General election 2019 blues

This is a waveless election (2019) wherein the preference or dismissal of a leader and issues seem to be pre-determined by the social background (caste and community) of voters. 

• The BJP  won 31% of the vote with 282 seats nationally in 2014. This is the highest vote to seat conversion indicating heaviest fragmentation of the anti-BJP votes. Plain arithmetic suggests that if all major non-BJP forces come together, the Modi machine will halt.
• Today BJP today rules 17 of 29 states (a year ago 21/29 states), either directly or with its allies. Despite BJP's countrywide presence, it is also true that the opposition has been winning most of the Lok Sabha by-elections which is a sign of defeat for the Modi-Shah combine in these elections.
• Anti Modi factors are: Demonetisation, GST, cow vigilante  lynchings, agrarian crisis, unemployment, inflation, cattle trade ban, etc.
• Pro Modi factors: Good governance, divided opposition, Balakot airstrike, surgical strikes, absence of major scams, etc. Factors such as welfare schemes like the PM Awas Yojana, Ujjwala Yojana (free LPG cylinder connection to BPL families), Rs 2,000 to the farmers, are secondary reasons for BJP.
• BJP which won in UP (71/80 seats), Rajasthan (25/25), Gujarat (26/26), Bihar (31/40), MP (27/29), Chattisgarh (10/11), Maharashtra (22/48) and Karnataka (17/28), in 2014, may lose most of these seats in 2019. 
• There is no perceptible Modi “wave” this time and the muscular nationalism plank that the BJP banks on fails to evoke the required response in the face of widespread agrarian crisis.
• The public resentment against the BJP governments is glaringly evident even though some believe that Modi has no alternative. It is also clear the BJP is not adding any new constituency of voters. The trends point to a clear reduction of the BJP’s tally from its commanding position of 2014. 
• Stung by the failure of the campaign based on muscular nationalism in the early phases of voting, the BJP desperately looks for new strategies and altered roadmaps, with emphasis on Hindutva. The candidature of the Malegaon blast accused, Sadhvi Pragya Singh Thakur, in Bhopal against Digvijaya singh is a major step towards Hindutva consolidation.
• Modi's election campaign is increasingly looking like his style of governance over the last five years, particularly the manner in which demonetization and GST were pursued. A new narrative every day, with new reasoning and strategies along with altered road maps to attain a proclaimed objective. This could also lead to results as chaotic as demonetization and GST produced.
• Congress party has scored some vital points in terms of ideation of new policy initiatives and programmes, but has failed to follow this up with solid organisational initiatives and electoral strategies.
• In Uttar Pradesh, multiple narratives are impacting the election in different ways. BJP's candidate's weaker profile as compared to BSP-SP-RLD alliance is widely acknowledged.
• People are not interested in communal issues but have economic concerns. The BJP had impar­ted a larger-than-life cult image to Modi. Even now they are projecting him as a lone lion in the jungle versus the rest. This is not going to work now.
• Had even a single person been killed in Pakistan by our our strikes, would they have returned Wing Commander Abhinandan in one single piece within days? Is Imran Khan not answerable to the people of Pakistan? So how did Amit Shah claim we killed 250 Pakistanis!” -- Raj Thackeray 
• EVM's are neither easy to tamper with and at the same time not tamper proof. Its non-transparent mechanism gives scope for losing candidate to think that EVM has been tampered with. Unless public confidence is earned, EVM will remain a contentious issue. EC telling that EVMs are perfect without explaining how they are perfect is nonsense.
• This election is not about who wins but to ensure that the BJP loses so that the nation survives. “We will take on each other later.”  -- Raj Thackeray 
• Mukesh Ambani had recently extended his support to Congress candidate Milind Deora in South Mumbai constituency. Raj Thackeray called this shift in Ambani’s loyalty from BJP to Congress is a big message to the country. Ambani is Uddhav Thackeray’s close friend but decided to side with a Congress candidate is a clear indication that Modi is heading towards defeat.

As things stand today, a weak opposition is Modi’s biggest strength and he is likely to benefit from the TINA (there is no alternative) factor the most, with other positives contributing towards making him virtually unassailable. Reactions from the echelons of the Sangh Parivar after the first two rounds of polling point towards a sense of unease. Many leaders admit that there is a possibility that the BJP would only win half the seats it had in 2014. 

Jammu and Kashmir Governor Satya Pal Malik’s act of dissolving the Assembly when three non-BJP political parties in the State were on the verge of forming a coalition government is of a piece with the systematic undermining of democratic polity. Modi unleashing CBI, ED, Income Tax etc on all anti-BJP parties terrorizing opposing candidates and immobilizing their associates is gross misuse of institutions which are supposed work autonomously. In order to safeguard democracy it is important that Modi & BJP must be defeated in this 2019 elections and be watchful that future governments don't follow the same path. 

Varavara Rao & 4 others arrested - Arbitrary crackdown

Deccan Chronicle | Hyderabad | 29-8-2018

Virasam leader Varavara Rao (77 years), lawyer Sudha Bharadwaj, Arun Fereira, Gautam Navlakha and Vernon Gonsalves were arrested on 28-8-2018 by the Maharashtra Police for their alleged involvement in organising Elgaar Parishad, suspected with Maoist links, earlier this year in Pune. They were arrested under IPC Section 153 (A) and according to the FIR, provocative speeches were made at the event, and these triggered the violence in Bhima Koregaon.

• The National Human Rights Commission observed that "it appears that the standard operating procedure in connection with these arrests has not been properly followed by the police authorities, which may amount to violation of their human rights."
• He’s almost 80 years old. I don’t know how he will hold up in prison, said Hemalatha, Varavara Rao’s wife, as she broke into tears.
• This entire plot is devised to garner Hindutva support. Modi is already losing support and he wants to gather sympathy by stating that a Hindu leader is going to be killed. This Bhima Koregaon, an assertion of Dalits is a barricade to the Hindutva politics, so they want to taint it, said Kurmanath.
• This is a witch hunt and an attempt to divert attention from the failures of the current government, questions that are being raised about demonetisation, the Rafael deal, and right wing extremism, said historian Ramachandra Guha.
• The Hyderabad High Court bench of Justice C V Nagarjuna Reddy and Justice T Amarnath Goud gave the direction while hearing an urgent plea filed by Hemalatha wife of Varavara Rao. Seeking counters from DGPs of Maharashtra and Telangana, the bench said that it would declare the arrest illegal if their counters did not disclose a valid case against the writer. “If it is found that police did not follow due procedure, we will intervene,” the bench said while adjourning the case to next week. 
• The Supreme Court today (29-8-2018) said the five people arrested yesterday in connection with the Bhima Koregaon investigation should be kept under house arrest till Sep 6, 2018 - the date of the next hearing in the case.
• Dissent is the safety valve of democracy and if you don't allow these safety valves, it will burst, said the Supreme Court bench, which comprised Chief Justice Dipak Misra, and Justices A M Khanwilkar and D Y Chandrachud.

The recent multi-city crackdown on human rights activists and left-leaning intellectuals and academics is in violation of fundamental rights. It was totally unjust, but sought to be justified on the pretext that they working against the country’s interest. But the fact remains that they championed the cause of the country’s impoverished people. It would be a sad day for Indian democracy when the defense of the weak and vulnerable is treated as a crime.

Demonetisation - Much about nothing - RBI report

The Hindu Businessline | August 30, 2018

The RBI, its annual report released on Wed Aug 28, 2018, has revealed that only  ₹16,050 crore out of the  ₹15,44,000 lakh crore (1.04%) of the scrapped higher denomination notes have not returned back into the banking system and therefore remain missing or unaccounted for. This data has raised questions about the overall gains and the impact on the economy, especially the informal sector, because of the disruption 'Demonetization' has caused. 

• The Modi government had framed the dramatic announcement as a move to clamp down on corruption and black money, cut off terrorist financing and tackle fake notes. But with almost all the demonetised notes coming back, everyone wonders whether the stated purpose of demonetisation has been served.
• Modi's hidden objectives of demonetisation were (i) its perceived windfall in terms of an enhanced dividend for the government from the RBI as government expected at least 30% (~₹5,00,000 crores) of cash, black money stacked will not get back into banking system and (ii) disarming opposition parties with all their stacked cash becoming worthless and thus paving his way to win UP elections effortlessly.  
• The initial narrative by the government was that a large amount of demonetised currency will not find its way back into the system. This purported benefit did not materialise in any significant way. It cannot be said that significant losses have been inflicted upon those holding black money.  
• The claim that it would lead to an increase in tax collection, nothing can be anything with confidence.
• During the reporting financial year, 522,783 pieces of counterfeit notes were detected in the banking system, which was 31.4% lower than in the previous year.
• The cash-based terror and criminal activities may have been disrupted for some time, as did cash-based legitimate activity, it is not clear that there has been any significant disruption.
• The liquidity surge in the banking system that came about in the aftermath of demonetisation complicated the RBI's conduct of monetary policy.
• RBI had to introduce many instruments to absorb demonetisation induced liquidity from banks.
• The increase in CRR dented bank's earnings.
• The mopping up of liquidity eroded the RBI’s earnings. 
• RBI's expenditure on printing of currency doubled from the previous year. 
• RBI's income for the year decreased by 23.56% and its expenditure increased by 107.8% resulting in a sharp decline in the RBI’s surplus.
• Demonetisation served as a negative shock to the economy. GDP growth in the Jan-Mar 2017 quarter slowed to 6.1%, and to 5.7% in the next quarter (April-June 2017). 
• A number of small-scale businesses were adversely affected. The unorganised sector especially bore the brunt of the sudden shock. Economic activity shrinkage is over ₹300,000 crores & loss of jobs at over 2 million, this is the worst any PM could do to any nation. 
• The value of banknotes in circulation increased by 37.7% over the year to ₹18,03,700 crore as at end-March 2018. The volume of banknotes, however, increased by 2.1%.
• While there no benefits at all (all pain & no gain), the clear lesson is that tax reforms and effective monitoring of suspicious transactions are a better alternative for addressing the stated objectives. 

What India has done to its money is sickening and immoral - Steve Forbes ... In November 2016, India's government perpetrated an unprecedented act that is not only damaging its economy and threatening destitution to countless millions of its already poor citizens but also breathtaking in its immorality. Without any warning India abruptly scrapped 85% of its currency. It claims the move will fight corruption and tax evasion by allegedly flushing out illegal cash, crippling criminal enterprises and terrorists and force-marching India into a digitized credit system. Human nature hasn't changed since we began roaming this planet. People will always find ways to engage in wrongdoing. Terrorists aren't about to quit their evil acts because of a currency change. There's no misunderstanding what this is truly about: attacking your privacy and inflicting more government control over your life. What India has done is commit a massive theft of people's property without even the pretense of due process--a shocking move for a democratically elected government. (One expects such things in places like Venezuela.) Not surprisingly, the government is downplaying the fact that this move will give India a onetime windfall of perhaps tens of billions of dollars. By stealing property, further impoverishing the least fortunate among its population and undermining social trust, thereby poisoning politics and hurting future investment, India has immorally and unnecessarily harmed its people, while setting a dreadful example for the rest of the world. 

Political narrative slipping out of Modi’s hands

It is not unusual for governments to become unpopular in their last year or two. But what surprised many is that the same thing happening to Modi, the master communicator, the king of narrative, the man who sets the agenda others follow, the slayer-of-demons who won UP despite the failure of demonetisation, and who knows how many rabbits he could still pull out of his hat.

• The gory details of the brutalisation of women, recently at Kathua, J&K and Unnao, UP,  shocked people and angry protests followed. PM Modi maintained stoic silence for weeks as usual, breaking his silence only after public outrage, protests that continued even after the government has woken up. April 2018 could well have been December 2012. The intensity then was much greater, but the pattern is similar.
• The government appears to be out of control and has lost its grip over the political narrative. Every week there’s a new crisis that makes the government look worse than it did the previous weekend. The negative headlines drown out PM Modi’s photo-ops.
• A year ago, after winning UP elections with three-fourths majority, the Modi government looked so powerful people thought it would rule forever. Everyone had exclaimed. Modi and Shah inspired fear and awe alike. 
• On July 31,2017, the provincial princeling of Patna, Nitish Kumar, felt compelled to give into the force of gravity, falling into the BJP’s waiting arms. Nobody can defeat Modi in 2019, he had declared triumphantly.
• Exactly a month later, on 31 August, GDP for the Q1 of 2017-18 were published. India’s GDP had fallen to 5.7%, the impact of demonetisation was writ large. It was clear that things weren’t going to look up anytime soon because the mangled, badly designed and hurriedly rolled out and messy implementation of GST on July 1, 2017 slowed down business activity and hurt job creation. 
• UP voters knew the truth is that demonetisation had failed to save any black money but voted for the BJP for other reasons. But demonetisation and GST hurt everything: jobs, rural economy, private investment, government revenues, consumer confidence and so on. The government cherry-picked economic data to defend itself. Spin-doctoring can make you believe any lies except the bit about the money in your pocket. 
• The government managed to carry the political narrative over disastrous demonetisation and GST as successes, only till the GDP numbers were out. Since then, the Modi narrative has fallen week after week. Less than a year after the stupendous victory in UP, the Modi juggernaut is not looking beyond the pale of the cycle of anti-incumbency that inevitably follows mandates of hope.
• Week after week, the Modi government’s own tall promises made through lofty slogans -- Beti Bachao, Digital India, Re-exam warriors, Co-operative federalism, Na khaoonga na khaanay doonga, Chowkidar of public money, Saffron Ambedkar all have boomeranged on Modi's face.
• I&B minister Smriti Irani’s attempts to muzzle the press with the fake news bogey backfired. An unprecedented press conference by four sitting Supreme Court judges fuelled speculation that the government was interfering with the independence of the judiciary. The government’s attempt to shove Aadhaar down people’s throats without a consensus furthered its anti-democratic image.
• The BJP’s big reply to its critics was that it keeps winning election after election. The party’s good performance in the NE was overshadowed by its humiliating loss of Gorakhpur & Phulpur in UP. Dalit alienation by Yogi government in UP forced the BSP to ally with SP that raising doubts over the BJP’s election machine.
• The Gujarat election result was a victory that didn’t feel like one. Instead of improving BJP performance dropped to below 100 seats for the first time since the party’s rise to power, due to farm distress. The story was repeated in bypolls in Rajasthan’s Ajmer and Alwar. Farm distress and unemployment both became big stories that overshadowed the government’s tall claims. This, more than anything else, cast doubts over the party’s invincibility, and the inevitability of their 2019 victory. 

With an year to go for the 2019 general elections, Narendra Modi landed himself perfectly on a sliding slope, with no hope for him to rise and shine again? 

Read the source article

Modi proved himself as the worst PM India ever had, so far, did nothing for poor, peasants, unemployed youth & common man and focused in only enriching richer people, who hitherto fills his coffers. He ruthlessly destroyed informal sector which provides employment to masses but doesn't pay taxes. He has only empty rhetoric promises for them only to be forgotten in next few seconds. He doesn't care for constitution, democracy, rule of the law, laws of the land, institutions, traditions, allies or anything that comes his way. He was only successful at winning almost all elections till date. When he loses elections in 2019, which is almost a certainty, BJP leaders would be more happier than anyone. 

Modi and BJP fading away in Hindi heartland

In 2014-15 BJP president Amit Shah's proclamed an uninterrupted BJP rule at the Centre for the next 50 years. Even those who factored in unforeseen political challenges had little doubt that the BJP under the leadership of Prime Minister Narendra Modi and Shah would have an easy ride at least for 15 years. But such conviction is a thing of the past. These observations were made by a senior BJP leader from UP within days after the BJP suffered shock defeats in the byelections in Gorakhpur and Phulpur. UP CM Yogi Adityanath, the BJP's latest mascot candidly admitted that they had been done in by overconfidence. 

• As in March 2018, BJP is in power 15 states and shares power in 5 other states. While 3 states are in Congress fold, 6 states are ruled by regional parties.
• Despite its massive presence in the country, today BJP is trembling with negative vibrations across the nation and elections for 5 states are slated for 2018 and general election for 2019 and Modi is desperately searching for a magic wand, that will work.
• In a span of 10 days, BJP suffered stinging defeats in UP’s Gorakhpur and Phulpur, constituencies held earlier by CM Adityanath and DyCM KP Maurya. While Tripura was wrested by BJP ending the 25-year-old Left Front regime, BJP surrendered their 27-year-long  domination of Gorakhpur to a loose alliance of the SP and BSP. In Bihar, revived alliance with the JDU did not bring any benefit as RJD retained the Araria LS constituency and the Jehanabad Assembly seat. Indeed, you never can take the Indian electorate for granted.
• In the RS polls, BJP’s strength in UP Assembly assured its victory in 8 seats, but it managed to win another seat by engineering cross-voting from the opposition to ensure the BSP candidate’s defeat. Managing a victory in a RS election through backroom manoeuvres is in no way a measure of public opinion.
• The reports from the Hindi heartland States of UP, Bihar, Rajasthan, MP and many more affirm that the popular mood is definitely turning against the BJP. The party is witnessing a steady erosion of support on account of agrarian crisis, the economic hardships on account of demonetisation and GST reforms, and the general failure to live up to the high expectations generated through the rhetoric of leaders like Modi. There is little doubt that this is bound to reflect in reduction of seats for the BJP in the 2019 general election.
• The fact of the matter is voters in the Hindi heartland States are fed up with BJP and they need to face it squarely without taking recourse to convoluted logic and lame excuses. The vote share of the BJP fell by 1,04,495 in Gorakhpur from the 2014 count and by a massive 2,20,102  in Phulpur.
• It is more daunting for the BJP since a mere arithmetical aggregation of SP and BSP votes of the 2017 Assembly elections shows the two parties ahead in as many as 50 of the 80 LS seats in the State. If this arithmetic is getting supplemented by an emotive appeal, a potential SP-BSP alliance will make rapid strides in UP’s electoral politics. Projections on the basis of a cumulative vote share assessment of the 2017 UP Assembly election results are that the SP-BSP combine has a lead of 1.45 lakh votes across 57 LS seats. The BJP and its allies lead in 23 seats by 58,000 votes, a sharp fall from the 71 seats won by BJP and 2 seats won by its allies in 2014.
• Akhilesh Yadav, SP president and former UP CM is of the view that the voter dissatisfaction with the BJP regimes at the Centre and in the States is fast acquiring big proportions and is bound to spread nationally in due course. He opines that Gorakhpur and Phulpur were merely precursors. 
• Akhilesh Yadav said that efforts to portray the BJP defeats in Gorakhpur and Phulpur as the mere fallout of electoral arithmetic is a mechanistic assessment that fails to take into consideration the larger social, economic and political context marked by misrule, the human misery caused by that misrule.
• The TDP  decision to leave the NDA and move a no-confidence motion against the Modi government is another indication of BJP mishandling its NDA allies.
• The manner in which the BJP’s sought to counter the no-confidence motion underscore a sense of panic. The party seems to have unleashed the AIADMK, which has become completely servile to Modi and Shah after  Jayalalithaa’s death, and the TRS to continuously disrupt Parliament on some pretext or the other so that the no-confidence motion cannot be taken up. It seems that like the UPA-II, the Modi Ministry is desperately seeking to run away from parliamentary inspection. The debates on the no-confidence motion would have been telecast live and this too could have added to the government’s discomfiture. But such desperate filibustering will ultimately aggravate voter disenchantment with the Modi government.
• The opposition parties have reinforced attempts to rally anti-BJP forces. While the Congress laid out its plan of action for non-BJP coalition in a special plenary and others are seeking to stitch an alliance of regional parties and these are based on the premise that the BJP is no longer in the position of strength that it enjoyed in 2014. 
• In the RS election in UP, the SP. and the Congress had announced support to the BSP candidate but lost due to cross voting in favour of 9th BJP candidate. The BJP leadership saw in the situation a chance to make mischief between the allies to split them. However, in the press conference that Mayawati said that BSP saw through the BJP’s dirty tricks and vile political games and horse-trading and made it clear that the alliance would continue. 
• BJP and RSS knew that Yogi Adityanath’s stock had taken a big beating. Projected last year as a potential successor to Modi, he has been exposed as an inefficient and ordinary “non vote catcher” leader who cannot even retain his own pocket borough that he had literally lorded over for decades. That does strengthen the Modi-Shah duo as the only vote catcher in the BJP, but the Hindi heartland States account for approximately 200 seats in the 545-member Lok Sabha.
• The BJP is known traditionally to be an urban-centric party. The low turnout in the urban areas in the Gorakhpur at 33% and Phulpur 31% was disconcerting in the context of electoral challenges. This showed that the rural antipathy towards the party continued, its urban core base was resolutely refusing to rally behind it. It remains to be seen how Modi and Shah will tackle this. Certainly empty rhetoric cannot contain these jolts and there is widespread agreement with this observation among the Sangh Parivar rank and file.

Read the source article

Having not ruled the country during first two years and misruled the country with disruptive reforms without preparation and leaving all vulnerable people to their fate without any support, time is now for Modi and BJP to pay the price. No matter what he does, his graph will continue to plunge, an RSS survey has warned Modi. The only way to limit damages is to go for flash polls. That is almost certainty if Karnataka result stuns BJP, which is likely as per opinion polls. Arrogance and dictatorial attitudes will never pay. Consequences are inescapable. Modi's wrong behavior and non-performance and corruption & scams etc has no bounds, much worse than Congress and UPA. Modi must realize that empty rhetoric will not work all the times.

Reticent Urjit Patel turn eloquent

RBI Governor Urjit Patel's silence on demonetization made him an easy target for critics. Almost all public statements on demonetization were made by economic affairs secretary Shaktikanta Das giving rise to the impression that government had sidelined RBI and usurped its policy role, confining it to mere execution. But the Nirav Modi-PNB scam has forced Patel to shun reticence and speak out on several contentious issues without mincing words. 

• Patel rejected accusations that the regulator’s laxity was to blame for the Rs.13,000-crore fraud at state-owned Punjab National Bank, suggesting that laws need to be changed to ensure punitive action can be taken in time and effectively putting the onus on the government. 
• He made a pitch for withdrawal of legal immunity from RBI regulations that PSB's enjoy, saying it had led to considerable emaciation of RBI powers over corporate governance. 
• Patel made an indirect case for privatisation or reducing the role of state-owned lenders. He said the government should decide what to do with public sector banks if it wanted to optimise the use of taxpayer money.
• He asserted that Banking Regulatory Powers in India are NOT Ownership Neutral. He then went on to read out chapter and verse, the list of clauses and sub-clauses from the legal landscape to underline the helplessness of RBI when it came to regulating public sector banks, which account for nearly 70% of Indian banking.
• Making this worse is the persistence of delays, of criminal investigation and judicial process. The Governor points out that “RBI data on banking frauds suggests that only a handful of cases over the past five years have had closure, and cases of substantive economic significance remain open. As a result, the overall enforcement mechanism is not perceived to be a major deterrent to frauds relative to economic gains from fraud.”
• Nearly nine months later – after two rounds of selection meetings – the Deputy Governor’s post is yet vacant.
• RBI is faced with constraints. It cannot act to remove directors or the management of public sector banks. But does it need the ultimate power to prevent malfeasance? The RBI is empowered to give directions where it is in the public interest. How often has that been deployed? Has the power of inspection been utilised? A call for more power is not a credible demand when existing provisions have not been leveraged.
• RBI said: “The risks arising from the potential malicious use of the SWIFT infrastructure” has been a risk factor and it had “confidentially cautioned and alerted banks” on three occasions since August 2016 and added, “Banks have, however, been at varying levels in implementation of such measures.” But RBI never cautioned savers about these risks in the banking systems.
• He said, “If we need to face the brickbats and be the Neelakantha consuming this poison, we will do so as our duty. We will persist with our endeavours and get better with each trial and tribulation along the way." He went on to saying that promoters and banks should seek to be on the side of the devas (the gods) rather than asuras (the demons) in this amrit manthan. 

Despite his image of a reticent, submissive man, Patel withstood pressures from various sides after demonetisation, stuck to a low-inflation regime, didn't lap up the proposal to create a bad bank and opposed farm debt waivers, calling them moral hazards posing inflation risk and undermining an honest credit culture. With his robust defence of the central bank and castigation of public sector banks, Patel has buried the image of a central banker of few words. And with his mythological references, he has shown he can find eloquence when required. 

The full text of RBI Governor's speech

Responsibility shared by two persons is not 50% each. It is 10% each.

While Bank's proper management rests with the owners (MoF in case PSB's), Urjit Patel, RBI Governor can't resort to offensive in the blame game initiated by Arun Jaitley by invoking mythological comparisons and absolve of its regulatory failures.

Had Urjit Patel shown same courage in 2016, the harebrained demonetization wouldn't have happened and nation would have been spared of its consequences borne mostly by lower class people. These discussions, reasons and advises will be engaging our time and leads to nowhere. While the loot may never get recovered, what is important is elimination of recurrence of such events in future. Urjit Patel must know his responsibility as institutional head never to allow government interference beyond a point and preserve institution's independence and integrity at all costs. Government as owner of PSB's is solely responsible for their proper functioning and the regulatory rules governing PSB's and private banks must be same. RBI's regulatory role in preserving depositors & lenders interests and integrity of banking system can not be compromised.

Why the fuss about Fiscal Deficit?

1. Budget deficit =      total expenditure – total receipts
2. Revenue deficit =   revenue expenditure – revenue receipts
3. Fiscal Deficit =       total expenditure – total receipts except borrowings
4. Primary Deficit =    Fiscal deficit- interest payments
5. Effective revenue Deficit = Revenue Deficit – grants for creation of capital assets
6. Monetized Fiscal Deficit =  part of the fiscal deficit covered by RBI borrowing

The Golden Rule of fiscal policy is that the government should borrow only to invest that benefits future generations and not to fund current spending, maintaining inter-generational equity. Hence, the best way is to spend the borrowed money is for projects like infrastructure. The policy suggestion is that government’s budget should have no revenue deficit, a situation where the government’s day to day earnings are not enough to finance its day to day activities.

• Overseas investors and rating agencies relies a lot on this number to judge the health of the country's economy.
• Fiscal Responsibility and Budget Management (FRBM) panel has recommended a fiscal deficit target of 2.5% of the GDP for fiscal 2022-23. The panel suggested 'escape clause' in case of over-riding consideration of national security, acts of war, calamities of national proportion and collapse of agriculture severely affecting farm output and incomes. Also, "far-reaching structural reforms in the economy with unanticipated fiscal implications" too can trigger deviation, not exceeding 0.5%, from the targets.
• This forces the government to walk the tightrope every time the budget comes, as it also has to attend to social sector needs and create enough stimulants for the growth engines of the economy to keep running.
• Any slip on fiscal deficit discipline puts the government at risk of inviting the wrath of the global rating agencies, whose outlook often determines the volume of investment flows into the domestic economy and markets. 
• Any government's move to go for additional market borrowing will be seen as a ‘negative’ that could widen the fiscal deficit. 
• A small fiscal deficit is a good idea but the problem is when the deficit swells and becomes untenable. In a high fiscal deficit environment, government borrowing can crowd out* bank credit, thereby forestalling any chance of capex revival.
  *is the high level of public borrowings that reduces the borrowing opportunity of the private sector.
• Fiscal deficit is met through borrowing by the government from the open market at competitive rate of interest, which increases the overall interest rate in the economy. It also adds to the burden on the future generation violating the principle of inter-generational equity.
• Surging oil prices mean a higher import bill for India and that will translate into higher expenditure. The faltering tax receipts, which are yet to shake off the twin impact of the GST and demonetisation will also widen fiscal deficit.
• Share sale in PSUs is not easy with the market outlook not that promising, limiting the government’s ability to mop up much revenue from that avenue.
• Credit growth in the economy is burdened with huge NPA loads forcing banks remain extra cautious in extending credit to industry. 
• Some economists and industry veterans say there is nothing so sacrosanct about this 'fiscal deficit' number and the government can always relax it a bit and work on it later on. It would be unwise to cut back on government expenditure, only to contain fiscal deficit, as long as that extra expenditure of the government is for investment and not for consumption.
• Ex-RBI Governor Raghuram Rajan opposed the higher fiscal deficit view for stimulating economic growth citing the dismal scenario of the Brazilian economy. He warned that the enormous costs of becoming an unstable country far outweigh any small growth benefits that can be obtained through aggressive policies. 
• Higher inflation remains the biggest headwind in deficit dynamics. Retail inflation @ 5.21% in Dec 2017 was much above RBI’s comfort zone of 4%. RBI’s stand is that higher fiscal deficit will bring more inflation and may distort economic activities in general.
• This year, loans repayment & interest payouts will take up 32% of the centre’s earnings, pensions and subsidies 23%, state grants 23% and defence expenditure 16%. These repetitive expenses will effectively mop up 94% of the total budget receipts. That leaves little room for allocations to new ideas or schemes. Higher fiscal deficit indicates the fragile state of the Centre’s finances, and its control over interest, pension and subsidy expenses indicating extremely limited elbow room in deciding on its budget allocations. 
• The other problem with the expenditure pattern is that the bulk of the budget spending goes into consumption or maintenance expenses, with very little spent on creating new assets.

The analysis tells us that for government to be really able to launch bold new schemes or make a difference to citizens’ welfare, it needs to clean up its finances first — pare down debt, save on interest payouts, reduce pensions and subsidies and raise asset creation. It must also ensure that its receipts grow at a far faster pace than expenses in future, so that the debt can be paid down. Therefore, the success or failure of the annual budget exercise really has to be measured on the progress in these parameters over the years.


Govt breached fiscal deficit target of 3.2% (actual 3.5%) in the current year 2017-18, same as previous year. The budget for 2018-19 projected fiscal deficit target at 3.3% of GDP against the earlier target of 3%. The reason for breaching current year target is mainly due to demonetisation and GST resulting in lower revenues and higher expenditure. 2018-19 being an election year, the budget is not so conducive for higher revenues and govt populist expenses are likely to go uncontrolled. Rising NPAs are big drag on economy. Oil prices surge will result in lower GDP growth and higher inflation thus widening fiscal deficit. Modi has learnt in very hard way not to play gimmicks with economy with reckless adventures but people of India paid the price for no fault of theirs.

Rahul Gandhi proves his mettle

Today, after winning successive elections since 2014 except Bihar, Delhi and Punjab [BJP & allies rule expanded to 19 of 29 states; Congress rule restricted to just 5 states] the invincible Prime Minister Modi is scared of only one man by the name Rahul Gandhi, whom he & his trolls once described as 'pappu' and a 'reluctant politician'. During the past six months Rahul Gandhi smashed all these and gave a spirited and stunning fight in Gujarat election making Modi and his BJP machine sweat like never before. Here are some points proving his mettle:

1. Rahul Gandhi said on demonetisation "Initially the government spoke about black-money, then moved to counterfeit currency and then again to a cashless society campaign. The prime minister took this so-called bold decision single-handedly. The bold decision can also be a foolish decision. And this has devastated the country. More than 100 people have died. Farmers, fishermen, daily wage earners have been hit hard." He also said "Dr Jaitley, the economy is in the ICU because of notes ban and GST. Aap kehtey hai aap kissi sey kum nahi/ magar aapki dava mein dum nahi."
2. Rahul Gandhi said on GST roll out "A reform that holds great potential is being rushed through in a half-baked way with a self-promotional spectacle. GST is being executed by an incompetent and insensitive government without planning, foresight and institutional readiness. India deserves a GST roll out that does not put crores of its ordinary citizens, small businesses & traders through tremendous pain & anxiety. Their GST is 'Gabbar Singh Tax'. Small shopkeepers are finished. Lakhs of youths have been unemployed. But they are still not ready to listen. Congress GST is 'Genuine Simple Tax'. Modiji’s GST is 'Gabbar Singh Tax'." 
3. Rahul Gandhi hammers on 'unemployment' issue repeatedly. On his superb trip to USA he said, "I think the central reason why Mr. Modi arose is the question of jobs in India. There’s a large part of our populations that simply do not have jobs and cannot see a future. But, certainly our prime minister is not doing enough in creating jobs. 30,000 new youngsters are joining the job market every single day and yet the government is only creating 500 jobs a day. My main issue with Mr Modiji is that he diverts that issue and points the finger somewhere else instead of listening." Though the ruling government floated a plethora of schemes like ‘Make in India’, ‘Startup India’ and ‘Digital India’, all of these initiatives proved to be duds.
4. Speaking on women rights back in 2014 Rahul Gandhi  said, "We talk a lot about becoming a superpower in the world but till the women of our country do not feel comfortable and secured, our country cannot become a superpower. And to tell you the truth, we don’t want such a superpower status, where women are not empowered. One thing I have learnt is if you empower women, they can do anything. One important battle we have to win is the women’s reservation Bill in Parliament. We’re not going to let go of it." The BJP had promised during their pre-election rallies that the women’s reservation bill would be passed as soon as they got into power. Despite three and a half years of Modi rule, the bill has not come up in the Lok Sabha so far.
5. Rahul Gandhi while speaking on intolerance had previously said, "Truth and Power are not the same thing. Truth is what stands up to power. Today, there is no doubt that the emperor is completely naked but there is no one with any courage to point it out. When the British came to India, people handed over freedom to them. It was never taken away from us. This could very well happen now. Both the RSS and Mr Modi want to create a country where people live in utmost fear surrendering their voice so that they can rule unhindered. Mr Modi, after locking his cabinet colleagues in a room announced demonetization which wiped off lakhs of jobs. Many media houses have been depicting this as a work of genius even while admitting in private that it was an act of insanity. Most of them have lost their voice." At his recently concluded USA trip, he again said, "What happened to the tolerance that prevailed in India? What happened to the harmony? For thousands of years, India has had a reputation of peace and harmony. This is being challenged. Our most powerful asset is that 1.3 billion people lived happily, non-violently, peacefully. This is something that as Congress people, every single one of us has to defend."
6. On agrarian crisis Rahul Gandhi said in a rally in Maharashtra, "Everyone knows that a farmer needs the support of the nation and the State Government. If you ask any farmer, how much money comes from their farm, then every farmer will tell you – if the MSP is not increased, if there are no rains and no compensation or bonus is given, then they won’t be able to work, and this is the truth behind today’s India."  Criticising the ruling NDA Government, Rahul said in Gujarat "the suit boot government doesn’t do anything for the farmers." Speaking earlier this year to the bereft farmers from Tamil Nadu, he said,” The farmers have been sitting here for so long. But neither the government nor the Prime Minister is listening to them. The people and farmers of Tamil Nadu deserve to be heard by the Prime Minister who is disrespecting them by not initiating any dialogue. Over the last three years, debt worth Rs 1.4 lakh crore held by 50 industrialists have been written off. Why the same is not being done in case of the farmers? Why are their debts not being waived? It is the Prime Minister’s responsibility to do so.” 
7. Rahul Gandhi has made the 'failed development model of BJP' as the body and soul of his Gujarat campaign. Modi had come to power based on the stellar work he had apparently done in Gujarat which he promised would be juxtaposed to other states as well. But Rahul Gandhi ripped that narrative to pieces saying, "Gujarat model of development can be called toffee model or ‘gubbara’ (balloon) model, which is nothing but loot of public money to benefit big people like Tata and Adani. Modi had given away 45,000 acres belonging to poor farmers and the size of Bihar’s Purnea district to a single person (Adani) at a rate of rupees one per sq metre which is equivalent to the price of a toffee. He gave away the entire stretch of land at a paltry sum of Rs.300 crores. Modi had also provided Rs.10,000 crore loan to Tata Motors for its Nano car project at 0.1% interest, while the common man get loan from banks at 12% interest. For every Nano car, the Gujarat government is providing Rs.40,000 assistance. The total budget of the Gujarat government on education, health and other welfare is less than Rs.10,000 crore." Speaking later he added, "Vikas has gone crazy? India’s economy has been destroyed. But everyone is quiet because they are afraid to speak against Narendra Modiji. These are not my words. Senior BJP leader Yashwant Sinha has written this in a newspaper article today. Poverty reduction in Gujarat was highlighted as a huge success but reports have since shown that it has been slower than most of the other states. There has been undoubted progress in electrification and infrastructure development but that has mostly played in the hands of the corporate sector with little to no improvement for the masses! If Gujarat model was dissected, an entire thesis could well be written on it with both pros and cons. We would just stop short of calling it a bigger success than it was.
8. We worked for 10 years to bring peace in Kashmir. Speaking in USA on the violence in the valley, Rahul Gandhi said, "PDP was instrumental in bringing youngsters in politics, but the day Modi made alliance with PDP, he destroyed them (PDP). He (Modi) massively opened up space for the terrorists in Kashmir, and you saw the increase in violence.Violence against anybody is wrong. Hatred, anger and violence can destroy us, the politics of polarisation is dangerous. These incidents are making millions feel that they have no future in their country. I lost my father, my grandmother to violence, if I don’t understand violence then who will?"

Read the source article

Rahul Gandhi blames the BJP for spreading abuses about him

BJP wins Gujarat & HP without shine & bragging rights

 

  

• BJP winning (1) Gujarat six times in a row and (2) winning Himachal Pradesh, ousting Congress, with a 2/3 majority is by no means a small achievement for Modi but what is lacking is its shine and bragging rights.
• With 49.1% of the vote, the BJP lost 10 percentage points from its 2014 Lok Sabha tally.
• NOTA grabbed over 5.5 lakh votes, or just under 2% of the votes polled.
• Gujarat voters have handed the BJP its sixth straight victory, but tempered the win by reducing its majority to 99 – its lowest tally since 1995.
• The ruling BJP won 36 of the total 40 seats spread in six major cities and that saved the day for the BJP in the tight contest between PM Modi and Congress president Rahul Gandhi.
• CM Vijay Rupani and DyCM Nitin Patel won their seats while five serving Ministers and Assembly Speaker Ramanlal Vora were defeated.
• The PM Modi’s 20-minute speech reflected his worries and the party’s vulnerabilities despite the victories.
• Though BJP has won despite the anti-incumbency factor, the State polls turned into a photo finish unlike the landslide and much below the BJP’s target of winning 150 seats. Saurashtra, the BJP’s stronghold since 1995, dealt the party a big blow, as the Congress won 30 out of 54 seats in the region.
• In Saurashtra's 11 districts, the BJP got nearly wiped out in 5 districts.
• Most of Modi's speeches at rallies focussed on divisive themes. Mandir-Masjid, Mughals, Pakistan, Ahmed Patel, Salman Nizami, etc., he practised classic dog-whistle politics that might have stoked passions among some sections of the electorate.
• Whatever the BJP leaders may say, the victory by an extremely slim majority and well short of its aim of 150+ seats is a setback.
• With the kind of spirited fight provided by Congress, BJP's proclaimed goal of a “Congress-mukth Bharat” suffers severe set back.
• In Himachal Pradesh, despite the big win, the BJP faced the ignominy of seeing its chief ministerial candidate, Prem Kumar Dhumal, lose to his Congress rival.
• BJP may be tempted to believe that neither demonetisation nor the flawed roll-out of the GST regime has dented its support among traders and the middle class. But the heart-stopper in Gujarat has given enough reason for it to rethink, do a reality check and reconnect with the remoter parts of India.

Notwithstanding the fact that BJP won Gujarat elections 99/80 defeating Congress, the truth is that Modi has addressed 34 rallies & 97 road shows campaigned like a CM not as a PM, never mentioning any of his development schemes but relied entirely on divisive & religious polarisation, Pakistan, Mughals, Muslims, Mandir-Masjid, abusing Congress leaders and arousing passions etc. Modi did everything like a street politician to win elections forgetting that he is holding office of PM and is oath bound to uphold its dignity and sweated like never before. On other hand Rahul Gandhi, in the company of 3 young turks, was at ease engaging people questioning ruling party of its failures, visiting temples, raising concerns of agrarian distress, unemployment, failed demonetisation and GST etc. While Modi was assisted by his entire central cabinet & several other BJP leaders from other states Rahul Gandhi was virtually alone. Modi put Gujarat above nation by postponing parliament's winter session and condensing its duration so that he could campaign more in Gujarat. Modi subverted EC by influencing it in delaying announcing poll schedule to enable his announcing sops to Gujarat. The kind of money spent for BJP's campaigning and liquor flowing in this dry state has dented his claim as crusader against corruption and black money. Modi's spectacular show in riding the sea plane (specially flown from Karachi for this show) a day before campaign ended is in violation of his own security protocol. Modi’s penchant for style and no substance has a chilling similarity with Mussolini’s Fascist Italy with less concerns for efficient governing of people in solving their economic problems but focused more on the spectacle of power, on the visual and impressive display of symbols, myths and rituals. With BJP winning 99/80 against Congress Modi diminished himself while Rahul Gandhi stood taller posing as a challenger for 2019 general election while his dream of  “Congress-mukth Bharat” stands buried. Like any other programmable computers, tampering EVMs is neither easy nor very difficult and its alleged tampering by BJP will never be known. The talk of the town is that many Modi's cabinet colleagues silently wished defeat of BJP in Gujarat so that he starts learning to walk on the ground. In order to preserve our democracy it is necessary to have a narrow & rigid election campaigning code and also prohibit constitutional office bearers taking up any assignment for a period of two years after retirement.

S&P's rationale for India's status quo

OVERVIEW

Despite two quarters of weaker-than-expected growth, India's economy is forecast to grow robustly in 2018-2020 and foreign exchange reserves will continue to rise.

Nevertheless, sizable fiscal deficits, a high net general government debt burden, and low per capita income detract from the sovereign's credit profile. We are affirming our 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India. 

The stable outlook reflects our view that, over the next two years, growth will remain strong, India will maintain its sound external accounts position, and fiscal deficits will remain broadly in line with our forecasts. 


RATING ACTION

On Nov. 24, 2017, S&P Global Ratings affirmed its unsolicited long- and short-term foreign and local currency sovereign credit ratings on the Republic of India at 'BBB-/A-3'. The outlook is stable.


OUTLOOK

The stable outlook reflects our view that, over the next two years, growth will remain strong, India will maintain its sound external accounts position, and fiscal deficits will remain broadly in line with our forecasts. Upward pressure on the ratings could build if the government's reforms markedly improve its net general government fiscal out-turns and so reduce the level of net general government debt. Upward pressure could also build if India's external accounts strengthen significantly.

Downward pressure on the ratings could emerge if GDP growth disappoints, causing us to reassess our view of trend growth; if net general government deficits rose significantly; or if the political will to maintain India's reform agenda significantly lost momentum.


RATIONALE

The ratings on India reflect the country's strong GDP growth, sound external profile, and improving monetary credibility. India's strong democratic institutions and its free press promote policy stability and compromise, and also underpin the ratings. These strengths are balanced against vulnerabilities stemming from the country's low per capita income and relatively high general government debt stock, net of liquid assets.

Institutional And Economic Profile: The ruling party continues to consolidate its power at the state level and, despite obstacles to the implementation of reform, strong growth is likely to continue Narendra Modi's coalition, led by the Bharatiya Janata Party (BJP), has further consolidated power in state-level elections in 2017 and we expect it to make further gains.

One-off factors, such as demonetization and the imposition of a goods and services tax, have led to some quarterly cooling in India's high growth figures.

Nevertheless, the medium-term outlook for growth remains favorable, based on private consumption, an ambitious public infrastructure investment program, and a bank restructuring plan that should help revive investment.

The ruling BJP-led National Democratic Alliance (NDA) coalition dominates the electoral scene, and has a clear majority in the Lok Sabha (the Lower House of parliament, which is directly elected by the people). However, it lacks a majority in the Rajya Sabha (the Upper House, which is largely elected by state assemblies under India's federal system). In the Upper House, the opposition has been able to stall some reform efforts. The NDA has been doing well in 2017's state-level elections and is forecast to make further gains at this level, which could eventually lead to a majority in the Upper House.

The coalition has also managed to pass a number of reforms to address long-standing impediments to the country's growth. These include comprehensive tax reforms through the introduction, on July 1, 2017, of a goods and services tax (GST) to replace the complex and distortive system of domestic indirect taxes. Other measures include a Bankruptcy Code and nonperforming loan resolution framework; a plan to recapitalize state-owned banks; a plan to strengthen the business climate by simplifying regulations and improving contract enforcement and trade; and reforms to the energy sector.

However, confidence and GDP growth in 2017 appear to have been hit by the sudden demonetization exercise in late 2016 (by which high-value cash notes of Indian rupee [INR] 500 and above, which constituted about 85% of the country's cash stock, were replaced with new notes, in an effort to curb tax evasion).

The July 1, 2017 introduction of the GST, which combines the central, state, and local-level indirect taxes into one, has also led to some one-off teething problems that have dampened growth.

Nevertheless, in the medium term, we anticipate that growth will be supported by the planned recapitalization of state-owned banks, which is likely to spur on new lending within the economy. Public-sector-led infrastructure investment, notably in the road sector, will also stimulate economic activity, while private consumption will remain robust. The removal of barriers to domestic trade tied to the imposition of GST should also support GDP growth.

Ratings are constrained by India's low wealth levels, measured by GDP per capita, which we estimate at close to US$2,000 in 2017, the lowest of all investment-grade sovereigns that we rate (see "Sovereign Risk Indicators," Oct. 13, 2017, also available at www.spratings.com/sri). That said, India's GDP growth rate is among the fastest of all investment-grade sovereigns, and we expect real GDP to average 7.6% over 2017-2020 (6.5% in per capita terms).

Flexibility And External Performance Profile: Ongoing expenditure pressure at both the central government and state level will ensure fiscal consolidation remains slow, but India's external position is a strength given the planned ramp-up in public-sector-led infrastructure investment and the persistent deficits, especially at the state level, fiscal consolidation will remain difficult.

The rupee's liquidity in international foreign exchange markets will continue to buttress our external assessment.

Recapitalization of state-owned banks is likely to pave the way for some improvement in credit expansion from 2018. India's external position remains a credit strength. According to the "Triennial Central Bank Survey," published on April 2016 by the Bank for International Settlements (BIS), the rupee was traded in 1.1% of all foreign exchange transactions globally. We therefore consider the rupee to be an actively traded currency, which increases India's ability to finance external imbalances. The recent increased issuance of offshore rupee-denominated bonds (masala bonds) is a testament to this flexibility.

We forecast that India's external debt, net of liquid public and financial sector external assets, will average a modest 8.4% of current account receipts over 2017-2020. The level of economy wide external indebtedness is likely to remain contained throughout the forecast period, underpinned by an improved current account deficit, which we forecast will average 1.8% over 2017-2020, down from the 2.3% level recorded on average between 2011-2016. Recent narrowing has been driven by robust
exports and lower global oil prices. The Reserve Bank of India's foreign exchange reserves stood at above US$400 billion in October 2017, amounting to over six months of import cover, a sizable buffer.

Against the backdrop of the planned ramp-up in public-sector-led infrastructure investments, as well as persistent deficits at the state level, the large general government debt load and India's overall weak public finances continue to constrain the ratings. India has a long history of high net general government fiscal deficits (net of liquid assets, deficits averaged over 8% of GDP over the past 20 years and 7% in the past five years).  The planned large infrastructure investment program is likely to limit expenditure flexibility, even though the government is likely to be able to tap private sector funds for the construction of many of these infrastructure projects.

In addition to expenditure demands, the country's fiscal challenges also reflect revenue underperformance compared with most peers at the rating level. India's general government revenue, at an estimated 22% of 2017 GDP, is low compared with peer sovereigns. Administrative efforts to expand the tax base--including demonetization (which has increased the number of tax registrants) and the introduction of the GST in July--corroborate our belief that government revenues will accelerate into the forecast period.

Although we expect central government to broadly succeed in controlling deficits at the federal level, we foresee that problems at the state level will add 3% on average to the consolidated general government deficits over the forecast horizon. 

India's high fiscal deficits in past years have led to the accumulation of sizable general government borrowings (about 67% of GDP in 2017, net of liquid assets) and relatively high debt servicing costs (close to one-fifth of general government revenue). We project that net general government debt will decline by a modest amount over our forecast horizon. India's government borrowings are mostly denominated in rupees, which largely mitigates exchange rate risks. The small portion of external government debt is predominantly sourced from official lenders over long tenors and at concessional rates. 

India has a two-tier banking sector. Its private sector and foreign banks amount to about 30% of the banking system, with the public sector amounting to 70%. The private sector banks have better profitability and higher internal capital generation, and are better capitalized with lower-stressed assets than government-owned banks. 

Given their weaker profitability, we estimate that public-sector banks will need a capital infusion of about US$30 billion to need capital to make large haircuts on loans to viable stressed projects and meet the rising requirement of Basel III capital norms. 

In October 2017, the government committed to a capital infusion plan of roughly that size, partially financed by the government itself and the rest raised via other sources. We include planned recapitalization costs to our assumptions of the sovereign's general government debt issuance. Our Bank Industry Credit Risk Assessment for India is '5' (with '1' being the strongest assessment and '10' the weakest). Nevertheless, combining our view of India's government-related entities and its financial system, we view the country's contingent fiscal risks as limited. 

The Reserve Bank of India (RBI) has made substantial progress in lowering consumer price index (CPI) inflation following the introduction in February 2015 of its medium-term inflation target band (with 4% CPI inflation plus or minus 2% as the principal nominal anchor for monetary policy), aided by broadly lower oil prices and other factors. Other steps taken to strengthen policy formulation include the introduction of the monetary policy committee framework, improved communication, and efforts to strengthen monetary policy transmission (for example, through new guidelines requiring banks to determine their lending rates using marginal cost of funds). These have also helped improve monetary effectiveness. We expect the RBI to continue to achieve its inflation targets. We believe these RBI measures will support its ability to sustain economic growth while attenuating economic or financial shocks. 

Earlier when the rating was given usually the government took a view that 

they are under-rating our performance. Now we are saying they may be 

over-rating our performance. In either case the consensus seems to be 

they are not rating properly. So leave it there ... YV Reddy

S&P was kind enough to use soft words and yet made their point of the reality clearly. In the past we had the advantage of low oil prices continuously for 3+ years but the advantage was squandered away by lethargy and reckless spending. Going forward our wrecked economy has to face increased oil price regime. Modi's reforms so far have been disruptive in nature with poor design, badly implemented without any mitigation space and had decimated informal sector. These have resulted in closure of 250,000 SMEs and livelihood loss for over 2.5 million workforce. All his vanity schemes launched with spectacularity have bounced. The result is economy shattered and all sectors are in deep distress except MNCs and service sector. The real position is reflected by 90% usage of fiscal space within first three months and reduced revenues and expenditure uncontrolled. Modi with quack advised schemes effortlessly wrecked economy but rebuilding the same is painfully slow and will take its own sweet time and in the meantime poorer classes are subjected to enormous pain for no fault of theirs. What is store for India, time will reveal in next one and half years i.e. prior to 2019 general elections. I foresee stable or worsened situation.

GST deficit slowly reducing?

 

EENADU Telugu Nov 24, 2017

• GST after disrupting economy for continuously for 5 months limping towards zero deficit.
• In July 2017 it was utter choas, August ended with deficit of 29% (Rs.12,210 crores) improved in September to 24% (Rs.10,343 crores) and further improved during October 2017 to 17.6% (Rs.7,559 crores). Quarterly (Aug-Oct 2017) collection stood at Rs. 98,930 crores against target of Rs.129,042 crores with 23% deficit of Rs.30,111 crores.
• This would enlarge fiscal deficit from 3.2% of GDP to 3.5%. Already GDP growth rate took severe beating nose diving to 4 year low of 5.7% which otherwise should have been 9.1%.
• Oil prices are shooting up with current price at its 4-year high of $63.4 per barrel. The rising prices will further impact our fiscal deficit and inflation.
• The resilient Indian economy withstood impact of harebrained demonetisation and even before it recovered fully, Modi unleashed badly designed GST only to demonstrate that he is bold and his intentions of continuing financial reforms but causality is the nation and its people. Boldness is different from recklessness, he failed to grasp.
• Now, with sentiment completely destroyed, investments at standstill, informal sector decimated, agrarian sector in deep distress, construction paralyzed, empty coffers, wide ranging joblessness, dwindling exports, uncontrolled imports, rising oil prices and so on are having its adverse effects on economy, simultaneously. How long consumption driven economy will survive on a single service sector? There is no one who could pop us up from our self inflicted distressed economy.
• Any economist will tell you that the only way to boost a sagging economy is by increasing government spending on infrastructure thus creating large scale construction jobs and increasing consumption, funding it by widening fiscal space by increasing fiscal deficit even at the risk of higher inflation. Modi is just not doing that and result in near future is anybody's guess.
• Tax terrorism in the form incessant raids by taxmen and trying to impose service tax on software exports with retrospective effect from 2012 will further ruin any chances of economic recovery.
• While GST deficit might become zero by the end this financial year, after 3 quarters, it has left us in deep distress, gravely wounded and uncertain future.
• Who is responsible for this all round distress? ... The answer is Modi and his quack advised Modinomics.

Spending on infrastructure projects could be lower as sluggish GST growth have upset the government’s budget calculations and GDP growth rate is to take a further hit. The revenue shortfall could be over Rs. 80,000 crores if the current trend continues until the end of the year and will force a re-think in government spending. GST's ambiguous rules, onerous return filing system and glitches with its IT back-end have made doing business far more complicated for many companies. Frequent changes in tax rates launch have heightened business uncertainty. Hurried GST roll out had resulted in a lot of chaos and pandemonium. PSU's reduced dividend, RBI's less than half dividend all have impacted government revenues contrary to budget projection of 17% growth in tax collections. Above all, psu banks recapitalisation and rising oil prices needs to be supported from the budget. So where are we heading for?

Implications of Moody's ratings upgrade for India

• Moody's upgrading India's ratings from 'Baa3' to 'Baa2' two days ago - even though a notch up but still remains in 'Investment grade-Moderate credit risk' band only. The rating outlook was only changed to 'positive' from 'stable'.
• However, Moody’s have put out a caveat that they will watch out for any deterioration of the fiscal situation or banking system. 
• S&P has stated that it will continue to keep India's rating unchanged.
• The only jubilation for BJP is that Manmohan Singh tried but couldn't get it. And Modi tried and failed in 2016, but could get it citing demonetisation and GST roll out as reforms now in 2017.
• India’s last upgrade by Moody’s was 13 years ago in 2004 to 'Baa3' from 'Ba1'. 
• From Jan, 1988 India had a credit rating of A-2, the highest investment grade rating it ever got. But on Oct, 1990, it was downgraded to Baa1 in the wake of India’s twin crisis of worsening balance of payments and fiscal indiscipline. On Mar, 1991, it was further downgraded two notches to Baa3, which was the last category of investment grade rating. On Jun, 1991, India plunged into the non-investment category at Ba2, a downgrade of two notches. From Jun, 1998 (in the aftermath of India’s nuclear tests in Pokhran) India remained classified in the non-investment or ‘junk’ category 'Ba2'. 

• In the last 13 years, investment flows from abroad have seen a steady rise and Indian companies have been borrowing more from overseas markets, though the terms of these loans could have been better with a higher rating from Moody’s. Nevertheless, a rating of Baa3 has really not come in the way of either more foreign investment or higher foreign borrowing. 
• On the back drop of botched demonetisation and badly implemented GST, Moody’s upgrade found it reassuring that the economic outlook is better now, thus puncturing the domestic narrative. But ground reality remains same that economy is in shambles and much needed to be done for its revival.
• Economic decisions should be analysed only from an economic point of view only. Seen through the colour of political ideologies, all kinds of biases creep in.
• For corporates, who are leveraged and have overseas borrowing, it will lower cost of borrowings. 
• The increased flow of foreign exchange into the country is likely to see appreciation of INR, which is already overvalued and impacts already stressed exports and surge in imports that might not augur well for current account deficit that has already widened to over 2% GDP.
• The combined fiscal deficit of states and the Centre is still in control at 6.4% of GDP in 2016-17 that gave the Moody’s some confidence in India’s ability to stay on the path of fiscal consolidation.
• If the health of the banking system does not improve in the next year or two, the risks of a downgrade may lurk once again.
• If oil prices rise and the government is not able to manage their consequences in the domestic economy properly, then the newly acquired rating could be subjected to a review.
• Moody’s has noted that the combined debt of the governments has risen to 68% of GDP, which is significantly higher than the median rate of 44% for all countries classified under the Baa group. While there are many other positive countervailing factors in India’s case, but further growth in debt can be a cause for concern.
• If elections could be won with the help of good economic news from international agencies, leaders of the BJP should consider themselves fortunate but elections are hardly won on external certifications.

Moody's upgrading India rating with a caveat and S&P maintaining status quo clearly indicates that Moody's had succumbed to intense lobbying by Modi & Co and hence this upgrading speaks out nothing and reaffirms domestic narrative that Indian economy is in shambles following botched demonetisation and badly rolled out GST. Now we can see Modi & BJP bombarding nation with high pitch campaigns that our economy is booming and targeting Congress with choicest abuses. Moody's decision of politics hurts its integrity and its ratings will be of no use going forward.

Why GST was rolled out hurriedly?

• Immediately after botched demonetisation, the fact that they introduced the GST in such a hurry shows that the government is much more interested in actually presenting their macho image of someone who is capable of doing fantastic things rather than really thought out measures. 
• With an eye on Gujarat elections & next general elections, rulers have resorted to wildest & reckless gamble on Indian economy. Otherwise they would have nothing to publicise during these elections with almost all failed schemes. Insanity is defined as doubling the speed while in wrong direction. 
• Things like the economy must not be mucked around with just like that, in order to create impressions, in order to display ones attitudes.
• The poorest in the country have suffered the most from this demonetisation.
• The point is that GST is something that has affected the informal sector very badly.
• In the economy now, the government is dealing blow after blow to the informal sector. 
• They have this wrong idea that formalisation of the economy per se is a very good thing. Now if the economy got formalised on its own, through its own development, that’s one thing. But if you actually forcibly get the economy to be formalised, that basically occurs by dealing [a blow] to the informal sector. Now that is what is wrong, because those who are affected by it, there’s no cushion for them, they are not going to get jobs anywhere else. As a result, they just go under.
• Now, there are many things government can do to reverse some of these negative impacts on informal sector. The first thing that they can do is to complete remonetisation and make sure that the cash shortage is overcome. Provide help to the informal sector - provide remunerative prices to the growers of cash crops who are facing crisis; provide low-interest loans to the growers of the cash crops and so on.
• Before the neoliberal policies got going, the state aided the petty production sector in many ways to survive by giving assured prices, through giving subsidies, through protecting them from world market price fluctuations and so on. All those cushions have been removed, as a result this is a sector that is now being buffeted around by the so called market forces, which basically means being encroached upon by the large capital, the formal sector. Providing them succour by protecting them against such encroachments is the way to revive them and through that, the economy itself.
• Modi & Jaitley have been making a number of statements about failed demonetisation which are quite worrying, because it is impossible to believe a responsible public functionaries should be using such utterly specious arguments. The fact of the matter is that with Indian experience, no country in the world will ever resort to demonetisation in next 100 years.
• Venuzelean dictator emulated Modi's demonetisation but was wise enough to suspend with in few days due to public outcry, where as our Modi is much more thick skinned. He doesn't care when poor people dies.

In demonetisation, everything done was wrong.

In GST, nothing was done right

Modi unveiling quack advised and secretly planned ill prepared demonetisation on the nation effecting each and every one and destroying whole economy is unbelievable. Dealing with black money, corruption, terrorism and fake currency has nothing to do with demonetisation, which this buffoon thinks otherwise even now. Such a person is unfit to be at the helm of affairs of the nation even for a minute. Shamelessly he continues till public decides to over throw him.

On other hand Jaitley, FM talks about bringing informal sector into formal economy, by brute force in the name of GST, not knowing that the informal sector units neither have that much of awareness, nor adequate capital nor  sufficient margins to comply with formal sector requirements and would simply thrown out of business. Lacking this much knowledge he is unfit to be FM of the nation. Again shamelessly he hangs on to his seat of power and ultimately public will dump him trash bin.