AFTER INDIA, CHINA NOW SLAMS CREDIT RATING AGENCY MOODY’S AFTER DOWNGRADE

The article originally appeared on India Today.
Here it is bit modified and extended.

After India, now China has taken on the global credit rating agency Moody’s for downgrading its credit ratings. Moody’s has degraded China’s sovereign rating by one notch, from AA3 to A1, first for China in 28 years. Chinese economy had not seen a rating downgrade from 1989 even if its economy has started slowing down for past some years. But China could not fathom it. According to a Global Times report, the Chinese Finance Ministry has said that the “rating downgrade by the Moody’s was based on inappropriate methodology”.

And its arguments are similar to India’s: “Moody’s has overestimated the difficulties faced by the Chinese economy, while underestimating the capabilities of China to deepen side-supply reforms”. India, too, has argued that credit rating agencies overestimate the challenges faced by the Indian economy, and underestimate the nation’s capabilities – especially in light of the economic reforms initiated in the last three years.

Moody’s has warned China for its slowing economy and rising debt and has based its downgrade on these parameters, “The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows”.

India has also highlighted the concern of ‘inappropriate methodology’ being used by the credit ratings agencies. According to a Reuters report from December 2016, “India had criticised Moody’s ratings methods and pushed aggressively for an upgrade.” According to the report, India’s Finance Ministry, in a series of letters and emails last October, raised questions over Moody’s rating methodology which was ignoring India’s reducing debt burden and sustained impressive growth. But Moody’s rejected India’s claims raising concerns over India’s debt burden and bad loans worth $136 billion saying “not only was India’s debt burden high relative to other countries with the same credit rating, but its debt affordability was also low”.

Moody’s logic has been, though India’s debt-to-GDP ratio has come down to 66.7 per cent from its peak at 84 per cent in 2003, interest payments take away one-fifth of government’s revenue. Also, as per the report, India’s revenues at 21 per cent of GDP are considerably lower than the median income of the countries with the BAA ratings that is at 27.1 per cent. Moody’s further contended that “a resolution to the banking sector’s bad loan problems was “unlikely” in the near-term”.

Despite the concerns raised by India, Moody’s in November 2016, Moody’s went on affirming India’s BAA3 rating with a positive outlook, ignoring Economic Affairs Secretary Shaktikanta Das’ arguments of “stable external debt parameters and the slew of reforms introduced in the realm of foreign direct investment”, the Reuters report quoted from his letter written to Moody’s.

And not only Moody’s, two other major credit ratings agencies, Standard & Poor’s and Fitch have also refused to budge on India’s concerns. Fitch’s BBB- rating, that is the lowest investment grade rating, has been in place since August 2006 and S&P’s BBB- rating from January 2007.

These three agencies, which control 95 per cent of the market, have been so obstinate in refusing India’s concerns that India’s Chief Economic Advisor Arvind Subramanian had to term their approach as ‘egregious and compromised’. Subramanian said, “In recent years, rating agencies have maintained India’s BBB- rating, notwithstanding clear improvements in our economic fundamentals (such as inflation, growth, and current account performance). He called the assessment of the international ratings agencies as ” one of the most egregious examples of compromised analysis”.

©SantoshChaubey

DIESELGATE: GERMAN PROSECUTORS INVESTIGATE CEO MATTHIAS MULLER OVER ALLEGED INVOLVEMENT

The article originally appeared on India Today.

German prosecutors have said they are investigating Volkswagen’s CEO Matthias Muller, along with its former CEO Martin Winterkorn and Hans Dieter Potsch, the Volkswagen (VW) Supervisory Board chairman for market manipulation linked to Volkswagen emissions scandal after a complaint from the Federal Financial Supervisory Authority, Germany’s market and financial regulator. The criminal investigation into market manipulation moves was launched in February but was announced on Wednesday only.

Though Winterkorn and Potsch had been identified earlier as well as possible suspects in the market manipulation scandal that has plagued the world’s largest automaker since the last two years. Winterkorn had to resign because of this in September 2015 when the scandal broke, it is the first time that its present CEO Matthias Muller, who had replaced Winterkorn, has been named as a suspect.

According to a Deutsche Welle (DW) report, prosecutors in German city Stuttgart are investigating if there was a deliberate delay by Muller in informing the Volkswagen shareholders about the emissions cheating scandal. The investigation pertains to the period when Muller was heading Volkswagen main shareholding company, the Porsche Automobil Holding.

According to a report in the New York Times, if it is proved that top VW managers indeed withheld and then deliberately delayed the information about the large scale cheating being done in the automobiles of the company, it can cost the company $10 billion.

The VW emissions or pollution cheating scandal broke in September 2015 when the United States Environment Protection Agency (EPA) issued a notice to VW after it found a cheating software or “defeat device” in VW diesel engines in cars being sold in America that helped its vehicles bypass the stringent testing norms. From the US, it soon spread to many other countries of Europe, Asia and even Africa. The auto giant soon accepted its guilt but the scale of the scandal was so vast that skeletons are still tumbling out of its closet. Many top managers have been suspended and many are under scanner.

The scandal has cost VW $22 billion alone in the US in settlements and fines. Also, according to a Bloomberg report, the damages so far have cost the auto giant 22.6 billion Euros. It is facing multiple lawsuits in many countries including the US and Germany. It had to recall over 11 millions of its cars to address the cheating revelations. In December 2015, the automaker had announced to recall 3.4 lakh “defeat device” diesel cars, sold from 2008, in India but according to a report last month, only 30 per cent of those cars could have been fixed so far. The scandal, after broke, eroded the group’s brand value by over $15 billion while a Credit Suisse estimate said that the episode could cost VW $87 billion in the long run.

But it seems the Germany company’s strategy to iron out the mess has started paying back. In 2016, VW emerged as the world’s largest automaker dethroning Toyota who topped the selling charts for four years before it. Then its first quarter’s earnings this year have beaten the estimates. At $4.7 billion, the earnings are 28 per cent higher than the same quarter of the last year and 20 per cent higher than analysts’ expectations. It’s strategy to deal with the situation includes developing new lines of sports utility and hybrid vehicles and cost cutting with the VW brand vehicles.

©SantoshChaubey

CHINA EYEING INDIAN TALENT?

That might be the case if we go by the increasing number of such assessments in the official Chinese media like this one, an assessment published in China’s Global Times, one of the official newspaper of the Chinese Communist Party. Published in Global Times’ opinion section ‘Insider Eye’, the article argues that like the western countries have successfully done, it is now time for China to leverage huge Indian talent pool to fuel its global competitiveness and presents point by point support to base its narrative.

The article is written by S. Ramakrishna Velamuri, a professor at the China Europe International Business School (CEIBS) in Shanghai. CEIBS is one of the Ivy League B schools globally. This assessment by an Indian origin professor who did his MBA from Spain and PhD from America is important because it is not the first article on the subject in the official Chinese media and because it is published in one of the main official newspapers of China where nothing can go on pages without approval from the higher ups in the Chinese government.

The article says even if China produces largest number of engineers and science graduates in the world, its forte traditionally has been in hardware. Making it complimentary to the huge pool of software professionals in India will give the Chinese economy the edge it needs to succeed in the times when we are heading to Industry 4.0, an era of smart factories that work on seamless integration of hardware with software. The industrial future is automation, driven by the Internet of Things and cyber-physical systems.

The article argues that with superior English language skills, “Indian software engineers are more accustomed to developing solutions for global markets, whereas Chinese engineers have been more focused on their domestic market”.

Also, Indian population is youngest in the world. The median age in India is 10 years lower than China. The article argues that as knowledge-intensive industries hire fresh graduates and groom them further, tapping into the Indian talent pool will provide a sustained supply base in the foreseeable future. That will be a boon for a rapidly aging China which is projected to have maximum number of over 65 people in the world.

And to cap it all is India’s cost competitiveness, as the article writes that ‘Indian talent is significantly cheaper than the Chinese talent’.

The article says China is rapidly becoming an innovation-driven economy from being the global manufacturing base and was ranked 25th on the Global Innovation Index 2016. In upper middle income countries, the country was ranked first. India has emerged as the R&D hub for multinational companies. The articles says India has around 1200 R&D centres including 42% of the top 500 R&D spenders in the world which employ over 3,00,000 professionals and the count is only going up. So, India has what China needs.

Last month too, an article in Global Times had written that by not attracting Indian talent, China had made a mistake. Written by a Global Times reporter of Chinese origin, that assessment was more direct in accepting that “talent pool in China was not large and flexible enough to meet demand for the rapid expansion of innovation capability’. The article wrote, “China cannot afford to risk a decline in its attractiveness for high-tech investors and attracting high-tech talent from India could be one of China’s options for maintaining its innovation ability”.

©SantoshChaubey

NOW CHINESE STATE MEDIA FINDS INDIA DISSATISFIED AND JEALOUS TOWARDS CHINA

It seems, after successful ICBM and other military hardware test launches, it’s now India’s economic progress that has left the Chinese power elite uncomfortable. After targeting the Indian government’s demonetization move, equating it with terms like ‘gamble with money’ and ‘failure’, it is now about Indian stand on the global credit rating agencies.

While presenting India’s annual Economic Survey on January 31, the Chief Economic Adviser (CEC) Arvind Subramanian had slammed the rating agencies. A PTI report quotes him, “How did the rating agencies behave? They despite all these risky developments they did not downgrade China and our rating was maintained six notches below China. This is a reflection on how these institutions work. You should question them.”

Global Times, China’s official mouthpieces, now has responded to it. An opinion piece by a senior economist writes in Global Times that ‘it is noticeable that S&P has not adjusted India’s rating since 2011, Fitch hasn’t done so since 2006 and Moody’s hasn’t changed since 2004. With its rating left at such a low level for over 10 years, India’s dissatisfaction and jealousy toward China seems understandable’.

Mark the words ‘dissatisfaction and jealousy toward China’ here. They tell the prevailing Chinese mindset. This opinion piece written by an economist has economic jargons and technical details to prove its point that ‘instead of being obsessed with the sovereign credit ratings themselves, India should take a more macro view so as to fundamentally find out the underlying problems and solve them’. Indian economists, too, have successfully used economic parameters and jargons to explain the bias of the rating agencies.

While presenting India’s annual Economic Survey, CEC Subramanian, had come down heavily on the credit rating agencies, accusing them of having a China bias. Questioning rating agencies’ ‘poor methods and inconsistent standards’, Subramanian had said that the sovereign rating agencies had consistently ignored India’s economic reform measures like GST, Aadhaar integration, monetary policy framework agreement and eased FDI regime, coupled with its commendable fiscal discipline and strong growth trajectory.

Subramanian had further said that the rating agencies failed to see that India’s economy was growing at a faster pace while China’s was slowing down, from an average of 10 percent to 6.5 percent now. China’s sovereign ratings, fixed years ago, remained same even if its economy came down. The rating agencies have done the same with India. The contention is the approach here. S&P raised China to AA from A+ in 2010 and it is still at the same level in spite of clear growth pangs in the Chinese economy. It scaled down India from BBB+ to BBB- in 2012 and remains stuck there despite clear signs of growth in the Indian economy that has made it the world’s fastest growing economy.

So, it is not about jealousy and dissatisfaction. It’s about a dignified, rightful treatment.

Unlike other emerging economies, India has an unique position. While others are struggling, fundamentals of India’s economy remain sound. And it is too big to fail or to be taken lightly. India is the world’s third largest economy in terms of purchasing power parity and the only bright spot, by all assessments, to drive the world’s growth in coming years, especially after China is slowing down. So there has to be this inevitable comparison. When it was so in heydays of the Chinese economy, then why not the same yardstick for India. India or Indian media didn’t rush to ridicule or mock or criticise China when the whole world was looking at its miraculous growth.

India’s economic adviser gave expression to some valid concerns, slamming the credit rating agencies with his ‘come back to assess us after half a century’ jibe. India has been raising questions on the rating mechanisms used by the credit rating agencies for quite some time. After Subramanian’s dig at S&P, in another move, questioning the criteria used by the rating agencies, Indian government has now asked Fitch to explain its rating methodology.

©SantoshChaubey

AFTER OUTRAGE, AMAZON CANADA REMOVES INDIAN FLAG DOORMAT FROM ITS WEBSITE

The article originally appeared on India Today.

Hear it is a bit modified.

Though there is no official word from Amazon or from its India or Canada subsidiaries, it seems that the outrage the doormats based on the Indian flag on Amazon Canada website created has forced the global online retail giant to remove the product from its website as demanded by the External Affairs Minister Sushma Swaraj.

This is how the website looks now on searching for ‘doormat Indian flag’.

doormatindianflagamazonca

Few hours earlier, when the news broke, the search phase returned with different doormats based on the Indian tricolour available for sale.

amazoncanada
(Image Courtesy: India Today)

The Indian Flag doormat on Amazon Canada website angered Indians and Sushma Swaraj had demanded an unconditional apology from Amazon for disrespecting the Indian flag and had asked the company to immediately withdraw the product. She had warned the global giant that India would not grant visa to any Amazon official and would withdraw the earlier ones in case immediate action was not taken.

sushmaamazontweet1

What Sushma expressed through her tweets was an expression of Indians across the spectrum as rightly pointed out by Kiren Rijiju who said that Sushma ji had vented out the sentiments of every self respecting Indian.

kiren-rijijuamazontweet

The controversy erupted after a tweet pointed out this to Sushma Swaraj with a screen grab from Amazon Canada website.

Atul Bhobe @atulbhobe – @SushmaSwaraj Madam. Amazon Canada must be censured and warned not to sell India flag doormats. Please take action.

amazonbhobe

©SantoshChaubey

AMAZON DISRESPECTS INDIAN FLAG, SUSHMA ASKS FOR UNCONDITIONAL APOLOGY, THREATENS TO CANCEL VISAS

The article originally appeared on India Today.

External Affairs Minister Sushma Swaraj is extremely angry and has demanded unconditional apology from Amazon, the world’s and India’s biggest online retailer and one of the world’s most prized companies, for disrespecting the Indian flag.

She has said that Amazon must tender unconditional apology and must withdraw all such products that disrespect the Indian flag or else India will not issue visa to any Amazon official and will also rescind the visas issued earlier.

Sushma Swaraj ‏@SushmaSwaraj
Amazon must tender unconditional apology. They must withdraw all products insulting our national flag immediately.
If this is not done forthwith, we will not grant Indian Visa to any Amazon official. We will also rescind the Visas issued earlier.

sushmaamazontweet1

Atul Bhobe (@atulbhobe) from Navi Mumbai had tweeted a screenshot from Amazon Canada website showing many doormats available for sale having Indian tricolour as the base design.

Atul Bhobe @atulbhobe
@SushmaSwaraj Madam. Amazon Canada must be censured and warned not to sell India flag doormats. Please take action.

amazonbhobe

Sushma Swaraj immediately responded to it saying that the Indian High Commission in Canada should immediately take it up with Amazon at the highest level.

sushmaamazontweet2

©SantoshChaubey

CASHLESS ECONOMY? DONALD TRUMP BELIEVES NO COMPUTER IS SAFE

The article originally appeared on India Today.

US President elect Donald Trump believes computers are not safe and it is better to follow your conventional methods when it comes to dealing with sensitive information or matter.

According to the reports in the US media, while interacting with reporters on the New Year eve, Trump said that no computer was safe. News reports quoted him saying, “It’s very important, if you have something really important, write it out and have it delivered by courier, the old fashioned way because I’ll tell you what, no computer is safe.”

He further said that even a 10-year-old boy can do anything with a computer, “I don’t care what they say, no computer is safe. I have a boy who’s 10-years-old, he can do anything with a computer. You want something to really go without detection, write it out and have it sent by courier.”

That is in stark contrast to what is happening in India.

The country is preparing to go digital with financial transactions and the government intends to usher in an era of cashless economy hoping it will weed out parallel economy and black money from the system and thus will help in eradicating corruption. The government is going big about it, promoting and launching digital payment platforms with the latest addition of BHIM app that will act as a Unified Payments Interface (UPI).

But there are many who are worried about cyber threats to this digital push. And they have reasons to believe so.

US Barack Obama has expelled 35 Russian diplomats for the alleged Russian role in cyber attacks on the US political parties in the recently concluded US Presidential polls. We can gauge its seriousness from the fact that such a huge public expulsion of diplomats is rarely seen in the US-Russia ties.

Then we cannot forget that when Rahul Gandhi’s and other leaders’ Twitter accounts were hacked recently, it took many hours to restore them, in spite of being such high-profile cases. These are just some much talked about instances. Hacking is increasing rapidly with spread of digitisation in our lives.

When the US Presidential Polls is not safe from cyber threats or when the US President elect prefers to use a ‘courier’ than a computer to exchange sensitive information, can we believe our money will be safe in apps of our mobile wallets? Though the government has assured that it has worked on this aspect, detractors and the political opposition is counting the threats of the move with such instances.

©SantoshChaubey

TRUMP THREATENS ON MOVING BUSINESSES AND JOBS OUT OF THE US, PROPOSES TO TAX THEM

The article originally appeared on India Today.
Here it is a bit modified and extended.

Reiterating his pre-poll promise once again, US President Elect Donald Trump has issued a direct threat to the US companies outsourcing jobs or moving their business to other countries or firing employees.

Trump has warned that is unfair for the companies to move their production units outside while selling their products in the US market.

Trump who sums his series of tweets on the issue with ‘THE UNITED STATES IS OPEN FOR BUSINESS’ in capital letters says it cannot be the business as usual and warns the outifts before making ‘a very expensive step’ to venture out of US for their business interests.

Though he has been repeating it that there will soon be a tax on such companies that will make them leaving the US financially difficult, it is the first time that he has said so in clear words.

During the campaigning phase, he continuously threatened to slap an import tariff of 35% on the US companies taking their businesses out. His tweets indicate he wants to make the US borders strong by such coercive measures, including his grand plans of electing a wall on the US-Mexico border to check illegal immigrants from Mexico whom he despises as rapists and criminals.

Here is what Donald Trump has just tweeted.

Donald J. Trump @realDonaldTrump

The U.S. is going to substantially reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. without retribution or consequence, is WRONG!

There will be a tax on our soon to be strong border of 35% for these companies wanting to sell their product, cars, A.C. units etc., back across the border.

This tax will make leaving financially difficult. These companies are able to move between all 50 states and negotiate a tax free deal! Our country cannot keep losing these jobs, & won’t these companies are able to move between all 50 states, with no tax or tariff being charged.

Please be forewarned prior to making a very expensive mistake! THE UNITED STATES IS OPEN FOR BUSINESS

Stop outsourcing and preventing businesses moving out from the US has been at the core of the Trump politics that promises to ‘make America great again’. His US is going to both, ‘OPEN and CLOSE’, the Donald Trump way it seems.

Just two days ago, Trump visited an Indianapolis plant of AC maker Carrier claiming that he had brokered a deal that saved 1000 jobs at the plant from being outsourced to Mexico. And in a typical Donald Trump fashion, publicised it enough to have its echo felt across.

©SantoshChaubey

HAD NEVER SEEN SOCIAL PARITY IN INDIA LIKE THIS!

I had never seen social parity at this level, here in India, before this current phase that is undoing many historical stereotypes.

Being a media professional, I was aware of it since the moment it began, but it is only today that I got the first hand experience.

But before that, let’s be clear about it – that social parity basically applies to them who form the majority of our society – except out upper middles classes and elites (including some VIPism folks from the lower middle class). So this time also it is going to be about this ‘majority’. Like always, the other folks are never in this rate-race.

I had to go the Delhi airport today and I had only Rs. 500 notes in my wallet and some change that accounted for around Rs. 200. So, in spites of having a loaded purse, I was literally impoverished – to the hilt – because the airport ride needed anything around 500-1000 bucks depending on the mode of transport I would choose.

Okay, I could have gone the cashless way but there was this desperate urge to try the Delhi Metro route hoping that I would be able to get at least some change for my Rs. 500 notes. So there I was.

But to my dismay I found there (at Delhi Metro stations) sympathetic customer care executives or nonchalant cash counters but not the problem of my solution. And soon whatever change I had was gone.

And I was not alone. There were multitudes. How I came out of this quagmire is a story for another day. Today it is basically about the social parity this sudden move by the Government of India has brought where all the biggies have suddenly become commoners like us – at least for the stuff that they need cash to trade for – like in transportation or petrol pumps or for buying the stuff of daily usage like milk or grocery items. Now you can use your Rs. 500 or Rs. 1000 notes at many places but the problem is even those places are running dry.

So, all of a sudden, uniformity can be seen among masses thronging our roads or streets. Those having millions or those barely surviving on their salaries or daily earnings, they all can be seen in ATM or bank queues. I appreciate AIIMS for this sort of culture – in spite of having loads of people from VIP fulcrum or staff-linkages, a man flashing his latest iPhone model can be seen in same queue waiting for his turn along with the man who kills his waiting hours by playing with the buttons of basic feature phone.

If we leave some of the super-elite aside (after all, in every democratic society, a class like this always exists – after all, history needs to preserve its elements, even if it is elitism and VIPism), all in the society looked on an open platform today which had no extensions to offer.

They all are talking of the similar pains (and gains).

So, even if everyone was flashing his Rs. 500 or Rs. 1000 note, it meant nothing to the guy sitting on the other side. And it is the story of the whole country.

It was like – either everyone was victim – or everyone was perpetrator – though the victim corollary works better here.

It is like you have all – and you have nothing.

Everyone was looking in a similar social hue today – in fact has been looking like this since November 8 when prime minister Narendra Modi suddenly announced that the biggies of our currency flow would become unwanted existences post midnight.

©SantoshChaubey

CURRENCY NOTES IN CIRCULATION: BASIC STATS

RESOURCES

WORTH

  • 17,54,000 CRORE: OVERALL WORTH OF NOTES IN CIRCULATION

IN VALUE TERMS

  • RS 500 NOTES CONSTITUTE 45% OF THIS
    RS 1000 NOTES CONSTITUTE 39% OF THIS

IN VOLUME TERMS

  • RS. 10 AND RS. 100 NOTES CONSTITUTE 53% OF THIS.

RS. 500 AND RS. 1000 NOTES IN CIRCULATION

ACCORDING TO A BUSINESS STANDARD REPORT QUOTING DEPUTY GUV R GANDHI:

  • “16.5 BILLION RS 500 NOTES AND 6.7 BILLION RS 1000 NOTES IN CIRCULATION CURRENTLY”.

ACCORDING TO A BLOOMBERGQUINT REPORT QUOTING THE RBI,

  • 7% OF NOTES IN CIRCULATION: RS. 1000
  • 14.7% OF NOTES IN CIRCULATION: RS. 500

RS. 6,32,600 CRORE IN CIRCULATION – IN THE FORM OF RS. 1000 NOTES – TO BE REPLACED BY RS. 2000 NOTES

CURRENCY CHESTS

  • STATE BANK OF INDIA – HAVING STRONGEST CURRENCY CHEST IN INDIA – 1965 IN NUMBER
  • SBI AFFILIATES – 757 CURRENCY CHESTS
  • OTHER NATIONALIZED BANKS – 1173 CURRENCY CHESTS
  • PRIVATE BANKS – 160 CURRENCY CHESTS

COUNTERFEIT

2015-16: COMMERCIAL BANKS FLOW DELECTATED 6.5 LAKH COUNTERFEIT NOTES.

  • 30%: EXPANSION IN ECONOMY BETWEEN 2011 TO 2016.
  • 40%: INCREASE IN CIRCULATION OF CURRENCY NOTES.
  • 76%: INCREASE IN CIRCULATION OF RS. 500 NOTES IN THE SAME PERIOD.
  • 109%: INCREASE IN CIRCULATION OF RS. 1000 NOTES.
  • 4 LAKH OF THESE NOTES WERE OF RS. 500 AND RS 1,000.

GOVERNMENT WANTS TO CHECK THIS BY RE-MONETISING RS. 500 NOTE AND REPLACING RS. 1000 NOTE BY RS. 2000 NOTE.

BUT WHAT ABOUT COUNTERFEIT RS. 100 NOTES?

RS. 100 COUNTERFEIT NOTES IN CIRCULATION: 2 LAKH

©SantoshChaubey