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There Are Very Strong Concerns About The Indian Economy: Joseph Stiglitz

India and U.S. have taken measures to detain illegal migrants. Amit Shah in India, has talked about NRC while the U.S. is planning to take DNA samples from asylum seekers and other migrants. What is the fallout of such measures?

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Joseph E Stiglitz
Joseph Eugene Stiglitz is an American economist

Joseph Stiglitz, 76, gently placed his walking stick beside the sofa and a stack of papers on the table as he settled in to savour some South Indian breakfast. He was in the city to deliver a lecture organised by a university.

It has been almost three decades since India liberalised and integrated with the global economy. It was the seventh largest economy in the world by gross domestic product in 2018. But this growth has slowed, and is expected to shrink further in 2019-20, according to multiple global institutions.

“The data that I have seen reinforces very strong concerns [about the economy],” Stiglitz told IndiaSpend in the course of an interview. “I do not know anybody who is not in the government who is not worried.” Governments tend to “suppress data when it is on shaky grounds”, he added.

While India has been able to benefit from globalisation, there is a view that is “not an uncommon view but an unpleasant one”, that in a regulated market like India foreign players “have a disadvantage because the insiders know how to play the game”.

Stiglitz won the 2001 Nobel Prize in economics for his analyses of markets with asymmetric information. He was a member of the Council of Economic Advisers in the US from 1993-95, during the Bill Clinton administration, and its chairperson from 1995-97. Between 1997 and 2000, he served as chief economist and senior vice-president of the World Bank.

Stiglitz has authored multiple books on economics including People, Power, and Profits: Progressive Capitalism for an Age of Discontent; Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump; and The Price of Inequality: How Today’s Divided Society Endangers Our Future. In 2011, he was among Time magazine’s 100 most influential people in the world. He is a professor in the department of economics at Columbia University and founder and president of the Initiative for Policy Dialogue, a think-tank on international development based at the university.

In this interview, Stiglitz explains the impact of globalisation in the last two decades, and of populism, the rise of the gig economy, and the problem of inequality in India and the world. Edite

How has globalisation changed in the last couple of decades, particularly with the rise of protectionism and populism and what impact have you seen on emerging economies like India?

Twenty years ago the common wisdom was that trade would benefit all. It was a contested view in both the [global] North and South. While it was held by a lot of elites, it was not universally held. Many developing countries only liberalised with the threat of the International Monetary Fund as a condition of getting aid in the structural adjustment programme.

I wrote papers in the early 1980s pointing out that [global markets] are not perfect risk markets and trade can make everybody worse off. Trade exposes countries to risk without risk insurance, producers of risky products may contract production that might hurt people in other parts of the economy, and similarly, many people in all countries could be worse off.

It was meant to be a warning against naive globalisation. Although it [paper] did not ask people to not go ahead with globalisation, but it says that those people who think that everyone will be better off have not proved the case. Under certain assumptions, it would make some better off while others would be worse off. The gainers could compensate the losers, but they never did. The other problem is the assumption that markets are perfect, which was not true.

When I wrote this nobody in the policy world paid any attention to it, even when I was in the White House and the World Bank. Eventually (by the time I wrote ‘Globalisation and Its Discontents’), there were examples of jobs being destroyed and not as many being created. It showed that we had to learn to manage globalisation better. It was not that globalisation was necessarily bad, but it was not good either.

India has gained a lot with its integration into the global economy (U.S. and western Europe), including the technology sector, modernisation, [new] universities, etc. Though it is not so clear that better managed policies with respect to importing cheap Chinese manufactured goods would have led to a robust manufacturing sector [in India].

Young people seem to have found opportunities in the gig economy through cab aggregators like Uber and Ola, and other food delivery applications in India, often working long hours with inadequate benefits. In California, new legislation has made it harder for gig economy companies to treat their workers as contractors instead of employees. Similarly in India, there have been protests demanding labour benefits for workers in the gig economy. How do you assess the gig economy globally and its effect on economies like India?

At one level you can celebrate that they make it easier for people to enter the labour force, but clearly part of their business model is exploitation and circumvention of existing regulation, most of which have a good purpose.

In New York [city] there was a study on the wages paid to the taxi cab drivers on [such] platforms which said that they received $6 per hour which was below the minimum wage and a livable wage. This is also a dangerous wage because of the increased number of hours that a person would have to drive. New York city has passed a law that tripled the wage to about $18.

Knowing where your cab is and being able to call them has efficiency gains, but this could have been done even if it was regulated by taxi cabs. I think there are efficiencies that the gig economy can bring, but the business model is driven by exploitation and circumvention. We have to maintain the advantages the model offers but at the same time restore more bargaining power and regulate the bad aspects.

While you have maintained that “GDP is not a good measure of wellbeing”, India’s GDP growth has been revised downwards by multiple agencies. Further, there are issues of data suppression. Abhijit Banerjee, one of the 2019 Nobel Prize winners, believes that the “Indian economy is on shaky ground”. Would you agree?

One of the problems when there seems to be data suppression is that you cannot precisely know what the state of the economy is. But usually governments suppress data when they are on shaky grounds. They will suppress data when there is weak growth.

There are a number of indicators like consumption which are, to say the least, worrisome. It is hard to have a robust economy when the basic data for consumption and investment are weak, as they are [in India]. So, the data that I have seen reinforces very strong concerns [about the economy]. I do not know anybody who is not in the government who is not worried.

The pre-tax national income of the top 10 percent in India increased by nearly 23 percentage points to 56.1 percent, while that of the bottom 50 percent declined nearly 8 percentage points to 14.7 percent over 25 years to 2015, according to the World Inequality Database. The nine richest Indians now own wealth equivalent to the bottom 50 percent of the country. Why is there an increasing accumulat of wealth globally, and what are the solutions?

There are many dimensions to this problem. The people at the top figure out ways of not paying taxes, so their wealth multiplies in a way ordinary people’s cannot. The largest Foreign Direct Investment source for India for a long time has been Mauritius, which is a tax haven. A lot of the wealth [in India] has to do with special deals in telecom or defence, where the government gives a license or contract. It becomes difficult to know if the price is competitive.

In the U.S., real estate developers get zoning variances that allow them to do things others do not (through political connections). Two of the richest contributors to the Republican party were people who run gambling establishments globally. Gambling is a part of the money laundering industry.

Even in China, a lot of billionaires are part of the real estate industry with connections to local party officials and have access to land. In a natural resource economy, getting favourable access to it brings wealth. But there are also people like Jack Ma of Alibaba who have been really entrepreneurial.

Was it the corruption and bureaucratic red tape? Are there solutions?

They could manage the red tape. It was a combination of corruption and thuggishness, although I never got a clear view of the nexus between outright thuggishness and corruption. But they left. These were honest and brilliant people [U.S. companies], who would have brought talent.

It was not an uncommon view but an unpleasant one, which was that in a highly regulated country with big players, outsiders have a disadvantage because the insiders know how to play the game.

The solutions are that with the right government you establish rules of transparency, oversight, independent procurement agencies, independent corruption agencies. Singapore and Hong Kong have managed it to a good extent.

How does the rise of populism and majoritarian governments worldwide perpetuate the problem of inequality? And what changes do you observe in democratic institutions in India and the U.S., particularly in the role of civil society?

When people see unfair outcomes they get disillusioned with the system. Things can go a couple of ways. You could get a demagogue like [Donald] Trump who knows how to exploit the discontent but not cure the problem, [which can] make things worse. Then you have the other side where you have reform movements (which is hopefully happening in the Democratic party) where policies are being put in place for more competition, stringent ethics, oversight, among others.

The central governments of India and the U.S. have taken measures to detain illegal migrants. Amit Shah, India’s home minister, has talked about a nation-wide expansion of the National Register of Citizens while the U.S. is planning to take DNA samples from asylum seekers and other migrants. What is the fallout of such measures?

When things are not going well, people always want to blame somebody else. This may be foreign trade [for example]. But we made that trade [deal]. India may make the excuse that the U.S. forced it to sign, but the U.S. cannot make that excuse because we were the ones who wrote the deal.

Immigration is not the source of the problem in the U.S. The parts of the country with a lot of immigration love their immigrants. We could not function without our immigrants. It is a problem in the country where immigrants do not want to go, and where there is emigration and not immigration. The issue is that [in these parts] societies are collapsing as there is no economic opportunity, reduced life expectancy, and issues of drug overdose, alcoholism and [high rates of] suicide. This is the problem, not immigration.

(Paliath is an analyst with IndiaSpend.)

This copy was published in a special arrangement with IndiaSpend and IANS.

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Rajasthan crisis: The story of a nose-diving Pilot and soaring Gehlot!

Pilot stood like a wall between Gehlot and his men and hence, it was expected that he will be shunted out as Rajasthan PCC chief.

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PILOT and SCINDIA

Jaipur, July 12 : The greed of Ashok Gehlot to keep his power intact and the hunger of Sachin Pilot to stay strong in the larger picture is the reason for the tussle which triggered the Congress crisis in Rajasthan.

Since the Congress party formed its government in Rajasthan, there were two power circles created, one being led by Chief Minister Ashok Gehlot and other by Sachin Pilot.

While Congress stands at 101, the BJP and its alliance with RLD had 75 MLAs. Looking at the thin strength, Gehlot played his magic and brought 13 independents under his fold. Later, 6 BSP MLAs merged with Congress.

Surprisingly, Pilot, despite being PCC chief, was kept out and was informed about the developments the next day via the media. This was just the beginning. The files of his department (PWD) were sent back by Finance (under Gehlot) quoting reasons for fund crisis.

Even the ministers of his camp were facing challenges and were receiving back files from bureaucrats quoting “Please Discuss”.

During the Covid crisis, Gehlot was busy calling video conferences with health and other departments, however, Pilot was never part of the meetings.

Pilot camp sources said that the Deputy CM wanted the entire Congress team on ground, however, Gehlot was more interested in making his larger picture and hence centralised the operations during corona.

Even on his father Rajesh Pilot”s death anniversary on June 11, when Pilot and team was about to go to Dausa to pay floral tributes, the police officials called Pilot and asked him to stay away from visiting Dausa as section 144 was imposed in the town in the wake of covid-19.

“They were busy holding meetings, camping in Marriott to prevent MLA poaching, but Pilot was intentionally stopped from visiting Dausa as it could have been his show of strength as many MLAs wanted to visit there,” said an MLA from Pilot”s team. Even the home department is looked after by Gehlot.

Further, the challenge started appearing grave when Pilot wanted Congress grassroots workers to get tickets for ensuing panchayat and corporation polls while Gehlot wanted to favour his closest. Also for political appointments, the CM wanted the BSP and independent MLAs to get plum posts while Pilot wanted them to be kept for Congress workers.

Pilot stood like a wall between Gehlot and his men and hence, it was expected that he will be shunted out as Rajasthan PCC chief.

“However, Pilot wanted to continue his term as PCC chief but was not interested in reading files as minister. The deadlock continued and when he was defamed many times by Gehlot camp in one or the other way, he then decided to bring in the high command into the picture and show his strength and that”s why this is happening now,” said a source.

It”s more like a door-die situation for Pilot but hopefully the Congress high command wakes up from its slumber said a PCC worker who told IANS that the party seems to be crumbling in the state with the deadlock. “We look dead and if things don”t improve, our party will be declared dead.”

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Range-bound: Rupee caught between higher inflows, swelling reserves

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rupee dollar

Mumbai, July 11 : The Indian rupee has been caught in a flux of higher FDI inflows and swelling foreign exchange reserves, thereby restricting its future movement around the Rs 75 per US dollar mark.

Analysts opined that the rupee is caught between higher foreign inflows and the Reserve Bank of India”s efforts to shore up reserves.

Even a lower import bill and stable exports do not seem enough for the rupee to break free from its current range.

“With the RBI continually increasing its forex reserves and investment in dollar via forward contracts, a floor seems to be place below Rs 75 levels on spot,” Anindya Banerjee, DVP, Currency and Rates, Kotak Securities, told IANS.

“The upside is also capped due to improving sentiments in the equity and bond markets. All in all, we are looking at a range of Rs 74.80 to Rs 75.80 over the next few weeks, with volatility remaining at a low.”

According to Sajal Gupta, Head, Forex and Rates, Edelweiss Securities: “The rupee appreciated swiftly to Rs 74.52 per dollar due to large FDI flows and rising equity markets and then weakened to Rs 75.20 on the back of the RBI”s efforts to mop up dollars to shore up reserves which stand at a record high of $513 billion dollars.”

“India is expected to see a Balance of Payment surplus of $60 billion this year due to lower crude price and falling imports. It is a big surprise that amid such strong FDI inflows, the rupee is still not strengthening as the RBI is mopping up all dollars to the reserves.”

Besides, he pointed out that imports have slowed down at a faster pace as domestic economy looks weaker compared with global markets.

Presently, India”s foreign exchange reserves increased by $6.416 billion during the week ended July 3.

The reserves grew to $513.254 billion from $506.838 billion reported for the week ended June 26.

Last month, official data showed India posted a marginal current account surplus in Q4FY20 on the back of a lower trade deficit, along with higher remittances, and an increase in investment flows.

The current account is the net difference between inflows and outflows of foreign currencies.

On the quarterly basis, the current account balance recorded a marginal surplus of $0.6 billion (0.1 per cent of GDP) in Q4 of 2019-20 as against a deficit of $4.6 billion (0.7 per cent of GDP) in Q4 of 2018-19 and $2.6 billion (0.4 per cent of GDP) in the preceding quarter of Q3 of FY20.

At present, India”s exports are steadily moving towards normalcy.

“Going ahead, we expect the caution surrounding the impact and duration of the novel coronavirus may keep all riskier assets on an edge, including the rupee. We see USD/INR trading between Rs 74.75-Rs 75.75,” said Rahul Gupta, Head of Research — Currency, Emkay Global Financial Services.

“Only heavy inflows may cap the upside in USD/INR spot. We recommend exporters to wait for better hedging levels as we expect the spot to appreciate; however, they can start hedging their receivables once USD/INR spot falls below Rs 75.”

(Rohit Vaid can be contacted at [email protected])

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Did Vikas Dubey reach Ujjain himself or was he brought there?

After Madhya Pradesh Home Minister Narottam Mishra announced his arrest, the Congress is raising questions.

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Vikas Dubey.

Ujjain/Bhopal, July 9 : After gangster Vikas Dubey, who had been on the run for the last seven days, was arrested in Madhya Pradesh’s Ujjain on Thursday morning, a controversy erupted over how he managed to reach the temple town. Questions have been raised whether he came on his own or was brought here, and also as to how he manage to cross many districts of Uttar Pradesh without being recognised.

Dubey, accused of killing eight police men in Bikaru village of Kanpur, was constantly changing his location for the past seven days. Though the Uttar Pradesh Police continued to raid various possible locations, he still reached Ujjain, dodging the police of several districts of UP and Madhya Pradesh.

Dubey, whose in-laws are also from Madhya Pradesh, has been coming to Ujjain every year. His mother Sarala Devi had admitted that he used to go to Ujjain every year to offer prayers at Mahakaal temple. It is being said that he reached Ujjain by road and also offered prayers at the temple on Thursday morning.

After Madhya Pradesh Home Minister Narottam Mishra announced his arrest, the Congress is raising questions.

Police sources said that Dubey came to Ujjain in a car from Uttar Pradesh and he also stopped at a residence of a person known to him in Nagjhiri area where he stayed for some time. He reached the temple for ”darshan” on Thursday morning. However, the security guards posted at the temple got suspicious and stopped him for questioning. He reportedly had a brief scuffle with the security guards who then informed the police post. Dubey was later arrested there.

But if Dubey did actually come to Ujjain by road, then he must have covered a distance of about 200 km in Madhya Pradesh seemingly without attracting police attention. Before entering Madhya Pradesh, he must have passed through several districts of Uttar Pradesh as well. Apprehension has been expressed that he reached Ujjain via Rajasthan”s Kota. The police is investigating this also.

Mishra said that Dubey came to Ujjain driving his own vehicle. “Two of his accomplices — Bittu and Suresh have also been arrested. The entire state police was on alert after the Kanpur incident. The surveillance was carried out and finally MP police succeeded in arresting him.”

However, questioning the government, Congress Rajya Sabha member and former Chief Minister Digvijaya Singh said: “It looks like a sponsored surrender to avoid an encounter by the Uttar Pradesh Police. My information is that this has been possible with the courtesy of a senior leader of Madhya Pradesh BJP.”

However, it was not immediately known whether Dubey reached Ujjain on Thursday morning itself or had come a day before.

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