Thoughts On Recent Indian Economics And Politics 2019 To 2021

I am hereby summarizing some thoughts on contemporary Indian politics and economics [2019-2021].

1. 2021 COVID Second Wave :

   1. My answer to “The government has announced vaccination for 18 above starting from 1st May, but still very few able to book the vaccination. Why is that?”

Originally answered here : https://qr.ae/pGh3Kz

Supply-Demand imbalance.

Supply Side

Vaccine supply is not trivial. You have the following :

• Investment cost to have each incremental pipeline of 100,000 vials/day per day.

• More importantly there is a theoretical limit of the possible machinery or HR we could use for vaccine production. You cannot really train millions of people to work on vaccine production overnight I guess. You can increase production capacity by a few million per day, but what if you want to make vaccine production 100X in one day. Do you have as much machinery available to put into place ? Vaccine making machinery is not like soap a product which can be infinitely [in figurative sense, not literal[] procured.

• If you invest into vaccine production today, there is a lag by the time factory gets ready and people start working. Only then you would see the returns.

So while investment is being poured into vaccine production, it would take time for it to ramp up :

https://timesofindia.indiatimes.com/business/india-business/finance-minister-approves-advance-payment-of-rs-4567-crore-to-serum-institute-of-india-bharat-biotech/articleshow/82149322.cms

I assume it will take a few months before this investment fructifies and increases supply. Ok, just saw this :

https://www.msn.com/en-in/money/other/sii-ceo-adar-poonawalla-100-million-doses-per-month-from-july-exclusive-interviews-cnbc-tv18/vi-BB1fTp9z

Demand Side

Now that we have seen supply side, lets look at the demand side. Demand of such situations like we have today is what we call “surge demand”. All 1.3 Billion people of the country want to get vaccinated immediately or as soon as possible. Its like everyone is trying to come out of DLF cybercity in the evening and there is just one Uber cab available.

https://en.wikipedia.org/wiki/Cyber_City,_Gurgaon

Now one way would be to create as many cabs as there are people expecting to get out of DLF cybercity. 1000 people, try immediately creating/deploying 1000 cabs out of thin air. That has three challenges :

• How to even achieve this immediately. There would be a demand surge everywhere , so you cannot deploy cabs from other places and if you just procure cabs, there are only so many available in all car showrooms of Gurgaon.

• Even if you can theoretically produce 1000 cabs, what will they do after the demand surge is over. 1000 cabs is a lot of investment and one needs to be judged if its good enough for just one ride per new cab.

• If you have 1000 incomeing cabs at the same time, will DLF cybercity roads be able to handle a surge of 1000 new cabs all of a sudden.

So if India invests heavily to produce say 1 Billion vials of COVID vaccine per day, it would take Billions [maybe trillions of dollars] of investment, as stated above would take years to develop maybe and would be enough to vaccinate the whole world in 14 days. What would this investment do after the 14 days ? So only a production line that is economically fast and viable would be setup. No point waiting 2 years to build a pipeline of Billion vaccines per day, than waiting 2 months for a functional 100 Million/month pipeline.

But that doesn’t offset the fact there is a surge demand. I or any other person for that matter would prefer to get vaccinated immediately. What happens when you have surge demand for Uber ? Dynamic pricing. You cannot have that in a life saving thing like vaccine. So, the only other way is rationing.

Rationing

Rationing is what is going on right now. In Soviet Union’s later days, when bread was scarce, even that was rationed. Think of playing fastest finger first for even bread. Rationing means only a few people will get slots.

https://en.wikipedia.org/wiki/Rationing

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   My answer to “India is the biggest manufacturer of medicines, how come they are unable to manufacture sufficient Covid-19 vaccines?”

Originally answered here: https://qr.ae/pGp6ZP

[As of 17^th April 2021] India has produced, administered and exported most amount of vaccines in the world. Much more than any other country [even the US]

https://timesofindia.indiatimes.com/india/india-fastest-in-world-to-administer-100-million-covid-vaccine-shots/articleshow/82007330.cms

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https://www.businesstoday.in/current/economy-politics/india-exported-37-percent-of-covid-19-vaccines-as-gifts/story/431413.html

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Safe to say India is producing more than any other country in the world.

We have India’s second COVID wave ongoing and that is why the demand for vaccine has shot up as people want to get vaccinated fast. To suddenly vaccinate over a billion people, you need over 2.5 Billion vials of vaccine. I guess that is much more than monthly production of all vaccines of the entire world combined !

I don’t think India had any plans to vaccinate everyone by April, so it had never invested into production as much.

If you can produce X vaccines / day, you need many factors to ramp up the production to say 10X/day {rate at which people expect vaccination to happen now} :

• Demand [short term and long term]

• Investment

• Time

• Raw Material and Human Resources

Its not like tap , that you turn it on and water starts coming out. It takes a very long time to build a production pipeline.

“Sufficient” is an adjective. Adjectives are subjective, mean different to different people. When something is good for a person, they might never call it sufficient. There is no “sufficient salary” for example. Possibly you want everyone to get vaccinated in two days [That is 500 Million vaccinations/day] ? Do you think there is any infrastructure in the world that can handle such scale : production / supply chain wise ? Even if we have such a infrastructure theoretically in India, vaccines take weeks if not months to create immunity. There is no way a vaccination in middle of the pandemic wave would stop the wave, so even if we spend everything on vaccine production and administration [to say 10X/day], the current wave is not going away.

The right decision is first to provide care / oxygen / ventilators to serious patients and make sure we bend the curve. Some amount of money would go into boosting vaccine production, but that would not make the production/delivery 10x.

Even the world’s richest economies cannot solve scarcity produced due to black swan events like a sudden COVID wave. No one could have predicted that India’s almost non-existent COVID cases till January-February would go crazy in April. One slight mutation of virus in the UK and it brings a country almost out of the pandemic back in. We can only rationalize and intellectualize with advantage of hindsight.

I remember many “influencers” saying in January that vaccines are being rolled out too soon, they must be tested more and too much taxpayer money is being spent on “private” vaccine companies because there is no COVID urgency and today the same influences are asking why the vaccine production is slow. The definition of “sufficient” changes very fast !

My answer to “Why does India face oxygen shortage in the second wave of the COVID-19 pandemic?”

Originally Answered here: https://qr.ae/pGGtCT

Here is a follow up question to the original question. How much permanent Medical Oxygen capacity would you prepare in anticipation of a possible third wave of coronavirus pandemic given you have seen the first and second wave peaks {I hope that the peak is passing as on 25th April 2021} now ? Let’s say the first pandemic peaked at around 100k new cases a day and the ongoing [much worse] second wave has 250k new cases a day, how much oxygen would you produce/keep in stock always ? What’s the worst case scenario of a pandemic peak ?

If Coronavirus pandemic [or any other pandemic for that matter] followed a normal distribution, you would know that it would peak somewhere around the percentage of population it had effected in the past. So in case a Normal distribution was being followed, India should have been ready in its second wave with 100k + 1 X standard deviation [to make sure that they would cover ~85% of scenario] of 100k + 2 X standard deviation to make sure they would cover ~98% of possible scenario. Everyone who knows Gaussian Bell curve can guess that , right ?

Keep in mind keeping high Oxygen in stock always requires :

1. Production Capacity: You definitely need more oxygen than is produced by sum total medical oxygen producers in India in response to common supply-demand equilibrium. Even in emergency mode, where most industrial units of India are producing as much oxygen as possible, we are barely reaching required capacity. So building permanent medical oxygen production for the “100 k + 2 X standard deviation new COVID patients / day” scenario is a LOT of investment. You should remember that pumping so much speculative money into permanent medical oxygen is only temporary as after the peak recedes, all this investment and oxygen plants will face a demand crunch [and I hope they do face low demand scenario, meaning the country is out the pandemic]. Even if we understand or not, the way to fight the pandemic once its spreads is tactical, converting ones existing resources [other industries] into weapons. But suppose that you still made the Oxygen supply capacity manyfold investing Billions of dollars. You now have permanent medical oxygen being produced for 100 K + 2 X standard deviation new COVID patients per day for the next wave.

2. Transportation Capacity: Transportation is the main bottleneck during Indian COVID second wave. You suddenly cannot build better roads or create 2X the amount of oxygen trucks which have been procured over years. It would take time. Let’s say that in the gaps between waves, you spend billions of dollars just produce tens of 1000s of oxygen trucks to make sure Oxygen can be supplied to address the 98% scenario above.

Let’s just say that India had Billions of Dollars and kept 100 K + 2 X standard deviation resources [98% of scenario] functional to beat the peak. Let’s say India was willing to write off all that money in case there was no peak as most of the medical oxygen / oxygen cylinder would have been un-needed in that scenario {that amount of money going waste would have been a great political gossip store in case no second wave would have happened}. We would all be set for the second wave if we addressed 98% of scenario [or looking at the first two waves, we would be all set for a third wave] right ?

Unfortunately, you cannot predict and cannot be prepared.

No government/ person can be sure of what the next pandemic peak size would be. If this would be the case, countries like EU or the US [with tonnes of cash] would have had much better responses to their second wave {they were struggling too}. The reason is the pandemic peaks [unlike many other phenomenon] do not follow a Normal Distribution. You just have no clue Mathematically what you have to prepare for. All human statistics [and Machine Learning] work around the feeling that similar things happen [or the Gaussian bell is true]. They fail to predict COVID waves or Earthquake Richter Scales or Size of a financial downturn because : 1. You have much less data as these are rare events [for example in above, what do you think the standard deviation in 100k + 2 X standard deviation patients/day is ?], 2. Even if you have data, these things don’t follow a Gaussian Bell. They follow other bells {or whatever you want to call the curve} like say Cauchy’s or Pareto’s.

1. When eccentricity parameters are out of control [when they are during cases like pandemics], such distributions will give infinite predictions to cover 98% scenario. Basically, whatever amount of money you invest, an even larger pandemic wave can come and your resources would be meager. You have no expected value even. You cannot ever be prepared for a pandemic wave.

All a country can do is :

A. during the pandemic wave, be resourceful and adaptable. Convert existing resources into emergency pandemic resources [Like India has done converting large private firms like Tatas and Jindals into emergency Oxygen providers], ask people to social distance and hope for pandemic wave to go away. Trains and Airforce are carrying Oxygen to those who need.

B. Try to do things which keep virus spread to minimum. Social Distancing

1. 2021 India US Finance Dynamics

   1. My answer to “America has put many countries, including India, in the list of ‘currency manipulators’. What are ‘currency manipulators’, and what action will be taken on these countries?”

Originally answered here : https://qr.ae/pGGvg0

“Currency Manipulators” are people who don’t play by America’s rules.

American currency (USD) is reserved currency of the world. As a result, America enjoys a special privilege. For example, US could print Trillions of dollars to distribute to its people and institutions during the pandemic to keep their economy working. Was that possible for any other country ? No. Inflation would have sunk the population if they print Trillions. OTOH, US can just go about having stock market boost and some visible retail inflation, but no serious consequence. Can China do this ? Can India do this ? Can EU do this ? No. They all had to manage by austerity and endure the economic collapse. The reason is that US is the economic engine of the world and a world power, others are not. American institutions have much more money now and well no one really seriously thinks that their currency’s power has gone down, others at best are where they were before the pandemic. Having much more money all of a sudden means US institutions getting asymmetrically strong.

Other countries on the other hand have had people becoming poorer. They cannot just print money to get out of the pandemic disruption as that would just cause hyperinflation and make them go bust. They also now have to encounter the asymmetric power of American investors and institutions who have gotten rich while these countries are doing worse. Because they cannot just drop out of the international commerce, they will try to use “tricks” to get around the sudden asymmetry that has been introduced. But “How dare you get away from ‘free and fair trade’, aye ? You manipulator.” Asymmetric differences between countries in terms of money or a disruptive technologies have created colonies/extinction of civilizations in the past, so its not totally stupid of countries to bypass such situations by using tricks. There are countries where the “elites” are happy playing the American game. India as of now, is not.

What’s the definition of currency manipulator you ask ?

https://www.msn.com/en-in/money/topstories/explained-us-adds-india-to-currency-manipulator-watchlist-what-does-it-mean/ar-BB1fQ6RV

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   That basically means you cannot have an independent fiscal/monetary policy from US. Take decisions according to how US dollar behaves.

US’s economic and financial future and clout depends upon how well their own people or people in other countries accept this sudden transfer of wealth to its power institutions. People like Ray Dalio think this might backfire too :

https://youtu.be/tw0wtyzW6nA

Ray Dalio is one of the few persons in the world whose Economic views I feel actually represent reality.

My answer to “What are the lessons for India in Joe Biden’s Covid rescue plan for the US economy?”

Originally answered here : https://qr.ae/pGvtV3

Subjective answer here.

You cannot copy Joe Biden’s plan in India due to 2 reasons :

1. You cannot print too much rupee like the US is printing dollars. US has almost doubled the Dollars in circulation in just one year. USD is the reserve currency of the world so people are taking some time to realize that things are suddenly much cheaper for people who have received these new printed US dollars. The entire foreign/economic policy of the US will be focused in next few years to justify that their dollars still hold the same value as pre 2019, while their institutions have many times more dollars. If the US can pull it off, it will retain the title of world power for sometime to come, if it fails, well they are going into a bad spiral. India neither has clout, nor its elite have spine to print and distribute money and force the world to accept that the value of its currency is unchanged. Unlike US MSM and elites, Indian MSM is more focused on showing our shortcomings, so we have to walk the tightrope of printing only enough to avoid a deflation spiral. Risk taking needs lot of support from all corners of society. An example is how US media covered the COVID surge and death in New York and how Indian media did it, showing pyres and creating an image of chaos. You can suddenly see the silence in US media about all the money printing after President Biden announced printing Trillions of it in his plans. That said, even US is taking a risk and it remains to be seen what happens.

2. India is “Super Hyper sensitive” to inflation. You cannot risk inflation in some sectors to boost others here. Low per capita income has its disadvantages. The US is essentially trying out the next Marshall Plan which created wealth like crazy and gave rise to the baby boomer generation. But the circumstances are not same, let’s see !

https://www.bloomberg.com/opinion/articles/2021-04-15/big-banks-like-bofa-and-citigroup-can-t-keep-up-with-money-printing

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   Just by December [before Biden’s spending plans], US had made 40% worth of new dollars.

   https://gsiexchange.com/u-s-gov-has-printed-40-of-every-dollar-that-existed-in-march/

   

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1. You can already see the case being built on India to accept the new change. “Currency Manipulator”, “Stopping vaccine raw material export” {now retracted} are steps which look like an attempt at that.

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   2021 Self Reliance Campaign:

   1. My answer to “How far can India go to keep the Chinese players, who are well en-trenched in the global tech supply chain, off the Indian market without prejudicing its own growth?”

Originally Answered Here: https://qr.ae/pNCyD5

This is a very good question. Has an assumption which many people among us consider true or maybe God’s Word. I myself believe in Adam Smith’s concept of “the invisible hand” Dispelling Mysteries About the Invisible Hand

and that becoming a part of global trade system is very important to develop and make technological progress. I had to do some reading to convince myself why and how being self-sufficient and allowing the invisible hand to run are not opposing concepts but must co-exist.

Let us talk about the basic assumption here : “Free Trade gets the best growth, the freer the better”. That is true to a very large extent. Inefficiencies start occurring if you interfere too much in free trade as competition doesn’t exist at all and this makes a stagnant, inefficient and bloated economy. Pre-1990 India’s socialist economy was like that and so we had to unwillingly accept free-trade in 1991, which was the economic fashion and trend back then. India tried to do everything by itself before 1991 and post 1991 we decided to stop trying to do most of the things and become the Sweatshop - Wikipedia

of the world following the concept of specialization : Division of labour - Wikipedia

. As you might see, we were at one extreme before 1991 and the other extreme after 1991. There was a time in 2000s that buying anything India-made was considered really bad and working at an Indian institution was considered backward and everyone wanted to work at a MNC. At the time of independence in 1947, the exact opposite was true.

Its only after the Financial crisis of 2007–2008 - Wikipedia

2008 crisis that people started understanding that the old Indian proverb of “ना अति बरखा ना अति धूप” ( Moderation - Wikipedia ) is true in economics too. You need some redundancy, too much efficiency is like too much sugar in body. You need a lot of sugars to do your work, but a bit in excess, they start rotting the system. That appears to be true with most systems. In their paper here: https://www.swarthmore.edu/sites/default/files/assets/documents/user_profiles/bschwar1/GrantSchwartz_PPS2011.Too%20Much%20Good%20Thing.pdf

Adam Grant and Barry Schwartz told that there should be efficiency in any system, but to make it run at the maximum efficiency is generally harmful by giving concept of inverted U.

So while there is no doubt that you need to be efficient , but should not try to be the most efficient. That is in term of economics, you need to have as much free trade and as less control/centralization as possible, but that doesnt mean you give away the nation’s leverage altogether. The best example about how this works is China itself. China objects strongly when India applies any restrictions on trade, but does the same itself. Just yesterday : China bans Scratch, MIT’s programming language for kids – TechCrunch

Not just that, Chinese market access is for sectors where it doesnt want to develop specialization in, otherwise the only access you get to is its cheap workforce. This enables development of economic sectors which it desires. No other country apart from China has been able to develop global internet companies like AliBaba, Baidu , TikTok and others after US. Same with electric cars, Solar, Consumer Electronics and many other technologies. No other country is in a race to become a superpower with US apart from China, understand the relationship.

The Chinese economic growth has been better than India, because unlike India, China took a bet on what segments it wants to specialize in rather than India which chose to specialize in industrial segments it was a more natural fit to.

To defeat the general rate of progress of world’s economies, you will have to make several of such convex bets Convexity (finance) - Wikipedia

and hope for some of them to succeed. Japan and the Asian tigers Four Asian Tigers - Wikipedia did it in 1990s and China did it in 2000–2020. State forced industrialization is one such convex bet, all you need to make sure is that you dont get totally isolated from supply chain like North Korea and Soviet Union : [Industrialization in Japan: Origins, Characteristics & Impact - Video & Lesson Transcript

Study.com](https://study.com/academy/lesson/industrialization-in-japan-origins-characteristics-impact.html?wvideo=up3rn5t1r0)

India has till now resorted to the risk free option of free trade, which has given it a decent economic push, but we need to take bets too. China took a bet to become the hub of global supply-chain when it was clearly not going to be able to and succeeded by giving clever access to its market. India on the other hand let inefficiency creep in until things broke and it had to surrender its market with very few restrictions. We need to understand our populace and need to build both a consumer base and a supply-chain focused both inward and outward.

My opinion is that we should try to have as much free trade but not run blindly behind it . Some points I would like to say about why in practical world, the overplaying “invisible hand” fails (this is opinionated and not based on any research) are as follows:

No inter-country free trade is actually free : A very good documentary about that here :

https://youtu.be/DnW9ZQtI1_E

Global free trade is well packaged politics. Global Trade is only as beneficial as the person negotiating it on your behalf has leverage and good intentions. We have been lucky to have not negotiated things too badly, but not everything is perfect. As said earlier, free trade is good, but no point going banana over it.

Some specializations are less “replaceable” than the others and hence carry more risk : Adam Smith’s invisible hand is very true for a short-term static universe, but it doesn’t take creative disruption into account. Some specializations achieved by free trade, like India becoming an IT sweatshop are more at risk of becoming redundant than say Computer Science research. China recognizes it and has launched Made in China 2025 - Wikipedia

program which targets industry 4.0, things that are not going to go through commoditization soon. Replaceable specializations lead to instabilities.

My answer to “As an Indian If I am buying a Xiaomi phone do I indirectly Contribute to Chinese Economy which is not good for Indian Economy?”

Originally answered here : https://qr.ae/pNbKBk

{You will need context of India-China tensions in 2020 to get the background of this question : https://en.wikipedia.org/wiki/2020_China%E2%80%93India_skirmishes }

Yes. Buying a Chinese phone contributes to economy of China. Money does go to China and it can invest that money into military build up on our border and kill our people just like it did earlier.

20 Indian soldiers killed in LAC stand-off with Chinese troops

Its not just simple ‘Chinese firms paying taxes in China’ issue, China’s state has deep connections with its companies.:

Huawei: China’s Controversial Tech Giant

Chinese companies are also notorious for potential data transfer to China. Apparently they are bound by a Chinese law to transfer data of anyone on their platforms to Chinese government anytime it demands.

These are the two things why sudden anti-china sentiment is being seen in Indian market. When our data, our land and our people can get in danger by us spending money on something, why do it ? Its true that China is the factory of the world and many components for almost everything you buy come from China, a share of profit going to Chinese firms is vastly different than all of it. Most countries have realized this supply chain bottleneck and are trying to fix it.

That said, buying Chinese products doesn’t harm our economy directly. It might not be the best way we should run our economy (otherwise China would be allowing products of other countries to dominate in its local markets, which it doesn’t and I guess no one really considers Chinese economic policy bad), but its still better than how our country had a socialist economy pre-1990s gatekeeping for our elite.

I think we can learn from China how to use our markets to not just grow economy but also make it more sturdy. Post independence, our markets have had strange emotions, either not opening up at all or becoming totally xenophilic .

The answer is always in the middle, what probably we are trying now, no mandatory import substitution but a preference to Indian goods and services.

My answer to “How can we say that India can affect the Chinese economy while on the other hand all Indian startups such as Paytm, Ola, Oyo, Swiggy, etc. are funded by China only?”

Originally answered here: https://qr.ae/pNCZMX

{You will need context of India-China tensions in 2020 to get the background of this question : https://en.wikipedia.org/wiki/2020_China%E2%80%93India_skirmishes }

I have written in detail about this in my answer here: Muktabh Mayank’s answer to What are your views on Chinese investment in Indian unicorn startups?

1. Why do we need to effect China’s economy ? All we need to make sure is we aren’t too dependent on their supply chain which they might use as a leverage against us. The aim should be to develop our nation’s economy while having reasonable control and competition. We need to work for benefit our our people, ways-of-living and community, not for harm of someone else. Don’t fall for the emotional shorttermism of harming/effecting someone else’s economy. It’s not a Zero-sum game - Wikipedia. A civilization built on malefic intentions will not last, India has never done this in past, is not doing anything like this today, and will not do it in future.

2. You need external money to grow with less amount of risk. Equity Investments are almost never bad if handled carefully. As long as startups are serving India and have effective management in India, there is no problem in reducing risk right now when we are relatively weak by giving away some share of our future riches. Marginal Utility of money is much high now than it will be when our country is rich and developed. Emotions and business dont mix well together, dont confuse them.

   1. My answer to “Should India’s self-reliance be taken as isolation?”

Originally answered here : https://qr.ae/pNzSYF

No. Making internal products competitive is different from banning foreign competitors. The former is called what “Atma Nirbhar” [Self Reliance] means and the latter is what isolation was pre-1990. One needs to realize difference between “homophilly” and “xenophobia”. Unfortunately, extreme ideologies like “total free trade” or “boycott all foreign goods” make better sales politically and emotionally than common sense. Common Sense is to force competition between foreign and Indian products using policy to keep local companies on edge and innovative and having check on foreign companies to keep local companies competitive. We Indians were “only local” pre 1990 and “yo! foreign” post 1990, both wrong in today’s perspective {maybe correct decisions then}.

There is no way an indigenous product would ever be competitive to a foreign product given the amount of head start and preferential attachments international companies have as compared to an India only firm. Delivering same quality at the same price requires the same scale of production. https://en.wikipedia.org/wiki/Economies_of_scale

, someone will have to help the weaker guy out if we want weaker guy to become competitive in the long run. We do so in education, jobs and society, why cant we help our weaker companies become competitive to multinational behemoths ?

You need to understand that anyone with more resources will want open competition [free market, no reservations] as they have resources to beat the weak opponent by quality alone. The decision is with us if we want the weaker opponent to stay competitive in the long run or no.

My answer to “Since India has banned several Chinese apps, can China retaliate by refusing to supply so many products which we are forced to import from China?”

Originally answered here : https://qr.ae/pN9Ab4

That would be slightly bad for India and very bad for China.

India is a HUGE and irreplaceable market and losing access to a part of it is certainly better than losing access to all of it. To do the latter as a retaliation of the former by China would be considered a bad economic step, something that only former Argentina governments would have done. (Argentina government once used to heavily tax exports, so well why not just ban it).

India on the other hand will face some supply crisis, but due to the huge demand, would end up building a indigenous supply chain or an alternative supply chain. India’s only aim should be continuing to grow people’s wealth while pushing towards a hybrid manufacturing-knowledge economy. The only time supply side crisis is a problem when it is about essentials about food and medicine. India has learnt a lesson from 1950–60 food crisis ( Food Problem in India (With Measures)

) and guards its internal players against such risks thenceforth. The one essential India imports is oil and that is not from China (and will slowly get redundant as we move to solar).

The symmetrical response to India’s app ban by China would be to ban Indian apps (which I doubt are used in China) or other exports (mainly raw materials). That btw does not look like a problem yet : India: Iron ore exports scale new heights on strong China demand

1. 2020 Coronavirus Crisis:

   1. My answer to “Has India officially gone into recession as of 2020? If so, how much time would it take for us to recover from it?”

Originally answered here : https://qr.ae/pNiVKk

Every country in the world (I don’t know about China and North Korea) has gone into economic despair. Recession is a technical term for two quarters of negative growth (that is basically economy becomes smaller than the last quarter and then again the same thing happened in the next quarter). For most countries, first quarter of lockdowns was worse than the second one, so they avoided “recession” technically. That doesn’t mean the second quarter was good, just that it was less bad.

India measures its growth rate with respect to the same quarter of last year (YoY instead of QoQ)). So all this says is, we had a worse Mar-May economically in 2020 than 2019 and worse Jun-Sept economically in 2020 than 2019. If other countries calculated recession this way, they would have all been in the same boat (Few countries had a better economy in 2020 than 2019). There cannot be economic growth during a pandemic anywhere !

India enters recession as Covid-19 pandemic hits its economy

Political Press, however, will use this type of technicality to drive their political views. All you need to understand is, this recession really has no extra negative effect apart from well of course the economic losses in pandemic times. Its like a economic trauma, one can recover from the damage and be back, not like a chronic economic problem as many people would want you to believe.

My answer to “How come the world’s biggest economy (USA), and the world’s most populous nation’s (China) economies haven’t shrunk as much as India’s? Have they managed their economy better or Covid-19 than us, or both both Covid-19, and economy?”

Originally answered here : https://qr.ae/pNcqj0

Good Question, but I am not sure that is true.

The reason why people feel India did much worse is because India reports YoY [That is a quarter is compared to same quarter of a previous year] numbers and US reports QoQ [Quarter of economy is compared to just the previous quarter]. When you look at these numbers, India’s case looks worse. That however is like comparing celsius temperature to fahrenheit. Let’s see apples to apples :

India GDP Annual Growth Rate

vs United States GDP Growth Rate

India lost over 23% of its economy in Q2 :

US did not do better :

If anywhere India was doing worse than expected, it was in 2019. Look at the drop between 2018 and 2019.

China on the other hand, nowhere close, look at the numbers.

China GDP Growth Rate

China did better because {and I don’t believe I am saying this and I still doubt I believe all the data they sent in} they are an authoritarian government. They could ensure strictest possible lockdowns and contain the CoronaVirus spread very quickly. Once COVID was gone and the rest of world struggling, all China needed to do was start producing things they would consume during the pandemic {and they would have passed some stimulus too}. Zero COVID strategy may require reduction of some human rights [look at the negative opinions on lockdown imposition in India and the US], but once you reach zero COVID infections after a harsh lockdown, you could just reopen. In India, we did wait and give way for the poorest of poor during lockdowns.

https://e2ce7631-765d-43bc-802c-4092e3250e22.filesusr.com/ugd/e42b58_106bab46da0b412c9b116e81cc65d1ea.pdf

Democracies like India and US are very sensitive to human rights and believe in “No one left behind”. You can find many reports of state and center governments “overreaching” during lockdown, while they were trying to contain spread. China focused on cold Maths and Statistics.

I am still of the opinion that India could impose a much better lockdown than I was expecting it to do and the economic effects of pandemic are lesser than what they were expected to be. Reuters also says so :

India’s economy shrinks 7.5% y/y in July-Sept quarter - govt

My answer to “Can India beat Covid without raising budget spending dramatically?”

Originally answered here: https://qr.ae/pND8kP

Have you heard the phrase “Penny wise, Pound foolish !”. Being fiscally conservative at the time of an emergency like pandemic is exactly that.

The state doing nothing might be a good solution when the times are normal {that is at least what conservatives and some schools of economists believe} and you can possibly allow people to take charge and drive growth. Calvin Coolidge, the US President during the 1920s, was exactly an example of this. He let citizens drive economy and enjoyed a growth rate of 4% by basically doing “nothing”.

Calvin Coolidge and the Moral Case for Economy

US saw an economic boom in 1920s : Roaring Twenties - Wikipedia

Coolidge entered office in an economic boom and did nothing, basically what a libertarian President should do and the economy grew like there was no tomorrow.

Governments during good times make investments in bad projects like Greece hosting Olympics in 2000. They are loss making and don’t build enough infrastructure for future growth, so some fear by conservatives is justified. However, there are places like EV subsidies where governments might actually introduce a great new engine into economy. You can see that spending during good times is discretionary, can be good or bad.

Nio Motors (NYSE: NIO) Has Chinese Government Support: But Do The Risks Outweigh The Benefits?

However, in case of Coolidge, just like any other boom, there came a correction in 1929, a shocker which just reduced spending {and borrowing}. This is a nominal process in finance, a crash comes once every few years. The question is never “if” but “when”, and more importantly, “how is it handled ?”. Wall Street Crash of 1929 - Wikipedia

Just like spending creates positive multiplier effect in boom, risk aversion after a economic shock creates a deeply negative one. People who have lost money {from say stock markets in 1929/2008 or due to pandemic disruption in 2020}, will not want to spend and hence the economy will keep getting smaller and smaller , reducing the RoI and confidence in spending even more. Without people spending, there is no economy.

People losing money due to economy shrinkage is actually money that evaporates away and cannot be brought back immediately. “Basically your next month salary is money that your employer’s clients make this month. If they dont make money this month, your next month salary is gone and so is the salary of a local barista where you drink coffee, assuming that you will cut discretionary expenses like cafe house visits if you lose a month of salary”. All this money just evaporates if your company’s client doesn’t make money one month. Think of this as a whole, the economy just becomes a fraction of cost if people lose money in a shock event !

Do you just wait for the crash to grow incrementally and see what is the lowest it reaches, be totally laissez faire , or avoid the downturn ? Economy lost money as a shock, but does the sudden shock need to reverberate in future months ? That is the problem government spending solves. Pushes some extra money by spending to partially cover for the shock so that the shock is temporary or at least is not lethal. Think of the amount of money governments are pushing into economy right now being done in normal times, inflation would have skyrocketed. But just spending is not what works too. Beyond a certain level, too much cash becomes a bigger problem. Central banks need to avoid both deflation and high inflation. This is solved by spending in “useful” stuff which creates a multiplier effect in productivity just like spending creates a multiplier effect in demand.

What happened in 1929–30 is that the US government did some spending to get the economy going and when they saw that things are improving a bit, they went back to gold standard and strict fiscal discipline [Government should not spend more than it makes]. This created a depression so huge it lasted almost a decade. The consumer never had enough money to spend !

Great Depression - Wikipedia

Now a pandemic is a shock event {called black swan by N N Taleb} just like a stock crash, but it has an added component. You do not generally know its long term effect of pandemic on population. So unlike a stock crash where one has to save just the economy, in a pandemic one has to save both citizens’ lives and economy. Government’s work is to do the tightroping between avoiding a negative loop to setup and making currency useless due to lack of productivity.

Clever spending is the answer, no spending is not, neither is over spending !

My answer to “Is building another parliament house costing hundreds of crores amidst the economic crisis by the government in India justified?”

Originally answered here: https://qr.ae/pNZrAO

If you believe Keynes John Maynard Keynes - Wikipedia

, that is exactly the type of project a government needs to do when they want to push money into the economy.

Even hard critics of Keynes, like Hayek, who are against interference of government in economics, agree that in extreme circumstances like a pandemic, the government needs to inject money into the economy to keep it running. (Albeit he advocates much less long term government involvement).

Friedrich Hayek - Wikipedia

Please remember that its not just the parliament that the government is building, its rebuilding the whole capital area around Parliament. This structure would be used to administer the country for another 100–200 years. The construction has been planned and delayed since 2010, but now is the right time to get it done.

Construction is the type of place where you want to put money to reboot the economy after a bad shock like a war or pandemic. It starts putting money almost immediately, requires lots of workers, doesn’t require a lot of expertise (constructing buildings is somewhat of a commodity skill) and the buildings and public utilities would be used for a lot of time.

My answer to “How could Indian billionaires increase their wealth during the pandemic?”

Originally answered here : https://qr.ae/pNzysm

In event of a shock event, like a pandemic, everyone suffers. However, in recovery, some qualities make one recover much faster than others. People who are more self-sufficient, have ability/prestige to get things done and most importantly have wealth/influence emerge much stronger. The reason is world depends upon them and looks upto them to show the way out of the shock. There would be a few people with these qualities who would still blow it, but, they will need to try really hard.

So, what is the reason of Indian billionaires getting richer ? Every shock effect {pandemic/wars} have their losers and the winners. The ones who are getting rich are the winners of pandemic disruption lottery. There can be two possible ways :

Increase in value of pre-existing wealth : This is something we can understand by the Starbucks effect in real estate. The Starbucks Effect - How It Affects Nearby Properties

Sometimes, some areas in city suddenly become relevant and costlier real estate when they get lucky (in this case they are chosen as a location for a hip upmarket coffee shop). These areas would have had potential, but Starbucks announcing their intent to setup a coffee shop there suddenly makes a house worth say 20,000 $ become 40,000 $. Remember no money is really transferred yet, just coffee shop being announced makes one’s real estate values on books go double. Then they can choose to put their house on a relatively high rent and even make some cash from there good fortune.

Similarly, some billionaires happened to have their stakes in businesses which suddenly became much more conspicuous during pandemic times. As people were working from home and staying at home, Jio’s utility was suddenly proven much more than ever. {It was a good product already, but its usage shot during the pandemic times}. As a result large players decided to invest some money into it at high valuations. That made the value of rest of the shares of company shoot through the roof. How Mukesh Ambani became US$22 billion richer in 2020

Remember Mr. Ambani did not get 22 Billion transferred to his account, it was just that the world believes his property [company stocks] is worth much more than what it was earlier. I describe Elon Musk’s sudden rise to become the richest person here : Muktabh Mayank’s answer to How did Elon Musk manage to become the richest person in the world with companies that aren’t even profitable yet?

Liquidity Storm : Another reason is the crazy macroeconomics that plays out during shock events like pandemic. People suddenly stop spending and want to save their money into things that would keep their money safe. They could keep it safely in banks’ savings/fixed deposit, but that is a bad option as interest rates are low during an economic shock. Also the government pumps money into the economy to make sure people who live check to check survive and economy is not tanked and increased supply of money means the currency might lose value. So they need to put money in places which will yield them high returns. Where are they ? stocks of large companies that are gaining due to pandemic.

Muktabh Mayank’s answer to Why do global stock markets rise even during an economic collapse?

Remember not all billionaires gain crazy amount of wealth during a disruption, some of them gain, others lose money as well. Just like amongst common people, there are lottery winners among billionaires too media chooses to focus on the ones who make wealth more than who lose wealth to show wealth creation to be a zero sum game [poor getting poor, rich getting rich].

Another thing is billionaire’s investments are generally well hedged against shock events. There are investment funds and dedicated family offices. So well hedged investments avoid them from absolute ruin. Thus you have few such stories of billionaires getting poor after a shock event, which projects an impression that all billionaires made profits. हाथी मरा तो भी नौ लाख का

My answer to “Do Indians now feel the absence of an eminent economist in the decision making process to lift the economy as repeated measures of GOI are not giving desired results?”

Originally Answered Here: https://qr.ae/pNMQbi

{This question was asked in September 2020, during COVID19 disruption when economies of most countries had tanked}

India has an economist in the decision making loop always to advice government : Chief Economic Advisor to the Government of India - Wikipedia

The post is right now being held by Krishnamurthy Subramanian - Wikipedia.

Are you suggesting that all the decisions should be made just economists as in a technocracy ? That is not really the best approach according to me as I explain here : Muktabh Mayank’s answer to Should Indian netizens come together to create a decentralised, democratic, and technocratic political party?

Reasons according to me are :

1. Economics is not a science like say Maths/Physics is. Answer to a question is not fixed. Its study of cause and effect. You will have economic theories and schools and different solutions to the same problem. Each of this . When you choose an economist to take all decisions, you are essentially choosing one school of economics over other. Its more like making a religious/philosophical/political choice than say vouching for evidence based science. The best approach is to have representatives from different schools advice to leader (who is good at decision making) who then takes the right step.

2. A technocrat on top who is there because (s)he as an expert has tonne of optionality to try out untested theories and not be responsible to people for their failure in anyway unlike an elected politician who needs to go back to people for validation. Every Economic Policy Decision tries to optimize some number, which it always will very well or average, but whether improving that number helps common people can be judged by people’s validation. A bureaucrat on top OTOH has the problem of not being qualified enough and need to rely on experts’ validation. That is the reason we choose leaders, people solely responsible for decision making, they have no excuses and have to perform what people expect them too.TL,DR : Democracy is better than technocracy/bureaucracy !

You can have opinions about whether the Economic decisions are optimizing the metrics that you consider important and disagree with them (that is democracy), but to say that no economic policy exists and no economic policy is involved in taking the decision is not correct. India’s government has a process, flawed or good.

Another thing that all of us need to understand that India and most countries of the world (except China who is not doing as bad) are going through a bad phase due to the pandemic. Economy is us people going out and spending money. Most people are afraid and some have lost their job and hence people are spending less making economy shrink for most places where pandemic has spread. We don’t really know how the economic recovery will look like for any country and only time will tell.

India was locked down for very long to develop an infrastructure against the pandemic. This is very different from other cold countries who had to reopen during their summers to avoid letting people die and are facing second wave of the pandemic now.

Is this recent case guiding your perception ? Lot has been written comparing India’s Jun-Aug 2020 quarter performance under a partial lockdown with countries that had already opened up (without this disclaimer) :

India’s GDP contraction worse than any other G20 nations, says Gita Gopinath; Congress links slump to demonetisation - India News , Firstpost

In June :

France reopens economy to quicken virus recovery - ET HealthWorld

Now :

Coronavirus: France to impose night-time curfew to battle second wave

I have pasted links about France here, but a similar situation is ongoing in other countries you would typically think of having an economically better quarter in Jun-Aug 2020.

India chose a longer lockdown to get rid of the first COVID wave and is reopening now during its festival season. You can expect people going out and spending more and economy bouncing back a bit.

Muktabh Mayank’s answer to Amongst this exponentially increasing COVID-19 cases, is unlock V a good move? Why?

Industry is already anticipating this and hence you see +ve news like this :

Manufacturing PMI at over 8-year high in September; industry raises output at full throttle

The best we can hope is now that we are reopening, people go out and spend giving our economy some much needed recovery while following social distancing and wearing masks during upcoming festival/marriage season.

Ok , so now summarizing (and adding some more points just in case) :

1. Economy is us people going out and spending. Despite most Indians still having the traditional economy when they think of GDP, India is now a Consumer economy - Wikipedia. We were afraid and locked in our houses and afraid of spending till sometime back and it was bound to fall. To reopen, government needed to win our confidence so that we go out and spend on reopening. That is what has happened with first wave of pandemic peak getting over. People will now be willing to go out and spend making the wheel if economy turn.

2. So now we are reopening just like other countries did. We did not have to hurry unlike Europe to reopen in summers as we have pleasant winters. We could get past the first peak and develop some infrastructure. Some of our experts take things half cooked. We take reopen-shut formula of pandemic economy from other countries doesn’t mean we take the exact timings of reopen-close. (And then there is so much noise!). Europe, US and India have different business seasons. Let’s learn to learn and think beyond the west BTW and copy tricks how China, Korea and Vietnam contained the pandemic, high mask compliance.

3. If you think all this co-ordination is being managed without technical people advising government, I think you need to reconsider your opinions. While not all technologists are good at decision making and even their jobs, some are really really good.

   1. 2019 Economic Stagnation :

Some thoughts on 2019 Indian Economic Slowdown

My Answer to “Why is the Indian Economy not growing ?”

Originally Answered Here: https://qr.ae/pNnZk7

Indian economy is not “not growing”.

The rate of growth has gone down though. That’s like when your car’s speed goes down, it still moves forward, though slowly. The typical rate of growth of Indian GDP in last few years has been around 6%. It has however gone down to 4.5% this quarter.

There are multiple analysis of what is responsible for this, I think its a combination of factors. Few things I would like to say before I answer:

1. I am not an economist.

2. This is what I have guessed from my readings on the internet and elsewhere and can have my biases ingrained into it.

3. You can think of it as a subjective answer and may not want to agree.

So here we go, the reasons for why the economy is “growing slower”

1. A bubble killed Adam Smith:

I think we all know what is the best policy to make your economic numbers (any numbers: GDP / GNP / controlling inflation) get better: “ Laissez Faire “. Simple supply/demand should be able to make economy efficient and ever growing. Just don’t come in the way. All Adam Smith assumes is two things : 1. Humans are greedy 2. Humans have information at hand and will make rational decisions. That’s it. You let business happen without any interruption based on people buying what they need at the cheapest cost and the economy will keep on growing perpetually.

The living proof of this was almost a super rapid advancement of the world economy with Globalization for decades after World War World War II - Wikipedia

and even faster after Cold war Cold War - Wikipedia. Pax-Americana Pax Americana - Wikipedia

for all practical purpose is the most Laissez Faire system we have ever seen in the world.

Global Economic Slump Challenges Policies

You can see that the World economy was always growing post 1970 (always higher that 0% until 2010)

Look at how Per Capita Income looked before/during Pax Americana:

Economic Growth

So why did the system of Adam Smith fail despite of being so basic ?

Now there is no error in the assumption that “Humans are greedy”, but the other basic assumption “Humans have information at hand and will make rational decisions.” has some flaw. Humans often don’t collect enough information and they can take irrational decisions. When greed and rationality are misaligned, humans go with greed. That’s what happened with many bubbles of late 20th and early 21st century. Humans knew that there is a limit on betting on something, but they kept doing it until the risk became too high. The Dot Com bubble was small, the Subprime mortgage crisis - Wikipedia

blew the world over. The world’s economy became smaller and almost came to a stop.

Why is this relevant here ?

Well because the world (esp. The USA which is still one out of the two engines of world economics and then was the only), came to know that super Laissez Faire might sometime bite in the back and there is a risk involve in this type of growth. Laissez Faire is the best and most efficient to grow economy, but there is risk involved. The East which was still developing developed a dislike of the system too.

Now that humans saw risk in the choice of Laissez Faire, they chose another less risky option: Deglobalization

Brexit - Wikipedia

Presidency of Donald Trump - Wikipedia

China–United States trade war - Wikipedia

If you think this is a term I am making up:

Globalisation is dead and we need to invent a new world order

Sounds Familiar, eh ?

So wait, why did it all wait till 2016 when the financial crisis was in late 2000s ?

Laisez Faire is simple. Supply should have met demand. We would have reached an equilibrium after financial crisis. This would have let companies fail and we would have had a smaller economy which would have developed back again. In the long term, the impact would have been removed. But in the short term, there would have been painful compromises. This was not acceptable to the rich and powerful. Governments came in to save their “too big to fail” with their money printers and bonds. This caused a Disequilibrium Definition

for a few years which slowly changed the face of the world economy. Disequilibrium eventually gives way to a new and different equilibrium. This is what we have today, the Deglobalized economy.

How the crisis accelerated the rise of China

So yeah, a lot of economists don’t expect growth rates like globalized era in the upcoming times. They even probably want to move away from GDP as a measure of success to other factors like Economic Satisfaction or PCI. The world is not the same as the world where China (with the same economic policies that President Trump hates so much now) was invited to WTO and almost accelerated to 10% growth by the entire world :

Bill Clinton’s Last Great Victory Is the Reason Hillary Gets Hammered on Trade Today

So yeah, 10% acceleration because of the world backing us doesn’t look possible in the current environment. That has been the way Germany and Japan and China developed after World War 2. The tested and tried recipe won’t work, we need something new.

What is it then ?

Deglobalization reduces growth rates for all, but large economies and countries suffer comparatively less. They can exploit their own ecosystem to create growth, the harm is that it creates Oligarchy.

Smaller economies effectively become a colony of one of the larger company.

EU for example under the disguise of “privacy” has been creating deterrence for companies from outside :

France builds WhatsApp-like service to avoid privacy breaches

How regulation brought innovation back to European tech

China, already has created a huge deterrence for outside companies doing in China by its IP laws, which basically enables Chinese locals to create a local cheap copycat of external companies:

What Is Intellectual Property, and Does China Steal It?

In case of internet companies, it has created a deterrence by the Great Chinese Firewall

What Websites and Apps are Blocked in China? (Updated August 2019)

This essentially has given rise to China’s own ecosystem of internet products:

Market Spotlight: Crash Course on China’s app ecosystem

And China is selling its products to smaller countries (along with its own market) to drive growth.

Meanwhile, in India, we have to still choose whether we want to be a pole of this upcoming multipolar world or an economic colony. There seems to be some strategy, but there is a lot of politics and “what’s the right way” discussion.

Look at BBC (and Technology “Expert” Mr. Prashanto Roy) criticizing a similar move by India as if India is doing a big crime here:

India may cite Pegasus row to store data locally

Let’s talk more, our apps are loosing to Chinese ones :

[The Chinese takeover of Indian app ecosystem

FactorDaily](https://factordaily.com/the-chinese-takeover-of-indian-app-ecosystem/)

India was unfortunately a closed economy during globalization times and delayed the opening up too much (we opened our economy after Communist China !) and now that tactically closing some parts is required, we are getting slow too. This is what is going to drive growth if globalization dies like what it seems to be doing now. Our economists need to figure out a way to squeeze the last bot of globalization advantages to develop our local ecosystem.

2. Black v/s White

Another hitch which seems to slowing down the GDP as of now is the war on Black Money. PM Modi has been very serious about it.

Modi 2.0 ‘Na Khaunga, Na Khane Dunga’ drive takes 12 top taxmen’s jobs

“Na Khaunga, Na Khaane doonga” means I will not eat (people’s money), neither let others eat (people’s money).

There are two moves that have effectively halted black money in India : 2016 Indian banknote demonetisation - Wikipedia

and Goods and Services Tax (India) - Wikipedia

While a lot of people will argue about whether these had any effects or not and I could respond by saying that I have personally seen people putting their black money into very high risk investments to get rid of notes during demonetization which they are still trying to get a handle onto, let me prove this by Economic theory.

Simple economics says that when a lot of credit is available for something (that is demand is inflated) , the prices should rise, just by simple Economic Surplus [Definition + Examples]

concept. There would be a equilibrium established later where the cost would get stable, but there is no way in hell that prices can go down. Right ?

Check this out!

Indians have been given too many loans for Housing and Vehicles in last 4 years:

Indian households’ debt doubles in FY17-18: What are we borrowing for and how much?

(Just to add, Indian consumer loans are comparatively very fraud proof where the money is generally given only after many levels of check and a three party system dealer/builder - consumer - bank is followed. You can safely assume that these are mostly genuine loans).

So you should see a boom in the vehicle and housing sectors (and conversely a slump in consumer durables given loans are not being given there). The government/central bank is basically forcing a boom. But you dont.

From Reuters:

Realty bites: Indian property slump leaves beleaguered banks exposed

Property prices have fallen slightly in most major Indian cities in past one year: Report

So more money than before into real estate but they are still “out of money”. This basically cannot happen, unless, there was a parallel economy earlier which was way larger than even the artificial inflation government has induced.

It was very common for builders to ask for payments in 50%+ black money just a few days back.

Same with vehicles:

Slowdown Blues: Maruti sales fall again in November, decline 3.3%

This while it is so easy to get a car loan these days. I can get a vehicle with Zero down payment, just on easy EMIs.

The car thing is more complex though, there are other issues like rise (and then stagnation) of Ola/Uber, Peak car - Wikipedia

, super easy personal loans for Ola/Uber drivers now getting more real and less bubble-y. But you get that despite this combination, this is anomaly.

How much black money was there that it can hurt economy so much ?

Well some not-so-small amount, but its buying power was huge. Black money is more liquid than white money which is typically invested in bank/stocks and circulates more.

When you spend a 10 Rupee note into economy, it is not just 10 rupees of GDP. It gets spend many times to make payments (and was spent many times as credits to get you the thing you wanted to buy on credit). With so much of liquid black money stopping, you could expect some good ripple effect.

[Before you comment, one person’s black money can become other’s while money and hence killing the black money does kill white money too. There are consequences of doing anything, even removing black money from economy.]

The small trader effected by GST excuse politicians make didn’t find too much support on ground during Modi’s relection with even larger mandate because in back of mind, most Indians were clear that black money needs to stop.

3. Who bells the Cat ?

Coming out of black money economy is a good thing. Corruption in general is lower. In defense of Modi’s corruption record

I am from a family of government servants and people in my extended family who are still are in government jobs continuously keep cribbing about their government jobs being less “satisfactory”. Smart columnists keep cribbing about “but there is still corruption”, but people can get a signal about what happened there.

The following is what needs to be done:

1. Low Corporate Tax (government already did this).

2. As long as effective center of control of companies stays in India, there should be no hindrance to money coming into company from outside. 100% FDI maybe.

3. Black Money and taxation to be good (somewhat implemented). GST seems to be getting better: Finally, some good news: November GST collections up 6%

1. We have to build large companies and enterprises within. With deglobalization being the trend in the world, we will need big in house companies who can sign big cheques and take big risks. Small traders and local enterprises won’t be able to do so. That or we take the thought of being a world leader out of our head and keep playing psychological standstill. Unless globalization comes back into fashion again (not that probable) , in which case we should just open economy up more.

2. Privatizing PSUs. We already have some large companies (as said in 4), but they are not really efficient. This makes our PSUs efficient. (Already being done)

Now these are not things that will be easy, these are bold decisions that WILL hurt some people (some of which are core Modi votebanks). Probably the reason why Modi was given such a strong mandate that he doesn’t need to worry about people getting unhappy, but despite all of this, he is a democratic leader and needs to worry about his image. We have to see what we can pull off.

My answer to “What are the challenges being faced by the Indian government while growing the economy of the country?”

Originally Answered Here:

Before you read my answer, a disclaimer that I am not an economics expert. This is just log of my observations.

Let’s keep something clear, our economy is growing, but not growing at a rate it used to. None of the world economies (except United States) is really doing better than it was say 5 years back. China’s 6% GDP growth rate is widely understood to be a flawed number [Subscribe to read

Financial Times](https://www.ft.com/content/961b4b32-3fce-11e9-b896-fe36ec32aece)

and Germany is very close to a recession (India is not in a recession, its a time for low growth, recession means negative growth). Germany’s economic growth were -0.1% and 0.1% in successive quarters.

Why has German car production hit a 22-year low?

[Subscribe to read

Financial Times](https://www.ft.com/content/a6df76e8-06aa-11ea-a984-fbbacad9e7dd)

These are stats from the few economies larger than India. Smaller economies are growing (like say Bangladesh, Vietnam, Ethiopia), but they are really nothing in comparison. Total economy growth of the world last year was dominated by two countries, China and India, despite both being in an economic slowdown.

Net-net , India’s economy is not doing bad as compared to the world right now, its doing way worse than what it was doing in the past in terms of growth. There are some things where its actually doing better too :

Is it true that India is doing better than ever on many key indicators?

I hope its clear that the question is not about whether we can do whether with respect to contemporary world, but can we do way better than the world. You should understand that is a hard challenge.

Some challenges Indian government faces when they try to push the economy up:

Lack of easy capital :

There was a time when the neoliberal order was investing in developing countries like there is no tomorrow. China became China because west invested “a lot” into them and made them what they are today. [Subscribe to read

Financial Times](https://www.ft.com/content/9ebf9e36-1271-11e8-940e-08320fc2a277)

http://press-files.anu.edu.au/downloads/press/p214211/pdf/9.-The-impact-of-WTO-accession-on-FDI-Chen-Chunlai.pdf

Let’s be clear about this, having money and then spending it correctly is what gets industries/businesses established, which begets jobs, new middle class is formed and prosperity comes home. Comparatively, here is what India raised during that time:

Foreign Direct Investment (FDI) In India (Since 1991)

If you understand compound interest, you can understand how that wealth might grow in countries if they manage the money well. We need money + we need to manage the money well to become a good economy. Only in 2015, we could start getting FDI comparable (and even slightly more) to China :

Foreign direct investment in India - Wikipedia

Now assuming we manage money as good or better than China (discussion on that later), we would now slowly need compounded growth + investment over time to be as good as China say. However, with the old economic order falling and the old fashioned mercantile system coming back, investments are becoming lower and India is trying really hard to just keep the FDI per year intact.

Fallout from Trump’s trade wars felt by economies around the world

In an old fashioned climate, FDI would have fallen, but with ease of business etc going up, at least we are seeing somewhat consistent FDIs. But they have not really gone up.

FDI in India: Foreign Direct Investment Opportunities, Policy

So yes, the environment is changing and we can see some effects of it. FDI is somewhat risk-free investment in a sense that if you can create confidence amongst investors, you don’t have to give anything up to receive it. All you need to make sure is you show you have a good legal system to recover money if lost and a growing economy that will give returns. With media reporting negative things all the time just when the growth rate has gone down a bit, its a vicious cycle, negativity rises even more and the government has to counter that too to keep the FDI tap running (and probably increasing).

You also have to understand that to drive GDP growth the base changes every year, so one has to spend more and more. For example you spent 2 rupees to grow economy from INR 100 to 106 (viz 6%), it is very good that next year the economy grows by 6% again (6% of 106 is around 6.4 INR) by spending lesser, but most of the time you need to spend as much or even more. You can call it bubble or whatever, but that’s how most economies work. You can either finance this through FDI (least risky method) by maintaining a good name and goodwill, or by inflation (like how previous governments did it) or by debts.

Current government has a principle to keep inflation stagnant and with stagnant FDI, India has to look into more risky methods like:

Debt:

Good old debts and bonds. Unlike China (now-a-days) and Japan(since the 1980s) who have gone on a debt spree to increase local consumption to boost economy , India has been fiscally more responsible. Fiscal Responsibility and Budget Management Act, 2003 - Wikipedia

China on the other hand uses debt as a method to boost local growth :

[Does China face a looming debt crisis?

ChinaPower Project](https://chinapower.csis.org/china-face-looming-debt-crisis/)

You could consider this a positive or negative thing in China’s case, but they have at least been successful in pushing all the debt towards growth. This will hopefully give them long term returns is what they think.

There is infact common advice that India does this too :

However, debts unlike FDI are less directed. have no KPIs attached to them and hence there is a high chance of misuse of funds into liabilities than assets. FDIs are almost always invested into businesses or real estate. Debts can be used wherever. Its very easy to secure debt for India’s finance growth, but the government doesn’t want it.

India plans to cut spending to curb deficit; may hurt growth

And it is somewhat correct. Democracies don’t have good record of spending money on things that would lead to sustained growth. Greece hosts olympics and Argentina just keeps giving government jobs with the debts they receive. China manages it slightly better because there are no elections so it can invest in long term things, say making electric cars slightly cheaper and by stopping giving cheaper petrol car license plates. Chinese use their extended bureaucracy to keep a tight control on the debt money by government officials, then state owned banks and state owned companies. Democracies work on election cycle so they will invest in short term things, which generally will not sustain growth.

Greek government-debt crisis - Wikipedia

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Financial Times](https://www.ft.com/content/9161f0c0-caff-11e9-a1f4-3669401ba76f)

So yes, that is condition, you can fund growth through 1. FDI (people buying stake in the country), 2. Debt(Taking money as loan), 3. Inflation(people paying for the growth by depreciating values of their assets). 1 is slightly harder to increase, 2 is a generally avoided by India, 3. Current government is a populist government, so they dont want to hurt their voter base.

So government has to now focus on growing economy through the hard way : Efficiency. “A rupee saved is a rupee invested”

Economic Efficiency:

When you cannot grow by investment, you have to grow by increasing efficiency. If you haven’t observed, the government is acting on it.

Government has merged Public sector banks to form large stable banks. Also the banking system is back to profitable after a long time. India had a huge bad retail loans crisis in 2010s.

Nirmala Sitharaman announces big reforms for Public Sector Banks: Key highlights

Indian Bank’s Q2 net increases 13% to Rs 359 crore

Large and inefficient government companies are being disinvested to turn into efficient ones:

PSU disinvestment: Strategically right

Government Panel Approves Rolling Out of 150 Private Trains

Encouraging startups and innovations are other ways to do things more efficiently. Government has taken steps their as well :

Challenge

ISRO To Support Space Startups With Incubation Programme

Make In India Defence Production: Pages

Startup Policy Rundown: Govt Launches E-Auction Platform, 3rd Defence India Startup Challenge And More

These types of news articles are common throughout India, different state governments and central governments are trying to use technology for more efficient methods to run the economy. Its just a start and will take some time to show results, but none the less this is the way to do things efficiently when the investments are lesser.

India is trying to take a lesson from Israel here:

Israel’s tech start-up scene: the heartbeat of the economy

R\&D, the other very important thing for a innovation-driven (or efficient) economy is something India needs to focus on. India’s research ecosystem is just a white elephant, we have too many scientists and many of them are basically teachers or people who have evolved using system’s inefficiency. India needs more scientists who can actually “get shit done”.

Government has of course thought about this too :

After PM prodding, DRDO looks to set up new lab with scientists under 35

PM urges young scientists to “innovate, patent, produce and prosper”

As you can probably guess, this is slow because the old guard is not always so receptive. Just yesterday, a nation-wide strike was called in government companies/enterprises to protest against the reforms.

No one is really “going after” jobs, just that employees will become private sector employees. I am not sure if you can recognize the flags in strike photo in the screenshot above, but I will share the logo of the banking organization whose head is being interviewed by Reuters as an expert in the article. Rings a bell ?

Large public-owned enterprises ? get a hint!!

Another big challenge is getting our workforce to be more efficient. There are specialized jobs in the economy, but students entering universities are often not aware of what to study. Government is trying to get youth achieve employment skills for cheap/free, but we still have to see where it goes.

https://www.msde.gov.in/nationalskilldevelopmentcorporation.html

So yes, many challenges for the government ahead. They are trying to solve them and the future will tell what course our economy takes.

My Answer to “Is it True India is doing better than ever on many indicators”

Originally Answered Here: https://qr.ae/TS3Xa5

My answer was written long before the 2020 stock market crash due to CoronaVirus fear and Stock Markets during 2020 {the next year} were totally tanked.

Some metrics on which India is doing very good (and in some cases the best ever):

Stock Markets:

https://www.businesstoday.in/markets/stocks/share-market-live-sensex-nifty-trading-on-december-17-2019-yes-bank-cipla-arcelor-mittal/story/392174.html

Forex Reserves:

Forex reserves hit record high at $457.46 billion

Debt to GDP Ratio

India’s debt lower than best emerging market economies: IMF

India’s Debt to GDP ratio is at one of its best positions ever

India’s banking sector has finally unscrewed itself

After two successive years of losses, banking sector turns profitable in first half of FY20

Ease of doing business is better

India jumps to 63rd position in World Bank’s Ease of Doing Business 2020 report

Number of patents is going up (so hopefully we are innovating more):

IIT Delhi Files 150 Patents in 2019, Highest Ever in a Year

GST collections are (finally) going up, so (hopefully) consumer spending is back !

GST collections: Check which state topped collection in December, how much tax other states got

Businessmen will finally not get arrested for failing at a business (aka we now have a bankruptcy reform)

‘GST, bankruptcy code to help Indian economy’ - Times of India

We need to work on our slow economic growth during last few quarters no doubt, but all hope is not lost.

1. Other Issues :

   1. My answer to “If the rest of India doesn’t have a problem with the farmer bill, why doesn’t the government just withdraw the bill from Punjab and revoke any more benefits to them as well?” [2020-21 Farmer Protests]

Originally answered here: https://qr.ae/pNaMiZ

Punjab is just in a unique situation. The status quo which kept farmers incomes low throughout India and had many inefficiencies was actually successful in Punjab due to internal efficiencies of Punjab.

Post independence from British, the zamindari was abolished limiting how big a farmers land holdings can be and land was distributed to farmers. However, in Punjab (and Haryana), these land holdings were much more consolidated in hands of a few from colonial period. Land ceiling killed individual ambitions, but a community based consolidation survived.

Punjab: Land struggle in the time of pandemic

When during the Green Revolution - Wikipedia

in the 1960s, India was looking to scale up its food production and stock up grains to feed its then poor population, Punjab was in a unique situation to invest and take loans as compared to others due to consolidation.

The Agrarian Crisis in Punjab and the Making of the Anti-Farm Law Protests

The consolidation of land in the hands of the few and supply of cheap labor from Uttar Pradesh and Bihar actually built somewhat of a one community driven corporate farming industry in Punjab making it a much more efficient business than small, unorganized and individual farmers in rest of India. Inequality/Oligopoly has its disadvantages, but businesses built in this way are much more profitable and stable. Farmers in the region with large land holdings (or organized large holdings) when combined with cheap labor from UP and Bihar, basically build up a money making machine.

Unlike Punjab, farms in other states of India are relatively better (not perfect but less unequally) distributed among conflicting castes and sects. Better distribution means less organization and consolidation. That basically means less profits and thus poor investments and worse incomes. Farmers in rest of the country need a way to scale their agriculture according to market economics. Look how poorly they compete against Punjab : New Agri Bills: Punjab farmers, a pampered lot, protest easily

Government procures 90% of grains of Punjab for India’s PDS - Public distribution system - Wikipedia

[Where it guarantees a subsidy on grains ensuring high prices]. Most farmers from rest of India, hardly get to sell their grains at the same cost. This is such inefficiency that the farmers are paid good money only for the food poorest people eat. There is a huge layer of middlemen that leak the money India’s middle class, rich and exports pay and none of that reaches the farmer. All taking help of inefficiencies. The aim of country should not be to ensure just MSP, but make farmers so efficient that they can market and sell their goods at the right forum at the right price.

Thus, while Punjab’s farmers want to keep the status quo, rest of the country has news of farmer distress : Farmers’ suicides in India - Wikipedia

These are states with unorganized farming and relatively poor lands. These farmers will never be able to meet Market Economics unless they become efficient like how Punjab’s farmers are. We don’t want a land consolidation like Punjab in rest of India, so the way is to push free market efficiency to make these farmers become competitive. That is what the recent bills introducing agricultural reforms do. They follow Shanta Kumar commission’s reports to make agriculture in India more efficient.

There are Punjabi farmers showing foodgrains from malls as things being sold on high prices and being procured from them at low cost. The truth is most of Punjab’s grains are used to food poor people for free !

Even for government procurement Shanta Kumar committee basically suggested to : https://fci.gov.in/app2/webroot/upload/News/Report%20of%20the%20High%20Level%20Committee%20on%20Reorienting%20the%20Role%20and%20Restructuring%20of%20FCI_English.pdf

A. Make Infrastructure better for better transport :

B. Embrace free market in grain storage:

Please note that the “mandi” system which works relatively in Punjab (northwest) has been also dubbed for reforms to make them efficient. Agricultural produce market committee - Wikipedia

. This is btw, a report on procurement by government for PDS we are talking about here. The agricultural reforms introduce procurement by private firms directly for retail as well.

Mandis in Punjab and Haryana are inefficient and the nation loses billions of dollar every year procuring from them. Since these grains are eaten by poorest of poor, no one cares about their quality.The Government Must Act on the CAG’s Damning Report on Rice Milling and Paddy Procurement

Unfortunately, this inefficient Mandi system is what gets the best price for farmers.

The latest agricultural reforms basically enable the following :

1. Farmers don’t need to necessarily sell to Mandis. They can sell to Mandis if they want a collective bargain.

2. Private players can procure directly from farmers.

3. Infrastructure should be made better so that unorganized farmers aren’t at a disadvantage.

I agree that a Mandi needs to be given some special privilege when fighting against a multinational as they cannot dump enough money as predatory capitalism. The right way is to empower the mandis to give a fair competition and thus forcing them to get more market driven and competitive rather than hiding behind procurement for PDS which is a comfort zone. Government is ready to back mandis in competition with private players : Tomar: APMC will be strengthened, Modi govt fully committed to farmers’ welfare

Ok. Now I would answer your actual question, why would Punjab farmers might not want to just block the reforms in their state and let the rest of nation go ahead with it :

A. Punjab farmers might be afraid that the monopoly they have in the government procurement may be disturbed if the whole of the country becomes competitive to them given the whole country reforms the agriculture system. Punjab is still expected to be ahead in a reformed agriculture sector due to the inherent advantages it has, but why take any risks.

B. Punjab farmers might be afraid that the monopoly they have in the government procurement may be disturbed if they continue to stick with the old system and the rest of the country moves ahead with reforms as well. BTW, this is the situation we have now. Punjab has blocked the changes to Mandi procurement system (as mandi laws are controlled by state).

C. The only way for Punjab monopoly in PDS procurement to continue is what the status quo till September 2020 was. So they want a rollback of reforms.

E. The protests against corporatization of agriculture is misplaced as Punjab’s agriculture is already a corporate industry. From the above linked article :

That said, this Zero Sum Mentality is what keeps people behind. In India :

i. Most money in agriculture will not come from PDS, but from free market. The whole fight is over PDS procurement. Think of how small the fight is in the grand scheme of things.

ii. Farmers should make cooperatives which negotiate on behalf of them and get them prices basis of free market rates. Also educate them about what to produce to increase their income. PM Modi gave some examples of this few days back :

PM Modi doubles down on farm laws, says are opening new possibilities

iii. We can have cooperative firms like Amul in agricultural sector too. See some examples in apiculture here :

A recent study says most #honey brand in #India are adulterated. Friends here we present forest honey from #Sundarban. Bonphool honey from Sundarban is available online also. Every bottle of honey purchased contributes to conservation & provide livelihood to traditional people. pic.twitter.com/WKoZA88PE4

— Parveen Kaswan, IFS (@ParveenKaswan) December 3, 2020

My answer to “Why are farmers in Haryana and Punjab protesting?”

Originally answered here: https://qr.ae/pNZrFt

I have answered the question in detail here: Muktabh Mayank’s answer to If the rest of India doesn’t have a problem with the farmer bill, why doesn’t the government just withdraw the bill from Punjab and revoke any more benefits to them as well?

TL,DR of the answer is :

* Whole of India’s agricultural sector was very unorganized apart from Punjab (and some parts of Haryana, given Haryana was initially a part of Punjab). This gave Punjab a special monopoly where they were able to sell their crops to government at guaranteed prices. This made the agricultural sector of Punjab more consolidated and powerful. In the rest of the states, farmers could hardly sell their crops anywhere close and there was widespread farmer distress. This is a well known problem in economics called Monopsony - Wikipedia

as most farmers had to sell to mandated intermediaries who could pay whatever they want.

* India has liberalized the agricultural markets where farmers can now engage with any buyers who can give them a good price and making them more efficient.

* Farmers in Punjab are however (I think) more afraid about their organized farming industry which churns out money can be disrupted given the rest of country becomes efficient and organized too. This by the way is fear only for losing India’s PDS procurement, which many people know as the MSP issue, which is a small part of the actual agriculture marketplace, most farmers even in Punjab don’t have issue with the other 90% of the reforms. In fact, 10 years back, Punjab farmers protested for similar reforms to be introduced:

http://archive.vn/WqmkB

Punjab farmers getting disrupted however is a low probability event because they will still be ahead of any other state (as they started the race ahead of others), but why accept a non-zero probability of disruption is probably what they think. More stats and details details in the linked answer.

* The rest of the protest is made of perpetual protestors , people who are always in protest mode and will stop the country at whatever event anyone in the country doesn’t like.

My answer to “Being Liberal is good, so why are Liberals hated so much in India ?”

Originally Answered Here: https://qr.ae/TS4cmg

The following is very much my reading of the current political situation in India. I am not an expert on either politics or history, so take this answer with a grain of salt :

Indian political scene is filled with misnomers : “Liberals” are not really liberal, “Rationalists” are actually communists, all sides of political spectrum are basically “progressive”, that is want living conditions of humanity to get better with time, “Secular” word is very unclear in definition, “Indian Intellectuals” many a times aren’t intellectuals (many celebrities who are counted as intellectuals haven’t really completed their basic education, they can be called leaders, not intellectual).

So “Being liberal is good” is not really a fact like you have mentioned. It is a statement like saying “Movie X is good”. It is a subjective statement.

You need to understand that the “liberal” politics in India is not really liberal (liberal politics is a different type of politics altogether which has no support base in India), but a mix between Fabian socialism, neoliberalism and identity politics. (essentially the politics of Indian National Congress at different stages during Indian democracy period, which has been in power for most of the time post-independence).

In current context, If you understand that you like the policies implemented by the INC in India, you can definitely call yourself an “Indian Liberal”, but please don’t feel you have a liability to be called “liberal” as the word has a good reputation. You might like the Indian Liberal philosophy, the Liberal(or classic liberal as now it is called, given there is a neoliberal philosophy too) philosophy, none, a mixture of both, whatever you feel like.

As of 2019 , I want to explain (as to how I understand) what is an “Indian Liberal” philosophy and what are they really against in current BJP regime. (And that there is a lot in common too which they should not really be against)

The Indian Liberal Political stance

1) Fabian Socialism:

I think if you are reading this answer you probably already know what socialism is. Socialism is basically a democratic form of communism which aims at bringing wealth redistribution and state/co-operative ownership of important means of production. By just policy of democratic socialism, Political Communism in India and Socialism are not really different as both comply to electoral means to gain power. (There is also real communism in India which wants to overthrow capitalists through a bloody and warlike revolution, what we know today as Naxalite - Wikipedia

). However, Fabian thought is what sets them apart.

Fabian thought is slightly different though. Fabian Society - Wikipedia

. It believes that the best form of government is that which is run by an elite and aims to redistribute wealth as a “Socialism run by Aristocracy” (This is not my words, but Annie Besant’s, J.L.Nehru’s political guru).

If you look at Indian politics, most elite people’s families have been elite for generations. Just google a bit about post-Nehru Congress leaders or our artists or mediapersons etc, you will see a lot of them come from elite families (who were quite influential after or sometimes even before independence) and stay elite. They don’t want to show it, try to portray themselves as common people, but they are. Fabian Socialism creates an ecosystem which tries to implement socialism without becoming more populist (We will discuss about the term later).

If you remember before the internet and social media, the only way to understand the depths behind a topic was to read opinions on a topic in newspapers. I used to read opinions and editorials of Indian English newspapers when I was a kid. Thinking of it, a lot of subjective knowledge was passed to me as real knowledge and I probably still believe a lot of it even now. That is the epitome of Fabian society, I was guided into what I believe is right in a lot of topics by elites whom the media thought were experts in their fields.

In India, the way Fabian Socialism works is the following:

1. Highlight weak sections within the majority and become their representative. 2. An elite ecosystem to run the country and create propaganda

3. Meritocracy in executive and technocracy to keep populism in check (the people think they get a say in running government).

The entire concept of dynasty politics is not just limited to politics, but also in media, arts, business, judiciary etc. Fabian thought aims at building an elite which runs the show. In UK, OxBridge educated elite is another example of a similar “socialist aristocracy”: List of University of Oxford people with PPE degrees - Wikipedia

There is a small inlet for the common people to break into this elite through competitions etc to make sure they are not dissatisfied.

So its not just Nehru-Gandhi family, but a set of families which run the country. They take in a few new elite people and the old ones are retained, keeping their narrative aligned always. They let certain meritorious people into elite who comply with their narrative enriching the ecosystem . Let me explain a bit more.

Socialism in my view is basically elite-run Communism. It follows similar goals to communism, but is unlike communism, not brutal and authoritarian, allows for economics to flourish too and makes more rational choices.

There is a somewhat parallel movement in India we had of a more populist (identity politics based) socialism and you have common people rising to become powerful politicians. (Mulayam Singh Yadav, Nitish Kumar, George Fernandes, Lalu Yadav, Kansiram etc ). But since the ecosystem was built to facilitate fabian socialism, they all convert into fabian socialists in the long run. Most of these populist socialist parties have now evolved into what is known as “dynestic politics” parties in India. That is the reason why some people even allege that the BJP is becoming like the Congress (because the country works based on ecosystem and parties have to adopt it to some extent to run the nation). The class of 1975 - Times of India

If we think in the terms of George Orwell, the INC is the Inner Party - Wikipedia

and it has developed an ecosystem that any ruling party has to comply to.

In modern context, Socialism’s most important call is to end wealth inequality. Means of production and other philosophies have been replaced by Neoliberalism (including here in India) and welfare state. Only very recently, we are seeing Jeremy Corbyns, AOCs and Bernies of the world bringing the hard left back. Truth is that combining Socialist welfare state with neoliberalism has had some really good consequences for people for countries.

Look at the HDI:

Or World Happiness Index:

Or quality of life:

The 23 cities with the best quality of life in the world

In India, you can roughly equate the AAP government’s work in Delhi to be India’s equivalent to the welfare state. Delhi Government Performance Report 2015-2019

(That link is from website of the political party itself so yeah, use some salt)

2) Neoliberalism:

Neoliberalism - Wikipedia

is a policy that most left-of-center political parties adopted 1990s onwards (Democrats in US, Labor Party in UK, INC in India). Embracing capitalism and globalization as more “efficient” socialism. Neoliberalism basically lets globalization take precedence. As trade increases, prosperity grows, and more money for helping depraved. This sacrifices the goal of finishing “economic inequality” , but no one complains given better circumstances that arise. Parties also become more center in the political spectrum, making them more acceptable.

The other policies of identity politics remain, while the cathedral/ecosystem allows meritocratic entrance not just by meritocratic competitions but also by entrepreneurship. The entrepreneurs who get into the elite using the system is what a lot of critics call “cronies” in modern era. This policy has proven to drive growth. Most modern global multinational companies took their form thanks to neoliberal policies and they became huge. Neoliberalism and multinational giants support and reinforce each other. You can assume that most Forbes companies these days are a product of globalization and Neoliberalism. So is a lot of discoveries and inventions and human achievements.

This has definitely made the world a better place:

Poor people are getting a better life due to this and in some countries in Africa, the average age is going up by more than 1 year to live every year, that is people have more years to live ahead of them as they get older.

A very nice narrative around this can be found in Enlightenment Now, one of my favorite books, which tells how chasing openness in science, reason, humanism and betterment of people has been achieved in last few years and the world is becoming a better place every day:

Indian National Congress was somewhat neoliberal during their stint as UPA governments in 2004–2014. The good thing is you can be socialist and neoliberal both (infact that is the most prevalent form of center-left politics in the world) .

3) Identity Politics:

So how would a minority of elites can run such a huge country on socialism/neoliberalism ? If you basically tell people you want to run a democratic neoliberal government to open up the country, help traders, entrepreneurs and scientists, you will not get even a few votes in a democracy.

The answer is by never letting a majority form. Social Justice is a good concept, but when it is combined with identity politics, it becomes an effective measure to never let the majority unite. Any and every society in the world has its flaws and fault lines. You can effectively make the weaker sections support the elite without a lot of trouble. In India, you have Minority politics, Backward caste politics, Scheduled caste politics, Women politics and so on. This is a brilliant way to keep populism in check. Votebank politics is the common name for this phenomenon in India. All you have to do is positive discrimination to rule.

Minorities must have first claim on resources: PM

Identity Politics does give a feel to marginalized segments of society that they have sway in the society, and that is why it wins.

Unlike intellectuals and elite who respond more to facts, common people respond more to emotion and will respect identity politics shown real and emotional stories of oppression, poverty and struggle.

There is some argument that identity politics actually works: In Defense of Identity Politics - Signs: Journal of Women in Culture and Society

But most people disagree:

[Why identity politics benefits the right more than the left

Sheri Berman](https://www.theguardian.com/commentisfree/2018/jul/14/identity-politics-right-left-trump-racism)

Indian Liberal is against What ?

Well, now that I have described in my own definition what an Indian Liberal is, let me describe what are they fighting against:

Modi-ism (This is not really a term, but I don’t really know what we have as an actual term for this phenomenon)

Modern Hindutva, BJP, Modi-ism or whatever terms you want to put to the current phenomenon that has rocked India in terms of politics recently is not a new one. It evolved from Congress itself when it was a big tent party for Indian Independence before it took a decisive fabian socialism turn under Nehru. Unlike most right-of-center parties in the world, Modi’s politics is not really conservative (You can see a lot of people writing “Hindutva is not Hinduism”, that is because not all tenets of our traditional religion is what he aspires to), fiscally socialist(Modi government distributes many freebies to poor people), but yet pro-business (in fact they have sometimes been criticized for being anti-business too). Economically, BJP is closer to Democrats (general democrats, not the left fringe we see these days) than Republicans in US. Modi government is trying to run a version of Obamacare in India. The “Gujrat Model” he wants to bring to the nation is more or less how we define Neoliberalism above. Growth in Gujarat hasn’t been confined to 1% of population

Economically, the only difference between Modi and previous Indian governments is his openness to let businesses created outside the elite class. He has reduced red tape and number of laws, made getting businesses registered, loaned and closed easier. He also promotes SMEs/MSMEs/startups and pitches them everywhere. This appeal to allow non-elite people in the top is what we will address next.

As an Indian Liberal , you might oppose Modi for the following for just opposition’s sake, but there is not too much ground to this criticism:

1. His Neoliberal economics

2. Him being “old-fashioned” or “orthodox”

3. Socialist policies

The truth is he is trying to solve the same issues as a Indian Liberal government would try and solve and agrees with you things need to change from the status quo. Sometimes he might come up with similar solutions to what an Indian Liberal government would come up with (with lesser or higher efficiency), sometimes his policies will be radically different.

There are two issues however on which there is massive disagreement. These are the fundamental issues which when Modi tries to change, people blame him for changing the “idea of India”

Populism :

The most fundamental difference between Modi’s thought and Indian Liberal thought is who sets the narrative : the majority of people or a set of elite.

Populism is the rule of the majority. Basically Populism means sticking to what the majority thinks is right. Some basic things you can easily guess that the majority in a nation state wants is :

1. non-interference in day to day life

2. control of morality

3. social mobility and

4. Social Influence and Relevance

This puts Populism at odds with the rule of the elite. Let’s see examples of these fundamental differences:

1. More social mobility as long as you dont want to destroy the system. If you respect the system (Nazi Party in Nazi Germany, CPC in China and Communist Party in USSR), you could rise from the bottom of the society to the top.

Stalin ,for example, came from a family of shoemakers:

In a elite run state (US from 1990–2016 was a proper neocon-neolib state) , most people who get power even from marginalized sections of society are elite too. Barack Obama, for example, had a more privileged life than most African Americans.

Speaking from A Place of Privilege: Why Barack Obama Can’t Win for Losing on Race?

As you see above, many people in the community weren’t totally happy with the way he ran his Presidency (Not talking about Republicans who were unhappy with him, I am talking about people who had voted for him expecting him to bring some huge reform for his own community).

How Obama Failed Black Americans

That’s because as an establishment candidate there is only so much he could do (and he was a pretty good President overall), you cannot expect populist policies from him like what these people were expecting.

2. Social Influence of the majority is better and they are left alone: Trump canceling Paris climate accord for coal miners or putting trade embargo on China to make sure manufacturing stays in US are steps that help common Americans live their life without expecting too many changes. This is something majority likes, stressful constant life. Gradual changes is what they want. Elites are strong and well placed to take blow from changes in day to day life, common people are not. That is the reason why their openness-to-change is low. So when populists start placing majority’s comfort above elite policies, well, the common people feel they have more power in society. This is in direct contrast to Identity Politics, where marginalized groups feel they are in power.

In India, Demonetization 2016 Indian banknote demonetisation - Wikipedia

which has been told to be a failed move by most experts was loved by most Indians at that time and is still loved even now. Most of us have personal anecdotes of our black money grabbing corrupt government servant or businessmen relatives who had to sweat hard to save their money and might have lost a lot of it. These were the same people who had used the system to their advantage. Majority doen’t really know how RBI says most of currency came back, but we do remember these “elite” rich evil people getting troubled and this amused them, despite the fact they had to face hardships too. Now these people of silent majority don’t come out and interview on television and write editorials on newspapers and so they are hard to find online, but go ask your neighbor from lower middle and lower class and there are stories you would have not heard.

The problem with will of majority is, it is emotional and often sub optimal. Probably because the majority is facing life everyday, they don’t get the context or time to gain the bigger picture. Occam’s Razor is very good, but when you don’t have enough facts, you can often choose a very simple narrative that actually doesn’t even explain the situation but just sounds right to you (Occam’s Razor is for scientific competing hypothesis, but when a simpler non-scientific hypothesis like “Jews are evil” comes into play, it just gets stupid). Unfortunately, that has what has happened with populism in the past.

Populism has been around for a long time, I feel communism is populism in some way and so is Fascism. For example, look at the communist poster here:

It is basically hating everyone as an elite except the common working class. Bourgeoisie – Wikipedia was basically everyone who did not want what the will of the people was.

If you think this was just communism that was against the elite, check out the other star of the show, the nazis :

So if you have ever wondered why “People’s Republic of China” has People’s in its name or why Nazi Party’s full name was National Socialist Germans Workers Party. These were populist governments. Populist governments haven’t had the best of reputation:

Mass killings under communist regimes - Wikipedia

The Holocaust - Wikipedia

Holocaust, one of the largest organized killing of humans, was result of a populist regime :

So the fear of populism is somewhat justified given what has happened in the past. However, in recent times, we have seen some populist governments functional and not just killing people all the time (with some flaws of their own no doubt) which has slowly started changing the trend.

There are things now majority in most countries (at least for sure in India) understands, hence they don’t want a communist style grassroot level populism:

A. There will be inequality, there will be elites without whom the country won’t be able to function. These elites will have more power

B. You need economic growth in the country to create a larger and richer middle class who can live a more comfortable life

C. Businesses are important and are brutally hard to run, people now support businesses that have come up using opportunity, but hate the ones that use the system.

D. Meritocratic selection of elite is better than nepotism.

And that brings us to the new form of populism we see these days (at least in Asia) :

Neoliberal Populism is a recent phenomenon and has been somewhat of a lesser mass murderer than Communism or National Socialism. This was basically invented in Singapore by Lee Kuan Yew, the guru of Asia’s economic rise.

Lee Kuan Yew eulogised as a ‘leader, not a populist politician’

Does that description of leader sound familiar in India ? That’s exactly how Narendra Modi is being projected too.

This populism combines a political capitalist system :

https://www.cato.org/sites/cato.org/files/serials/files/cato-journal/2015/2/cj-v35n1-2.pdf

and a meritocratic political+executive elite:

https://lkyspp.nus.edu.sg/gia/article/resisting-authoritarian-populism-lessons-from-for-singapore

This system has in last few years lifted millions out of poverty. Takes just few decades to turn countries from low income to high income:

If you are reading my answer from top till now, look at the Gujarat model article I had shared. Get the similarity ?

There are the usual drawbacks of Populism like no way for dissent which have been present in all three countries above (not just China but also South Korea and Singapore) . There are also additional risks of persecution of minorities and shifting the focus of country from the neoliberal track to a more nationalist one like in Russia.

In India, Modi is trying to get a neoliberal populist subsystem in place in conformation with Indian Constitution. While there is an meritocratic executive elite in India ( Union Public Service Commission - Wikipedia)

The political elite is not at all meritocratic as I have described earlier. It is very dynastic and that is why they do not like the concept. Many people accuse Congress of nepotism, a lot of them blame our cinema industry for the same too. Populism requires this to change and you will see constant efforts by Modi to put such changes in place.

For example, judges in India are appointed by recommendations. Modi’s introduction of a judge appointment commission was met with a lot of criticism and was later struck down by the Supreme Court. However, Supreme Court has introduced new methods to make the appointments more transparent.

National Judicial Appointments Commission - Wikipedia

When an Indian Liberal is accusing Modi of changing the idea of India, they are against this type of populism. Just an example of a latest populist speech here:

3. Control of Morality: By this I mean who decides what is wrong and what is right. For example if there is a question “If a person comes to your house at night asking for help and looks shady, should one help them or not ?”, majority might think very differently to it than what elites think. They both live in very different localities, meet very different people and hence one might feel that the other is pushing their views on other.

Look at the narrative on Diwali (biggest hindu festival) coverage from different sides of the spectrum:

Truth is Diwali does add some pollution into atmosphere for one day, but the pollution in/around Delhi is prevalent throughout the season and peaks weeks after Diwali. Given that, is it OK to boycott traditional practice of crackers ? That is what control of morality means and that is what fight is about.

So I hope I have been able to somewhat explain what Indian Liberals don’t like about the populist terms of Modi government.

The other issue of contention between Indian Liberals and Modi-ism is

Hindutva:

This is a very hot button issue. Probably what the BJP and its allies are hated for the most by Indian Liberals. While Indian Liberals refer to it as “the philosophy of hate”, while for the cultural right wing, its a philosophy to make Hinduism more resistant to the flaws it had during muslim invasions and British raj as a society.

When Savarkar (the proponent of Hindutva) met Mr. Gandhi (a very conservative Hindu), he was trying to prove to him that Hinduism needs to change to become less prone to division, while Mr. Gandhi wanted the old practices of Hinduism to stay.

[When Mahatma Gandhi met Veer Savarkar

India News - Times of India](https://timesofindia.indiatimes.com/india/when-mahatma-gandhi-met-veer-savarkar/articleshow/71326322.cms)

One of the ways to become less prone to division is to become more cohesive and defensive. That is not something a lot of people will like as it reduces the openness to new ideas like socialism or secularism or different religions.

Indian liberals and Indian right is very very strongly divided over this issue. Politicians from Modi’s party who give useless inflammatory speeches against others time-to-time further give rise to the doubt that maybe political Hindutva is not a defensive philosophy but a hate philosophy.

So in a nutshell, if you believe in many of the following:

1. Socialism as a means to redistribute wealth

2. Neoliberalism

3. Minorities getting power through identity politics

4. A government more influenced by intellectuals and less by what the majority would think.

5. Don’t believe that Hinduism as a culture needs to be more cohesive/defensive or think Hinduism is obsolete and needs to go away.

You can say you are an “Indian Liberal”

An Indian Right Wing guy (also called RW on social media) is one who has a good number from the following beliefs:

1. Populist, that is believes majority sentiment should be considered important.

2. Doesn’t want nepotism but a meritocratic elite/intellectuals.

3. Believes Hinduism needs to be more united to save the local cultures/beliefs.

4. Neoliberal economics

5. Socialism as a means to keep the nation together.

Based on the above discussion, you should make a choice about what political group you belong to rather than just thinking that “being liberal is a supposedly good, so I should be a liberal” or an otherwise equivalent statement like “Being Populist seems like a good option”.

Classical Liberalism or Liberalism (not Indian Liberalism) is basically the policy of Laissez Faire capitalism, freedom in all regards to people and progressiveness. This philosophy has absolutely no political base in India. A lot of people who believe government should let the religions alone and think only in terms of economy belong to this school of thought, but if you think about the ramifications of such a government, it might not be really possible to have such a government.

The other part is Why are liberals criticized so much ?

1. Anyone who takes a stance is criticized by the other side. People have different belief systems so one needs to open to criticism when one proposes subjective ideas.

2. The best way for an elite to run the show is to not be distinguishable from the crowd. But many elites become “Let them have cake” level disconnected from the majority and speak/do things the majority doesn’t like. That begets criticism.

3. Many people are “Indian liberal” because this has social brownie points in some circles. These people to show themselves as more distinguished start an arms race which gets them to become more and more fringe.

4. Going with the saying “enemy of enemy is friend”, Indian Liberals have sometimes taken support from people who have taken refuge in far left or many alternative -isms. Communism wants the nation state to be obsolete and hence these people sometimes say things against the country as a whole instead of a political party. That rubs many people the wrong way. Also nothing is without consequences, you dilute your ideology when you mix it with anyone. Also the global trend of moving far left for center left politics supports this.

5. Indian Liberals like any other political group are hypocritical in highlighting problems when they seem fit and staying shut when needed. Hypocrisy is guaranteed to get criticism. For example, an Indian Actress who criticizes Diwali festival for fireworks had lot of fireworks in their movie release party.