Comment by Riaz Haq on March 2, 2023 at 10:38am

Other countries’ view of India is influenced by calculations and hopes that it can help counter Chinese expansionism in Asia

Written by Christophe Jaffrelot , Pratinav Anil

https://indianexpress.com/article/opinion/columns/india-china-emerg...

Today, the international media echo indices of democracy and freedom of expression prepared by institutions like Varieties of Democracy, Freedom House, and Reporters without Borders which are often comparing the evolution of India’s regime to the Emergency.

Researching our book on the Emergency, India’s First Dictatorship (HarperCollins, 2021), we found that the change in regime did not change the way Western democracies perceived New Delhi. Trade was one reason why they looked the other way. India bought Jaguar fighters from the UK, and the two countries set up the Indo-British Economic Committee in January 1976; the trade talks that took place in London in April were well attended, and not only by arms dealers. British support for the Indian government, moreover, was bipartisan, from Labour Left to Tory Right, as Rudra Chaudhuri shows in “Re-reading the Indian Emergency”. Michael Foot suggested that it was a “monstrous lie” that Mrs Gandhi “wanted to be a dictator”. Margaret Thatcher believed the Emergency served the Indians well in “tackling problems like world recession and inflation”. The FCO concurred: “An authoritarian regime is better equipped than a democracy to force through the reforms which are needed to make India less of a burden on the world.” Following this logic, in 1976, the Overseas Development Ministry increased aid to India by over 30 per cent.

Comment by Riaz Haq on March 3, 2023 at 8:17am

What Limits Any U.S. Alliance With India Over China


https://www.theatlantic.com/international/archive/2023/03/india-rel...

Though sharing concerns about Beijing’s growing aggression, New Delhi has always been wary of aligning too closely with Washington.

By Michael Schuman


The front lines of the widening confrontation between the United States and China stretch from the halls of the United Nations to the island nations of the South Pacific. Yet, as in any great geopolitical game, certain countries carry more significance than others for American interests—foremost among them India.

As Asia’s other emerging power, India could act as a crucial counterweight to Chinese influence, both in the region and outside it. That’s why Washington has been courting New Delhi with gusto. President Joe Biden has grand plans to cement the U.S. position in the Indo-Pacific, which encompasses South Asia, East Asia, and the western Pacific, through a range of diplomatic, economic, and security initiatives. India could play a determining part in their success or failure.

Whether India can be counted on to support the U.S. is an open question. Historically, relations between the two countries have been marred by deep distrust and sharp differences.

That legacy weighs on the relationship to this day, but more important is the mercurial nature of Indian foreign policy, which has been a hallmark of the nation’s sense of its place in the world since its formation in 1947. One moment, India’s leaders appear aligned with Washington; the next, they march off in their own direction, sometimes to parley with America’s enemies.

Comment by Riaz Haq on March 3, 2023 at 11:05am

#India’s #Economy Looks Shaky Under the Hood.
The key driver of India’s economy—#domestic consumer #demand—is weakening after a brief post-#pandemic spurt . #Modi #G20Summit https://www.wsj.com/articles/indias-economy-looks-shaky-under-the-h...

https://twitter.com/haqsmusings/status/1631731122202886145?s=20

India’s economy is losing steam in the one place that has been the South Asian nation’s strongest bulwark against a possible global recession: robust domestic demand.

India’s economy slowed further in the December quarter, figures released this week showed, as postpandemic pent up demand ebbed and the country’s manufacturing sector continued to weaken. Asia’s third largest economy recorded year-over-year growth of 4.4% last quarter, down from 6.3% in the September quarter.

Weakness in private consumption stood out the most. India’s private consumer spending, which comprises about 60% of India’s gross domestic product, rose just 2.1% year over year, compared with an 8.8% increase in the September quarter. It was mainly hurt by higher interest rates and elevated inflation. Slower growth in rural spending after some pandemic-era subsidies were cut could have also played a role.

Higher borrowing costs will probably continue to pinch pocketbooks, especially in urban areas, as the Reserve Bank of India remains laser-focused on reining in stubborn inflation. It has raised benchmark interest rates by 2.5 percentage points since May last year and will probably hike by another 0.25 point to 6.75% in April, squeezing household budgets further. Despite an aggressive rate-raising cycle, retail inflation jumped to a three-month high of 6.52% in January.

A closer look at other numbers in the GDP data also paints a worrisome picture. Import growth fell more sharply than export growth, again signaling weak domestic demand. And while fixed investment growth was a relative bright spot, it still slowed for the second quarter in a row.

Fizzling momentum at a time of high global economic uncertainty and tightening global financial conditions also spells trouble for the country’s monetary policy stance. A weak external environment wasn’t entirely unexpected, but the emerging evidence of rapidly slowing domestic demand makes the central bank’s job much harder. A heat wave or subpar monsoon could make things even more difficult by hitting agricultural output, and boosting food price inflation.

Nomura economists Sonal Varma and Aurodeep Nandi think markets are still significantly underappreciating the risks to India’s growth. They say the country’s growth cycle has peaked, and a combination of weaker global growth and tight domestic and global financial conditions could spell further trouble for exports, investment and discretionary consumption.

The International Monetary Fund still projects India will be the fastest-growing major economy in 2023—largely on the back of resilient domestic demand. The Indian government forecasts that India will grow 7% in the year ending in March 2023, and another 6.5% the following year.

Those numbers may turn out to be optimistic if private consumption doesn’t pick up the pace again soon.

Comment by Riaz Haq on March 5, 2023 at 4:57pm

Ritesh Kumar Singh
@RiteshEconomist
Most of incentives and #tax breaks funded by the Indian taxpayers are being used to buy Chinese materials and parts to assemble in #India, be it #Electronics #EVs or #SOLAR power #equipment
#PLI #exports #imports #GreenEnergy

https://twitter.com/RiteshEconomist/status/1632237841370566656?s=20

Comment by Riaz Haq on March 5, 2023 at 9:47pm

Ex Central Bank Chief Raghu Rajan: 'India dangerously close to Hindu rate of growth'. #Hindu rate of growth is a term describing low #Indian economic growth rates from the 1950s to the 1980s, which averaged around 4%. #Modi #BJP #economy #Hindutva
https://www.deccanherald.com/business/economy-business/india-danger...

Sounding a note of caution, former Reserve Bank Governor Raghuram Rajan has said that India is "dangerously close" to the Hindu rate of growth in view of subdued private sector investment, high interest rates and slowing global growth.

Rajan said that sequential slowdown in the quarterly growth, as revealed by the latest estimate of national income released by the National Statistical Office (NSO) last month, was worrying. Hindu rate of growth is a term describing low Indian economic growth rates from the 1950s to the 1980s, which averaged around 4 per cent. The term was coined by Raj Krishna, an Indian economist, in 1978 to describe the slow growth.

The Gross Domestic Product (GDP) in the third quarter (October-December) of the current fiscal slowed to 4.4 per cent from 6.3 per cent in the second quarter (July-September) and 13.2 per cent in the first quarter (April-June).


The growth in the third quarter of the previous financial year was 5.2 per cent. "Of course, the optimists will point to the upward revisions in past GDP numbers, but I am worried about the sequential slowdown. With the private sector unwilling to invest, the RBI still hiking rates, and global growth likely to slow later in the year, I am not sure where we find additional growth momentum," Rajan said in an email interview to PTI.

Recently, Chief Economic Advisor V Anantha Nageswaran had attributed the subdued quarterly growth to the upward revision of estimates of national income for the past years. The key question is what Indian growth will be in fiscal 2023-24, Rajan said, adding "I am worried that earlier we would be lucky if we hit 5 per cent growth. The latest October-December Indian GDP numbers (4.4 per cent on year ago and 1 per cent relative to the previous quarter) suggest slowing growth from the heady numbers in the first half of the year. "My fears were not misplaced. The RBI projects an even lower 4.2 per cent for the last quarter of this fiscal. At this point, the average annual growth of the October-December quarter relative to the to the similar pre-pandemic quarter 3 years ago is 3.7 per cent. "This is dangerously close to our old Hindu rate of growth! We must do better." The government, he said, was doing its bit on infrastructure investment but its manufacturing thrust is yet to pay dividends. The bright spot is services, he said, adding "it seems less central to government efforts." On a query regarding the production-linked incentive (PLI) scheme, Rajan said any scheme in which the government pours money will create jobs and any scheme which elevates tariffs on output while offering bonuses for final units produced in India will create production in India, and exports. "A sensible evaluation would ask how many jobs are being created and at what price per job. By the government's own statistics, 15 per cent of the proposed investment has come in but only 3 per cent of the predicted jobs have been created. This does not sound like success, at least not yet," Rajan said.

Furthermore, even if the scheme fully meets the government's expectations over the next few years, it will create only 0.6 crore jobs, a small dent in the jobs India needs over the same period, the former RBI Governor said. "Similarly, government spokespersons point to the rise in cell phone exports as evidence that the scheme is working. But if we are subsidising every cell phone that is exported, this is an obvious outcome.

Comment by Riaz Haq on March 5, 2023 at 9:48pm

Ex Central Bank Chief Raghu Rajan: 'India dangerously close to Hindu rate of growth'. #Hindu rate of growth is a term describing low #Indian economic growth rates from the 1950s to the 1980s, which averaged around 4%. #Modi #BJP #economy #Hindutva
https://www.deccanherald.com/business/economy-business/india-danger...

Furthermore, even if the scheme fully meets the government's expectations over the next few years, it will create only 0.6 crore jobs, a small dent in the jobs India needs over the same period, the former RBI Governor said. "Similarly, government spokespersons point to the rise in cell phone exports as evidence that the scheme is working. But if we are subsidising every cell phone that is exported, this is an obvious outcome.

The key question is how much value added is done in India. It turns (out to be) very little so far," he said. Rajan said cell phone parts imports have also gone up, so net exports in the cell phone sector, the relevant measure that no one in government talks about, is pretty much where it was when the scheme started. "Except, we have also spent money on subsidies. Foxconn just announced a big factory to produce parts but they have been saying they will invest for a long time. I think we need a lot more evidence before celebrating the success of the PLI scheme," he said.

Currently, Rajan is the Katherine Dusak Miller Distinguished Service Professor of Finance at The University of Chicago Booth School of Business. He further said the most developed economies of the world are largely service economies, so you can be a large economy without a large presence in manufacturing.

"Services do not just account for the majority of our unicorns, services can also provide a lot of semi-skilled jobs in construction, transport, tourism, retail, and hospitality. So let us not deride service jobs – indeed while the fraction of manufacturing jobs has stagnated in India, services have absorbed the exodus from agriculture." "We need to work on both manufacturing and services to create the jobs we need, and fortunately, many of the inputs both (services and manufacturing) need schooling, skilling...," he said.

On what measures the government should take to improve oversight of private family companies to address worries after the Hindenburg allegations on Adani Group, Rajan said: "I don't think the issue is of more oversight over private companies". The issue is of reducing non-transparent links between government and business, and of letting, indeed encouraging, regulators do their job, he said. "Why has SEBI not yet got to the bottom of the ownership of those Mauritius funds which have been holding and trading Adani stock? Does it need help from the investigative agencies?," Rajan wondered.

Adani group has been under severe pressure since the US short-seller Hindenburg Research on January 24, accused it of accounting fraud and stock manipulation, allegations that the conglomerate has denied as "malicious", "baseless" and a "calculated attack on India".

Comment by Riaz Haq on March 8, 2023 at 5:06pm

India's oil deals with Russia dent decades-old dollar dominance | Reuters


https://www.reuters.com/markets/currencies/indias-oil-deals-with-ru...

India in the last year displaced Europe as Russia's top customer for seaborne oil, snapping up cheap barrels and increasing imports of Russian crude 16-fold compared to before the war, according to the Paris-based International Energy Agency. Russian crude accounted for about a third of its total imports.
----------

NEW DELHI/LONDON, March 8 (Reuters) - U.S.-led international sanctions on Russia have begun to erode the dollar's decades-old dominance of international oil trade as most deals with India - Russia's top outlet for seaborne crude - have been settled in other currencies.

The dollar's pre-eminence has periodically been called into question and yet it has continued because of the overwhelming advantages of using the most widely-accepted currency for business.

India's oil trade, in response to the turmoil of sanctions and the Ukraine war, provides the strongest evidence so far of a shift into other currencies that could prove lasting.

The country is the world's number three importer of oil and Russia became its leading supplier after Europe shunned Moscow's supplies following its invasion of Ukraine begun in February last year.


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Some Dubai-based traders, and Russian energy companies Gazprom and Rosneft are seeking non-dollar payments for certain niche grades of Russian oil that have in recent weeks been sold above the $60 a barrel price cap, three sources with direct knowledge said.

The sources asked not to be named because of the sensitivity of the issue.

Those sales represent a small share of Russia's total sales to India and do not appear to violate the sanctions, which U.S. officials and analysts predicted could be skirted by non-Western services, such as Russian shipping and insurance.

Three Indian banks backed some of the transactions, as Moscow seeks to de-dollarise its economy and traders to avoid sanctions, the trade sources, as well as former Russian and U.S. economic officials, told Reuters.

But continued payment in dirhams for Russian oil could become harder after the United States and Britain last month added Moscow and Abu Dhabi-based Russian bank MTS to the Russian financial institutions on the sanctions list.

MTS had facilitated some Indian oil non-dollar payments, the trade sources said. Neither MTS nor the U.S. Treasury immediately responded to a Reuters request for comment.

An Indian refining source said most Russian banks have faced sanctions since the war but Indian customers and Russian suppliers are determined to keep trading Russian oil.

"Russian suppliers will find some other banks for receiving payments," the source told Reuters.

"As it is, the government is not asking us to stop buying Russian oil, so we are hopeful that an alternative payment mechanism will be found in case the current system is blocked."

Comment by Riaz Haq on March 9, 2023 at 7:54am

China is right about US containment | Financial Times

By Edward Luce

https://www.ft.com/content/bc6685c1-6f17-4e9e-aaaa-922083c06e70

But encircling Beijing is not a viable long-term strategy

Here is a thought experiment. If Taiwan did not exist, would the US and China still be at loggerheads? My hunch is yes. Antagonism between top dogs and rising powers is part of the human story. The follow-up is whether such tensions would persist if China were a democracy rather than a one-party state. That is harder to say but it is not obvious that an elected Chinese government would feel any less resentful of the US-led global order. It is also hard to imagine the circumstances in which America would willingly share the limelight.

All of which suggests that loose talk of a US-China conflict is no longer far-fetched. Countries do not easily change their spots: China is the middle kingdom wanting redress for the age of western humiliation; America is the dangerous nation seeking monsters to destroy. Both are playing to type. The question is whether global stability can survive either of them insisting that they must succeed. The likeliest alternative to today’s US-China stand-off is not a kumbaya meeting-of-minds, but war. This week, Xi Jinping went further than before in naming America as the force behind the “containment”, “encirclement” and “suppression” of China. Though his rhetoric was provocative, it was not technically wrong. President Joe Biden is still officially committed to trying to co-operate with China. But Biden was as easily blown off course last month as a weather balloon. Washington’s panic over what is after all 19th-century technology prompted Antony Blinken, the US secretary of state, to cancel a Beijing trip that was to pave the way for a Biden-Xi summit. Washington groupthink drove Biden’s overreaction. The consensus is now so hawkish that it is liable to see any outreach to China as weakness. As the historian Max Boot points out, bipartisanship is not always a good thing.


Some of America’s worst blunders — the 1964 Gulf of Tonkin resolution that led to the Vietnam war, or the 2002 Iraq war resolution — were bipartisan. So is the new House committee on China, which its chair, Mike Gallagher, says will “contrast the Chinese Communist party’s techno-totalitarian state with the Free World”. It is probably safe to say he will not be on the hunt for contradictory evidence.

A big difference between today’s cold war and the original one is that China is not exporting revolution. From Cuba to Angola and Korea to Ethiopia, the Soviet Union underwrote leftwing insurgencies worldwide.


The original idea of containment, laid out in George Kennan’s 1947 Foreign Affairs essay, The Sources of Soviet Conduct, was more modest than the undeclared containment that is now US policy. Kennan’s advice was twofold: to stop the expansion of the Soviet empire; and to shore up western democracy. He counselled against the use of force. With patience and skill the USSR would fold, which is what eventually happened.

Today’s approach is containment-plus. When Xi talks of “suppression”, he means America’s ban on advanced semiconductor exports to China. Since high-end chips are used for both civil and military purposes, the US has grounds for denying China the means to upgrade its military. But the collateral effect is to limit China’s economic development.

There is no easy way round this. One possible side-effect will be to accelerate Xi’s drive for “made in China” technology. The Chinese president has also explicitly declared Beijing’s goal of dominating artificial intelligence by 2030, which is another way of saying that China wants to set the rules.

Comment by Riaz Haq on March 9, 2023 at 7:55am

China is right about US containment | Financial Times

By Edward Luce

https://www.ft.com/content/bc6685c1-6f17-4e9e-aaaa-922083c06e70

But encircling Beijing is not a viable long-term strategy


The one positive feature of today’s cold war compared with the last one — China and America’s economic interdependence — is thus something Biden wants to undo. Decoupling is taking on an air of inevitability. When Xi refers to “encirclement”, he is thinking about America’s deepening ties to China’s neighbours. Again, Xi mostly has himself to blame.

Japan’s shift to a more normal military stance, which includes a doubling of its defence spending, probably worries China the most. But America’s growing closeness to the Philippines and India, and the Aukus nuclear submarine deal with Australia and the UK, are also part of the picture. Add in increased US arms transfers to Taiwan and the ingredients for Chinese paranoia are ripe. How does this end?

This is where a study of Kennan would pay dividends. There is no endgame to today’s cold war. Unlike the USSR, which was an empire in disguise, China inhabits historic boundaries and is never likely to dissolve. The US needs a strategy to cope with a China that will always be there.

If you took a snap poll in Washington and asked: one, are the US and China in a cold war; and two, how does the US win it, the answer to the first would be an easy “yes”; the second would elicit a long pause. Betting on China’s submission is not a strategy.


Here is another way to look at it. The US still holds more of the cards. It has plenty of allies, a global system that it designed, better technology and younger demographics. China’s growth is slowing and its society is ageing faster. The case for US resolve and patience is stronger today than it was when Kennan was around. Self-confident powers should not be afraid to talk.

Comment by Riaz Haq on March 10, 2023 at 9:05am

US strengthens tech ties with India but doesn’t seek decoupling from China, Raimondo says

https://techcrunch.com/2023/03/10/us-strengthens-tech-ties-with-ind...


The U.S. government is not seeking to “decouple” from China, nor is it seeking “technological decoupling,” but Washington “would like to see India achieve its aspirations to play a larger role in the electronics supply chain,” U.S. Commerce Secretary Gina Raimondo said on Friday.

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But even as India and the U.S. tighten their tech ties, Washington is not looking to cut reliance on China, she insisted. “We see India as a trusted technology partner and we want to continue to deepen our technological relationship with India. But I also want to make it clear that the United States doesn’t seek to decouple from China.”

“What we seek to do is ensure that certain technologies where the United States is ahead and where China’s explicit strategy is to have these technologies and deploy them in Chinese military apparatus, those are technologies that we have used export control to ban the sale to China. So we enjoy trade with China. The vast majority of trade with China is in benign products and that will and should continue.”


The closer ties with India isn’t about decoupling, but it’s about keeping “eyes wide open to the fact that China is explicitly trying to get access to American technologies for use in its military and we need to protect ourselves and our allies and partners,” she added.

The partnership comes as India is aggressively offering $10 billion in incentives to win manufacturing projects from international chip firms. New Delhi has been able to attract a number of firms to expand their presence in India, but many industry leaders including Intel and TSMC have yet to make a broader play.


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On its part, the U.S. signed a memorandum of understanding with India on Friday to cooperate in the semiconductor sector.

The semiconductor industries in both the nations are beginning to assess the resiliency and gaps in the supply chain network, said Raimondo, whose department is overseeing pouring of about $52 billion into the U.S. semiconductor industry.


“You don’t have to believe me when I say that this is a consequential relationship and the U.S. government is excited to lean into this relationship with the government of India… the fact that ten leading CEOs from the U.S. came here and have pledged to do more business in India… I think that’s a testament,” she told reporters at a press conference in New Delhi.

India, the world’s second most populous nation, holds key importance in the ever-shifting geopolitical relationships among many powerful nations. The U.S.’s increasing alliance with India, with whom it also maintains a strategic dialogue through a Quad group with Japan and Australia, is emblematic of the growing concerns from American policymakers to cut reliance on China.

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