslims don’t fear death, rather prefer dying with honour rather than living a life of shame under oppression.
• Despite Modi's earlier admonition, the saffron lobby's continuing opposition to inter-faith affairs and the description of Mughal emperors like Babur and Akbar as "invaders", as by UP CM Yogi Adityanath recently recalling the castigation of Muslims as unpatriotic "Babur ki aulad" (children of Babur) during the Ram Janmabhoomi movement further alienates Kashmiris.
• The problem is essentially political. Financial packages announced by Prime Minister Narendra Modi are not the balm people need. You cannot throw money at the problem. If you think Modi will come here and announce a package and people will forget, that’s not going to happen.
• The appearance of schoolgirls on the streets to join the teenage boys to throwing stones at the security forces shows that the familial and social norms are breaking down.
• Hemmed in by bunkers, curfews and frequent internet bans, people are searching for dignity and justice. The tragedy is that like in the past over two decades, neither Srinagar nor New Delhi is wising up to the new reality and looking beyond security perspectives.
• The ground beneath Kashmir’s feet is indeed slipping.

My View:
Army can be used to conduct a specific operation in civilian areas similar to that of "Operation Steeplechase" to weed out Naxalites and "Operation Bluestar" to flush out militants from Golden Temple but it is the duty of politicians and police to establish normalcy and maintain law & order. Prolonged presence of Army in large numbers in Kashmir, while weeding out militants inflicts atrocities on civilians, and will only complicate the issue and alienation would be total and irreversible. The only solution is to make Kashmiris feel that they are equal citizens of the nation and engage them politically and economically, otherwise we may very well end up losing Kashmir and for Kashmiris it would be from frying pan to fire. 

Anti Slaughter Rules

• The Government of India's innocuous sounding amendment, ‘Restrictions on sale of cattle’ promises to be the final death knell of cattle and buffaloes in India, and along with them, the destruction of what little remains of a dignified life and livelihood for farmers.
• The rules defines ‘cattle’ to mean “cow, calf, bull, bullock, buffalo, heifer, steer and camel”.
• The notification is another instance of the ‘mischievous and deceptive’ law-making practice involving camouflaging a controversial provision with seemingly progressive and innocuous provisions in order to deceive and mislead the general public.
• The notifications breaks the steady supply of cattle to slaughter houses and operations and beef exporters.
• The rules will hurt mostly Muslim traders who face mounting violence by increasingly assertive cow vigilante groups. Farmers will also be hit because they will be deprived of a traditional source of income from selling non-milch and old cattle. Farmers who can't take care of their cattle will have to pay for their upkeep in shelters.
• The move introduces lots of paperwork for cow traders who are mostly poor and illiterate. Before the trade, both seller and buyer will have to produce identity and farmland ownership documents. After buying a cow, a trader must make five copies of proof of sale and submit them at the local revenue office, the local veterinary doctor in the district of the purchaser, animal market committee, apart from one each for seller and buyer. An insanity at its best!
• Slaughtering means 'the act of killing or butchering of livestock for market';
  Cruelty means 'disposed to inflict pain or suffering'.
• By equating ‘slaughter’ with 'cruelty' and criminalizing the trading of animals for slaughter at animal markets as an act of cruelty, the central government has enforced a country-wide ban on the slaughter of buffaloes and cattle, leather industry and the consumption of beef.
• These new rules choke the free movement of animals via the markets undermining the freedom and rights of farmers, traders and all others whose livelihoods are linked to this production cycle that sustains cattle and buffaloes of this country.
• It is pertinent to note that the Act does not prevent slaughtering of animals. The Act permits destruction or killing of animals for the purposes of food on the condition that such destruction was not accompanied by unnecessary pain and suffering. Slaughter houses which slaughters 90% of cattle, sources cattle from middlemen & animal markets which will now become defunct with this ban order.
• The dairy farmer's life and livelihood are at stake because 40% of a dairy farm’s income is derived from the sale of unproductive cows & buffaloes.
• The assumptions that (i) there is always a farmer ready to purchase another’s cow or bullock and (ii) a farmer will be willing to retain or buy an unproductive cow, buffalo or bullock are totally false. 
• During drought times, everyone looks to sell their cows and bullocks for want of water and fodder and the farmers gets a reasonable price in the market because of traders involved in the trade of animals for slaughter.
• Indian beef is in great demand in the world market because it is cheaper and India is the largest beef exporter.
  - Meat exports are over 1.3 million tonnes per annum of which 95% is beef..
  - Meat exports industry is Rs.27,000 crores pa.
  - Leather market is estimated at Rs.40,000 crores pa.
  - Dairying is Rs.80,000 crores pa.
  - Cattle trading is the livelihood of about 15 million Muslims.
  - About 35 million people depend on slaughtering, beef & leather industry.
  - In all, 50 million people are dependent on cattle related businesses.
  - Majority of rural population supplement their meager incomes with dairying.
  - Most workers in leather industry are Dalits.
  - Only 10% of buffaloes heads for slaughter houses.
• The number of animals in milk - cows & buffaloes are about 100 million. Out of which approximately 10% i.e. 10 million unproductive cows & buffaloes are slaughtered every year. With this ban, who will provide grass & feed to this 10 million unproductive cows & buffaloes? There is no mention  about this in Modi's ban order.
• Slaughtering and the markets for beef and leather, complements dairying. Farmers rear cattle for dairy or as work animals, and when they become non-productive, the have value for its beef and skin used for leather. Beef is a by-product of dairying and draught, is another aspect of livestock economy.
• If today the slaughter of cattle and buffaloes is considered an act of cruelty, then it will be only a matter of time before the sale for slaughter of sheep, goats and poultry will also be forbidden. With the food preferences of the majority of citizens who eat meat and a massive number of livelihoods at stake, this highly contentious interpretation of cruelty needs to be interrogated and challenged.
• While Europe, Australia, New Zealand and the US are waiting to dump large volumes of subsidized milk powder into India, and Indian dairy cooperatives fighting hard to stop this, it is extremely foolish of the government to literally kill dairying in the name of animal welfare.
• Instead of creating 20 million jobs per annum, Modi is destroying informal sector which provides mass employment with his mindless and sadistic decisions.
• This Modi's senseless order is not sustainable and will be revoked. The earlier is better to contain damages. Already Madras High Court has issued 'Stay Order' few days ago. 
• This is another classic example of 'quack' advised policy decisions by Modi. No expert in the field of Animal Husbandry, Dairying or official in Ministry for Rural Development etc will recommend this type of insane decisions.

My View:

While ban on cow slaughter is understandable for Hindu religious sentiment reasons, altogether banning cattle slaughtering is utterly unwarranted. While cruelty is inhuman, slaughtering of cattle is not. Unproductive cattle, if not slaughtered and unfed will die in due course suffering hunger and pain. When the Act expressly permits slaughter of animals for food, rules imposing a ban on sale of cattle for slaughter is untenable. The Rules harm many by infringing their rights and benefit none, except certain animals, upon whom no explicit fundamental rights are conferred by the Constitution. Modi with his another quack advised cattle ban order has unleashed death warrant on Farmers and Muslims and is attempting forcing the nation to become vegetarian directly interfering with personal food choices of people and destroying millions of jobs. While the Centre is empowered to frame rules, implementation of the regulation of livestock falls under the State government’s ambit and rules can't violate the Act.