Sunday, May 20, 2018

Random Musings on Developments in Karnataka

Some random ramblings on the Karnataka situation.
The situation appeared grim for the BJP, right from the start. 

Before the Floor Test
took place in the Karnataka Assembly at 4 pm yesterday, the following were possible scenarios I had shared with my Readings Broadcast List on WhatsApp.

(1) The BJP might just scrape through with a little help from some Congress   Lingayat MLAs for two reasons:
a.  their unhappiness with the possibility of a Vokkaliga CM (H. D. Kumaraswamy is a Vokkaliga) and
b.  B. S. Yeddyurappa (BSY) is a Lingayat.

(2) Also, the Congress and JD (S) MLAs know that even if BSY lost the trust   vote, the BJP won’t keep quiet. Over the next few weeks, the party will   try to engineer defections in the INC and JD (S) – thus turning the   numbers in the BJP’s favour.

(3) The fence-sitting INC and JD (S) MLAs also know that if they go out of   power (forming the government now and losing the majority later), they   may just lose the chance to make money (that is why they are in politics, aren’t they?) and stay relevant.
(4) If the BJP would engineer defections, it would be for today and 2019. The Karnataka battle will bruise the BJP in the short term but will pay rich dividends in 2019. Remember, all politics is local.
(5) However, despite all this and more, the BJP may just lose the Floor Test.

(6) BSY might resign before the Floor Test. I shared this message ten minutes before the proceedings started.

As it is, BSY resigned as the BJP could not muster support from the rival parties.

Following the resignation, the INC and its media friends went to town with grand statements that the Constitution has been saved, that democracy has won, and that there is widespread disenchantment with the BJP for its policies of demonetisation and the GST.

Let’s look at the tripe of ‘the Constitution has been saved’. In inviting the single largest party to form government, the Governor strictly went by the law (as laid down by the Supreme Court). If the INC and JD (S) had a pre-poll alliance, the Governor would have invited the alliance.

The Congress says that the BJP was rejected in Karnataka. Only arrogant folks will mouth such laughable statements, especially after the Congress went down from 122 seats to 78 seats while its arch-rival raised its tally from 40 to 104. The Congress’ humiliation cake had an icing: the chief minister Siddaramaiah lost from one of the two seats he contested.      

Consider the dumb idea of ‘democracy has won’. It beats reason when a party with just 38 seats is extended support by a party with 78 seats – the post-poll alliance between the JD (S) and the INC has only one objective: keep the BJP out. The post-poll alliance between the INC and the JD (S) is a marriage of convenience and as with all such marriages, it won’t go far. Too many inflated egos and contesting vote-banks will scupper any chance of a full-term for the alliance.

In the end, I think the biggest loser in the Karnataka saga is the Congress party and the biggest winner is the BJP. The BJP might have lost the Floor Test but in the eyes of the voter in the street, it came across as a victim of the post-poll alliance between opportunistic parties.

One more thing: the noise over the Federal Front and the rejuvenation of the INC is all humbug.

In the Federal Front, super large egos, of regional leaders like KCR, Mamata Banerjee and Chandrababu Naidu, will force them to behave like crabs.

The INC, under Rahul Gandhi, is tottering and losing election after election. Enough said about the INC. 

Saturday, April 28, 2018

The Explainer: India's External Debt


India’s external debt, as at end December 2017, was at around U.S.$513.4 billion. 

Over the years, several people have asked me a pertinent question: Is this the money the Government of India owes to external agencies like the World Bank (WB) and the International Monetary Fund (IMF)? 

Well, the answer is complicated.

To understand external debt, let’s use the traditional Q&A method. 

Give me a breakdown of India’s external debt.
India’s external debt is a mix of both long-term and short-term debt.
(a) There is a dominance of long-term borrowings – 81 per cent (U.S.$415.8 billion) of the total debt of U.S.$513.4 billion. 

(b) The remaining 19 per cent (U.S.$97.6 billion) is short-term external debt. This means this debt would come up for payment in the next twelve months. 

Define debt by types of maturities.
The maturity of a loan relates to its repayment period, i.e., when it becomes due for repayment.

Based on maturity, there are two kinds of loans: long-term and short-term. 

A long-term loan is a loan with a maturity period of more than one year. The longer the maturity period of the debt the lower the pressure on payments.

A short-term debt has a maturity period of less than one year, i.e., this debt would come up for repayment in the next twelve months. This debt, in the case of external debt, includes both the principal as well as interest on such loans. In other words, short term external debt includes short term debt by original maturity as well as long term debt.

What are the components of External Debt?
There are several components of India’s external debt. However, for the common person to understand something as complex as external debt, the following are the main components of India’s external debt:

Multilateral credit – borrowed by the Government of India from institutions like the International Monetary Fund and the World Bank;
Bilateral credit – borrowed by the Government of India from other countries (like Japan and Germany);
External commercial borrowings (ECBs) – these are the borrowings of companies like Reliance Industries from abroad;
Deposits of Non-Resident Indians (NRIs). NRI deposits are treated as liabilities as they have to be repaid to the depositors, and
Foreign Institutional Investment (FII) – investment by foreign fund houses (like mutual funds) in India’s stock markets and government securities.

As mentioned, India’s external debt is U.S.$513.4 billion. So, does it mean the Government of India borrowed all this money?
Yes, but just a part of it. Government debt is also called ‘Sovereign’ debt. 

The share of the Government’s debt in the total external debt is just 21.2 per cent (U.S.$108.9 billion). The remaining 78.8 per cent is non-Government debt (U.S.$404.5 billion). 

What are the components of Government debt?
Of the total Government debt of U.S.$108.9 billion,
42.1 per cent has come from multilateral agencies (like the World Bank and the International Monetary Fund);
18 per cent came from bilateral creditors (like Japan). In fact, Japan was the single biggest lender to India – nearly 79.7 per cent of bilateral credit came from Tokyo, followed by Germany at 10.9 per cent and Russia (5.3 per cent), and
39.9 per cent was sourced from Other Sources (like foreign institutional investment in government securities and defence debt).

How does India compare with the rest of the world in external debt?
India compares quite favourably with the rest of the world in external debt. 

India’s external debt to GDP ratio is 20.4 per cent – among the lowest in the developed and developing world. For the U.S., it is nearly 100 per cent while it is 14 per cent for China.

India’s foreign exchange reserves to total external debt is also good – 74.8 per cent (based on World Bank data for 2016). 

India is not vulnerable to any major or minor problem arising on the external debt front. 

Please share your feedback in the comments section.

Wednesday, April 25, 2018

Datagraphic: Top Economies in the World, SAARC, and BRICS


It has been more than a year since I posted something of significance. From today, I will try to blog on a regular basis - beginning with this set of datagraphics on the biggest economies in the world, the South Asian Association for Regional Cooperation (SAARC), and the BRICS grouping (comprising Brazil, Russia, India, China, and South Africa).

As you know, 
Gross Domestic Product (GDP) reflects the money value of all goods and services produced in one country in one year.
In the third week of April 2018, the International Monetary Fund (IMF) released the World Economic Outlook (WEO). The report confirmed India’s rise to the sixth rank in the world economy by the size of its GDP. India overtook France and is behind the U.S., China, Japan, Germany, and Britain.



Tuesday, October 24, 2017

Quiz - Place Name

Starting today, this blog will feature a quiz thrice a week. Please post your answers in the comments space.