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Creating Perceptions: What is Really Happening with the Indian Economy?

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Narendra Modi India Economy 2019

In just a little over a year, Indians will take to the polling booths again to decide whether the Narendra Modi led BJP (Bharatiya Janata Party) government’s much anticipated second term as the ruling party will become a reality or not. Even though the present government has always been the favourite to retain its position, a heightened focus on the health of the Indian economy may or may not be in their best interest, and it all depends on which picture Indians choose to accept.

One picture, two different outlooks

IMF (International Monetary Fund) chief Christine Lagarde said earlier in October that “for the medium term, we see a very solid track ahead for the Indian economy”, assuaging some of the disconcertedness that has surrounded the Indian economy post two of the boldest moves ever attempted by any government since independence in the country: demonetisation and a massive rollout of the GST (goods and services tax) earlier in the year. The lingering effects of the disruption caused by these steps resulted in India’s GDP growth slowing down again in the latest quarter to 5.7%, with the country playing second fiddle to China, again. However, Lagarde has lauded the steps taken by the Indian government to digitise the economy and simplify the tax regime, dismissing any surprises in the drop in figures as “a little bit of short-term slowdown” which was to be expected following the government’s “monumental effort”.

Moreover, during his visit to the US to meet with investors and corporate leaders, Minister of finance Arun Jaitley reflected that there is a “positive mood” about India in the US, adding that Americans have a good understanding of the actions taken by the government and what they will lead to. That may very well be the case, but the picture of the economy within the borders is far less pronounced, and the division of its state among the citizens far more.

Soon after the figures for growth were in for the latest quarter, India’s former minister of finance Yashwant Sinha, who is also a member of BJP, singlehandedly contributed hugely to the already dwindling confidence of the public in the government’s approach when he wrote in a letter in his column on The Indian Express about “the mess the finance minister has made of the economy.” Citing issues ranging from the decline in private investment and distress in the agricultural sector to the loss of jobs across different sectors, he has blamed demonetisation and a poorly implemented GST for the poor state in which the economy finds itself. Consequently, the past month has seen a flurry of editorials and opinion pieces on what the true picture is of India’s economy, where it is headed, and whether the fears of the people are warranted or if these tiny setbacks will finally be followed by the promised prosperity.

The problems are real, but what are they?

Agriculture was one crucial sector of the economy hit badly. The agrarian crisis has worsened due to an unsatisfactory monsoon season after farm loan waivers were granted following massive protests across states. On the other hand, the GST rollout has hit hard the small and medium businesses which were vastly unprepared to cope with the government’s move. While the GST council meet earlier in October may have eased the tax burden on the SMEs, it is still some way to go before they can be pulled out of what Mr Sinha accurately describes an “existential crisis”. An improvement in growth would also require a timely recovery from the supply shock caused by the implementation of the GST, in the absence of which it would be more realistic to expect more quarters of slow growth. Another major problem is the dearth in the investment by the private sector with an increase in stalled projects for the fifth consecutive quarter. This, along with other engines of economic growth including private consumption has shown slowing signs as well. The government may argue that when they inherited the economy it wasn’t in its best shape either, but demonetisation and now GST, no matter how ambitious have created a scare among the people leading to alarms of low confidence ringing across all major sectors, which needs to be addressed.

The biggest concern perhaps for the government is the lack of jobs created. One of the promises made by the Modi government during the elections was the creation of millions of jobs. However, according to the Centre for Monitoring Indian Economy the workforce declined from 406.5 million at the end of last year to 405 million till April this year. Almost every indicator points out to a net loss of jobs for the year 2017. The telecom, construction, and textile industries among others have also laid off a large number of their workforce. A broken promise on this end is unlikely to be forgiven and forgotten that easy.

Where the government is right

As is always the case, the analysis here as well is a two-way street. To the credit of the government, some positive signs have shown with the first tax collection under GST exceeding government’s expectations of Rs. 91,000 crore. Other sources also show a bit of a revival in consumer spending. Moreover, irrespective of the expected duration of the slowdown, PM Modi has recognised the need to tackle some of the most prominent issues that plague the economy in order to get it back on track. It is for that purpose that the Economic Advisory Council to Prime Minister has been set up consisting of experts chosen by Mr Modi himself. “There is a consensus amongst us that there are various reasons that have contributed to a slowdown of growth rate. Our entire thrust would be on implementable decisions”, said the Council’s chairman Bibek Debroy. The EAC or EAC-PM has identified 10 issues to tackle in order to launch the economy towards a higher trajectory of growth. These are inclusive of but not limited to the areas of agriculture, the informal sector in the country, job creation, public expenditure, and monetary policy among others. The need for instituting an Economy Track Monitor has also been realised by the Council to suggest correct courses of actions based on heavy and informed assessments.

Making it right: which path to follow

What can the government do? What should be done? Division exists on the suggested courses of actions as well. One of the solutions to the problem would be an increase in the government spending, a suggestion that has found the support of many policymakers throughout the country. That, however, is not without its problems. The central bank has warned that such a fiscal stimulus may come at the cost of macroeconomic stability and even the EAC seems not to be in favour of it. The government also wants to stick to its fiscal deficit target of 3.2% of the GDP and is unlikely to trade off some of this stability for growth. In the event that it should achieve neither, it would be further behind the starting line, not making for a flattering image before the next general elections.

If not a fiscal stimulus, then what is the alternative? The answer is policy reforms in those sectors of the economy that have been plagued with poor performance in terms of both employment and growth – textiles, real estate and construction, and leather among others. A report from JP Morgan suggests that the government should focus on fixing the supply chains that were disrupted first due to demonetisation and then the GST by improving the regulatory framework for SMEs. Resolving the problem of non performing assets in banks is another area that the government needs to set its sights on. The EAC, in its next meeting may look at the sale of government stakes for the recapitalisation of banks as the right step to take.

Time prevails over all

“It is a mistake to think that there is some magical, perfect way to run a large-scale complex system like an economy”, says Jitendra Singh, emeritus professor of management at Wharton, on the subject of the growth of the Indian economy. Yashwant Sinha expressed the same sentiment while concluding his letter when he mentioned: “nobody has a magic wand to revive the economy overnight.” The problems that the Indian economy is facing did not start with demonetisation and GST, they were already headed this way. These steps may have accentuated some of the many problems that have slowed growth but it is also true that an excessive and undue amount of attention is being placed on them. The real problems of the economy are the ones that the EAC to PM Modi hope to tackle and only time will tell what the government is able to do. Unfortunately, time is what is most scarce for the government.

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A student of economics with a keen eye for developments in the geopolitical sphere, Manak is a curious individual with a penchant for writing about anything that makes him ponder long enough.

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Joao Vale e Azevedo: pessimistic prospects could be tackled by collectivity

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As we enter the new year, the effects of 2021 are now echoing in the economy in 2022. According to the World Bank’s latest Global Economic Prospects report, global growth is expected to decelerate markedly from 5.5 in 2021 to 4.1 in 2002 and 3.2 percent in 2023. This has been proposed both in the case of developing and major economies, such as the case of the United States.

In 2021, governments around the world have suggested that it was a year of rebirth. However, current numbers are not showing that and so not everyone is trusting on this bet. This is the case of Joao Vale e Azevedo, chairman of KUNST Global – an equity firm based in London, Geneva, Zurich and Luxembourg. For him, the forecast is still negative for 2022 as inflation keeps on running critically in the US and in many European countries. But unlike in the 1970s and 1980s, the solution won’t lie in governments printing money like they did in the past.

The chairman of KUNST Global also doesn’t think that the so-called commodity crisis is temporary as the news might say. In fact, Azevedo believes that there is more to it than the effects of the pandemic. While the Covid-19 crisis has ignited the growth of e-commerce, Azevedo claims that this intensification in demand for goods would happen anyway and the problem is actually in the distribution industry: “It is unable to meet this increased demand. There is no labor, no trucks, nor ships. The offer is no longer able to meet the market demand and this is not a contingency, it is a physiological fact.”

Finally, the third and possibly the most concerning problem is the price of energy. “This is really a worrying question, and not only for our distant future, as it has been up to now, but also for our present,” explains Azevedo. “We are witnessing it on a daily basis: electricity and gas bills have skyrocketed. Families and companies, which were already suffering from the pandemic, do not know how to cope with the increases.”

Although propositions like moving from coal to gas or from oil to electricity may point the way out, Azevedo thinks we are completely deprived of the infrastructure and funds necessary to manage this change. What is more, the chairman of KUNST Global argues that present politics lacks long-term vision, which means politicians are often too focused on electoral cycles instead of considering the future – thus mining any possibility of investments for change.

In addition to that, Azevedo has been keeping a close eye on the war in Ukraine. In his opinion, if Russia persists in carrying on the war, not only this country will be doomed to bankruptcy, but the whole West could face a domino effect. “Regardless of this, the war in Ukraine means greater market instability, rising energy prices that are already out of control, and a further increase in inflation, which could reach double the current levels,” he adds.

However, not all hope is lost. Hopefully, the war in Ukraine will find a rapid resolution, which is something that could catalyze even more this sense of collectivity that Joao Vale e Azevedo sees growing after two years of pandemic. “The fact that we have had fewer opportunities for interaction has meant that we are now more aware of the value of those interactions, and probably also of human life. We are a stronger community. The challenges that await us are very difficult, but together we are much better prepared to face them,” he concludes.

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How People Around The World Are Investing Their Money

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One thing that everyone should aim to do with their spare cash is to invest it – as wisely as possible, but at least in a way which is going to lead to potentially high returns. If done correctly and with a bit of good fortune, it is perfectly easy to improve one’s wealth to a considerable degree this way, and it is therefore well worth people considering this.

As it happens, there are a lot of investment options that people are making use of all over the world, with some that are especially popular right now. Let’s take a look in some detail at some of the major ways in which people are investing their money – and making some considerable gains, in many cases.

Stocks & Shares

Arguably one of the most popular forms of investment is stocks and shares – which can be incredibly lucrative if it is done in the right way, and with the right set of circumstances behind an investment. Indeed, stocks and shares remain the number one investment that people are engaging in every day throughout the world, and with good reason. Not only is it potentially something that can bring considerable returns, it is also relatively straightforward to get into and learn at least the basics of, making it a very simple and easy form of investment for most people.

It also doesn’t require a huge amount of money to get going – although having that is obviously not going to hurt one’s chances of success starting out! In fact, it’s doable to get going with stocks and shares with literally a few spare pennies – so it really is something that pretty much anyone can get into and make use of. It can also be a good way to diversify and widen out a portfolio that may include other forms of investment as well.

Savings Accounts

Although many people think of investment and savings as two different things, they are really just two sides of the same coin. You can think of saving as a form of investment, especially if it is done in the right manner and with the right approach. Of course, in order to find success with this, it is important to make sure that you are choosing the best savings account there is. That means one that has a high enough interest rate for it to be worth it, as well as having other functions that might be important to an individual – such as the ability to take money out whenever you need to, for instance.

With interest rates diving all over the world, this is quickly becoming one of the less popular forms of investment – but for now it is still worth considering, as it can be a good way to at least store your spare cash as necessary. If nothing else, you’ll probably find that you are able to find yourself in a much better financial position this way soon enough, even if that doesn’t happen as quickly as it might with certain other investments.

Cryptocurrencies

Although there is some controversy around cryptocurrencies, there is no doubt that it is one of the world’s most popular forms of investment right now. There is also no doubt that it’s possible to make a lot of money this way – as some of the world’s richest people have done so already. Even in a much lesser sense, however, it is perfectly possible for an individual with a regular amount of wealth to make money investing in cryptocurrencies. And generally, this is done in a few key ways.

First of all, you can simply buy some crypto and then hold on to it, hoping for its value to improve and selling it on once it has done so. Alternatively, you might want to consider trading crypto coins by buying one kind and then trading into another as you think it might be lucrative. This takes a bit more knowledge, patience and skill, but the returns can be significant. Either of these can work very well, however, and they are worth thinking about at the very least.

A related form of investment, in that it too relies upon blockchain technology, is NFTs. These pieces of art can be bought and traded as above, and some of them are creating huge amounts of money for people right now, so it might well be worth getting into.

Spread Betting

Another form of investment that a lot of people are getting into in the past few years is something known as spread betting. This is where you place bets on a variety of outcomes on a particular event, whether it’s a sport, a political event or whatever else it might be. With the right bet and the right outcome, this can be a really effective way to make some money, and it is best done with the attitude of it being an investment rather than a bet – as this helps in keeping things a little more sensible.

To make the right decisions, it is helpful to be patient and work out what kinds of results are likely to occur, and to find them at a good price. Searching for NHL picks and horse racing tips is a good place to start for that. However it might be done, with care and attention this can prove to be a decent way to invest some spare money, so it is definitely something to think about.

Bonds

If you are particularly keen for a very safe form of investment, it is well worth looking into bonds. Bonds are something like a savings account, but with an important difference that needs to be understood well in order to make good use of them. Essentially, you buy a bond and you will be paid back your initial investment, plus any interest that may have accrued along the way too. They are very low-risk and yet can bring you a lot of money over the long-term, so they are worth looking into for pretty much anyone looking to make a little money on the side.

Bear in mind that you won’t be able to access the money during the fixed rate period, so you should only invest whatever you don’t need to have immediate access to. However, they offer higher interest rates than your average savings account, so it can be worth it.

Precious Metals

Another form of investment that many people around the world are investing in right now is precious metals. In truth, these are always popular, and it’s not too hard to appreciate why. After all, precious metals will generally always retain their value even when everything else in the world is going through turmoil. That is especially true of gold, which still holds the standard that the global economy works by – with the exception of cryptocurrency.

As you can see, precious metals are almost certainly worth considering at the very least if you want to invest your money wisely. But make sure that you are only putting what you can afford to lose into this investment, like any other. Although it is not the highest-risk investment, it is not zero-risk either.

Those are just some of the most popular investments around the world that people are making good use of right now. Any of these could be lucrative and useful for you, so take a look at them in turn and see whether any of them are suitable for your needs and purposes. You might be surprised at how effective they can be.

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Ridiculous Tariffs on Wines – China Australia Trade War Explicated

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China Australia Trade War
Scott Morrison (right) has not yet been able to secure a bilateral meeting with Chinese President Xi Jinping (left).(ABC News)

Earlier in November 2020, Communist China slapped Ridiculously high tariffs up to 212.1% on Australian wines. These tariffs were in the response of ongoing trade war between Communist Party of China and Australia. China is the biggest importer of Australian wines making up a whopping 39% of Australia’s total wine export. Australia has already raised concerns at a WTO meeting about China taking measures against its barley, wine, meat, dairy, live seafood, logs, timber, coal and cotton, according to a reuters report.

How did China – Australia trade war begin?

China and Australia shared one of the best times in their relationship after Kevin Rudd from the centre-left Labour party came to the power in Dec 2007. During his leadership Australia decided to pursue appease China policy which included steps such as:

  1. Chastising Taiwan for its renewed push for independence and reiterating support for a one-China policy in favor of People’s Republic of China. (Source: The Age)
  2. Signing a A$50 billion deal with PetroChina in 2009 (largest contract ever signed between the two countries) that ensures China a steady supply of LPG fuel until 2029.
  3. Unilaterally announcing departure from Quadrilateral Security Dialogue to appease China.

Nosediving of China – Australia Relationship

The course of this partnership changed when Julia Gillard from the centre-left Labour Party took over the leadership and initiated closer partnership with United States. This included revival of interest in Joining Quadrilateral Security Dialogue and stationing of US troops near Darwin, Australia.

In 2013, Tony Abbott from centre-right Liberal Party took over the leadership. During his term Australia saw some confusion in its China Policy. His Defence Minister Senator David Johnston told in a statement that Australia is seeking to balance their relationship between China and the United States. It was during his term when Australia and China established a Free Trade Agreement.

However, the relationship between Australia and China took a downturn in 2015 when Malcolm Bligh Turnbull from the centre-right Liberal Party came into power. This is the point in history which has led to current trade war situation between Australia and China.

  1. Australia became the strongest opponent of China’s territorial claim in South China Sea.
  2. Banned foreign donations to Australian political parties and activist groups in a move to target Chinese interference in Australian democracy.
  3. Revived Quadrilateral Security Dialogue with United States (Donald Trump), India (Narendra Modi) and Japan (Shinzo Abe). This was the time when Quadrilateral Security Dialogue saw hope of becoming something bigger as all four countries had centre-right governments who had a clear China Policy.

2019 Onwards: China – Australia Trade War

In 2019, relationship between the two countries further took a dip with Scott Morison from centre-right Liberal party becoming the Prime Minister. During his leadership:

  1. Australia signed a letter condemning China’s mistreatment of Uyghurs and other minorities.
  2. Suggested investigating the cause of Covid 19 in April 2020, which resulted into an angry response from China threatening to reduce Tourism and Trade.
  3. Opposed the Hong Kong National Security Law in June 2020.
  4. Reiterated its support for ethnic minorities in China and freedom in Hong Kong in October 2020
  5. Demanded a formal apology from China for posting a fake image of an Australian soldier holding a bloodied knife against the throat of an Afghan child

In conclusion, these continuous attack on China made China so angry that they deliberately leaked a list of 14 points suggesting why China is angry at Australia

China’s attempt at “buying” left wing politicians around the world

Recent trend is suggesting China’s attempt at “buying” influential left-wing politician around the world. In November, 2017 Australia’s Labour Party’s MP Sam Dastyari went against his own party on South China Sea. He later quit his party after he was found of taking financial favours from China.

In 2008, India’s Centre-left party – Indian National Congress signed a Memorandum of Understanding with Communist Party of China. Its contents are still hidden from the Government of India and the people of India.

Recent US Report has shown concern on President Elect Joe Biden not clearing doubts on his China policy.

How Can we Help Australia Post Ridiculous Tariffs on Australian Wines?

In 2020 China has directly or indirectly impacted many of our lives. Some of us have lost our jobs, some of us are taking a reduced salary. In fact, some of us are sitting at home instead of travelling; while some of us have lost our loved ones only because of communist party was incapable of controlling a virus outbreak.

As the entire world is struggling with this virus, Chinese economy continues to be on path of surpassing the US. Therefore, we should pledge to minimize buying Chinese products. It might be impossible to completely boycott Chinese products, but we can at least minimize it.

Install Cultivate Chrome Extension (non sponsored/affiliate link – We are not getting paid to post this). This plugin works on both Google Chrome and the new Microsoft Edge. It helps you understand the origin and seller location of a product on Amazon. It is a great tool to minimize your dependence on Chinese products. If you are lucky, this extension will also suggest some Made in USA alternatives

Buy Australian Wines – Australia desperately needs a new market for its wine and other products. This New Year and Christmas season, we should pledge to celebrate with at least one Australian wine!

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