China’s Belt and Road and India’s Infrastructural Ambitions – Where is the line to be drawn?

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When in 2017, China organized the first-ever Forum on Belt and Road, almost 130 countries from all over the world, including the United States had sent in their representatives to witness and be part of the diplomatic showcase of China’s global ambitious project, which aims to create an interlocked trade, financial and cultural network stretching from East Asia to Europe and beyond. There was, however, one notable miss, India. India was always opposed to Chinese ambitions of erecting this vast infrastructural network and the primary reason was that it violated India’s state sovereignty. The showcase arm of the Chinese Belt and Road happens to be the China-Pakistan Economic Corridor, a $62 Billion pet project of Chinese President Xi Jinping and traversing the entire length and breadth of Pakistan with nodal points in Xinjiang province of China, and Pakistan’s port town of Gawdar. CPEC is marked by modern infrastructure of transportation networks, special economic zones, industrial clusters and energy hubs, and considered China’s main plank of Belt and Road Initiative aimed to underscore China’s economic might and dominance over the Asian-Pacific seas. That a segment of CPEC cuts through the disputed territory of Pakistan Occupied Kashmir has irked India no ends, which it considers a direct, uncalled-for and aggressive nature of China’s global ambitions at the cost of state sovereignty. Though, the CPEC is yet to be fully commissioned, some segments have started to function. This is turning out to be major bone of contention between the two Asian economic giants. But, relations have a gotten a bit murkier since 2017, and two major geopolitical events have confounded matters further. 

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The first one is the Doklam Standoff between China and India. This tiny plateau nestled between China, India and Bhutan witnessed a three-month standoff between the two largest armies in the world over a road that the Chinese were building and which India apprehended would function more as a surveillance apparatus over the narrow path of land that connects the Indian mainland with the Northeastern states. Though the tension was eventually diffused, the state of affairs between China and India never really thawed as could have been anticipated. It was in 2017 that India and Pakistan became newly installed members of the Shanghai Cooperation Organization (SCO), having been elevated from observer states. China, anticipating an increasing amount of divisiveness within a regional economic and security organization by being accustomed to extreme comity and cooperative discussions was frustrated at India’s becoming a member state that Russia, another founder-member of SCO pushed for. Russia wanted to constrain China’s growing influence in the organization as it was concerned that post-Soviet SCO members were drifting too far into the Chinese geostrategic orbit. Moscow had long delayed implementing Chinese initiatives that would have enabled Beijing to reap greater benefits from regional trade. As China gained more clout in Central Asia, Moscow choice New Delhi’s inclusion to slow and oppose Beijing’s ambitions. It is under these circumstances that New Delhi would likely continue to criticize the CPEC in the context of the SCO because, as a full member, India now has the right to protest developments that do not serve the interests of all SCO members. The SCO also offers another public stage for India to constantly question the intent behind China’s exceptionally close ties to Pakistan.

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The second is the recent escalation of hostilities between India and Pakistan, and how Pakistan felt betrayed over China’s so-called neutral stand by asking both countries to take recourse to meaning dialogue in resolving the contentious issue of Kashmir and Terror and cease all military adventures. It is to be noted that the second convention of the Belt and Road Forum is to take place in April this year, and China is all hopeful to get India’s positive support for its infrastructural might. India’s notable absence from the 2017 meet has hit Chinese plans, and the latter wants to reverse the course this time around. Even if India were to take part this year, or send in their dissent note via an official communique, it would reliably and reasonably highlight the contradiction between China’s stated anti-terrorism goals and the reality of its policy. Most notably, Beijing has consistently looked the other way as Pakistani Intelligence Services continue to support terrorist groups in Afghanistan and Pakistan. Moreover, because India is particularly close to the Afghan Government, it could seek to sponsor Afghanistan to move from observer status toward full SCO membership. This would give India even greater strength in the group and could bolster Russia’s position as well.  

Lingering border disputes and fierce geostrategic competition in South Asia between China and India is likely to temper any cooperation Beijing might hope to achieve with New Delhi in latter’s inclusion at the Forum. Mutual suspicions in the maritime domain persist as well, with the Indian government shoring its position in the strategically important Andaman and Nicobar island chain to counter the perceived Chinese “string of pearls” strategy – aimed at establishing access to naval ports throughout the Indian Ocean that could be militarily advantageous in a conflict. Such mutual suspicions will likely impact Forum’s deliberations and discussions in unpredictable ways. Although India may be an unwelcome addition and irritant, China’s economic and military strength makes it far more formidable on its own – a point that is only magnified as Russian influence simultaneously recedes, or rather more aptly fluctuates. Even when India rejected Beijing’s Belt and Road Initiative overture, China remains India’s top trading partner and a critical market for all Central and South Asian states, leaving them with few other appealing options. India’s entry into the Forum, however, could put Beijing in the awkward position of highlighting the value, while increasingly working around or outside of it. Outright failure of the Forum would be unacceptable for China because of its central role in establishing it in the first place. Regardless of the bickering between countries that may break out, Beijing can be expected to make yet another show of the importance, with all of the usual pomp and circumstance, at the upcoming summit in April, 2019.

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What then is India’s infrastructural challenge to Belt and Road? India’s Prime Minister Narendra Modi instantiated the need for overhauling the infrastructure in a manner hitherto not conceived of by emphasizing that the Government would usher in a ‘Blue Revolution’ by developing India’s coastal regions and working for the welfare of fishing communities in a string of infrastructure projects. That such a declaration came in the pilgrim town of Somnath in Gujarat isn’t surprising, for the foundations of a smart city spread over an area of about 1400 acres was laid at Kandla, the port city. The figures he cited during his address were all the more staggering making one wonder about the source of resources. For instance, the smart city would provide employment to about 50000 people. The Blue Revolution would be initiated through the Government’s flagship Sagarmala Project attracting an investment to the tune of Rs. 8 lakh crore and creating industrial and tourism development along the coast line of the entire country. Not just content with such figures already, he also promised that 400 ports and fishing sites would be developed under the project. One would obviously wonder at how tall are these claims? Clearly Modi and his cohorts are no fan of Schumacher’s “Small is Beautiful” due to their obsession with “Bigger is Better”. What’s even more surprising is that these reckless followers of capitalism haven’t even understood what is meant by “Creative Destruction” both macro- or micro- economically. The process of Joseph Schumpeter’s creative destruction (restructuring) permeates major aspects of macroeconomic performance, not only long-run growth but also economic fluctuations, structural adjustment and the functioning of factor markets. At the microeconomic level, restructuring is characterized by countless decisions to create and destroy production arrangements. These decisions are often complex, involving multiple parties as well as strategic and technological considerations. The efficiency of those decisions not only depends on managerial talent but also hinges on the existence of sound institutions that provide a proper transactional framework. Failure along this dimension can have severe macroeconomic consequences once it interacts with the process of creative destruction. Quite unfortunately, India is heading towards an economic mess, if such policies are to slammed onto people under circumstances when neither the macroeconomic not the microeconomic apparatuses in the country are in shape to withstand cyclonic shocks. Moreover, these promotional doctrines come at a humungous price of gross violations of human and constitutional rights of the people lending credibility once again to the warnings of Schumacher’s Small is Beautiful: A Study of Economics as if People Mattered…

So, is there any comparison between Belt and Road and Blue Economy? Well, pundits could draw far-fetched comparisons between these infrastructural advances, but, for the Chinese, Belt and Road is geographically much vaster as compared to Indian Blue Economy, which is more confined to domestic consumptions but do have elements of exim and trade aspects to it. Apart from that, when it comes to fulfilling these ambitions, China with its economic might have much better resources at commissioning the initiative, whereas India, with its faltering banking industry and waning investor confidence is finding its increasingly difficult to map out routes of funding and financing. On a more geopolitical note, and especially in the wake of current events between India and Pakistan, china would do well to factor in the larger perspectives of its relations with South Asia. It’s well known that China has been using Pakistan as a foil against India since the 1960s, and with its CPEC has upped its commitment to Pakistan that includes the assurances of Pakistani well-being. But can China remain oblivious to Pakistan’s scorpion-like behavior of devouring itself? On the other hand, a stable India is providing opportunities for Chinese companies to expand themselves. The reset in Sino-Indian ties following the Wuhan Summit of 2018 has created conditions which can be of great benefit to Beijing in an era when it is facing a fundamental challenge from the United States. Who knows, New Delhi may even consider supporting the Belt & Road Initiative in some indirect fashion as the Japanese are doing?  

Infrastructure and Asian Infrastructure and Investment Bank. Some Scattered Thoughts.

What is Infrastructure?

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Infrastructure, though definitionally an elusive term, encompasses an economic standpoint consisting of large capital intensive natural monopolies. The term attains it heterogeneity by including physical structures of various types used by many industries as inputs to the production of goods and services. By this, it has come to mean either social, or economic infrastructure, wherein, in the former, are schools, hospitals etc, while in the latter are energy, water, transport, and digital communications, often considered essential ingredients in the success of the modern economy. Conceptually, infrastructure may affect aggregate output in two main ways: (i) directly, considering the sector contribution to GDP formation and as an additional input in the production process of other sectors; and (ii) indirectly, raising total factor productivity by reducing transaction and other costs thus allowing a more efficient use of conventional productive inputs. Infrastructure can be considered as a complementary factor for economic growth. How big is the contribution of infrastructure to aggregate economic performance? The answer is critical for many policy decisions – for example, to gauge the growth effects of fiscal interventions in the form of public investment changes, or to assess if public infrastructure investments can be self-financing.

Let us ponder on this a bit and begin with the question. Why is infrastructure even important? Extensive and efficient infrastructure is critical for ensuring the effective functioning of the economy, as it is an important factor determining the location of economic activity and the kinds of activities or sectors that can develop in a particular economy. Well-developed infrastructure reduces the effect of distance between regions, integrating the national market and connecting it at low cost to markets in other countries and regions. In addition, the quality and extensiveness of infrastructure networks significantly impact economic growth and affect income inequalities and poverty in a variety of ways. A well-developed transport and communications infrastructure network is a prerequisite for the access of less-developed communities to core economic activities and services. Effective modes of transport, including quality roads, railroads, ports, and air transport, enable entrepreneurs to get their goods and services to market in a secure and timely manner and facilitate the movement of workers to the most suitable jobs. Economies also depend on electricity supplies that are free of interruptions and shortages so that businesses and factories can work unimpeded. Finally, a solid and extensive communications network allows for a rapid and free flow of information, which increases overall economic efficiency by helping to ensure that businesses can communicate and decisions are made by economic actors taking into account all available relevant information. There is an existing correlation between infrastructure and economic activity through which the economic effects originate in the construction phase and rise during the usage phase. The construction phase is associated with the short-term effects and are a consequence of the decisions in the public sector that could affect macroeconomic variables: GDP, employment, public deficit, inflation, among others. The public investment expands the aggregate demand, yielding a boost to the employment, production and income. The macroeconomic effects at a medium and long term, associated with the utilization phase are related to the increase of productivity in the private sector and its effects over the territory. Both influence significantly in the competitiveness degree of the economy. In conclusion, investing in infrastructure constitutes one of the main mechanisms to increase income, employment, productivity and consequently, the competitiveness of an economy. Is this so? Well, thats what the economics textbook teaches us, and thus governments all over the world turn to infrastructure development as a lubricant to maintain current economic output at best and it can also be the basis for better industry which contributes to better economic output. Governments, thus necessitate realignment of countries’ infrastructure in tune with the changing nature of global political economy. Infrastructure security and stability concerns the quantity of spare capacity (or security of supply). Instead of acting on the efficiency frontier, infrastructure projects must operate with spare capacity to contribute to economic growth through ensuring reliable service provisions. Spare capacity is a necessary condition for a properly functioning system. To assure the level of spare capacity in the absence of storage and demand, the system needs to have excess supply. However, no rational profit-seeker will deliberately create conditions of excess supply, since it would produce a marginal cost lower than the average cost, and to circumnavigate this market failure, governments are invested with the responsibility of creating incentives ensuring securities of supply. This is seeding the substitutability of economics with financialization. 

So far, so good, but then, so what? This is where social analysts need to be incisive in unearthing facts from fiction and this faction is what constitutes the critique of development, a critique that is engineered against a foci on GDP-led growth model. This is to be done by asking uncomfortable questions to policy-makers, such as: What is the most efficient way to finance infrastructure spending? What are optimal infrastructure pricing, maintenance and investment policies? What have proven to be the respective strengths and weaknesses of the public and private sectors in infrastructure provision and management, and what shapes those strengths and weaknesses? What are the distributional consequences of infrastructure policies? How do political forces impact the efficiency of public sector provision? What framework deals best with monopoly providers of infrastructure? For developing countries, which have hitherto been plagued by weaker legal systems making regulation and enforcement more complicated, the fiscally weak position leads to higher borrowing costs. A most natural outcome is a systemic increase in financial speculation driven by deregulation transforming into financial assets. Contrary to common sense and what civil society assumes, financial markets are going deeper and deeper into the real economy as a response to the financial crisis, so that speculative capital is structurally being intertwined with productive capital changing the whole dynamics of infrastructure investment. The question then is, how far viable or sustainable are these financial interventions? Financialization produces effects which can create long-term trends (such as those on functional income distribution) but can also change across different periods of economic growth, slowdown and recession. Interpreting the implications of financialization for sustainability, therefore, requires a methodological diverse and empirical dual-track approach which combines different methods of investigations. Even times of prosperity, despite their fragile and vulnerable nature, can endure for several years before collapsing due to high levels of indebtedness, which in turn amplify the real effects of a financial crisis and hinder the economic growth. 

Role of Development Banks and AIIB

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Where do development banks fit into the schema as regards infrastructure investment? This question is a useful gamble in order to tackle AIIB, the new kid on the bloc. As the world struggles to find funds to meet the Sustainable Development Goals (SDGs), development banks could be instrumental in narrowing the gap. So, goes the logic promulgated by these banks. They can help to crowd-in the private sector and anchor private-public sector partnerships, particularly for infrastructure financing. However, misusing development banks can lead to fiscal risks and credit market distortions. To avoid these potential pitfalls, development banks need a well-defined mandate, operate without political influence, focus on addressing significant market failures, concentrate on areas where the private sector is not present, monitor and evaluate interventions and adjust as necessary to ensure impact, and, finally, be transparent and accountable. All of these are the ideals, which more often than not go the other way. China-led Asian Infrastructure Investment Bank (AIIB), despite having no track record still enjoys the highest ratings on par with the World Bank. This has fueled debates ranging from adding much-needed capital augmenting infrastructure to leniency in observing high standards of governance, and possibly ignoring environmental and societal impacts.

The AIIB was officially launched in Beijing on January 16th, 2016, with 57 founding members, including 37 in Asia and 20 non-regional countries. Being the largest shareholder of the AIIB, China has an initial subscription of $29.78 billion in authorized capital stock in the AIIB out of a total of $100 billion, and made a grant contribution of another $50 million to the AIIB Project Preparation Special Fund on January 16th, 2017. India is the second-largest shareholder, contributing $8.4 billion. Russia is the third-largest shareholder, contributing $6.5 billion, and Germany is the largest non-regional shareholder (also the fourth largest shareholder), contributing $4.5 billion. While being open to the participation of non-regional members, the AIIB is committed to and prioritizes the ownership of Asian members. This is reflected in the capital structure requirement and the requirements for the composition of Board of Governors in the AIIB’s Article of Agreement (AOA), which requires no less than 75 percent of the total subscribed capital stock to be held by regional members unless otherwise agreed by the Board of Governors by a Super Majority vote. The AOA also requires that 9 out of the AIIB’s 12 members be elected by the Governors representing regional members, and 3 representing non-regional members. The prioritization of Asian-members’ ownership of the AIIB does not necessarily mean that the AIIB’s investment is restricted only to Asia. According to its AOA, the AIIB aims to “improve infrastructure connectivity in Asia,” and it will invest in Asia and beyond as long as the investment is “concerned with economic development of the region.” The bank currently has 64 member states while another 20 are prospective members for a total of 84 approved members. 

The AIIB’s EU/OECD members potentially could have some positive influence over the institutional building and standard setting of the young institution. The European Commission has recognized that an EU presence in China-driven institutions would contribute to the adoption of best practices and fair, global standards. Adherence to such standards will be promoted by the AIIB entering into partnership with existing Multilateral Development Banks. It has also been argued that joining the AIIB would give the European countries access to the decision-making process within the AIIB, and may even allow the European countries to play a role in shaping the AIIB’s organizational structure. As an example of EU/OECD members’ activism in monitoring the AIIB’s funds allocation, both Denmark and the UK, who are AIIB’s OECD members, proposed that contributions to the AIIB would qualify as official development aid (ODA). After a thorough review of AIIB’s AOA, mandate, work plan and other available materials, the OECD’s Secretariat of the Development Assistance Committee (DAC) recommended including AIIB on the List under the category of “Regional development banks,” which means the OECD would recognize the AIIB as one of the ODA-eligible international organizations. Once approved, the Secretariat of DAC will be able to “monitor the future recipient breakdown of the AIIB’s borrowers through AIIB’s future Creditor Reporting System and thereby confirm that the actual share of funds going to countries on the DAC List of ODA Recipients is over 90%.” That is to say, if approved, there would be additional external monitor to make sure that the funds channeled through the AIIB to recipient countries are used properly. 

The AIIB’s initial total capital is $100 billion, equivalent to about 61 percent of the ADB’s initial total capital, 43 percent of the World Bank’s, 30 percent of the European Investment Bank’s (EIB), and more than twice of the European Bank for Reconstruction and Development’s (EBRD). Of this $100 billion initial capital, 20 percent is to be largely paid-in by 2019 and fully paid-in by 2024, and the remaining 80 percent is in callable capital. It needs to be noted that according to the AOA, payments for paid-in capital are due in five installments, with the exception of members designated as less developed countries, who may pay in ten installments. As of any moment, the snapshot of AIIB’s financial sheet includes total assets, members’ equities and liabilities, the last of which has negligible debt at the current stage since the AIIB has not issued any debenture or borrowed money from outside. However, to reduce the funding costs and to gain access to wider source of capital, the AIIB cannot rely solely on equity and has to issue debenture and take some leverage, particularly given that the AIIB intends to be a for-profit institution. In February 2017, the AIIB signed an International Swaps and Derivatives Association (ISDA) Master Agreement with the International Finance Corporation (IFC), which would facilitate local currency bond issuance in client countries. Moreover, AIIB intends to actively originate and lead transactions that mobilize private capital and make it a trusted partner for all parties involved in the transactions that the Bank leads. In the long term, the AIIB aims to be the repository of know-how and best practices in infrastructure finance. 

It is widely perceived that the AIIB is a tool of Chinese foreign policy, and that it is a vehicle for the implementation of the Belt and Road (One Belt, One Road) Initiative. During a meeting with global executives in June 2016, the AIIB President Jin Liqun clarified China’s position, saying the AIIB “was not created exclusively for this initiative,” and that the AIIB would “finance infrastructure projects in all emerging market economies even though they don’t belong to the Belt and Road Initiative.” It is worth pointing out that despite the efforts on trying to put some distance between the AIIB and the Belt and Road Initiative, there is still a broad perception that these two are closely related. Moreover, China has differentiated AIIB projects from its other foreign assistance projects by co-financing its initial projects with the preexisting MDBs. Co-financing, combined with European membership, will make it more likely this institution largely conforms to the international standards” and potentially will steer the AIIB away from becoming solely a tool of Chinese foreign policy. This supports China’s stated intention to complement existing MDBs rather than compete with them. It also means that the AIIB can depend on its partners, if they would allow so, for expertise on a wide range of policy and procedural issues as it develops its lending portfolio.

Although AIIB has attracted a great number of developing and developed countries to join as members and it has co-financed several projects with other MDBs, there is no guarantee for any easy success in the future. There are several formidable challenges for the young multilateral institution down the road. Not all the infrastructure investment needs in Asia is immediately bankable and ready for investors’ money. Capital, regardless it’s sovereign or private, will not flow in to any project without any proper preparation. Although Asia faces a huge infrastructure financing gap, there is a shortage of ‘shovel-ready’ bankable projects owing to the capacity limitations. The young AIIB lacks the talent and expertise to create investor-ready bankable projects, despite that it has created a Project Preparation Special Fund thanks to $50 million by China. The AIIB aims to raise money in global capital markets to invest in the improvement of trans-regional connectivity. However, infrastructure projects are not naturally attractive investment due to huge uncertainties throughout the entire life cycle as well as unjustified risk-profit balance. Getting a top-notch credit rating is just a start. The AIIB has to find innovative ways to improve the risk-adjusted profitability of its projects. This issue itself has been a big challenge for many MDBs who engage in infrastructure financing for a long time. It is uncertain if the AIIB could outperform the other much more matured MDBs to find a solution to tackle the profitability problem in infrastructure financing. The highest rating it has received from ratings agencies could pose a challenge in itself. The high rating not only endorses the bank’s high capital adequacy and robust liquidity position, but also validates the strong political will of AIIB’s members and the bank’s governance frameworks. A good rating will help the AIIB issue bonds at favorable rate and utilize capital markets to reduce its funding costs. This certainly will contribute to AIIB’s efforts to define itself as a for-profit infrastructure investment bank. However, there is no guarantee that the rating will hold forever. Many factors may impact the rating in the future, including but not limited to AIIB’s self-capital ratio, liquidity, management, yieldability, risk management ability, and its autonomy and independency from China’s influence. 

Global Significance of Chinese Investments. My Deliberations in Mumbai (04/03/2018)

Legends:

What are fitted values in statistics?

The values for an output variable that have been predicted by a model fitted to a set of data. a statistical is generally an equation, the graph of which includes or approximates a majority of data points in a given data set. Fitted values are generated by extending the model of past known data points in order to predict unknown values. These are also called predicted values.

What are outliers in statistics?

These are observation points that are distant from other observations and may arise due to variability in the measurement  or it may indicate experimental errors. These may also arise due to heavy tailed distribution.

What is LBS (Locational Banking statistics)?

The locational banking statistics gather quarterly data on international financial claims and liabilities of bank offices in the reporting countries. Total positions are broken down by currency, by sector (bank and non-bank), by country of residence of the counterparty, and by nationality of reporting banks. Both domestically-owned and foreign-owned banking offices in the reporting countries record their positions on a gross (unconsolidated) basis, including those vis-à-vis own affiliates in other countries. This is consistent with the residency principle of national accounts, balance of payments and external debt statistics.

What is CEIC?

Census and Economic Information Centre

What are spillover effects?

These refer to the impact that seemingly unrelated events in one nation can have on the economies of other nations. since 2009, China has emerged a major source of spillover effects. This is because Chinese manufacturers have driven much of the global commodity demand growth since 2000. With China now being the second largest economy in the world, the number of countries that experience spillover effects from a Chinese slowdown is significant. China slowing down has a palpable impact on worldwide trade in metals, energy, grains and other commodities.

How does China deal with its Non-Performing Assets?

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China adopted a four-point strategy to address the problems. The first was to reduce risks by strengthening banks and spearheading reforms of the state-owned enterprises (SOEs) by reducing their level of debt. The Chinese ensured that the nationalized banks were strengthened by raising disclosure standards across the board.

The second important measure was enacting laws that allowed the creation of asset management companies, equity participation and most importantly, asset-based securitization. The “securitization” approach is being taken by the Chinese to handle even their current NPA issue and is reportedly being piloted by a handful of large banks with specific emphasis on domestic investors. According to the International Monetary Fund (IMF), this is a prudent and preferred strategy since it gets assets off the balance sheets quickly and allows banks to receive cash which could be used for lending.

The third key measure that the Chinese took was to ensure that the government had the financial loss of debt “discounted” and debt equity swaps were allowed in case a growth opportunity existed. The term “debt-equity swap” (or “debt-equity conversion”) means the conversion of a heavily indebted or financially distressed company’s debt into equity or the acquisition by a company’s creditors of shares in that company paid for by the value of their loans to the company. Or, to put it more simply, debt-equity swaps transfer bank loans from the liabilities section of company balance sheets to common stock or additional paid-in capital in the shareholders’ equity section.

Let us imagine a company, as on the left-hand side of the below figure, with assets of 500, bank loans of 300, miscellaneous debt of 200, common stock of 50 and a carry-forward loss of 50. By converting 100 of its debt into equity (transferring 50 to common stock and 50 to additional paid-in capital), thereby improving the balance sheet position and depleting additional paid-in capital (or using the net income from the following year), as on the right-hand side of the figure, the company escapes insolvency. The former creditors become shareholders, suddenly acquiring 50% of the voting shares and control of the company.

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The first benefit that results from this is the improvement in the company’s finances produced by the reduction in debt. The second benefit (from the change in control) is that the creditors become committed to reorganizing the company, and the scope for moral hazard by the management is limited. Another benefit is one peculiar to equity: a return (i.e., repayment) in the form of an increase in enterprise value in the future. In other words, the fact that the creditors stand to make a return on their original investment if the reorganization is successful and the value of the business rises means that, like the debtor company, they have more to gain from this than from simply writing off their loans. If the reorganization is not successful, the equity may, of course, prove worthless.

The fourth measure they took was producing incentives like tax breaks, exemption from administrative fees and transparent evaluations norms. These strategic measures ensured the Chinese were on top of the NPA issue in the early 2000s, when it was far larger than it is today. The noteworthy thing is that they were indeed successful in reducing NPAs. How is this relevant to India and how can we address the NPA issue more effectively?

For now, capital controls and the paying down of foreign currency loans imply that there are few channels through which a foreign-induced debt sell-off could trigger a collapse in asset prices. Despite concerns in 2016 over capital outflow, China’s foreign exchange reserves have stabilised.

But there is a long-term cost. China is now more vulnerable to capital outflow. Errors and omissions on its national accounts remain large, suggesting persistent unrecorded capital outflows. This loss of capital should act as a salutary reminder to those who believe that China can take the lead on globalisation or provide the investment or currency business to fuel things like a post-Brexit economy.

The Chinese government’s focus on debt management will mean tighter controls on speculative international investments. It will also provide a stern test of China’s centrally planned financial system for the foreseeable future.

Global Significance of Chinese investments

Sino-India Doklam Standoff, #BRICS and Shanghai Cooperation Organization (SCO). How the Resolution Could Have Been Reached?

The National Security Adviser of India, Mr. Ajit Doval was posed with a blunt question by China’s state councillor Yang Jiechi when the two met on July 27 to make a settlement over the disputable patch in the Bhutan-owned Doklam stretch. He was asked: Is it  your territory? However, this tough question failed to faze Doval, who, according to reliable sources, had most calmly replied that the stretch of land in question is not China’s territory either – Does every disputed territory become China’s by default? Doval asked in return. This has the potential to read a lot in between and thus without getting awed by the response, deconstructing what transpired is the imperative. This sharp exchange between the two countries was followed by several rounds of negotiations between the two sides in Beijing, with India’s foreign secretary S Jaishankar and India’s ambassador to China Vijay Gokhale trying to reach out to a mutually acceptable solution. These meetings were also sanctioned by the prime ministers of both the countries, especially when they met in Hamburg on the sidelines of G20 meeting on July 7. In fact, the Indian Prime Minister Narendra Modi and his Chinese counterpart Xi Jinping also agreed to the fact that the negotiations should be held at the NSA level in order to let the dispute not escalate any more. Modi later asked his diplomatic team to reach to a solution at the earliest as this dispute had been the worst in numerous years and the two countries cannot afford to lose each other’s support any more.

This is Doklam, the tri-junction between India, Bhutan and China.

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It was here that India and China were involved in a three-month standoff with the two largest militaries in the world in a eyeball-to-eyeball contact. While, it was in everybody’s interest that the countries do not spark a conflagration, the suspense over this tiny out-of-bounds area had consequences to speculations trajectory. It all started in June this year, when the Indian troops crossed over the disputed territory claimed by both China and Bhutan as its sovereign territory to halt a road construction at Doklam, which could have given China the surveillance and access mechanism over India’s Chicken Neck, the narrow strip that connects the NE Indian states with the mainland. But, other reason for India’s crossing over the boundary lies in a pact with Bhutan where the country would defend any incursions into Bhutan. The standoff was pretty tense with piling up of the war machinery and the troops from either side in a ready-to-combat stature, but still showed extreme presence of mind from getting involved in anything adventurous. China’s blistering state-owned media attacks from instigating to belligerent to carrying out travel advisories on the one hand, and India’s state-purchased media exhibiting peppered nationalism to inflating the 56″ authoritarianism on the other did not really help matters boil down to what was transpiring on the ground. We had pretty much only these two state-owned-purchased behemoths to rely upon and imagine the busting of the myths. But, this week, much to the respite of citizens from either side of the border and the international community at large keenly observing the developments as they were unfolding, the tensions eased, or rather resolved almost dramatically as they had begun in the first place. The dramatic end was at least passed over in silence in the media, but whatever noises were made were trumpeting victories for their respective sides. Even if this were a biased viewpoint, the news reports were quantitative largely and qualitative-ness was generally found at large. The resolution agreed on the the accelerated withdrawal of troops from the site of the standoff.

China still vociferously insists that the territorial dispute in Sikkim was resolved as long ago as in 1890, when Beijing and the British Empire signed the so-called Convention of Calcutta, which defined Sikkim’s borders. As per Article (1) of Convention of 1890, it was agreed that the boundary of Sikkim and Tibet shall be the crest of the mountain range separating the waters flowing into the Sikkim Teesta and its affluents, from the waters flowing into the Tibetan Mochu and northwards into other rivers of Tibet. The line commences at Mount Gipmochi, on the Bhutan frontier, and follows the above-mentioned water-parting to the point where it meets Nepal territory. However, Tibet refused to recognise the validity of Convention of 1890 and further refused to carry into effect the provisions of the said Convention. In 1904, a treaty known as a Convention between Great Britain and Tibet was signed at Lhasa. As per the Convention, Tibet agreed to respect the Convention of 1890 and to recognise the frontier between Sikkim and Tibet, as defined in Article (1) of the said Convention. On April 27, 1906, a treaty was signed between Great Britain and China at Peking, which confirmed the Convention of 1904 between Great Britain and Tibet. The Convention of 1890 was entered by the King of Great Britain on behalf of India before independence and around the time of independence, the Indian Independence (International Arrangement) Order, 1947 was notified by Secretariat of the Governor-General (Reforms) on August 14, 1947. The Order provided, inter alia, that the rights and obligations under all international agreements to which India is a party immediately before the appointed day will devolve upon the Dominion of India. Therefore, in terms of Order of 1947, the government of India is bound by the said Convention of 1890. However, India’s affirmation of the Convention of 1890 was limited to the alignment of the India-China border in Sikkim, based on watershed, and not with respect to any other aspects. However, India-backed Bhutan is convinced that Beijing’s attempt to extend a road to the Doklam area goes against a China-Bhutan agreement on maintaining peace in the region until the dispute is resolved.

The question then is: how could have the tensions that were simmering just short of an accident resolved? Maybe, for the Indians, these were a result of diplomatic procedures followed through the time of tensions, whereas for the Chinese, it was a victory and yet another lesson learnt by the Indians after their debacle in the 1962 conflict. The victory stood its claim because the Chinese maintained that even if the Indians were withdrawing from the plateau, the Chinese would continue patrolling the area. Surprisingly, there isn’t a convincing counterclaim by the Indians making the resolution a tad more concessionary as regards the Indians. It was often thought that amid tensions over the dispute, there had been growing concerns over whether Indian Prime Minister Narendra Modi would skip the upcoming BRICS summit in China as he did in May when Beijing hosted an international event to celebrate the One Belt One Road Initiative championed by Chinese President Xi Jinping. Harsh Pant, a professor of International Relations at King’s College, London, and a distinguished fellow at Observer Research Foundation, said,

If the road is not being built, it’s legal enough for India to pullback, because the boundary dispute is not the problem and has been going on for ages. The real issue was China’s desire to construct a concrete road in this trijunction under dispute. If the Chinese made the concession to not build the road, the whole problem went away.

The Chinese Foreign Ministry’s spokeswoman said on Tuesday that China would adjust its road building plans in the disputed area taking into account of various factors such as the weather. In his turn, Prime Minister Modi would not have gone ahead with the visit to China if the border dispute remains unresolved, according to the expert. Following the resolution of the border dispute, India’s MEA said that Modi plans to visit Xiamen in China’s Fujian province during September 3-5, 2017 to attend the 9th BRICS Summit. But, the weather angle refused to go, as in the words of Hu Zhiyong, a research fellow at the Institute of International Relations of the Shanghai Academy of Social Sciences,

The weather condition is still the main reason. We all know that heavy snowfall is expected in the Donglang region by late September. The snow will block off the mountain completely, making it impossible to continue road construction. This incident has allowed China to clearly understand potential threat from India. I would call India an ‘incompetent bungler.’ That’s because India always is a spoiler in all the international organizations it becomes a part of. It always takes outrageous and irrational actions. After this incident, China realized that India is not a friendly partner, but a trouble-maker.

The Shanghai-based expert pointed out that the recent standoff has helped China better understand the potential harm India can cause. Chinese Foreign Minister Wang Yi said that Beijing hopes that New Delhi will remember the lessons of latest border confrontation and will avoid such incidents in the future. Despite both China and India agreeing to deescalate the border dispute for the sake of the BRICS summit, the temporary compromise may not last long, as tensions could quickly flare again. In the words of Brahma Chellaney, a professor of strategic studies at the New Delhi-based Center for Policy Research,

The standoff has ended without resolving the dispute over the Doklam plateau. The Indian forces have retreated 500 meters to their ridge-top post at Doka La and can quickly intervene if the Chinese People’s Liberation Army (PLA) attempts to restart work on the military road – a construction that triggered the face-off. As for China, it has withdrawn its troops and equipment from the face-off site, but strongly asserts the right to send in armed patrols. A fresh crisis could flare if the PLA tries again to build the controversial road to the Indian border.

Hu, the Shanghai-based Chinese professor, asserted that the recent standoff has allowed China to better prepare for future border disputes with India. The Chinese Defense Ministry said that China will maintain a high combat readiness level in the disputed area near the border with India and Bhutan and will decisively protect China’s territorial sovereignty.

So, where does Shanghai Cooperation Organization (SCO) fit in here?

With India and Pakistan as newly installed members of the Shanghai Cooperation Organization, or SCO, China is likely to face an increasing amount of divisiveness within a regional economic and security organization accustomed to extreme comity and cooperative discussions. India’s entry could especially frustrate Beijing because of rising geopolitical competition between the Asian giants and different approaches to counterterrorism. Beijing may not have even wanted India to join the SCO. Russia first proposed India as a member, likely in part to complement bilateral economic and security engagement, but mainly to constrain China’s growing influence in the organization. Russia is increasingly concerned that post-Soviet SCO members  –  Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan – are drifting too far into China’s geostrategic orbit. Moscow had long delayed implementing Chinese initiatives that would enable Beijing to reap greater benefits from regional trade, including establishing an SCO regional trade agreement and bank. As China gains more clout in Central Asia, Moscow may welcome New Delhi by its side to occasionally strengthen Russia’s hand at slowing or opposing Chinese initiatives. Indeed, during a visit to Moscow, Modi said, “India and Russia have always been together on international issues.”

Going forward, this strategy is likely to pay big dividends. New Delhi has a major hang-up related to the activities of its archrival Pakistan – sponsored by Beijing at the 2015 SCO summit to balance Moscow’s support of India – and continues to be highly critical of China’s so-called “all-weather friendship” with Islamabad. In May, New Delhi refused to send a delegation to Beijing’s widely publicized Belt and Road Initiative summit, which was aimed at increasing trade and infrastructure connectivity between China and Eurasian countries. According to an official Indian statement, the flagship project of the Belt and Road Initiative – the China-Pakistan Economic Corridor – was not being “pursued in a manner that respects sovereignty and territorial integrity.” Indian opposition stems from the plan to build the corridor through the disputed Kashmir region and to link it to the strategically positioned Pakistani port of Gwadar, prompting Prime Minister Narendra Modi to raise the issue again during his acceptance speech at the SCO summit last month. New Delhi likely will continue to criticize the corridor in the context of the SCO because, as a full member, India has the right to protest developments that do not serve the interests of all SCO members. The SCO also offers another public stage for India to constantly question the intent behind China’s exceptionally close ties to Pakistan.

India-Pakistan tensions occasionally flare up, and Beijing may have to brace for either side to use the SCO as a platform to criticize the other. In the absence of a major incident, Beijing has admirably handled the delicacy of this situation. When asked in early June whether SCO membership would positively impact India-Pakistan relations, China spokesperson Hua Chunying said: “I see the journalist from Pakistan sit[s] right here, while journalists from India sit over there. Maybe someday you can sit closer to each other.” Additionally, the Chinese military’s unofficial mouthpiece, Global Times, published an op-ed suggesting that SCO membership for India and Pakistan would lead to positive bilateral developments. Even if that is overly optimistic, it would set the right tone as the organization forges ahead. But the odds are against China’s desired outcome. Beijing needs to look no farther than South Asia for a cautionary tale. In this region, both India and Pakistan are members of the multilateral grouping known as the South Asian Association for Regional Cooperation. New Delhi, along with Afghanistan, Bangladesh and Bhutan, boycotted last year’s summit in Islamabad because it believed Pakistan was behind a terrorist attack on an Indian army base. Even with an official ban on discussing bilateral issues in its proceedings, SAARC has been perennially hobbled by the intrusion of India-Pakistan grievances. Beijing can probably keep its close friend Islamabad in line at the SCO, but this likely won’t be the case with New Delhi. Another major issue for the SCO to contend with is the security of Afghanistan. An integral component of the organization is the Regional Anti-Terrorist Structure, aimed at combating China’s “three evils” – terrorism, extremism, and separatism. India, however, is likely to reliably and reasonably highlight the contradiction between China’s stated anti-terrorism goals and the reality of its policy. Most notably, Beijing has consistently looked the other way as Pakistani intelligence services continue to support terrorist groups in Afghanistan, including the Afghan Taliban and Haqqani Network. Moreover, because India is particularly close to the Afghan government, it could seek to sponsor Afghanistan to move from observer status toward full SCO membership. This would give India even greater strength in the group and could bolster Russia’s position as well.

Lingering border disputes and fierce geostrategic competition in South Asia between China and India is likely to temper any cooperation Beijing might hope to achieve with New Delhi in the SCO. Mutual suspicions in the maritime domain persist as well, with the Indian government recently shoring up its position in the strategically important Andaman and Nicobar island chain to counter the perceived Chinese “string of pearls” strategy – aimed at establishing access to naval ports throughout the Indian Ocean that could be militarily advantageous in a conflict. Such mutual suspicions will likely impact SCO discussions, perhaps in unpredictable ways. Although India may be an unwelcome addition and irritant to Beijing at the SCO, China does not necessarily need the SCO to achieve its regional objectives. From its announcement in 2001, the SCO gave Beijing a productive way to engage neighbors still dominated by Moscow. But today, China’s economic and military strength makes it far more formidable on its own – a point that is only magnified as Russian influence simultaneously recedes, or rather more aptly fluctuates. For instance, even though India rejected Beijing’s Belt and Road Initiative overture, China remains India’s top trading partner and a critical market for all Central and South Asian states, leaving them with few other appealing options. India’s entry into the SCO, however, could put Beijing in the awkward position of highlighting the organization’s value, while increasingly working around or outside of it. Outright failure of the SCO would be unacceptable for China because of its central role in establishing the forum. Regardless of the bickering between countries that may break out, Beijing can be expected to make yet another show of the importance of the SCO, with all of the usual pomp and circumstance, at the next summit in June 2018. China as host makes this outcome even more likely.

Taking on the imagination to flight, I am of the opinion that its the banks/financial institutions, more specifically the Shanghai Cooperation Organisation (SCO) and the upcoming BRICS Summit that have played majorly into this so-called resolution. India’s move to enter Doklam/Donglang was always brazen as India, along with Pakistan entered the Shanghai Cooperation Organisations (SCO) shortly before India entered Chinese territory. In this sense, India was almost mocking the Shanghai Cooperation Organisation by refusing to utilise the SCO as a proper forum in which to settle such disputes diplomatically. So, even if diplomatically it is a victory for #BRICS, materially it is #China‘s. Whatever, two nuclear-powered states in a stand-off is a cold-threat to….whatever the propaganda machine wants us to believe, the truth is laid bare. This so-called diplomatic victory has yielded a lot of positive, and in the process have snatched the vitality of what economic proponents in the country like to express solemnly of late, growth paradigm, wherein the decision is rested with how accelerated your rate of growth is, and thus proportionally how much of a political clout you can exercise on the international scenario. India’s restraint is not to be taken as how the Indian media projects it in the form of a victory, for that would indeed mean leading the nation blindly at the helm of proto-fascism. This could get scary.

Dance of the Shiva, q’i (chee) and Tibetan Sunyata. Manifestation of Mysticism.

अनेजदेकं मनसो जवीयो नैनद्देवाप्नुवन्पूर्वमर्षत् ।
तद्धावतोऽन्यान्नत्येति तिष्ठत् तस्मिन्नापो मातरिश्वा दधाति ॥

anejadekaṃ manaso javīyo nainaddevāpnuvanpūrvamarṣat |
taddhāvato’nyānnatyeti tiṣṭhat tasminnāpo mātariśvā dadhāti ||

The self is one. It is unmoving: yet faster than the mind. Thus moving faster, It is beyond the reach of the senses. Ever steady, It outstrips all that run. By its mere presence, the cosmic energy is enabled to sustain the activities of living beings.

तस्मिन् मनसि ब्रह्मलोकादीन्द्रुतं गच्छति सति प्रथमप्राप्त इवात्मचैतन्याभासो गृह्यते अतः मनसो जवीयः इत्याह ।

tasmin manasi brahmalokādīndrutaṃ gacchati sati prathamaprāpta ivātmacaitanyābhāso gṛhyate ataḥ manaso javīyaḥ ityāha |

When the mind moves fast towards the farthest worlds such as the brahmaloka, it finds the Atman, of the nature of pure awareness, already there; hence the statement that It is faster than the mind.

नित्योऽनित्यानां चेतनश्चेतनानाम्
एको बहूनां यो विदधाति कामान् ।
तमात्मस्थं योऽनुपश्यन्ति धीराः
तेषां शान्तिः शाश्वतं नेतरेषाम् ॥

nityo’nityānāṃ cetanaścetanānām
eko bahūnāṃ yo vidadhāti kāmān |
tamātmasthaṃ yo’nupaśyanti dhīrāḥ
teṣāṃ śāntiḥ śāśvataṃ netareṣām ||

He is the eternal in the midst of non-eternals, the principle of intelligence in all that are intelligent. He is One, yet fulfils the desires of many. Those wise men who perceive Him as existing within their own self, to them eternal peace, and non else.

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Eastern mysticism approaches the manifestation of life in the cosmos and all that compose it from a position diametrically opposed to the view that prevailed until recently among the majority of Western scientists, philosophers, and religionists. Orientals see the universe as a whole, as an organism. For them all things are interconnected, links in a chain of beings permeated by consciousness which threads them together. This consciousness is the one life-force, originator of all the phenomena we know under the heading of nature, and it dwells within its emanations, urging them as a powerful inner drive to grow and evolve into ever more refined expressions of divinity. The One manifests, not only in all its emanations, but also through those emanations as channels: it is within them and yet remains transcendent as well.

The emphasis is on the Real as subject whereas in the West it is seen as object. If consciousness is the noumenal or subjective aspect of life in contrast to the phenomenal or objective — everything seen as separate objects — then only this consciousness can be experienced, and no amount of analysis can reveal the soul of Reality. To illustrate: for the ancient Egyptians, their numerous “gods” were aspects of the primal energy of the Divine Mind (Thoth) which, before the creation of our universe, rested, a potential in a subjective state within the “waters of Space.” It was through these gods that the qualities of divinity manifested.

A question still being debated runs: “How does the One become the many?” meaning: if there is a “God,” how do the universe and the many entities composing it come into being? This question does not arise among those who perceive the One to dwell in the many, and the many to live in the One from whom life and sustenance derive. Despite our Western separation of Creator and creation, and the corresponding distancing of “God” from human beings, Western mystics have held similar views to those of the East, e.g.: Meister Eckhart, the Dominican theologian and preacher, who was accused of blasphemy for daring to say that he had once experienced nearness to the “Godhead.” His friends and followers were living testimony to the charisma (using the word in its original connotation of spiritual magnetism) of those who live the life of love for fellow beings men like Johannes Tauler, Heinrich Suso, the “admirable Ruysbroeck,” who expressed views similar to those of Eastern exponents of the spiritual way or path.

In old China, the universe was described as appearing first as q’i (chee), an emanation of Light, not the physical light that we know, but its divine essence sometimes called Tien, Heaven, in contrast to Earth. The q’i energy polarized as Yang and Yin, positive and negative electromagnetism. From the action and interaction of these two sprang the “10,000 things”: the universe, our world, the myriads of beings and things as we perceive them to be. In other words, the ancient Chinese viewed our universe as one of process, the One energy, q’i, proliferating into the many.

In their paintings Chinese artists depict man as a small but necessary element in gigantic natural scenes. And since we are parts of the cosmos, we are embodiments of all its potentials and our relationship depends upon how we focus ourselves: (1) harmoniously, i.e., in accord with nature; or (2) disharmoniously, interfering with the course of nature. We therefore affect the rest: our environment, all other lives, and bear full responsibility for the outcome of our thoughts and acts, our motivations, our impacts. Their art students were taught to identify with what they were painting, because there is life in every thing, and it is this life with which they must identify, with boulders and rocks no less than with birds flying overhead. Matter, energy, space, are all manifestations of q’i and we, as parts thereof, are intimately connected with all the universe.

In India, the oneness of life was seen through the prism of successive manifestations of Brahman, a neuter or impersonal term in Sanskrit for divinity, the equivalent of what Eckhart called the Godhead. Brahman is the source of the creative power, Brahma, Eckhart’s Creator; and also the origin of the sustaining and supporting energy or Vishnu, and of the destructive/regenerative force or Siva. As these three operate through the cosmos, the “world” as we know it, so do they also through ourselves on a smaller scale according to our capacity. Matter is perceived to be condensed energy, Chit or consciousness itself. To quote from the Mundaka Upanishad:

By the energism of Consciousness Brahman is massed; from that: Matter is born and from Matter Life and Mind and the worlds . . .

In another Hindu scripture, it is stated that when Brahma awakened from his period of rest between manifestations, he desired to contemplate himself as he is. By gazing into the awakening matter particles as into a mirror, he stirred them to exhibit their latent divine qualities. Since this process involves a continuous unfoldment from the center within, an ever-becoming, there can never be an end to the creativity — universal “days” comprising trillions of our human years, followed by a like number of resting “nights.”

We feel within ourselves the same driving urge to grow that runs through the entire, widespread universe, to express more and more of what is locked up in the formless or subjective realm of Be-ness, awaiting the magic moment to come awake in our phase of life.

Tibetan metaphysics embraces all of this in discussing Sunyata, which can be viewed as Emptiness if we use only our outer senses, or as Fullness if we inwardly perceive it to be full of energies of limitless ranges of wave-lengths/frequencies. This latter aspect of Space is the great mother of all, ever fecund, from whose “heart” emerge endless varieties of beings, endless forces, ever-changing variations — like the pulsing energies the new physicists perceive nuclear subparticles to be.

In the Preface to his Tao of physics Fritjof Capra tells how one summer afternoon he had a transforming experience by the seashore as he watched the waves rolling in and felt the rhythm of his own breathing. He saw dancing motes revealed in a beam of sunlight; particles of energy vibrating as molecules and atoms; cascades of energy pouring down upon us from outer space. All of this coming and going, appearing and disappearing, he equated with the Indian concept of the dance of Siva . . . he felt its rhythm, “heard” its sound, and knew himself to be a part of it. Through this highly personal, indeed mystical, experience Capra became aware of his “whole environment as being engaged in a gigantic cosmic dance.”

This is the gist of the old Chinese approach to physics: students were taught gravitation by observing the petals of a flower as they fall gracefully to the ground. As Gary Zukav expresses it in his Dancing Wu Li Masters: An Overview of the New Physics:

The world of particle physics is a world of sparkling energy forever dancing with itself in the form of its particles as they twinkle in and out of existence, collide, transmute, and disappear again.

That is: the dance of Siva is the dance of attraction and repulsion between charged particles of the electromagnetic force. This is a kind of “transcendental” physics, going beyond the “world of opposites” and approaching a mystical view of the larger Reality that is to our perceptions an invisible foundation of what we call “physical reality.” It is so far beyond the capacity or vocabulary of the mechanically rational part of our mind to define, that the profound Hindu scripture Isa Upanishad prefers to suggest the thought by a paradox:

तदेजति तन्नैजति तद्दूरे तद्वन्तिके ।
तदन्तरस्य सर्वस्य तदु सर्वस्यास्य बाह्यतः ॥

tadejati tannaijati taddūre tadvantike |
tadantarasya sarvasya tadu sarvasyāsya bāhyataḥ ||

It moves. It moves not.  It is far, and it is near. It is within all this, And It is verily outside of all this.

Indeed, there is a growing recognition mostly by younger physicists that consciousness is more than another word for awareness, more than a by-product of cellular activity (or of atomic or subatomic vibrations). For instance, Jack Sarfatti, a quantum physicist, says that signals pulsating through space provide instant communication between all parts of the cosmos. “These signals can be likened to pulses of nerve cells of a great cosmic brain that permeates all parts of space (Michael Talbot, Mysticism and the New Physics).” Michael Talbot quotes Sir James Jeans’ remark, “the universe is more like a giant thought than a giant machine,” commenting that the “substance of the great thought is consciousness” which pervades all space. Or as Schrödinger would have it:

Consciouness is never experienced in the plural, only in the singular….Consciouness is a singular of which the plural is unknown; that; there is only one thing and that, what seems to be a plurality is merely a series of different aspects of this one thing, produced by a deception (the Indian Maya).

Other phenomena reported as occurring in the cosmos at great distances from each other, yet simultaneously, appear to be connected in some way so far unexplained, but to which the term consciousness has been applied.

In short, the mystic deals with direct experience; the intuitive scientist is open-minded, and indeed the great discoveries such as Einstein’s were made by amateurs in their field untrammeled by prior definitions and the limitations inherited from past speculations. This freedom enabled them to strike out on new paths that they cleared and paved. The rationalist tries to grapple with the problems of a living universe using only analysis and whatever the computer functions of the mind can put together.

The theosophic perspective upon universal phenomena is based on the concept of the ensoulment of the cosmos. That is: from the smallest subparticle we know anything about to the largest star-system that has been observed, each and all possess at their core vitality, energy, an active something propelling towards growth, evolution of faculties from within.

The only “permanent” in the whole universe is motion: unceasing movement, and the ideal perception is a blend of the mystical with the scientific, the intuitive with the rational.

Activists’ Position on New Development Bank, Especially in the Wake of 2nd Annual Meetings Held at New Delhi (31st March – 2nd April). Part 1.

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This is an uncut version and might differ largely from the Declaration which the Civil society Organizations put up. It is also inspired by inputs from the Goa Declaration. So, here goes:

Peoples’ Forum on BRICS is a forum of peoples’ movements, activists, trade unions, national-level networks and CSOs. We intend to win our demands for social, economic and environmental justice. We heard testimonies confirming that the BRICS countries and corporations are reinforcing the dominant neoliberal, extractivist paradigm. Negative trends in the areas of global and local politics, and on issues of economics, environment, development, peace, conflict and aggressive nationalism, or social prejudice based on gender, race, caste, sexual orientation are not being reversed by the BRICS, but instead are often exacerbated. The BRICS speak of offering strong alternatives to the unfair North-dominated regimes of trade, finance, investment and property rights, climate governance, and other multilateral regimes. But on examination, we find these claims unconvincing.The victories we have won already on multiple fronts – such as halting numerous multinational corporations’ exploitation, gaining access to essential state services, occupying land and creating agricultural cooperatives,  and generating more humane values in our societies – give us momentum and optimism.

Our experience with other Multilateral Development Banks in the past have had bitter experiences with their involvement leaving a trail of destruction and irreparable damage involving devastation of the ecologies, forced eviction and displacement, inadequate policies of rehabilitation and resettlement, catalyzing loss of livelihoods and responsible for gross human rights violations. Despite having redress mechanisms, these MDBs have proven to carry forward their neoliberal agenda with scant respect for environment and human rights. Not only have their involvement resulted in the weakening of public institutions on one hand, their have consciously incorporated sharing the goods with private players and furthering their cause under the name of growth-led development, ending extreme poverty and sharing prosperity on the other. Moreover, with Right to Dissemination of Information forming one of the pillars of these MDBs, concerns of transparency and accountability are exacerbated with a dearth of information shared, inadequate public consultations and an absolute lack of Parliamentary Oversight over their involvement in projects and at policy-levels. There are plenty of examples galore with privatizing basic amenities like drinking water and providing electricity that have backfired, but nevertheless continued with. In other words, MDBs have stripped the people of the resources that commons.

The Forum views the emergence of New Development Bank in the context of:

  1. Threat to Democracy with an upsurge of right-wing nationalism, not only in BRICS, but also beyond on the global scale.
  2. As a result of this threat, state repression is on an upswing and aggravated under different norms, growth-led development being one among them.
  3. Widespread ecological destruction, with catastrophic rates of species loss, pollution of land and air, freshwater and ocean degradation, and public health threats rising, to which no BRICS country is immune.
  4. The precarious health of the economy and continuing financial meltdown, reflected in the chaos that several BRICS’ stock and currency markets have been facing, as well as in our countries’ vulnerability to crisis-contagion if major European banks soon fail in a manner similar to the US-catalyzed meltdown in 2008-09.
  5. The longer-term crisis of capitalism is evident in the marked slowdown in international trade and in declining global profit rates, especially evident in the three BRICS countries (South Africa, Russia and Brazil) which have negative or negligible GDP growth.
  6. Addition to commodity crashes, one cause of the economic crisis is the deregulatory, neoliberal philosophy adopted by BRICS governments, which puts corporate property rights above human and environmental rights; in the guise of development.
  7. The new generation of Bilateral Trade and Investment Treaties will potentially have adverse impacts on lives and livelihoods of people across the BRICS and their hinterlands, and need complete rethinking.
  8. The world’s workers are losing rights, farmers are suffering to the point of suicide, and labour casualisation is rampant in all our countries, with the result that BRICS workers are engaged in regular protest, including the strike by 180 million Indian workers which inspired the world on 2 September 2016.
  9. The social front, the threat to our already-inadequate welfare policies is serious, especially in Brazil’s coup regime but also across the BRICS where inadequate social policies are driving people on the margins to destitution.
  10. 10.Patriarchy and sexual violence, racism, communalism, caste discrimination, xenophobia and homophobia run rampant in all the BRICS, and because these forces serve our leaders’ interests, they are not addressing the structural causes, perpetuating divide-and-rule politics, and failing to dissuade ordinary people from contributing to oppression.

New Development Bank calls itself Green. However, the Bank is shrouded under a veil of secrecy. The website of the Bank lacks information about its activities to the extent that more than official records, one has to rely on secondary and tertiary sources of information. Not that such information isn’t forthcoming officially, it is the nature of unproven, untested environmental and social safeguards that is the point of contentious concerns for the communities who might adversely impacted by the projects financed by the Bank in their backyards. Unlike the World Bank and the Asian Development Bank, which somewhat robust safeguards to be followed and grievance redress mechanisms (not discounting sometimes questionable efficacies though), the NDB is yet to draft any such operational guidelines and redressal. Although speculative at large, such an absence could be well off the mark in meeting established benchmarks. Due to the lack of such mechanisms, communities may face threats of displacement, evictions, ecological destruction, loss of livelihoods, and severe curtailment of basic rights to life. These issues have recurred for decades due to projects funded by other multilateral development banks. Moreover, as a co-financier with other development institutions, the intensity of NDB’s seriousness on the objectives of promoting transparency, accountability and probity stands questioned. Furthermore, the NDB intends to be “fast, flexible and efficient”, without sacrificing quality. The Bank will use various financial instruments to ‘efficiently’ meet the demands of member states and clients. This is where things could get a little murkier, as NDB too has agendas of economic development dominating social and political developments, and the possibilities of statistical number jugglery to establish the supremacy of the ‘gross economic development’ sometimes trampling on human rights and environmental concerns. Consequently, the economic measures taken on many occasions forgo the human capital in a relentless pursuit of development agenda.

NDB could likely put issues concerning the marginalized on the back-burner in its accelerated economic means without justifying the ends. Whatever be the underlying philosophy of development finance, questions of sustainability from both social and ecological perspective should always be decided along with genuinely informed peoples’ participation. This is possible only when the information is transparently disseminated and there are measures for qualifying accountability rather than quantifying it. Furthermore, the NDB seems to have learnt no lessons from other MDBs with not only an absence of safeguards and dependency on country systems, but with all the more reliance on national development financial institutions which are liable to be relaxed in specific cases. The NDB has not engaged with the people directly and its engagement with the CSOs is a farce considering that there is massive absence of communities, marginalized groups, indigenous peoples who are likely to face the brunt of its investments. Free Prior and Informed Consent (FPIC) does not even exist in its dictionary. Adding to the woes is the accelerated pace of investing in projects without the policies being in place.

Everywhere that people’s movements have made alternative demands – such as democracy, peace, poverty eradication, sustainable development, equality, fair trade, climate justice – the elites have co-opted our language and distorted our visions beyond recognition. While we criticize the way world power is created and exercised, the BRICS leaders appear to simply want power sharing and a seat at the high table. For example, the BRICS New Development Bank is working hand-in-glove with the World Bank; the Contingent Reserve Arrangement empowers the International Monetary Fund; and the Asian Infrastructure Investment Bank serves mainly corporate interests – and all these financial institutions, despite their rhetoric of transformation, are opaque and non-transparent to people in BRICS countries, with no accountability mechanisms or space for meaningful participation by our movements. We have raised constructive critiques of BRICS in our plenaries and workshops. But beyond the analysis, we understand that only people’s power and activism, across borders, can make change. This Forum has found many routes forward for cross-cutting BRICS internationalism on various issues. We intend to win our demands for social, economic and environmental justice. The victories we have won already on multiple fronts – such as halting numerous multinational corporations’ exploitation, gaining access to essential state services, occupying land and creating agricultural cooperatives,  and generating more humane values in our societies – give us momentum and optimism.

BRICS Bloc, New Development Bank and Where the Heck is it

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Some of this post is a bit dated, as this was meant to be written as an editorial for a BRICS Journal way back towards the fag end of 2015, and a lot of water has flown under the bridge ever since, with India holding the BRICS Summit in October last year in Goa, which also saw parallel sessions being organized by Peoples’ BRICS Forum, a conglomerate of civil society organizations from BRICS member countries raising concerns over the possible funding patterns the Bloc would be undertaking at the expense of environmental degradations and human rights violations. So, let us get on with it:

The BRICS bloc, a conglomerate of five of the biggest emerging economies is home to 43% of the world’s population with a share of 22% of the global GDP. These staggering statistics make Brazil, Russia, India, China and South Africa truly a force to reckon with. The bloc’s initiative to erect a development finance institution in the form of New Development Bank (NDB), is often attributed in the West as a reaction to the institutional sclerosis of Washington-DC-dominated World Bank and the International Monetary Fund (IMF), whereas it is a catalyst complementing rather than challenging the Bretton Woods institutions or the Asian Development Bank in fighting poverty in the emerging economies. Whatever be the attributions, the logic of fighting global poverty is itself steeped in controversies ranging from applying mathematical and statistical juggleries to determine the number of poor according to standards that are a far cut from realities on ground, to economic measures built upon the plinth of models that on many occasions forgo the human capital in a relentless pursuit of development agenda, which is meaningless if only persevered in concentrating on the extreme poverty and purblind to the gap yielding inequalities.

The world is watching with keenness on the mushrooming of New Development Bank, which was officially launched in Shanghai in July, 2016. What would be the underlying rationale of this model? How and where would the finances flow? If the investments were complemented to fill a vast infrastructural gap, how would the safeguards be architected to prevent socio-economic and environmental violations on ecologies? What of the democratic set-up that underlies the formation of this bloc and subsequently of NDB getting hijacked by the political and economic clout and prowess of China? These have been some of the pressing and contentious questions that could either derail the rationale behind this initiative or leave no stone unturned in replicating the western-dominated financial institutions that find themselves increasingly in the eye of the storm for fostering irreversible violations and damages. Aside from that, China’s growing eminence in G20 is a step to rival G8’s macroeconomy, international trade and energy capitalisation lending it legitimacy for a foreign policy geared towards a north-south dialogue in addition to the south-south dialogue efficacious through BRICS and G20. Moreover, China views G20 as an economic platform with other emerging countries on board for a resolve on international affairs. G20 along with BRICS Bank is a contrivance for a financial architecture that focuses on development issues on the one hand, and internationalising its currency on the other. Clearly, it is not a case of what Deng Xiaoping called for “China keeping a low profile”. So, is it merely a speculative materialism that is the engine behind China’s true intentions?

The Asian Development Bank has calculated an infrastructural gap worth $8 trillion in the Asia Pacific needing to be filled by 2020. This is where NDB would cash-in most, and likely create a polarity between infrastructural funding and other developmental concerns. But, what is infrastructure is as hazy as the fuzzy logic of the calculated gap. It is a prerogative to continuously industrialise the BRICS, of building and upgrading ports, gateways, intelligent transportation and communication, power generational and distributional capabilities to augment developmental agenda, which incidentally sets parameters for economic prosperity, the fruits of which permeate to the hitherto-considered peripheries in a fight against poverty. However, the Articles, according to NDB President KV Kamath have a purpose sketched out for the Institution, “To mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging economies, complementing the existing efforts of multilateral and regional development banks.” This is imperative of sustainability, pragmatism, innovation and speed of execution, of which the last could accelerate in a more experimental manner. The speed could pierce through bureaucratic red tapes, blunt operating procedures, and intensify delivery of massive infrastructural projects. Dang Xiaoping, in a rather philosophically pensive manner referred to reform as a process of feeling stones while crossing the river. Although, this should be the dictum NDB needs to seriously gravitate to, dangers of transgressions are lurking heavily.

The BRICS economies are undergoing economic upheavals, and China, the second largest economic power in the world with a nominal GDP more than the rest of bloc’s combined GDP is seeing NDB along with the Asian Infrastructure Investment Bank (AIIB) and Shanghai Cooperation Organisation (SCO) as cardinal tools of its foreign policy initiatives. All of the three have a vision to revive China’s economic might through One Belt One Road (OBOR) and Silk Route through regional collaboration on the one hand and transcending state boundaries for facilitating trade links on the other. How would this augur for India is as important a question as how would the Government in India prioritize its policies for the NDB to plug in? The Government has sockets in place to provide the necessary plug ins, be they in the form of new tax allocations providing more funding for the states in order to empower growth, set budgetary allocations in order to expedite transport, communication and power capacities, proposal to create National Investment in Infrastructure Fund with a base capital of $3.25 billion, to planning and implementing regulatory reforms keeping a steady eye on growing influx of private capital and associated technologies to finally expunge bottlenecks to growth-led development model as a result. This is crucial, not just for India but for the entire bloc as a whole, since NDB’s priorities will be in line with the national development banks of member countries in effectuating the removal institutional roadblocks to growth. With a stated lending of up to $34 billion every year to begin with for filling up the huge infrastructural gap, NDB will act as an additional source of funding for India where the estimated gap in infrastructure is up north of $500 billion till 2020.

For the vast number of Indians, reality is far from development modelled on growth as envisaged by the political machinery at the centre. Growth forecasts have been revised downwards fearing a significant deceleration in exports and a capital flight from the country, courtesy unfavourable investment climes and a pitiable ease of doing business standards. While the Index of Economic Freedom ranks the country at 128 on a scale that defines the economy as situated in a mostly “unfree” zone, socio-economic concerns like malnutrition, falling public health indices, extreme poverty and growing inequality continue to plague the country. NDB’s role will be put under an intense scanner in addressing such internal contradictions of a magnitude that cannot be resolved merely by an external makeover tied to a growth that belittles its own citizenry. Unless Human Development Index, which emphasises life expectancy, education and income and GINI Coefficient Index, which measures inequality representing income distribution to country’s citizens are brought to affect the rating agencies’ take on India’s investment climate, Government’s relentless pursuit of developmental ends would never reach the multitude of people caught between the scylla and charybdis of regimental vagaries.

(DATED) With the upcoming India-Africa Summit to be hosted by New Delhi in October, there is a likelihood of trade relations between the two regions getting an uplift. Not only are India-Africa relations much softer compared to China’s scrambling for the African continent, it could also signal the way NDB gets projected by India in tune with its own foreign policy and diversify trade patterns seeking inroads into natural resources rich countries to augment a new investment destination for the increasing global profile of Indian corporate sector. As the Bank’s focus is concentrated on private investments, this gears in well with India’s investment in Africa in services and manufacturing sectors, roping in a vast population of non-resident Indians on the continent in a drive to foster economic regionalism on the one hand and throw around diplomatic weight on the other in a benign manner underlying India’s unique power equations. NDB could be a strong node bringing these realities to fruition, by promoting a reform in global economic governance with far-reaching significance and consequences. What remains to be seen is how much the NDB will abide by operation guidelines and procedures to see itself as not only different from other multilateral development institutions in terms of expediency, but also hold true to safeguards that protect vulnerabilities rather than exploiting and expropriating them. The latter is still a desiderata!!

Where is it all headed now?

The bank is planning to raise funds by issuing bonds in India, denominated in the local currency, the rupee, after to issued renminbi-denominated bonds in China in 2016. “In 2017, predominantly we’ll aim at taking up more lending tools to raise another $2.5bn for projects spreading over our member countries that are sustainable and do economic good. Virtually, we will try to double the lending of 2016 this year. What we are doing here at NDB is only a fraction of the need. Beyond lending, we would like to act as a catalyst, to get more parties involved in the lending process for projects that contribute to economic growth and sustainability,” said Kamath.

Major challenges for the bank lie in the changing global economic situation, which is seeing interest rates rise in developed countries. But, developing countries’ fast economic growth will help offset the effects, said he. Kamath also called the China-led OBOR a sound initiative that would bring benefits across several countries by investing in a significant way and creating economic momentum. “The program also brings synergy, making regions come together all along the Belt and the Road,” he said. Further he called, “We see it as something that will clearly spur economic activity in the region, and we think that the program is going to succeed.” On to renewable energy, where the focus seems to be concentrated….

In October last year, a new strategic report was produced by the Institute for Energy Economics and Financial Analysis (IEEFA), reviewing how successful the NDB has been so far. The report looked both at the increased renewable capacity of all five BRICS countries, but also the economic strain of such an ambitious project, a strain that is clear from the funding gap already present.

The NDB set targets tailored to each of the BRICS countries, taking into account their plans and their existing renewable capacity. The bank is designed to offer loans quickly and flexibly to the BRICS countries to make achieving these possible. “They had financed about $911m and that they had declared intent to finance or increase their loan by about $1.2bn every year,” says IEEFA consultant and the report’s author Jai Sharda. “So [the NDB is providing] about 11% of the public capital required.”

The report uses the concept of blended finance to work out the progress made and the progress required by the BRICS countries. “The concept of blended finance is basically built on the idea that when there is public money going into a sector it draws private money into that sector,” Sharda explains. “For every one dollar of public finance – the sort of finance being provided by the New Development Bank – it is estimated that it will make four dollars more of private money. So we built our estimations on that basis.”

Developing countries are some of the biggest consumers of energy in the world, as expanding a country’s infrastructure is energy-intensive. Economic development often requires large-scale industrialisation, such as we have seen in China, which has led to a more prosperous economy but also meant that China is the largest producer of CO2 in the world. All five of the BRICS countries rank in the top 20 polluters.

As such, the NDB has set goals to reduce the BRICS environmental impact while increasing the amount of energy they produce through renewable energy sources. Brazil is arguably in the best position to do this, as in 2015, 74% of its energy came from renewable sources. According to the IEEFA’s report, “Brazil’s 2024 Energy Plan envisages an increase in total installed renewable capacity, including large hydropower, from 106.4GW in 2014 to 173.6GW in 2024.”

India, China and South Africa have all set impressive targets, and have begun work to reach them. India intends to increase its renewable energy production by 40% by 2030, as well as reducing emissions intensity by 33%-35% over 2005 levels. China’s targets are even greater, as it plans “to reduce emission intensity by 60%-65% over 2005 levels”, the IEEFA report says. “China is estimated to increase its solar capacity to 127GW by 2020 from 43GW at the end of 2015, and wind capacity from 145GW in 2015 to 250GW by 2020.” South Africa has the furthest to go of the BRICS, as at present it gets 94% of its energy from fossil fuels but has plans to install a further 17.8GW of renewable energy capacity by 2020.

Russia is slightly different to the other BRICS countries as it has technically already met its target. Russia’s target was to reduce emissions by 25%-30% over 1990 levels, and emissions are currently around 40% lower than 1990 levels. However, the country is planning a 4.5% increase in the amount of renewable energy it produces by 2020.

All five BRICS countries have made progress, although to different extents. Brazil currently produces the most renewable energy, with 74% of its energy coming from renewable sources, the vast majority coming from large hydroelectric plants.

Sharda suggests that Brazil’s current success is, in part, due to its long-standing history of renewable projects, necessitated by a lack of coal: “I think Brazil has been better off than especially China and India in implementing more renewable energy because they lacked fossil fuel alternatives.”

Despite their fast-growing economies, India and China have historically been slower to develop their renewables sectors. “India and China have massive amounts of coal deposits, similarly Russia has large amounts of oil and gas deposits, and South Africa is one of the biggest exporters of coal,” Sharda says. “All of these countries have had a traditional, natural advantage.”

But things are beginning to change for both China and India, and they are expected to see the biggest boom in renewable energy of any of the BRICS countries in the next few years. “China led the coal and thermal power boom, they didn’t have an issue with dealing with worsening environmental conditions at a national level then,” Sharda says. “But the government and policy makers have actually become very sensitive to environmental issues which are why they are focusing a lot on renewable energy now.”

There is a massive trend moving towards renewable energy sources in China so, despite the fact that 74% of its energy came from fossil fuels in 2015, the IEEFA report estimated that China would increase its solar capacity to 127GW and increase its wind capacity to 250GW by 2020. However, in January, China increased its targets and its spending on renewable energy, and now plans to invest at least $360bn by the end of 2020, solidifying its position as a global leader on clean energy. Meanwhile, India increased its renewable capacity to 225GW by August 2016, a huge leap from 97GW in 2005. This is predominantly from using hydro.

Russia and South Africa are making slower progress. South Africa still relies on fossil fuels, increasing its renewable capacity to just 2.1GW in March 2016 from 1.8GW the previous year. Russia is making small progress predominantly due to a lack of investment from the country itself, only allocating $1bn for renewable technologies in all 17 Russian states in 2014.

Despite rapid development in the BRICS countries, for Brazil, China, India and South Africa there is a long way to go for any country to meet its targets. There is a funding gap which the NDB, among others, need to fill to help stimulate the development of the renewable energy industries in each country. The IEEFA estimates that “meeting these targets would require an annual investment of around $177bn. In comparison, the investment in the renewable sector in BRICS countries in 2015 was $126bn, leaving an average shortfall of $51bn.”

It is clear, therefore, that a vast increase in investment is needed. “Brazil’s renewable capacity expansion plans would require an investment of $86bn, or 85.2% of overall electricity generation capacity investment,” the IEEFA report states. This is despite Brazil’s impressive hydroelectric infrastructure. Meanwhile Russia would require an investment of $44bn, India will require $128bn, China $254bn and South Africa $30bn.

Whilst these figures are for varying timescales and some countries, China in particular, are likely to be able to channel enough money to meet their targets, it is clear that a much greater and more sustained investment will be needed if the BRICS countries as a whole are to achieve their goals. Furthermore, these figures do not include the knock-on infrastructure upgrade costs that renewable energy generation will create. India alone will need a further $26bn over the next ten years to update its grid.

But more is going to be done, starting with an announced increase in the loans available from the NDB. “The development bank has actually declared that they were targeting to expand and increase their support of energy development this year,” Sharda says. “Their target is actually about 35% percent of the overall public capital required.” This large increase could make all the difference.

At present, despite impressive advances in renewable capacity in the BRICS countries, some look set to miss their targets. If the NDB and other multilateral development banks and financial institutions manage to increase investment, the BRICS could have a massive effect on the environmental damage currently being created by their energy systems. Their success will be evident across the next ten years and beyond, and will be keenly anticipated around the world.

Is Indian GDP data turning a little too Chinese? Why to be Askance @ India’s Growth Figures?

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India defied expectations on Tuesday to retain the title of the world’s fastest growing major economy, despite the pain caused by Prime Minister Narendra Modi’s shock crackdown on cash.

Annual gross domestic product (GDP) growth for the October-December period came in at 7.0 per cent, a tad slower than 7.4 per cent in the previous quarter but much faster than the 6.4 per cent expansion forecast by economists in a Reuters poll. Economists are scratching their heads its almost seen for the economy is untouched by demonetisation now you are one of the strongest defendant of demonetisation. Would you agree that the economy was almost left untouched by demonetisation some pain was warranted was it not?

Shaktikanta Das: As we have explained earlier, we have to go by real statistics. Now, when the Q2 figures where the second quarter figures for the current year released the advanced estimates were released that time also we had explained that we have to go by real statistics and not by anecdotal evidence.

Being the fastest-growing large economy in the world is India’s destiny, and even the most poorly conceived economic policy imaginable can’t stop destiny….To say the data is startling is an understatement. The IMF had predicted that India would grow at around 6 percent in the half-year after “demonetisation,” as it’s called. Most independent economists forecast GDP growth would come in somewhere between 6 and 7 percent. Those economists naturally assumed that withdrawing 86 percent of the country’s currency and reducing access to bank accounts would dampen private consumption.  

Yet if one believes the government’s numbers, taking away most of India’s cash overnight didn’t hurt private spending at all. In fact, private consumption rose by 10.1 percent over the quarter. That’s the highest growth in spending in over five years, and it came at a time when consumer confidence was falling sharply. 

My take on the statistics:
Well, this is a simple tweaking of the equations that differentiate the growth curve. In short, we have all been a part of exams where 9/10 is different from 99/100, even if just one number distances the actual score from the maximum one could score. On similar lines, the crimes of growth are factored in on growth year/base year. This is mathematical jugglery narrowed in on political ends. Whichever way one looks at the data, some of the indicators are still found lagging the composite growth, thereby dumbing down the economists when the growth curve mandates a pattern recognition.
GDP, when calculated at Factor Cost is related with GDP at Market Price, and written as an equation of the form,
GDP (FC) = GDP (MP) – indirect takes + subsidies
While, Gross Value Added,
GVA (basic prices) = Sum (net of production taxes & subsidies) to GDP (factor cost)
Stamp duties and property taxes make up the production taxes, whereas labour, capital and investment subsidies are the other half. Why is this done? To inflate GDP after it starts representing the GDP of a country in terms of total GVA, i.e. without discounting for depreciation. Moreover, GDP at market price adds taxes and deducts subsidies on products and services to GDP at factor cost. The sum total of the GVA in various economic activities is called the GDP at factor cost. With a change in method and a subsequent change in base year, India has increased or rather expanded its manufacturing base in the sense of capturing it.  This has also enabled the country to include informal sectors, which hitherto had not found its true manifestation. This is mere adherence to standards that become internationalized.
Now, what happens in India’s case is the part subsidies, which has been the fixed denominator for our GDP, unlike most of the developed world, or even the developing economies. So, our GDP hitherto had largely been GDP (FC). After rearranging the equation above, GDP (FC) would have subtraction of the subsidies part, and yield GDP (MP), thus changing the base completely, and giving a large share of the economy as growing, rather than the dismal one predicted in the wake of demonetization. This has been effectuated since 2012 implying that whatever happens after demonetization, the growth period would project only redundant figures. Slip that into the quarterly period, and yes, the new base would indicate a growing economy, as used by the WB/IMF to forecast India growing more than China. So, there is nothing really dastardly an act here, but more about how to integrate the parts into the composite to yell at the world, we are growing.

Comment on ‘SMART CITIES: WHERE DOES THE FINANCIAL VIABILITY LIE?’

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I might be now be better placed to outline my critique of the notion of Smart Cities and the political thereof. The example of China is valid, but more inclined towards the domestic sector where export-oriented growth imploded, leaving the realty estate in a vacuum. Assuming that these habitats lend values to their inhabitants, the point of rupture would lie in setting up ground for vendors and their allies and alliances with a techno-savvy cognitariat operating the digitally conceived spaces. These would be precisely license-free, for they would have ample expertise in architecture of infrastructure and communication lines. Such technological platforms with network connections would plug and play into monetising services involving access to subscriptions and the latest big-thing in town, ‘data analytics’. A successful implementation of such would mean economising any sharing applications with others venturing out to have their version of success involving a plethora of professions and professionals creating a viability gap between the cognitariat and the precariat. And this would be precisely the gap where political fires would be ignited, grounded, and without an across the gulf implementation, systems integration would only be diffused. Such a diffusion would do no politics any good, and only exacerbate the already fragile ecology. 

Instead, what needs to be done is not any replication of failed systems, but a cognisance of how such monopolistic citadels are recognised and how and what intensity-level of intervention is required. In the form of monetisation when it comes to providing services, my political take goes from the inhabitants being charged to a massive costs overhead involved in when others try and replicate this successful model across other cities. Thats where the related question of monopoly would get in, and thats going to be a war of the corporations that poses a scare for me. And this is a political battle We’d be up against.If Smart City is a dystopia, their planners are much smarter than we have thought of them hitherto. That unbundling is what I mean by flipping the coin. 

Donald Trump may be a challenge for AIIB and NDB. Is It and How Far?

Was reading this news on whether Trump would be a challenge for Chinese-led development banks AIIB and NDB. Here is the blurb hyperlinked to the whole story, and why I think that more Trump, is the outcome of upcoming elections in France and The Netherlands that could be the chief hurdle, if at all.

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With the US president Donald Trump entering the stage, two new China-backed multilateral banks, the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) of Brics nations, may face a rough ride ahead, analysts say. 

China has benefited in diplomatic and political terms because these two banks have been sponsored by Beijing and are based in the country.

“China has gained in terms of ‘soft power’ because it could bring several European powers on the table through AIIB. At present, a lot of European countries are concerned about what they see in the US. This might increase potential cooperation between China and the European countries,” says Julian Evans-Pritchard, the China economist for Capital Economics……

Is Trump’s protectionist policy the real danger to Chinese-led banks? Is stepping out of the TPP the real threat? Or, is there some other hidden variable at work here? Holland and France go to Presidential polls this year and with BREXIT negotiations looming large, its the likelihood of referendum of the BREXIT kind in France and Holland once right of the centre parties are elected to power there, where there is a high probability of such happenings there.The rise of Alt-Right political parties in both countries such as the Front National (FN) led by Marine Le Pen in France and The Party for Freedom (PVV) led by Geert Wilders in the Netherlands could trigger the end of the European Union. AIIB, especially, since it has Europeans along its corridors. Moreover, US infrastructure is getting outmoded by the day and according to promises delivered by Trump during his electioneering, his focus would concentrate on domestic infrastructural projects, rather than get into the glamour created by the likes of multi-laterals and that too Chinese for the time being. Moreover, with his presidency the idea is to thaw the relationship between the US and Russia and stymying AIIB or NDB could be perplexing for that to happen unnecessarily. And would Russia really be subdued to these emanating pressures to put a period? As of now, it won’t look into the aspects of a cold relationship with China at US’s expense. While Trump labelled China a currency manipulator and threatened trade wars, he might have a more open ­attitude towards China-backed institutions and investment ­programmes. According to Jin Liquin, Chair of AIIB, “I was told that many in his (Trump’s) team have an opinion that Obama was not right not to join the AIIB, especially after Canada joined, which was a very loud endorsement of the bank.” So, the options are soft, but for reasons on domesticity, these might be the hard ones to steer clear for the US. What really should be taken into account is consensus on right-wing victories in the upcoming elections in Europe and a concomitant string of protectionist policies in their wake that could really be the derailing point for these Chinese-led development banks. As Josep Goded says, this year will be full of threats and challenges for global society.The potential disintegration of the European Union represents one of these, but no one knows how it will end. History is full of threats and challenge that are often happily resolved. The elections in The Netherlands and France will be all about choosing between tolerance or intolerance, war or peace, friendship or enemies, future or past…Their citizens will have an enormous advantage since they can see what Trump is doing in the U.S. and based on that they will make an important decision that will change the world for the better or worse.