Consumers should get the benefit of falling oil prices

At a time when even deficit hawks are clamouring for an expansive fiscal policy to fight the severe economic consequences of Covid-19, it will be tempting for the government to exploit every opportunity to fund the welfare programmes. When oil prices first dropped to less than $30 per barrel, the Modi government had promptly increased the central excise duty. However, this will not result in increased revenue due to the enforced lockdowns and halting of economic activity.If the objective is to help the economy rebound and bolster government finances, there are better ways than raising petrol taxes. In fact, lowering it will increase the disposable income of consumers, who will go out and spend more on other goods and services. Apart from increasing incomes, it will also help the government collect higher indirect taxes. Many businesses, which are reliant on petrol, such as transport and logistics, will get a much-needed fillip by reduced petrol prices.Since the price of oil has a cascading effect on the general price level in the economy, maintaining petrol and diesel prices at the same level or increasing it can lead to higher inflation and can further dampen their demand. Moreover, additional revenue gained by the government is offset by increased subsidy payments and revenue foregone from sectors dependent on oil. Further, since petrol is outside the purview of GST, states will want their fair share as well and will competitively increase VAT on petrol.The additional amount that can be raised by petrol taxes is about Rs 30,000 crore, which will not make a dent to the Rs 8-10 lakh crore required for the post-pandemic economic revival package. It’s time to pass on the benefit to the consumers.This appeared in The Print's Talkpoint

Trump’s India visit tightens defense ties

Donald Trump concluded his 36-hour India tour on Tuesday evening. This was his first visit to India since being elected the 45th president of the United States in November 2016. His tour to India was much anticipated by both the countries, which have a common strategic objective of balancing China’s rise.This objective was reflected immediately in Trump’s first speech after landing in India, where he took a jab at China’s undemocratic rise. India’s rise “is all the more inspiring because you have done it as a democratic country, you have done it as a peaceful country, you have done it as a tolerant country, and you have done it as a great free country,” he said in his speech at Motera Stadium in Ahmedabad, Gujarat.The article was originally published in Asia Times.

On US President Trump's India Visit

The Print’s daily roundtable TalkPoint posed a question connected to the US President's upcoming India visit: Will the spectacle of Trump's visit without a trade deal boost India-US ties?The US-India relationship over the last four years has been a case of one step forward, two steps backward. The convergence of the threat posed by China has led to a deepening of military ties between the countries with the operationalisation of the Logistics Exchange Memorandum of Agreement (LEMOA) and the signing of the Communications Compatibility and Security Agreement (COMCASA).At the same time, both the US and India have been unable to move forward on the issue of trade. While the Donald Trump administration has hung on to notions of ‘reciprocity’, the Narendra Modi government has raised import tariffs and pushed itself into a corner. Trump’s position on Pakistan has also changed; the plan to reduce and eventually withdraw US troops from Afghanistan is contingent on an understanding with Pakistan. Finally, India’s falling economic growth trajectory has restricted our ability to negotiate both with the US and China.Trump’s visit is unlikely to change any of these structural factors. Apart from a few defence purchase agreements, there is little to look forward to the US president’s tour.Read the entire discussion on ThePrint. here.

Citizenship Law and NRC Issue can Strain India’s Ties With its Most Important Neighbour — Bangladesh

The Print’s daily roundtable TalkPoint posed a question connected to the foreign policy implications of the Citizenship Amendment Bill and the National Register of Indian Citizens: CAB, NRC, Kashmir: Is Modi govt damaging India’s diplomatic standing for domestic politics? ‘Neighbourhood first’ was supposed to be the guiding principle of Modi government’s foreign policy. But all three measures — the new citizenship law, NRC and Kashmir issue — are examples of policy actions that are likely to have adverse outcomes for India’s interests in the region.The amended citizenship law and the NRC issue will put strains on India’s relations with its most important neighbour in the Indian subcontinent — Bangladesh. In 2018, Bangladesh emerged as India’s largest export market for Indian-made two-wheelers. Bangladesh has also surpassed Pakistan in terms of GDP per capita. The 2011 census data shows that illegal migration from there is reducing — it a stock problem from the past and not a flow problem of the present. Most importantly, the Sheikh Hasina government is one of the few steadfast pro-India formations in the neighbourhood. Unfortunately, the signal being sent to other leaders in the region is that taking pro-India positions might turn out to be a loss-making proposition.In the case of Kashmir, Pakistan will try to use the Article 370 issue to drive a wedge between the US and India. From Pakistan’s standpoint, returning to the India-Pakistan hyphenation era in the eyes of the US is desirable. From India’s viewpoint, the more Pakistan features in India’s foreign policy outlook, the less energy it has for confronting the more significant global challenges.Read the entire discussion on ThePrint.in website here. 

India’s road to RCEP laden with China-related obstacles

Ten years ago, the question was whether India and China should sign a bilateral free trade agreement (FTA). Today, it is whether India should join the Regional Comprehensive Economic Partnership (RCEP). There are two different but interconnected issues: the dominance of Chinese manufacturers in the export of goods; and the impenetrability of the Chinese market to Indian and other foreign companies. On the other hand, joining the RCEP might compel New Delhi to launch the second-generation economic reforms.Read more

Howdy Modi and Trump showcase Indian lobby in US. But double loyalties can’t go far

Trump’s presence at Howdy Modi certainly highlights the strength and the comfort of the India-US relationship. The event’s organisers claim that it is the largest-ever turnout for a foreign elected leader on US soil. Apparently, only the Pope attracted a bigger crowd. In the amoral world of international relations, it is par for the course for states to influence the politics and policies of other countries.  A lot depends on how the prevalent nationalist “America First” political sentiment in the United States perceives the Howdy Modi rally.Read more

Modi govt’s blanket ban on plastics at this moment of economic slowdown is a bad idea

Modi’s de-plasticisation campaign seeks to end the use of single-use plastics by 2022. It is unclear if anyone in the government has done economic and environmental cost-benefit analyses of a nationwide ban on single-use plastics. If India’s proposed ban on single-use plastics is successful, the benefit is that we will reduce plastic pollution, but at the cost of worsening the cumulative environmental impact.Read more

Slow economic growth is both immoral and anti-national. Don’t ignore falling GDP rate

Having convinced ourselves that the Narendra Modi government’s policies cannot be at fault, we are now debating whether the economic slowdown that began in 2017 is cyclical or structural. More than three million people emerge out of poverty for every percentage rise in GDP. The Indian economy will have to grow at over 10 per cent per annum every year to become a five-trillion-dollar economy by 2024. The RBI now projects a growth rate of 6.9 per cent for the next year.Read more

If India is in crisis, it is because good guys like ex-IAS Kannan Gopinathan rather quit

Ex-IAS Kannan Gopinathan’s resignation would have captured public attention even if it had not been in protest against the Narendra Modi-Amit Shah government’s clampdown in Jammu & Kashmir. In his ethical calculus, the benefit of fighting from the inside was lower than the costs of suppressing the voice of his conscience. So, he rightly quit. Yet, a different person in his shoes could have done the right thing by staying in service. Consider.Read more

India’s No First Use is badass enough. Modi govt needn’t change it to be more muscular

A day after India’s 73rd Independence Day, the Narendra Modi government threatened Pakistan with the possibility of a nuclear attack if it scales up cross-border terrorism and militancy against India. The Modi government appears to have calculated that the fear of an Indian nuclear strike will raise Pakistan’s costs of cross-border terrorism, thus deterring its use. The biggest problem with this bold new approach is that it will work only to the extent that the Pakistanis believe India’s threats are credible.Read more

Reliability of GDP data

In terms of the reliability of official data, India is getting dangerously close to Chinese territory. The year that witnessed demonetisation, when 86% of the cash in circulation was declared as illegal tender overnight and which was perhaps one of the greatest assaults on private property in recent history, is now being touted as the year of highest GDP growth in the last eight years. This was the year when all other macroeconomic indicators took a nose-dive, but the GDP for that year has been inexplicably revised upwards to 8.2%, which has left everyone confounded.Good policy-making requires reliable data. Collecting and publishing data has always been a difficult affair in India, given the magnitude of the task, compounded by the presence of a large informal and unorganised sector. We do not need deliberate manipulation and withholding of data to make the task even harder.Read more

What All Those Ministers Say!

This is the ninth edition of The Jobscape, our weekly round-up of news and opinion on the state of employment and job creation in India. In this edition, we look at the ministrations of Modi’s ministers, Ambani vs Bezos, jobs for trans men, and unfair taxes on angel investors.Read more