India’s Currency Ban – Part X

It has now been four months since Narendra Modi declared about 86% of monetary value of currency illegal. Linked here is the last in my series of updates, which was written soon after the deadline to deposit the demonetized currency. Most of the banned currency was eventually deposited, making a mockery of Modi, who had claimed that unaccounted money would not reach the banks.  Perhaps 3% of the cash never reached the banks.

 

A cunning plan unravels

Cartoon by Sandeep Adhwaryu

 

Those living outside India still have the option to return to the country, complete a number of formalities at the airport, and then hope that India’s central bank, the Reserve Bank of India (RBI) will do the conversion.

Many of these people are unfortunately return empty-handed. In India, where stamps, signatures of bureaucrats, file-passing, attesting of documents, etc. go with everything, a lot of submitted paperwork is deemed incomplete by the RBI.

 

India’s narrow money supply M1 has collapsed from 28.42 trillion rupees in September of 2016 to just slightly above 20 trillion rupees in December. This makes recently reported GDP growth data (see further below) particularly dubious – click to enlarge.

 

Modi never intended to hurt Indians who are living abroad, but in the utter chaos of India, he can merely wave his magic wand and hope. India’s bureaucracy has a life of its own. The silver lining is that the chaos of India makes it impossible to establish an all-out Stalinist state.

 

Non-resident Indians who succeed in depositing their banned notes are complaining that the RBI is not crediting the cash to their account. The process of depositing is not easy to boot.

Photo credit: PTI

 

No Toilets, but Will Send Rockets Into Space

The worst losers were the poorest people of the country, who are lucky if they have a toilet. 50% of Indians still relieve themselves out in the open.  Tribal people who never got to know about the ban, people who were too sick, or people who had forgotten their cash are now left with paper that can land them in prison. Modi has made ownership of more than ten of the banned bills illegal.

These hungry people have indeed been asked to celebrate that India has recently sent more than 100 satellites into space in a single launch, at a profit. People still have images of Sputnik in their minds when they think about satellites. What was not disclosed was that most of the satellites that India sent weighed no more than a few pounds.

 

Indian ISRO rockets taking off into space. Former British defense minister Gerald Howarth felt compelled to remark that “a country with its own space program does not need aid from us”  after learning that the UK had sent around GBP 300 m. in aid to India in FY 2015.

Photo credit: ISRO / DPA

 

People were also required to trust the government that the rocket was sent up at a profit. Politically correct international media happily accepted India’s claims. Of course no accounting had been disclosed. The question remains: How can you show the profitability of a small project of an organization that is totally dependent on public funds to stay up and running?

Indians have become extremely nationalistic. Independent thinking or challenging any facts that contradict good feelings about India are considered sacrilegious these days. With the exception of the tensions and the lack of even superficial unity that India’s huge ethnic diversity creates, India has all the makings of Pakistan, Afghanistan or Iraq.

Banks have become extended arms of the government. Nowadays one must explain cash withdrawals and deposits. Any cash transaction above Rs 300,000 (~US$4,500) has been made illegal in a country where most consumer transactions are in cash.

Income tax authorities have been given free reign to knock at one’s door without having probable cause to make such a visit. Modi is hiring more than 100,000 people to work for the tax department.  In the last four months India has rapidly become a suffocating police state. Banks and ATMs still suffer from a shortage of cash. Queuing up at banks is a mandatory part of life in India.

 

The terrible state of hygiene in India

Photo via indiaspend.com

 

Dubious Statistics

I have yet to meet anyone in India — including anyone from the ranks of  demonetization supporters — whose economic life has improved. People are still avoiding to go shopping. Businesses continue to fail. And food prices are still down by as much as 50% or more in many places, a sign that poor people are going hungry.

There are of course exceptions. Bureaucrats are now charging twice the usual bribe, to make up for losses they suffered due to demonetization. In the police state of India, the common man — still very proud of India’s achievements — is compliant.

India recently released its latest GDP growth numbers claiming that the country’s growth rate is still 7% on annualized basis.  International economists are confused, as they had expected India to face a short-term setback due to the  demonetization exercise.

The people on the street, simple folk like me, know better what is actually happening in India. India’s economy is not growing at 7%. It seems more likely that it has suffered negative growth of 20% annualized or more last quarter.

 

India, quarterly GDP growth rate, annualized and credibility-challenged – click to enlarge.

 

Not only are the growth numbers released by the corrupt Indian government  cooked, but many businesses also converted their undeclared money into legal money in November 2016 by booking fake sales.

They paid months of salaries to their employees in advance and often prepaid bills  years in advance while booking revenue for future sales. A lot of sales were back-dated and booked in cash.

All of these contortions increased GDP on paper exactly at a time when the entire economy was actually severely traumatized. India is not growing, it is regressing. India’s informal sector, which employs more than 80% of the population, is suffering the most.

 

Boosting happiness, Modi-style

Caretoon by Satish Acharya

 

China gets a lot of blame for allegedly cooking its statistics. I often go to China and consistently find it to be increasingly more open, more liberal, more investment-friendly and more growth-oriented. I see accumulation of capital and knowledge happening in that country.

At the same time, India is regressing to its medieval past. And this is not an exaggeration. This is happening not just economically, but most importantly culturally as well, as I have discussed at great length in earlier updates.

India is a democracy and many people are not happy to accept that it might be faring worse than China. In reality, India is so wretched that it is hilarious that people try to compare it with China. China’s economy is more than five times bigger than that of India.

There is massive confusion in the use of “growth” and “growth rate.” Even if India were growing at 7%, it would add only $120 to its per capita GDP of $1,718. If China grows by 6.8% (often erroneously referred to as “slowing”), it would add $561 to it’s per capita GDP. India is simply no match for China.

The often repeated statement of international organizations, media, economists and intellectuals that India is the fastest growing large economy fails to pass test of primary school mathematics.

Ultimately one must ask what India’s GDP of $1,718 per capita actually means. The reality is that a vast majority of India’s citizens goes to bed hungry every day. They often have no access to primary health care. They live in slums. Disease and tyranny are a daily part of their lives.

 

A common sight in towns and cities in India.

Photo credit: Jayant Bhandari

 

A great many Indians live a medieval lifestyle. On a per capita basis,  Indians  are poorer than Africans. On per capita basis India has more children exhibiting stunted growth than Africa has.

 

Conclusion

India’s problem is not a lack of tax collection. Its problem is a horrendous lack of productivity.

 

The sorry state of education in India. Forget about students, even the teachers are uneducated. The result is that Indians are completely unprepared for the modern economy.

 

Huge waves of young people are joining the workforce, with no hope of getting jobs. Job growth was stagnating in India even before the demonetization was announced. They are unskilled and very badly trained. Many so-called literates cannot even write their own names.

Among the jobs that have seen the largest growth in India in the past several years has been that of security guard. To anyone interested in sociology, this is not a sign of economic progress, but a symbol of a degrading society.

While the  world is looking with trepidation toward the impending arrival of the age of robots, India finds itself at the precipice of a humanitarian crisis, made much worse by the simplistic and dictatorial policies of Narendra Modi.

 

Collateral damage: India’s poorest

Cartoon via rediff.com

 

Charts by: TradingEconomics

 

Jayant Bhandari grew up in India. He advises institutional investors on investing in the junior mining industry. He writes on political, economic and cultural issues for several publications. He is a contributing editor of the Liberty magazine. He runs a yearly seminar in Vancouver titled Capitalism & Morality.

 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “India: Still the Fastest Growing Large Economy?”

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Gold – An Overview of Macroeconomic Price Drivers
      Fundamental Analysis of Gold As we often point out in these pages, even though gold is currently not the generally used medium of exchange, its monetary characteristics continue to be the main basis for its valuation. Thus, analysis of the gold market requires a different approach from that employed in the analysis of industrial commodities (or more generally, goods that are primarily bought and sold for their use value). Gold's extremely high stock-to-flow ratio and the main source of...
  • India – Is Kashmir Gone?
      Everything Gets Worse  (Part XII) -  Pakistan vs. India After 70 years of so-called independence, one has to be a professional victim not to look within oneself for the reasons for starvation, unnatural deaths, utter backwardness, drudgery, disease, and misery in India. Intellectual capital accumulated in the West over the last 2,500 years — available for free in real-time via the internet — can be downloaded by a passionate learner. In the age of modern technology, another mostly...
  • Cracks in Ponzi-Finance Land
      Retail Debt Debacles The retail sector has replaced the oil sector in a sense, and not in a good way. It is the sector that is most likely to see a large surge in bankruptcies this year. Junk bonds issued by retailers are performing dismally, and within the group the bonds of companies that were subject to leveraged buyouts by private equity firms seem to be doing the worst (a function of their outsized debt loads). Here is a chart showing the y-t-d performance of a number of these...
  • Pulling Levers to Steer the Machine
      Ticks on a Dog A brief comment on Fed chief Janet Yellen’s revealing speech at the University of Michigan. Bloomberg:   “Before, we had to press down on the gas pedal trying to give the economy all of the oomph that we possibly could,” Yellen said Monday in Ann Arbor, Michigan. The Fed is now trying to “give it some gas, but not so much that we’re pushing down hard on the accelerator.” […] “The appropriate stance of policy now is closer to, let me call it...
  • French Election – Bad Dream Intrusion
      The “Nightmare Option” The French presidential election was temporarily relegated to the back-pages following the US strike on Syria, but a few days ago, the Economist Magazine returned to the topic, noting that a potential “nightmare option” has suddenly come into view. In recent months certainty had increased that once the election moved into its second round, it would be plain sailing for whichever establishment candidate Ms. Le Pen was going to face. That certainty has been...
  • Mea Culpa – Precious Metals Supply and Demand
      Input Data Errors Dear Readers, I owe you an apology. I made a mistake. I am writing this letter in the first person, because I made the mistake. Let me explain what happened.   The wrong stuff went into the funnel in the upper left-hand corner...   I wrote software to calculate the gold basis and co-basis (and of course silver too). The app does not just calculate the near contract. It calculates the basis for many contracts out in the distance, so I can see the...
  • The Cost of a Trump Presidency
      Opportunity Cost Rears its Head Last Thursday’s wanton attack on a Syrian air field by the US and its bellicose actions toward North Korea have brought the real cost of candidate Trump’s landslide victory last November to the forefront.   It didn't take long for Donald Trump to drop his non-interventionist mask. The decision was likely driven by Machiavellian considerations with respect to domestic conditions, but that doesn't make it any better.   Unlike...
  • Heavily Armed Swamp Critters
      Worst Mistake GUALFIN, ARGENTINA – By our calculation, it took just 76 days for President Trump to get on board with the Clinton-Bush-Obama agenda. Now there can be no doubt where he’s headed. He’s gone Full Empire. Not that it was unexpected. But the speed with which the president abandoned his supporters and went over to the Deep State is breathtaking.     Once there was only a Trump fragrance called Empire... now he has gone full empire himself   Among the noise...
  • Central Banks Have a $13 Trillion Problem
      Paycheck to Paycheck GUALFIN, ARGENTINA – The Dow was down 118 points on Wednesday. It should have been down a lot more. Of course, markets know more than we do. And maybe this market knows something that makes sense of these high prices. What we see are reasons to sell, not reasons to buy.   DJIA daily (incl. Thursday)... it was just taking a rest - click to enlarge.   Nearly half of all American families live “paycheck to paycheck,” say researchers. Without...
  • Hell To Pay
      Behind the Curve Economic nonsense comes a dime a dozen.  For example, Federal Reserve Chair Janet Yellen “think(s) we have a healthy economy now.”  She even told the University of Michigan’s Ford School of Public Policy so earlier this week.  Does she know what she’s talking about?   Somehow, this cartoon never gets old...   If you go by a partial subset of the ‘official’ government statistics, perhaps, it appears she does.  The unemployment...
  • French Selection Ritual, Round Two
      Slightly Premature Victory Laps The nightmare of nightmares of the globalist elites and France's political establishment has been avoided: as the polls had indicated, Emmanuel Macron and Marine Le Pen are moving on to the run-off election; Jean-Luc Mélenchon's late surge in popularity did not suffice to make him a contender – it did however push the established Socialist Party deeper into the dustbin of history. That was very Trotskyist of him (we can already picture a future Weekly...
  • Trump Is An Insider Now
      Conspiracy of the Few GUALFIN, ARGENTINA – “U.S. stocks fall on Trump talk…” began a headline at Bloomberg. Or it may be Trump action. We had already counted six major campaign promises – including no O’care repeal and no “America First” foreign policy – already buried (some for the better).   A bunch of campaign promises get the MOAB treatment...  A great many  theories have been proposed to explain Trump's recent series of u-turns: 1. he is in thrall to...

Support Acting Man

Austrian Theory and Investment

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com