Weekend reading links

1. To give a sense of the demographic challenge facing Japan, sample this from Yubari town in Hokkaido, which recently became the first Japanese municipality to file for bankruptcy,

The town’s population has declined to about 8,000 from roughly 120,000 in the 1960s, according to the local chamber of commerce. The closure of Yubari's coal mines was a blow the community never recovered from; population decline only made matters worse.

2. From Ananth, fascinating analysis of India's income tax revenue trends in Livemint. The major share of income tax comes from salaried income compared to business income,

The total income declared by individuals during AY19 stood at ₹34.1 trillion. Of this ₹20 trillion, or the bulk of the income, was declared by the salaried class. The business income came in next at ₹9.3 trillion. The declared interest income was ₹1.19 trillion, whereas the income from house property stood at ₹37,448 crore... In AY13, individuals paying an income tax of greater than ₹1.5 lakh accounted for nearly 79% of the total tax. This figure fell to 74% in AY15. It has since risen to 79.1% in AY19. A possible explanation for this lies in the higher surcharges that the government has introduced for those in the higher tax brackets over the last few years... The number of people paying an individual income tax of greater than ₹1.5 lakh has increased from 1.38 million in AY13 to 3.49 million in AY19. Nevertheless, as a percentage of the population, this remains a very small proportion. In AY19, 0.26% of the population paid close to four-fifths of the individual income tax, against 0.11% in AY13.

The government appears to be spending more effort and political capital squeezing more tax revenues out from the system, than in trying to expand the envelope itself by enabling growth. The former is easier to do, and the latter difficult. And the former comes with all its perverse incentives. In fact, it worsens the situation without commensurate performance on the latter.

This about housing rental market is very interesting,

According to the data, only around ₹37,400 crore is generated as income from house property in a year (through rents after adjusting for home loan interest, etc.) in the entire country, which shows that much of these transactions are still cash-based and completely outside the tax net... In AY19, around 8.3 million individual returns were filed for house property income. Of these, around 4.67 million declared a negative income from house property. This basically means that they are repaying their home loans. An interest of a maximum of ₹2 lakh paid on a home loan(s) is currently allowed as a deduction from taxable income during a year. Hence, around 3.63 million filers actually made a positive income from house property. If I were to put it a tad simplistically, India has just 3.63 million landlords.

It underscores the challenge about rolling back the cash economy.

3. Also from Ananth, a good set of links to research papers that highlight different signatures of financialisation in the economy. Most of them are covered in great detail in The Rise of Finance.

4. Mint's Macro Tracker shows continuing economic weakness. All the high frequency indicators are in the red.

5. Good summary of India's water problems,

As for water, a near-total reliance on moody monsoons has not made Indians careful users. Around 70% of surface water is thought to be polluted, and pumping from 20m tube wells has dangerously lowered groundwater levels. Indian farmers use more groundwater than America and China combined. They draw as much as 6,000 litres of water to produce a kilo of rice, compared with as little as 600 in China. This is because for 50 years Indian governments have subsidised farming. Water for irrigation is free, and seeds, diesel fuel, electricity and fertiliser are all sold below cost. As a result, India now has a 70m tonne grain mountain and a 15m tonne sugar mountain. It ranks as the world’s biggest exporter of virtual water, shipping out the equivalent of nearly 100bn cubic metres a year in its exports of rice, textiles and other goods. Lack of access to clean water kills an estimated 200,000 Indians a year, and sickens millions more. Once-pleasant rivers such as the Yamuna in Delhi and the Mithi in Mumbai are devoid of oxygen and black with sewage. Bengaluru’s suburban lakes now regularly burst into flames or erupt in towers of toxic foam. Between pollution, overuse and global warming—which appears to be making the monsoons more capricious and slightly less generous—India is fast approaching a water crisis.

6. Even with all its flaws and limitations, the Ease of Doing Business surveys must count as one of the rare policy reform successes of the World Bank.

7. Elizabeth Warren's "fair markets, markets with rules" based manifesto is overall very impressive. Is this the most comprehensive proposal yet on redefining a national economic paradigm? 

8. After becoming America's biggest landlord, private equity giant Blackstone has a new target - warehouses used by e-commerce companies, close to urban areas.

Blackstone owns about 800 million square feet of industrial warehouses, with nearly half of its 443 million square feet in the Americas having been acquired this year.

It raised a record $20 bn real estate fund early this year, and manages $157 bn in investor capital aimed at real estate. 

This about what favours the large funds like Blackstone,

New York firm’s history of double-digit returns and a herd effect, where pension-fund managers and other big investors tend to favor the same brand names with established track records... Even before its latest fund, Blackstone had the record for raising the four largest funds, according to Preqin. Its previous real-estate fund, at $15.8 billion, currently holds the record. Giant firms like Blackstone and Brookfield Property Group typically have an easier time raising money than smaller firms. Investment officers working for pension funds, endowments and other institutional investors prefer firms with marquee names and long track records because they have less explaining to do if things go wrong.

Then there is also the fact that large funds manage to raise debt cheaper than their smaller competitors.