Can Pak’s Economic Crisis Lead To Its Balkanisation?

Can Pak’s Economic Crisis Lead To Its Balkanisation?

Bordering India, Afghanistan, Iran and China – Pakistan is comprised of four provinces – Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan.

Pakistan also has a federal territory, the Islamabad Capital Territory and two occupied regions – Pakistan-occupied Kashmir (PoK) and Gilgit Baltistan, both parts of the erstwhile princely state of Jammu and Kashmir which had become part of India in 1947 and are now illegally occupied by Pakistan.
All these provinces and territories of Pakistan have diverse cultures, languages and ethnicities. Unfortunately, Pakistan has failed to keep them united.

The Punjabis, who are arguably the most prosperous of Pakistan’s ethnic groups, hold all major posts within the government, the army and the judiciary. They have been lucky to avoid many of the crises plaguing the rest of the country. These crises, which continue to persist, have fuelled sectarian and separatist violence.

Pakistanis have largely lost faith in the coalition government headed by Prime Minister Shehbaz Sharif, having failed to carry out any of the much-needed economic reforms in the country.

Naveed Baseer, Expert on Pakistan says, “People are not happy with the Pakistan government or Pakistan system or whatever the army is doing, whatever the judiciary is doing. They are totally not happy and they are looking for such movements that can come up and lead them.”

The Baloch are living as minority on their own land and continue to face persecution at the hands of the Pakistan Army and spy agency, the ISI.

With Pakistan’s financial crisis owing to rising debt and dwindling foreign exchange, the Baloch’s situation has become even more dire.

The separatist movement in Balochistan has intensified and opposition against Pakistan and its ally, China, has risen.

Today, several pro-independence organisations like Jeay Sindh Qaumi Mahaz (JSQM), World Sindhi Congress, and Jeay Sindh Freedom Movement have gained a wider support base within Sindh and international platforms.

The Sindhis, who can trace their roots to the ancient Indus Valley civilization, have realized that by remaining integrated with Pakistan, their future will be uncertain and under threat and thus voices for a separate state have gathered steam.

Facing discrimination, extreme poverty, and loss of their Sindhi culture and language, the people in this part of Pakistan are determined to fight for their right for freedom.

“The historical nations particularly Sindhis, Balochs and Pashtuns are thinking that the only way is the emancipation of these historical nations” says Lakhu Luhana, leader of the World Sindhi Congress.

The Pashtuns, like the rest of disenchanted Pakistan citizens, have lost faith in the government, in particular with the ever-worsening economic situation.

Pakistan-occupied Kashmir (PoK) and Gilgit Baltistan, which have been under Pakistan’s forceful occupation since 1947, are also experiencing mass resistance to the Pakistani government. Cripplingly high inflation, food and medicine shortages, unemployment, and increasing distrust in the government are the key drivers behind the recent massive anti-Pakistan protests.

Pakistan has long exploited PoK and Gilgit Baltistan for their resources and has used the territories as breeding grounds for terrorism and has exploited their natural resources. This region is also used as a launchpad to push terrorists into India.

The continuing turmoil on both the political and economic fronts in Pakistan has led to widespread rebellion within the country. This risk seems imminent as the Pakistani rupee continues to sink to new lows against the dollar and every day is a struggle for survival for the large majority of the Pakistani population. (ANI)

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South Delhi locality

‘I Know Little About Economy, But I Am Managing Fine’

Naveen, 39, who sells mobile accessories in a South Delhi locality, says there are hardships in life but he is happy and has no worries

Is the Indian economy in a crisis? Are thousands of people jobless? Is there hunger and poverty in large areas of the country? I don’t know. It could be true. As for me, I have no complaints and I am happy with the economy and my life, and I have no great expectations or deep regrets. I live a humble life and I am able to manage.

I live in a simple DDA flat with my mother and relatives. Life has not been easy. However, I am able to cope with it all.

Standing here on the stairs, for long hours, shouting out to customers, selling my stuff, this is my comfort zone. Some ignore me, some buy my stuff. No one bothers me, and no one tells me to go away. I feel comfortable here, and many regular customers know me. I have no desire for a shop or a permanent job – as of now this work is fine for me.

I come here at 12 noon and stay back till late evening, even after dark. Most days I am able to make enough money, though it’s almost 2 am today and I have not had a single customer. Sometimes, in fact, many times, people buy my mobile accessories. Some buy many plastic glasses in one go. I sell one glass for ₹5. If they buy 50 glasses, it comes to ₹250. In that case, I earn around ₹30 or more. I make enough to survive with my mother.

ALSO READ: ‘Govt Claims On Economy Do Not Reflect In My Kitchen’

During the lockdown, thousands of people suffered. There were no jobs. Shops were shut. There was a universal crisis. However, I suffered no such crisis. I set up my make-shift shop outside my humble house and business was not so bad even during the pandemic and the lockdown. The cops were kind to me, and the area officers know me since I have been a child. So no one created any trouble for me. I was able to make some earnings even during that period of crisis. So, let other people say whatever – I really did not suffer so badly during and after the lockdown. I am happy with my little earnings.

I don’t have big dreams. Of course, I too have aspirations like everyone else, but I am not really chasing the money to become a crorepati. I would be happy to continue standing here and selling my stuff in the days to come. Little is enough for me.

Do you want to take my picture? Let me tell you, I don’t want any publicity (he wears his mask to block the picture). However, if taking my picture benefits you in some way, and helps you in your job, you are welcome to click my picture. (Takes his mask off). Thank you.

As told to Amit Sengupta

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SBI Team Debunks Raghuram Assessment On Slowing Indian Growth

We Will Be Lucky To Get 5% Growth Next Year: Rahugram Rajan

Former Governor of Reserve Bank of India Raghuram Rajan has said he believes the country will be lucky if it achieves 5 percent growth next year.

The former governor also said next year is going to be more difficult than this one. “Of course, this one had a lot of difficulties with the war and all that. Growth is going to slow in the world. People are raising interest rates that bring down growth,” he said.

While talking with Congress leader Rahul Gandhi, the former governor of the Reserve Bank of India said, “India is also going to be hit. India’s interest rates have also gone up but Indian exports have been slowing quite a bit.”

“India’s inflation problem is more about commodities inflation problem, vegetables’ inflation problem. That is also going to be negative for the growth,” he said on Wednesday in a candid talk with the Gandhi scion.

The economist said, “I think we will be lucky if we do 5 percent next year.”

The problem with the growth numbers is that you have to understand what you are measuring with respect to, he said. “We had a terrible quarter last year. And, you measure with respect to that you look very good. So ideally what you do is look before the pandemic in 2019 and look at now.”

He said, “If you look at 2022 vis-a-vis 2019, it’s about 2 percent a year. It’s too low for us.”

While being asked what he attributes this to, Rahul Gandhi, he said, “Pandemic was part of the problem but we were slowing before the pandemic. We had gone from 9 to 5. And, we haven’t really generated reforms that will generate growth.”

Rahul Gandhi had asked him in the candid talk: “There is one thing happening, 4-5 persons are getting rich and they could go into any businesses and the rest of the people have remained backward. Farmers and the poor have formed a new Bharat. These 4-5 persons’ dreams are fulfilled while those of the rest are dashed. What should we do with this inequality?

“This is a big problem. This is not about industries,” the economist said, adding, “The upper middle class has gained because they could work during the pandemic whereas the poor would have to go to factories and the factories were closed during the pandemic,” he said. “This divide has grown during the pandemic,” he said further.

Economist Raghuram Rajan said, “The poorest could get ration. They get everything. These rich didn’t suffer any difficulties. Those in between — the lower middle class — had to lose a lot. They lost their jobs. Joblessness went up. Debts went up. We should look at them. Because they have suffered a lot.”

On the subject of the concentration of wealth among the industrialists, he said we should also look at them. He said, “We couldn’t be against capitalism. But we should be fighting for competition. We could be up against monopoly. Monopoly is not good for the country.”

He said India’s issue was that our exports will also go down and growth would also decrease. “Technological support is needed, credit loans, there should be certainty about policies.”

He said there could be change. “If banks know that sales of small businesses are good and the steady revenue stream, they can lend but we need that information to be collected and made available. That is happening now. They are starting to think about all these in the fintech revolution right now. But in India, it needs to be 10 times,” he added.

Too many of our small companies don’t grow big. They need a path to grow, he said.

“Here is the problem, they get used to some of the benefits of staying small. If you don’t pay taxes, officers won’t come to them. They stay under the radar scan of the government instead of being helped by the government.”

He said, “You (company) stay under the radar until you get a revenue stream. Once your business grows, it should be like I’m going to look at you, I’m going to help you. I’m not going to tax you or make your life miserable. We need that situation.”

He added as soon as these businesses get better, the government takes away those benefits. “There is no incentive to grow bigger. Why not say, if you grow bigger, you will get these incentives for five years? By the time they are big, they don’t care,” the economist added. (ANI)

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High Commission

India-UK Free Trade Agreement On Cards

UK’s Trade Secretary Kemi Badenoch on Monday begins her India visit with a first face-face meeting with counterpart Union Commerce Minister Piyush Goyal as the sixth round of Free Trade Agreement (FTA) negotiations kicks off between the countries.

Badenoch’s visit marks the sixth round of formal negotiations between the UK and India. The goal of strengthening bilateral ties and reviving talks on an ambitious bilateral trade deal between the two nations, according to an official statement.

Badenoch is scheduled to address both the teams of negotiators teams before the round of talks begin. The negotiations will take place throughout the week

The UK Trade Secretary will also meet with business leaders to better understand their needs for a modern UK – India trade relationship.

This will include a meeting with envoPAP, a UK company investing over 10 million pounds in India to construct a plant producing Fairtrade paper and packaging products.

The talks, the first formal round since July, will aim to reach an agreement to reduce tariffs and expand opportunities for UK services such as financial and legal, making it easier for British businesses to sell to the world’s third-largest economy – with a middle class of 250 million people – by 2050.

“I’m here in New Delhi to kickstart round six of UK-India trade negotiations and meet my counterpart Minister Goyal in person to drive progress on this agreement,” Secretary of State for International Trade Kemi Badenoch said in a statement.

“India and the UK are the 5th and 6th biggest economies in the world. We have a long shared history, and are in pole position to do a deal that will create jobs, encourage growth and boost our 29 billion pounds trading relationship,” added the minister who was appointed to her role this September.

According to the official announcement, major UK brands such as Pret A Manger, Revolut, and Tide have announced plans to expand in India.

Following a franchise deal with Reliance Brands, British coffee and sandwich retailer Pret will build its first outlet in India in early 2023. The chain’s first location will be in Mumbai, as part of a goal to open 100 locations around the country.

“Bringing Pret’s freshly made food and organic coffee to more people around the world is a key part of our transformation strategy, and I’m delighted to be launching Pret in India,” Pano Christou, CEO, of Pret A Manger said.

According to International Director of the Confederation of British Industry, Andy Burwell the UK-India Free Trade Agreement remains a high focus for the industry.

Earlier in October when Prime Minister Narendra Modi congratulated Rishi Sunak on assuming charge as UK Prime Minister, the two leaders emphasized the importance of an early conclusion of “a balanced and comprehensive” Free Trade Agreement between the two countries.

India and the UK were looking to conclude the bilateral free trade agreement (FTA) pact but missed the deadline after the resignations of former Prime Ministers Boris Johnson and Liz Truss.

On July 29, the two countries concluded the fifth round of talks for an India-UK Free Trade Agreement (FTA). (ANI)

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Afghanistan Taliban

Taliban Sign Deal For Russian Oil, Gas, And Wheat At Discounted Rate

Taliban have inked an agreement to purchase and import Russian wheat, gas, and oil, the officials of the Islamic group said.

A Taliban spokesperson said products including gasoline, diesel, gas, and wheat would be purchased at a “special discount” in Russian currency, Khaama Press news agency reported.
Although Russia had agreed to the discounted trade deal, the Taliban official did not provide any details on the pricing and payment methods.

This deal comes as Russia has been hit hard by sanctions imposed after its invasion of Ukraine. The punitive measures from the Western countries have forced Moscow to shift its exports from Europe to Asia.

Meanwhile, economic development, trade, and transit remained a high priority for the Taliban, since its accent to power in August last year.

The Islamic group has continued diplomatic and economic engagement with regional countries, whose representatives stated publicly that formal recognition of the de facto authorities as a government was not imminent.

This deal comes after high-level Taliban delegations visited Russia earlier this year. Aside from Moscow, several companies from regional countries have shown interest in investing in the extractive industries sector in Afghanistan.

The Taliban leadership have consistently said that they are looking for trade deals with the international community.

This latest agreement with Russia move could help to ease the isolation that has effectively cut it off from the world following their takeover of Afghanistan last year.

A UN report released on Tuesday said the Afghan economy remained greatly weakened by the severe economic contraction and the banking and financial crisis that followed the Taliban takeover.

“Available data suggest that six-month revenue collection through June, driven by customs and non-tax sources, is on par with the level recorded for the same period last year, and exports, driven by coal and fruits, surpassed past performance,” said the latest quarterly report of the UN Secretary-General Antonio Guterres to the Security Council.

The sudden stop of aid inflows, however, accompanied by political uncertainty, inadequate access to services and women’s exclusion from economic participation, continued to lead to slow growth, the report added.

According to the UN report, Humanitarian needs were compounded by the sharp economic decline and the devastating combination of decades of conflict, recent earthquakes, recurring natural hazards, and protracted vulnerability. (ANI)

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US Inflation Signs Of Cooling Off

FDI Inflows To Cross $100 BN In 2022-23

The inflow of FDI (foreign direct investment) to India is expected to surge to a record $100 billion in the current financial year, helped by the Make-in-India initiative and steps taken by the government to improve the country’s ranking in ease of doing business.

According to data released by the Ministry of Commerce and Industry on Saturday, FDI to India almost doubled to $83.6 billion in 2021-22 from $ 45.15 billion in 2014-2015.
To attract foreign investments, the Government of India has put in place a liberal and transparent policy wherein most sectors are open to FDI under the automatic route. FDI inflows in India stood at US $ 45.15 billion in 2014-2015 and have since consecutively reached record FDI inflows for eight years, the Ministry of Commerce and Industry said in a statement.

The year 2021-22 recorded the highest ever FDI at $83.6 billion. This FDI has come from 101 countries and invested across 31 UTs and States and 57 sectors in the country.

On the back of economic reforms and Ease of Doing Business in recent years, India is on track to attract $100 billion FDI in the current financial year, the ministry said.

Launched in 2014, ‘Make in India’ initiative has played a crucial role in transforming the country into a leading global manufacturing and investment destination. The initiative is an open invitation to potential investors and partners across the globe to participate in the growth story of ‘New India’. Make in India has substantial accomplishments across 27 sectors. These include strategic sectors of manufacturing and services as well, the ministry said.

The Production Linked Incentive (PLI) scheme, across 14 key manufacturing sectors, was launched in 2020–21 as a big boost to the Make-in-India initiative. The PLI scheme incentivizes domestic production in strategic growth sectors where India has a comparative advantage.

This includes strengthening domestic manufacturing, forming resilient supply chains, making Indian industries more competitive, and boosting export potential. The PLI Scheme is expected to generate significant gains for production and employment, with benefits extending to the MSME ecosystem.

Recognizing the importance of semiconductors in the world economy, the Government of India has launched a USD 10 billion incentive scheme to build a semiconductor, display, and design ecosystem in India.

To strengthen the Make in India initiative, several other measures have been taken by the Government of India. The reform measures include amendments to laws, and liberalization of guidelines and regulations, in order to reduce unnecessary compliance burdens, bring down costs and enhance the ease of doing business in India. Burdensome compliance with rules and regulations has been reduced through simplification, rationalization, decriminalization, and digitization, making it easier to do business in India.

Additionally, labor reforms have brought flexibility in hiring and retrenchment. Quality control orders have been introduced to ensure quality in local manufacturing. Steps to promote manufacturing and investments also include reductions in corporate taxes, public procurement orders, and a phased manufacturing program.

To promote the local industry by providing their preference in public procurement of goods, works, and services, the Public Procurement (Preference to Make in India) Order 2017 was also issued pursuant to Rule 153 (iii) of the General Financial Rules 2017, as an enabling provision. The policy aims at encouraging domestic manufacturers’ participation in public procurement activities over entities merely importing to trade or assembling items.

The policy is applicable to all ministries or departments or attached or subordinate offices or autonomous bodies controlled by the government of India and includes government companies as defined in the Companies Act, the Ministry of Commerce & Industry said. (ANI)

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Weekly Update: Healthcare & Growth Are Two Things Modi Must Focus On

The big bang statement that India’s budget could have made wasn’t made. I am talking about healthcare. India spends under 1.8% of its GDP on healthcare, an amount that is far lower than what it should be ideally. The inadequacy of India’s healthcare infrastructure could not have been demonstrated better than it was during the waves of the Coronavirus pandemic that swept across the country. Millions of people suffered as hospital beds and oxygen tanks were in short supply. Much of the havoc that got created and was reported about in the media centred around India’s larger cities but the fact is that the situation was far worse in rural and semi-urban India.

The latest budget could have addressed the healthcare crisis with more focus. For example, moves to educate, train and deploy more medical and paramedical service providers, particularly in rural India. As well as measures to ensure that there is more investment in expanding the number of beds that are available for patients. According to World Bank data, for every 1000 people there is just 0.5 hospital bed available in India and that compares rather badly to even other developing countries. 

Some analysts have commended the budget for its growth-orientation. Primarily this centres on the indication of the government’s willingness to trade off higher inflation rates (at least in the short term) with higher investments. A policy that accommodates higher inflation rates for future growth potential can be non-populist and in a year that will be marked by several important state elections that can be a risk for a regime (the Bharatiya Janata Party-led ruling alliance) that has an avowed objective to rule in every state. But the government appears to have taken that risk. Now, it is to be seen whether investment and, therefore, growth is spurred.

Economic growth has become an area of serious concern in India. A statistical analysis shows that between 2011 and 2020, India’s growth slowed down while inflation soared. Prime Minister Narendra Modi had promised that by 2025, India’s GDP would reach $5 trillion. That is most unlikely to happen. Pre-Covid estimates showed that it could be far lower, say, at $2.5-2.6 trillion.

Independent pre-Covid estimates for 2025 had touched $2.6 trillion at best. The pandemic has shaved off another $200-300bn. Post-Covid, it could be lower by another $200-300 billion.

Covid, however, has not been the only dampener for the Indian economy. Hasty policy decisions such as the rush to roll out the GST tax regime and sudden decision to demonetise the rupee hit the economy hard. India’s GDP growth was at 7-8% when the ruling regime came to power in 2014. By the fourth quarter of 2019-20, it was down to 3.1%. 

The situation is far worse on the employment side. Given the Indian population’s relatively young demographics, India needs 20 million jobs to be created annually. Under the ruling regime, the number has been much lower. In 2017-18, according to official estimates, unemployment was at a nearly 50-year low: 6.1%. Since then, a Centre for Monitoring the Indian Economy (CMIE) estimate suggests that it might have doubled. Also, according to Pew Research, an estimated 25 million people have lost their jobs since early 2021 and nearly 80 million people might have gone back into poverty. 

India likes to compare itself with China, where the economy grew exponentially primarily because of a huge thrust on manufacturing and marketing. When the Modi government came to power, it unveiled the ‘Make in India’ policy to emulate the Chinese experience. By simplifying procedures and introducing manufacturing hubs where tax and other incentives were to boost manufacturing, the regime hoped that manufacturing would comprise 25% of the GDP. But nearly seven years later, manufacturing’s share remains at a paltry 15%. And the number of people employed in the manufacturing sector is down by half.

Consequently, exports have stagnated at $300 billion for the past 10 years with India losing market share to other developing countries, including tiny Bangladesh whose export growth, driven by the garments industry, has been significantly impressive.

Not all is bad, though. In basic infrastructure there have been strides. Under the Modi regime, India has been building 36 km of highways and roads every day. Under the previous government, it was barely 8-10 km. Installed capacity of non-conventional energy, mainly solar and wind, has doubled in the past five years and India will likely achieve the 2023 target of175 gigawatts.

More Indians have joined the formal sector for employment, although still too many (half of the nation’s workforce) are employed in agriculture, where productivity is low and where very little growth has taken place over the past 10 years.

There are many complex problems that policy makers attempting to boost India’s economy face. But if they were to focus on two of the most important ones they ought to be these: First, healthcare because India spends far too little on that sector. And second, boosting growth by encouraging investments. India’s latest budget attempts to do the latter. But will that be enough?

On a recent Sunday morning, the economist Kaushik Basu, a professor at Cornell University, tweeted tellingly:

“2016-17: 8.2%

2017-18: 7.2%

2018-19: 6.1%

2019-20: 4.2%

2020-21: -7.3%

These are India’s growth rates. 5 years, with each year’s growth less than previous has never happened after 1947. Sad. Let us not live in data denial, reducing everything to politics.”