Monthly Archives: November 2016

INDIAN DEMONETISATION – come back Man Mohan Singh !

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THE country’s economy is now on a knife edge.

In the Lok Sabah yesterday, former Prime Minister, and Oxford Economics Professor Man Mohan Singh, described current PM Modi’s clampdown on cash held by individuals in India as ‘organized looting and legalized plunder’. Incredibly, as he spoke in the Chamber, Mr Modi was seen sitting nodding his head wisely as if in agreement with Mr Singh as he made his blistering attack on the Government! 

More than 80% of India’s banknotes are now out of circulation. The sudden withdrawal of 500 and 1000 rupee notes was introduced to supposedly fight corruption and forgery and has resulted in a massive shortage of cash.  People have been queuing outside bank branches for days with half the country’s ATM’s still empty. Insufficient numbers of new rupee notes were printed.  Indians are being forced to exchange their old notes without sufficient notice, or lose them. Trucks are stranded, workers are not being paid, and millions of jobs are at risk. 

In India’s cash economy, 40% of people still do not have access to the financial system, so cash is king and is used in an estimated massive 78% of transactions!

The situation is now alarming and scary for the country, so PM Modi needs to act fast to alleviate the situation or it could cost him dear with state elections looming. Observers say the current desperate state of affairs could lead to a major political backlash against him at the polls. It is vital that he gets the new cash out quickly into the real economy so that peoples’ livelihoods are not affected. 

Mr Modi has undoubtedly started from a position of strength and has a lot of public support in principle in his attempts to crack down on corruption. However, what is seen as the incompetent manner in which this whole experiment has been handled, could seriously derail India’s reform drive. It is said that it will take 6 months at least to supply the cash India needs, in which time massive damage will be done to the economy and to its people resulting in scars which will be long lasting.

International comment has been adverse. Most observers emphasise that the rich will not suffer as corruptly acquired fortunes have largely been converted to shares, gold and real estate. Only the poor will end up losing out. Many think that the measures have much in common with the failed experiments of dictatorships and consider them to have been a dangerous miscalculation by Mr Modi. 

In a shocking comment alleged to have been made by Mr Jaitley, India’s finance minister, he is quoted as wondering aloud as to how many poor people would even have 1000 Rupee notes.  If true, surely this should have been considered before a potential shut down of the Indian financial system which, incidentally, has always been one of the most resilient in the world. There is little doubt in the minds of many that heads should roll!   

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CUBA  – GOODBYE FIDEL

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AND, from many, good riddance !

Over the next few days we shall all be swamped no doubt with the usual humbug tributes from the loony left, certain academics and entertainers,  and other fellow travellers,  particularly from those in the so called ‘non-aligned’ nations, and former Soviet satellite states, over the death of Fidel Castro.

Nearly all of them will ignore the fact that Castro, who died earlier today after a long illness, was nothing short of a narcissistic, brutal dictator who betrayed the Cuban Revolution. He executed and imprisoned thousands of Cubans in order to enforce upon the country his brand of Soviet-type Marxism-Leninism. He forced many thousands more of his countrymen to flee the beautiful island nation in order to escape his ruthless totalitarian rule. With great risk to their lives, most of these Cubans fled just 90 miles away across the sea to Florida where many of them and their descendants took to the streets today in excited and jubilant celebration on hearing the news of his death. 

Castro, who was born into a wealthy land-owning family, took only two years to oust the criminal regime of the then incumbent President Batista. After his army of revolutionaries took Havana, and chased Batista out of the country, he announced publicly on New Year’s Day 1959, the establishment of a ‘representative democratic government’ which he categorically stated would be neither Communist nor Marxist. In a very short time, it was not only one of the most repressive Communist- Marxist regimes anywhere, but his brutal excesses were at least equal to those of any committed by Russia or its eastern European allies.  

Thousands of democratic political opponents were executed and jailed. Even under Batista, opposition newspapers had been allowed to operate within certain limits. However, Castro banned these entirely and no political dissent was allowed under his rule. In 2006, Castro handed much of the day to day running of Cuba to his younger brother, Raoul, who went on to assume the presidency two years later. While some liberalisation has taken place over the past ten years, Cuba is still run on totalitarian lines by what can now be called an ‘autocratic family dynasty’.  Raoul Castro still reigns. 

Fidel Castro will also go down in history as the man who brought the entire world to the brink of nuclear catastrophe in 1962, by allowing the former Soviet Union to station nuclear missiles in Cuba. A third world war was averted by President Kennedy’s strong stance on the issue and his ultimatum to the then chief Soviet mischief maker, Nikita Kruschev, to remove all Russian missiles from Cuba forthwith. Kruschev blinked first and in a few days all the nuclear weapons were returned to Russia.

There is little for a Westerner to admire over the 49 years of Castro’s rule. However, for the record, it should be acknowledged that the regime has two remarkable factors to its credit. In education, a very high literacy rate has been achieved by even Western standards, certainly comparable to that attained in the South Indian state of Kerala under the communist government of E M S  Namboodripad.  The other is in health care which is amongst the best in the world.

BREXIT AGAIN

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It seems that much of the media, are as determined as ever to push ministers into revealing their hand prior to the start of negotiations with the EU. Are they too dim to realise that they’re banging their heads against a brick wall?

The imperturbable, the inscrutable, and ever gloomy Philip Hammond, the UK Chancellor, who only recently has startled us all by occasionally showing the merest hint of a smile, gave little away to the popular, but always predictable, BBC interview wonk, Andrew Marr, on his Sunday slot. By now, we should all be well aware of ministers’ standard response on whether the Government will go for a hard/soft exit, ie stay in or leave the customs union and the single market. 

As Hammond pointed out, EU ministers have rightly maintained a very disciplined silence on the tack they might take in their talks with Great Britain. Smart. So where is the advantage to the UK for the British Government to give away its negotiating hand before the talks begin? As part of their thinking, UK ministers will no doubt consider what the basic priorities of the other EU countries are likely to be. One doesn’t need to be an Einstein to realise that its probably the same as ours, the continuation of ongoing free trade between us after Britain leaves the EU. Not to proceed on this basis, despite our differences on the free movement of people, for example, would incur the wrath of their own business community for whom the UK is a major market for their many exports. 

Should everything go pear shaped during the negotiations, EU exporters have much more to lose than Britain. The value of exports from other EU countries to the UK in 2015 was about £290bn, while the export of goods and services to other EU countries from the UK was some £220bn. So the UK runs quite a substantial trade deficit with the rest of the EU. However, these figures differ if you look at EU data which suggests that goods and services exported from the rest of the EU to the UK could actually be valued at some £360bn in 2014, obviously much higher than the £290bn the UK data shows for 2014 and 2015. The UK data is much more conservative.

Is it too much to hope that common sense will prevail at the negotiations? It is obviously to the mutual advantage of both the UK and the other EU countries to not only maintain the current level of trade between them, but to develop it further. Even now, governments in the other EU countries are being lobbied strongly by exporting companies on the importance of maintaining their markets in the UK. At the end of the day, EU negotiators would look pretty stupid to their business community if they allowed certain political considerations to damage strong existing trading links. Also, surely the negotiations will be smoother if they are conducted on the basis of the friendship and mutual regard we have for each other?

UK business leaders are right to be concerned at what has become known as the ‘cliff edge’ scenario and the resultant disruption to trade which an abrupt, or hard, exit from the EU would undoubtedly bring. Because of the complexity of the entire Brexit process, it is now being hinted that some kind of transitional agreement may be sought in order to soften the shock of the break from the EU, for British business. Brexiteers have their fingers crossed that this is not the start of a watering down by PM May of the departure process. 

We all recognise that, despite the term, common sense is a very scarce commodity where national interests come into play, but rational thought should deliver an agreeable outcome for all of us. 

Indian Demonetization

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Most of us were delighted to see Narendra Modi  elected as India’s new Prime Minister some two years ago but, in an extraordinary display of bureaucratic ineptitude  lacking in intelligence and foresight, the Indian government moved last Tuesday to withdraw the country’s 500 and 1000 rupee notes. The ensuing chaos has led to even more misery for the long-suffering people of India.  Ostensibly, the move was intended to crack down on tax evasion, but PM Modi has been accused of bringing almost all economic activity down to a grinding halt as insufficient replacement currency notes, particularly smaller denomination notes, were not printed. All over India, people are waiting in long lines to trade in old notes for the new which are in extremely short supply. ATM’s are not adequately stocked with the new notes, and Modi has asked Indians to be patient. It could be a minimum of 3 weeks before sufficient new notes are printed. Meanwhile, its reported that no one has the money to buy their daily necessities, consumption could be on the point of collapse, and stocks of food and other commodities may perish on the shelf. Some claim all it has done is inconvenience a whole sector of low income people, in order to flush out some petty corruption. Untaxed money in one area employs some 35 million people in the construction sector which is now shutting down. This means that these workers may be returning to their villages with no means of support.

Most daily financial transactions in India are conducted only in cash. Businesses across the country have had to shut down because of the currency crisis. The economy and the public have been starved of money. Only the cash in your pocket or what happens to be in your bank account, if you have one, is available for your use. Even so, 50 and 100 rupee notes are a precious commodity and have all but disappeared. True to form, a black market has arisen in cash and in some places the exchange value of the old notes to profiteers is now more than 20%!

While government supporters claim that this ‘short term pain’ will be worth it to the man in the street, and that there will be long term benefits for growth in the economy, its critics have accused Modi of drawing all the blood out of the economy just to score a political point. The withdrawal of notes comprised some 86% of cash flow in India, with this money freely circulating daily. Modi is also accused of being absurd about thinking only now how this radical new initiative is to be implemented, AFTER it has been announced.
Tax evasion has been rife in India for decades. Fewer than 3% of Indians paid income tax in 2013! Evasion is commonplace, the cynics say,  practiced by everyone with government officials, bureaucrats and a whole army of tax accountants there to tell you how to evade taxation. Its a civil offense, no one is sent to jail, no one is afraid of being charged, the courts are so slow it can take decades to start a prosecution, so how can you get people to comply? The government has not introduced or amended any laws, only 4% of untaxed income is held in cash, so Modi has gone for the small end of the problem, his opponents say, and is indulging in tokenism.

What its really about, they say, is how Modi is now trying to show the electorate and his BJP party that he is still the man to clean up the economy befor major state elections in 2017. He is also half way through his term at the centre. So he has tried to focus on this new dramatic issue for the electorate. Critics also accuse his government of not delivering on promised new investment, on higher tax revenues, and on new jobs. His accusers also say that the government has inflated growth figures by adding as much as 2.2% to GDP, by changing the basis for calculation.

Mr Modi,  the Indian people need some immediate and effective action to clean up the currency crisis and the pain which your government has inflicted upon them.

Scotland and Independence – Respect the 2014 Referendum result

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The leader of the Scottish National Party (SNP), Ms Nicola Sturgeon, is a charismatic and intelligent individual, and without her leadership it is highly unlikely that the SNP would have reached the heights it now occupies both in the Scottish and Westminster parliaments. Furthermore, in the past, the leadership qualities of some of those in the pro Union parties in Scotland left much to be desired.

It was the fantasy economic case the SNP tried to argue in the Independence referendum in 2014, their unrealistic view of the future oil price in particular, which led to the majority of Scots voting to remain in the UK.

However, the SNP have again been encouraged to talk of yet another Independence referendum, this time on the basis that the majority of Scots voted in June to stay in the EU, despite the fresh embarrassing revelation that some of Ms Sturgeon’s own colleagues voted for Brexit!

Ms Sturgeon now needs to be told that ‘the express will of the Scottish people’ , a slogan she never tires of ranting, has already been delivered unequivocally by the Scots, as per the 2014 referendum result, and that THERE WILL BE NO 2nd REFERENDUM ! Mrs May must get this message across to Ms Sturgeon once and for all. Mrs May should, however, prioritise regular consultations with the Scottish Government, on the Brexit negotiations once they start. Not to do so would be inexcusable in view of the huge mandate held by the Nationalists.

A recent welcome development in Scotland, is the re-emergence of the Conservatives, after years in the doldrums, as a force to be reckoned with under their leader, Ruth Davidson, who is ably backed by Mark McInnis and Rab Forman, among others, in the party’s headquarters. However, they are simply not aggressive or proactive enough and they must do more to tackle Ms Sturgeon in the short term, rather than use their traditional tactics of the long game. Time waits for no one!

Japan

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No credit to the Japanese Prime Minister, Mr Shinzo Abe, for expressing the wish last month that Britain ‘ act responsibly ‘ in the Brexit negotiations with the EU. This caution was unnecessary, and almost insulting to Mrs May, as if she would want to conduct these critical negotiations in any other way!

Compare this to the Malaysian Prime Minister’s comments when he referred to the historic ties of friendship between our two countries, and expressed his confidence that, notwithstanding Brexit, these would continue.

I’ve long admired the enterprise and hard work characteristics of the Japanese people, and have been fortunate enough to visit the country often. Better kindness and hospitality would be difficult to find anywhere.

However, it would do no harm to remind Mr Abe that Japanese administrations in the not so distant past, have not acted at all responsibly, resulting in tragedy and irreparable damage to both their own people and to other nationalities, notably the Chinese. In particular, I refer to the disgraceful mass murder and mass rape of the population of Nanjing (Nanking) in the winter of 1937/38, when it is estimated that over 250,000 people were massacred by the Japanese military. Is this event truthfully covered in Japan’s school history books?? Are the many other similar war-time Japanese atrocities in Asia?

Look before you leap Mr Abe !

Hong Kong

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Many local Chinese feel that the recent disorder at the swearing-in ceremony in the Hong Kong legislature by newly-elected ‘Democracy’ councillors, was not a responsible way to serve the electorate.

Their antics are unlikely to further their worthy cause, which is basically to continue to ensure minimal interference in the territory’s government and laws from their communist masters on the mainland. Namely, one country, two systems, as provided for under the Basic Law agreement reached between the Chinese and British governments. China has already interfered in their election, and they would have done well to remember that China’s governing politburo are still a hard-nosed bunch, with enormous security and military support, and who will brook no interference in their plans for the future of the former British enclave, regardless of the provisions of the Basic Law. It is regrettable that the British government saw fit to foster even closer economic ties with such a regime by binding the UK to a long term civil nuclear deal with China, with all its dangerous implications. One can only empathize with all those mainland Chinese who wish to see a government with a popular mandate and which will bring in democratic reforms, especially freedom of the press and freedom of speech. We live in hope.

Unless they become more politically savvy, the least that can happen to these new legislators is their ‘disappearance’, ie indefinite imprisonment without trial, or worse. Remember Tiananmen!

Brexit

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Its difficult to believe that only three months ago, our major political parties were in a state of meltdown. We now have a new Prime Minister who heads a Conservative administration whose members we thought were united by a common purpose, regardless of whether they were previously ‘remainers’ or ‘leavers’. That is to negotiate the UK’s exit from the European Union on terms most favorable to Britain. While we are all used to the incessant bitching and noise from the Left, what is less easy to accept are the loud demands by some MP’s on the Government’s own side, who want Mrs May to divulge her negotiating strategy in the forthcoming talks with Brussels in advance of the event. Not only that, they are also demanding a say in the actual date when Britain will trigger Article 50 of the Lisbon Treaty, which will formally signal the UK’s intention to leave the EU. These are all tactics designed of course to frustrate the will of the British people who have voted to leave that trading bloc. Mrs May now has to contend with the recent adverse High Court ruling giving Parliament a say in the process, which is being appealed.

The PM was right to give nothing away to these Tory and other troublemakers in advance of what will be very sensitive negotiations. She exudes a quiet confidence in the upcoming process of trying to get the best deal for Britain, probably a mutually beneficial non-tariff customs union, and rightly will not give a running commentary on progress. That Parliament will be kept informed in the customary manner should have been enough for anyone.

In the current situation where we’ve witnessed a sustained fall in the value of the Pound, Bank of England executives, Treasury officials and business chiefs should be emphasizing the underlying strength of the British economy, which is backed by solid evidence. The pound has fallen far enough and its time for our business leaders not only to broadcast our strengths, but to show confidence in a world brimming with trade opportunities for the UK outside the EU.

The Chancellor and the Bank of England Governor, both first class people, would do us all a favour if they talked up the pound with a bit more enthusiasm, and behaved less like undertakers!