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IMD Sets New Normal To Normalise Monsoon; Tide Has Turned And Factors Conspire For Negative Balance Of Payments
India spent less than Colombia on Covid, Boris here next week, Allahabad HC rejects same-sex marriage, lemon robbery catches on as prices spiral, and Bhagwat says India has only accelerator, no brakes
A newsletter from The Wire & Galileo Ideas | Contributors: MK Venu, Seema Chishti, Siddharth Varadarajan, Sidharth Bhatia, Sushant Singh and Tanweer Alam | Editor: Pratik Kanjilal
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Snapshot of the day
April 15, 2022
India’s labour force shrank by 3.8 million during March to 428 million, the lowest in eight months, with both employment and unemployment falling, signalling economic distress, the Centre for Monitoring Indian Economy said. Employment shrunk by 1.4 million to 396 million in March while the count of the unemployed fell by 2.4 million, according to CMIE.
Going with the times, the IMD has set the new normal and decreed that in India, the monsoon will be normal. It has “revised downwards the definition of what constitutes average rainfall as part of periodic update. India would get 99% of the Long Period Average (LPA). The LPA was 89 cm until 2018 and was changed to 88 cm that year. In 2022, this has been again updated to 87 cm.” When it rains, it pours.
A UN report shows that India spent less than the average of developing countries for Covid, placing it between Guatemala and the Philippines. A survey conducted by LocalCircles of over 29,000 citizens across 345 districts finds that 57% of families had one or more Covid cases in the last two years. About 74% of families said they could have avoided it by following norms.
When Covid-19 peaked in April and May last year, Ahmedabad officially recorded at least three times as many total deaths than in the same period in the previous two years, reports Reuters. This gives weight to claims of health experts that India heavily undercounted Covid-19 fatalities. The city of 8 million reported 30,427 deaths in April and May of 2021, compared with an average of 8,337 in the previous two years. Gujarat’s Health Ministry data shows fewer than 1,000 Covid-19 deaths at the time. Ahmedabad recorded 10,942 Covid-19 fatalities since the start of the pandemic, but has approved at least 87,000 compensation claims. Meanwhile, the state government has informed the Gujarat High Court that it is preparing for the 2036 Olympics and representatives from the International Olympic Committee will visit in 2025.
British PM Boris Johnson is expected in India next week after the Easter break, though Downing Street hasn’t confirmed yet. Johnson’s visit has been cancelled twice before – first when he was invited as chief guest for Republic Day celebrations, due to a Covid-19 spike in the UK in early 2021, and then again because of the pandemic situation in India. Yesterday, Johnson’s Home Secretary Priti Patel signed a dodgy and possibly illegal “world-leading migration partnership” with Rwanda, whose human rights record it criticised recently, to relocate thousands of asylum-seekers in the UK. This will not improve Johnson’s standing, at home or abroad.
The deportation of a Rohingya woman to Myanmar has sparked fears that India is preparing to expel refugees, reports The Guardian. Hasina Begum, 37, was deported from Kashmir two weeks ago, despite UN verification of her refugee status, intended to protect against arbitrary detention. Begum was among 170 refugees arrested in Jammu in March last year. Her husband and three children, who also have UN refugee status, remain in Kashmir. Days after her deportation, the authorities detained another 25 Rohingya refugees. They are being held in Hiranagar Jail, which police described as a “holding centre” for Rohingya “illegally living” in India. Begum’s deportation is arbitrary and has heightened the insecurity of Rohingya in India. In early 2019, hundreds left for Bangladesh, fearing detention and deportation when India decided to record their biometric data.
India is facing a supply crisis in fertilisers, especially phosphatic and potassic, while retail food inflation hit a 16-month-high of 7.68% in March and kharif crop plantings begin in June. Stocks as on April 1 are estimated at around 2.5 million tonnes (mt) of di-ammonium phosphate (DAP), 0.5 mt of muriate of potash (MOP), and 1 mt of complex fertilisers containing nitrogen, phosphorous, potash and sulphur (NPKS). India annually consumes 9-10 mt each of DAP and NPKS complexes, besides 4.5-5 mt of MOP. No new import contracts have been signed in two months for non-urea fertilisers as companies aren’t sure if the government will increase subsidies or permit price hikes.
Hindustan Unilever (HUL) has once again hiked prices 3-20% across skin cleansers and detergents. As almost 30% of the company’s business comes from packs priced Rs 1, Rs 5 and Rs 10, HUL prefers to reduce their weight instead of increasing prices. Mahindra & Mahindra has increased prices of its entire model range by 2.5% with immediate effect.
The Modi government has once again missed its targets for the Bharat Net project, earlier called the National Optical Fibre Network. It would take another two years to cover all 262,825 gram panchayats, which were to be connected by March 2019. The target is now 2025. The government has admitted in the Rajya Sabha that until March 1, it could connect just 27% of villages.
After Hindutva groups’ ban on Muslims setting up stalls during the famous Channakeshava Car festival in Belur, following tradition despite objections from the right, a Muslim cleric recited versus from the Quran in front of the god’s chariot to launch the event. Thousands of devotees witnessed the car festival in Belur on Wednesday.
An intense battle is being fought in the corridors of the US Commission on International Religious Freedom (USCIRF) as it prepares a report to be submitted to the State Department on April 25. In the past two years, the USCIRF recommended that the State Department designate India as a ‘Country of Particular Concern (CPC)’ on religious freedom, but the administration ignored it. This time, the battle within USCIRF on the India chapter is more intense than ever, amidst insider accounts that one commissioner has “been turned” and is insisting on several changes to the draft. In a letter to USCIRF, US-based civil rights and faith groups have asked it to hold up against pressure. “It is clear that those seeking to obfuscate the reality of India’s persecution of its religious minorities are now using intense lobbying and combative communication with the goal of preventing USCIRF from recommending India’s designation as a CPC for the third straight year,” said the letter. “We have also learned that such pressure includes attempts to influence USCIRF Commissioners and officials to exclude even a mention of PM Narendra Modi.”
RSS chief Mohan Bhagwat floored the pedal at a gathering of saints and seers in Haridwar yesterday, speaking of Akhand Bharat within 15 years. “India has to now grow big. The rise of Dharma is the rise of India. There’s no stopping India, which has launched itself on the track of rise and upliftment. Those who try to stop it will either step aside or be eliminated. This is a vehicle which has an accelerator but no brakes,” Bhagwat said amid chants of “Jai Shri Ram”.
Rama Teltumbde Ambedkar reflects on the most poignant moments of the last two years, during Anand Teltumbde’s incarceration in the Bhima Koregaon case.
The spiralling price of lemons is attracting thieves to the orchards of Kanpur. In the last four days, thieves have made off with around 15,000 lemons weighing 7.5 quintals from the orchards in the region of Uttar Pradesh. Rattled farmers have hired lathi-wielding guards to protect the crop.
The Union government has developed a sudden interest in amending forestry rules, benefiting corporates at the expense of the marginalised, reports Newsclick.
Bommai’s minister forced to resign on charge of abetting suicide
Amid mounting pressure from the Congress, BJP’s Karnataka Rural Development and Panchayati Raj minister KS Eshwarappa is being forced to step down today. The Opposition has been demanding that Chief Minister Basavaraj Bommai should drop Eshwarappa from the cabinet after he was booked by the Udupi Police for abetment of suicide. He was held responsible for the suicide of Santosh Patil, a contractor from Belagavi.
Ayodhya Mandapam goes to TN govt
The takeover of Ayodhya Mandapam in Chennai by the Hindu Religious and Charitable Endowment department has become the latest flashpoint between the ruling DMK government and the BJP. Tamil Nadu BJP chief K Annamalai alleged that this was a deliberate move by the DMK government to shut down Ram bhajans and satsangs at the Mandapam. Right wing groups accused the DMK of being anti-Hindu and anti-Brahmin.
But the process for this takeover started in 2013, when the AIADMK was in power, due to allegations of misappropriation of funds. It was challenged in the Madras High Court, which granted an interim stay on the executive order for over eight years. A judgement allowed the HR&CE department to take over on Monday.
Moved by sanskara, Allahabad HC rejects same-sex marriage
The BJP government in UP has filed an affidavit in the Allahabad High Court stating that same-sex marriages are against Indian culture and various Indic religions. It said they should be invalid under Indian laws founded on the existence of a man and a woman. It also argued that marriage is a sacred sanskara, unlike in other countries where it is a contract, and that the country is run on cultural and religious values.
Justice Shekhar Kumar Yadav, while hearing a plea of habeas corpus, on April 7 rejected recognition for same-sex marriage. The petition was filed by Anju Devi, mother of a girl in a lesbian relationship, who had sought custody of her daughter, 23, alleging that she was illegally detained by a 22-year-old woman.
Uttarakhand to draft UCC
Chief Minister Pushkar Singh Dhami has said that the first step towards introducing a Uniform Civil Code (UCC) in Uttarakhand has been taken ― the cabinet has approved a committee to draft it. Consisting of legal experts and stakeholders, it will take into consideration everyone’s views. “We need a Uniform Civil Code as we share our borders with two countries. Every family in Uttarakhand has someone in the armed forces. Uttarakhand is also a cultural and spiritual centre,” he said. It’s all very mysterious.
The Long Cable
The tide has turned and factors conspire for balance of payments shortfall
The gradual normalisation of global output growth post-pandemic has been severely marred by rising food and energy inflation, which the IMF Chief has described as a “clear and present danger” to the world economy. The damage done by the Ukraine conflict is still to be fully assessed as most economies, including India, fervently hope that a solution would moderate energy and food prices.
Governments tend to postpone the full transmission of high energy prices to the consumer. It’s like a pressure cooker being kept at full steam for an extended period. Smaller economies in South Asia and Latin America are already on the brink of a foreign exchange crisis as most are net importers of energy and food.
India fortunately has decent forex reserves, but they are depleting gradually for four consecutive weeks. The week ended April 9 saw the central bank’s reserves fall $11 billion to about $606 billion. The peak of RBI reserves was at $642 billion in October last year. They fell $35 billion over five months even before the real economic impact of the Ukraine war was experienced.
India’s external sector may seem stable at present but by no means should it be regarded as foolproof. For one, many economists are predicting a negative balance of payments in the current fiscal. In recent years, India’s current account deficit hovered at 1-1.5% of GDP (roughly $40 billion), which was more than adequately compensated by much higher foreign capital flows ― robust direct foreign investment and positive FII portfolio inflows into the stock market. The forex reserves pile got bigger and bigger. However, in this financial year, the equation has changed. Foreign investors are seeking a safer haven in US treasury bonds. This situation is exacerbated by the Fed and other OECD central banks gradually withdrawing their easy money policy. Remember, this easy money at near zero interest was flooding the Indian tech and green energy sectors in 2020-2021 , adding massively to forex reserves. That honeymoon is all but over.
Capital inflows will slow sharply in 2022-23 and the trade deficit will nearly double, going by present trends. Due to high energy and commodity prices, India’s imports are rising faster than exports, widening the trade deficit. It peaked at $18.5 billion in March. Annualised, the deficit could potentially touch $210 billion.
Accounting for remittances of about $90 billion which overseas Indians annually send home, the current account deficit could reach an unprecedented high of $120 billion or about 3.5-4% of GDP. To be balance of payments neutral, India would need net capital inflows of this magnitude. Is that feasible in the next 10 months, when most large central banks are withdrawing easy money? Most economists predict a negative balance of payments.
For instance, if India needs $120 billion to bridge its current account deficit but receives only $50 billion as net capital inflows, the remaining $70 billion must be taken out of the RBI reserves. It seems certain that India’s forex reserves will be drawn down over the next 11 months. The problem is that negative sentiment can build up to spur further capital flight, like a self-fulfilling prophecy. For instance, the RBI may still have enough forex reserves after meeting the balance of payments deficit, but the currency could still come under attack and more reserves may have to be deployed to support it.
In such situations, confidence can be eroded and other risk factors begin to look very ominous. For instance, India’s short term external debt on a residual maturity basis (debt obligations that include long-term debt by original maturity falling due over the next 12 months and short-term debt of less than 1 year maturity) stood at 41.8% of foreign exchange reserves at the end of June 2021. So roughly $250 billion of short term debt is to be repaid by June 2022.
Forex reserves may have to be deployed to pay back some of the short term debt maturing upto June 2022, if it can’t be rolled over. A lot of such debt is normally rolled over, but post Ukraine, conditions are anything but normal.
The IMF has said the state of the global economy may entail “complex policy tradeoffs” making the policy landscape very complicated. One clear tradeoff is that even if the external sector comes under pressure and necessitates reduction of essential imports, it has its limits as the poor and vulnerable populations have to be taken care of. We are witnessing this in Sri Lanka, Peru, Nepal, Pakistan, Afghanistan etc.
No country, especially in the middle income bracket, is totally immune from this. India’s fundamentals look better today but there is a need to keep a close watch on the balance of payments situation, which tends to slide back every 10-12 years.
India, far from being non-aligned, seems to risk falling with a thud between two stools, by hesitating to admit that a rupee-ruble trade is being discussed. Commerce Secretary BVR Subrahmanyam has said there are “no official discussions”, and that the government is only trying to help exporters recover dues. Reportedly, India and Russia are working on an alternative payment method after Moscow was cut off from SWIFT.
Prime Number: 98
The richest 98 Indians own the same wealth as the bottom 55.2 crore Indian citizens. This gap has increased over the last decade, as the bottom 50%, which held 8% of the wealth in 2012, had a mere 6% in 2021.
Sushant Singh (a contributor to The India Cable) on the haphazard manner in which the government is trying to make the Indian Army a leaner force. “When it comes to the military, reforms by stealth are not reforms, they only demonstrate stealth. The consequences of a blow by stealth to the military may seem fiscally beneficial, but the real benefit will only accrue to India’s adversaries.”
(In the Deep Dive yesterday, the Foreign Contribution (Regulation) Act was incorrectly referred to as the Foreign Control (Regulation) Act. The error is regretted.)
Opeds you don’t want to miss
In the BJP’s formulation, the citizen is beholden to a charitable state, rather than actively claiming rights from the state. It positions welfare as empowerment, but strips it of the language of rights, and enforces it through centralised delivery mechanisms, writes Yamini Aiyar.
Omair Ahmed writes that the “hasty declaration of the end of Mandal or caste politics is problematic”, most importantly because it ignores how narrowly the politics of equal rights has been interpreted.
Defiance of our constitutional norm, with nothing to replace secularism and no end state ― we seem to be comfortable with this, going by the reactions of the judiciary, bureaucracy, diplomacy and civil society, including the business community, writes Aakar Patel.
Gopalakrishna Gandhi writes that it is time for the courts to take a stand, with the National Human Rights Commission and the National Commission for Minorities as their thought-partners to uphold the Preamble and Article 25 of our Constitution.
By organising communal violence, its purveyors want to redraw the normative map drafted by the Indian Constitution: that of freedom and equality, writes Neera Chandhoke.
SY Qureshi writes that hate speech must be unambiguously condemned and the law must take its course, not merely because it can lead to future violence. Hate speech, an indispensable resource for the ruling powers, must be treated as a violent act in itself.
Farewell, Rishi Sunak, parliament’s Icarus who has finally crash-landed, writes Aditya Chakrabortty, about the Indian-origin British Chancellor of Exchequer.
Paying attention to life expectancy disparities in India across deprived communities shows that inequality in health outcomes is relevant even today, write Aditi Priya and Vipul Paikra.
Rabindra Nath Sinha writes that it is becoming awkward for Mamata Banerjee, with the kin of victims of political violence expressing distrust in the state police and demanding court intervention.
Capability differential, unfavourable terrain configuration and risk of escalation to a limited war virtually rule out a military option in Ladakh, writes Lt Gen HS Panag (retd).
Christophe Jaffrelot has done some plain talking on BBC’s ‘Thinking Aloud’, about the majoritarian project in India, and the global rise of strongmen.
Justice S Muralidhar speaks on Dr Ambedkar’s birth anniversary on ‘Appearing in Court: Challenges in Representing the Marginalised.’
Over and out
Invented in 2000, a handpan is a musical instrument that emits a rare combination of drum-like rhythms and bell-like melodies. Indian handpan groups are thriving.
Pen shows — popular in the West, they’re catching on in India. Pune and Mumbai have had theirs, and starting Friday, Kolkata will have its first ever pen show, titled Pen Mahotsav. It’s organised by the Pen Club in College Street.
That’s it for today. We’ll be back with you on Monday, on a device near you. If The India Cable was forwarded to you by a friend (perhaps a common friend!) book your own copy by SUBSCRIBING HERE.