Weekend reading links

1. Very interesting analysis of demographic trends across Indian states by S Rukmini. The salience of the north-south divide will become starker by 2036. Some interesting snippets,

Over one-third of the total increase in India’s population between 2011 and 2036 will come from two states alone - Uttar Pradesh and Bihar - new census population projections show, while all of the southern Indian states will see their share in the population declining... People from the four most populous southern Indian states will account for fewer people than from Uttar Pradesh alone... India will move from being a very young country, to increasingly resembling something closer to a middle-aged country... By 2036, Bihar will be the only state that has not achieved replacement fertility.

2. A useful listing of all benefits to MSMEs announced by government of India in recent times.

3. It is reported that 16.8 GW of solar and wind power projects, with investment worth about Rs 600 bn, which have been publicly auctioned and awarded are in limbo because state government owned distribution companies (discoms) are refusing to sign the contracts. These projects have been auctioned by Solar Energy Corporation of India (SECI), who in turn sign power supply agreements (PSAs) with discoms. The discoms are balking at signing the PSAs since they have been encouraged by the low rates discovered in subsequent tenders and prefer to do tariff shopping. The Government of India is now planning to bundle different power projects and sign PSAs at weighted average tariffs. 

4. The rising job losses among the salaried people in formal jobs is a big concern for the Indian economy. It has risen to 18.9 million, with 5 million such jobs lost in July, as per CMIE estimates. Besides, the latest corporate results are a matter of big concern.

But indicators also points to recovery happening, though much of it is obviously base effect from a washout previous quarter.

5. Good profile of Vivek Chaand Sehgal, founder of car parts supplier Motherson Sumi, one of the true Indian manufacturing success story.

6. I have blogged here about how the National Infrastructure Investment Fund (NIIF) is displacing private capital. It is reported that the government has roped in NIIF as a bidder to redevelop and transform Mumbai’s Chhatrapati Shivaji Maharaj Terminus railway station.

This may be a good use of NIIF only if there is limited market interest or competition for the Terminus development project. But if there is limited commercial interest for a project like the Mumbai terminal, arguably the prime asset for the Indian Railways (along with New Delhi Station), then it raises questions about either the commercial viability of the whole PPP-based railway stations redevelopment project itself or the terms of these tenders.

However, I foresee a good use of NIIF's capital to de-risk the project and crowd-in private capital for some second tier city terminals, where commercial interest could be justifiably lower.

7. An example of where regulators like SEBI could do with some state capacity to make better use of their already existing powers and regulate more effectively.

8. James Anderson has become the first fast bowler to take 600 wickets. However, I don't think that by any stretch can Anderson be called an all-time great. Among modern fast bowlers (since the seventies) the following will stand apart (for number of wickets, average, strike rates, and performance across the world) - Marshall, Roberts, Holding, Garner (never played in India), Ambrose, Walsh, Lillee (never played in India), McGrath, Hadlee, Imran, Wasim, Waqar, Donald, and Steyn. The next level will consist of Botham, Kapil, Pollock, Anderson, Brett Lee, and Broad. 

The closest comparison I can think of is with Anil Kumble. Like Kumble, on helpful home conditions, Anderson is exceptional. But outside of those, they are surely not the top bracket. That's unlike the names indicated in the first category.

9. Simon Kuper has two very good football articles. As talks about his exit surface, this on Lionel Messi highlights Barcelona's over-reliance on its star and why that could create the conditions for a cliff-edge fall when he departs or retires. The article is also a brilliant portrait of Messi's enigmatic hold on Barcelona's football system. 

The best footballer of probably any era has lived for almost his entire career in the unremarkable town of Castelldefels, outside Barcelona... the essential underpinning of 15 years of routinely brilliant football is a boring life... The Argentine became an umbrella for the organisation. He made running Barça relatively easy.

This on the European Champions League runner-up and Qatari owned Paris Saint Germain (PSG) and how it has slow come to represent Paris. It has involved reclaiming PSG's association from the suburban banlieues and unmarking it to the Parisian elites too.

In 2016 PSG upgraded the stadium, more than doubling the number of VIP seats to about 4,500. Tom Sheehan, the project’s architect, said: “What PSG wanted us to do was look at how we could breathe the identity of Paris into the Parc itself. Paris is a very luxurious destination. We’ve tried to make the Parc a chic destination.” He likened the stadium’s renovated VIP entrance to the entrance hall of Paris’s Opéra Garnier, “where people come early, to see and be seen”. Young banlieusards drinking beer and smoking pot on the surrounding pavements didn’t fit PSG’s plan. In effect, chic Paris was reclaiming the club from the banlieues. The new owners redrew PSG’s badge, making the word “Paris” very big, above a large Eiffel Tower, with “Saint-Germain” in smaller type underneath. Blanc said, “We are called Paris Saint-Germain, but above all we are called Paris.” Sleek men in white shirts in PSG’s sun-filled offices defined (in their new “brand book”) exactly what PSG should stand for: the elegance, beauty and excellence of Paris itself.

10. Jacob Helberg points to how America's de-industrialisation has accompanied China's rise as the world's factory,

In the first decade of the 21st century, more than 66,000 manufacturing facilities closed down or moved overseas. America’s share of the world’s printed circuit board production has dropped 70 percent since 2000; China accounts for around half of global production today. The high-tech industry is hardly exempt: As of 2015, Chinese factories produced 28 percent of the world’s cars, 41 percent of ships, more than 60 percent of TVs, and a staggering 90 percent of the world’s mobile phones.

He points to the strategic risks from US deindustrialisation and the rise of an aggressive China,

Currently, Taiwan—which China dubs a renegade province—is home to Taiwan Semiconductor Manufacturing Company, which accounts for half the global supply of computer chips used in everything from F-35 fighter jets to Apple devices. The United States cannot afford to ignore China’s plans to eventually seize control of Taiwan and the consequences this would entail for the entire U.S. technology industry.

11. A very detailed investigation of the activities of the United Front supported Chinese Communist Party's talent recruitment programs aimed at diaspora Chinese in developed economies and who are working in strategic sectors there and could serve as conduits to access confidential business and other information. (HT: Ananth)

12. Milind Sohoni and Oshin Dharap have an excellent article that draws attention to a less discussed damage done by UGC's quest to standardise university curriculums and examinations on a national or global basis, thereby completely overlooking local contexts and requirements and disconnecting students from engagement with local issues.

Should a “good” student be able to write a newspaper article on a local issue, or conduct a study? Should IIT Bombay or Shivaji University analyse the Kolhapur floods or measure the parameters of the epidemic in their cities? Can the state rely on its colleges for research on drinking water? Should the nation expect that elite institutions will work to improve the railways and devise timetables for shramik services? These questions have never been answered... The case study on local problems has been absent in the curricula. When states innovate, the MHRD is more likely to steam-roll it. This was witnessed in Maharashtra, where its innovative programme, Unnat Maharashtra Abhiyan, linking colleges with district administration was refused support by the MHRD... The most exceptionable is the UGC-NET, the qualifying exam for college teachers. Their curricula are, of course, “national” or for that matter “global”. In Economics, it is the last chapter (of 10 chapters), where the Indian Economy is finally introduced. Missing is the District Economic Plan, a document which is regularly prepared by state governments, or the economics of the city. Sociology wends its way through Marx and Weber, ignores key development programmes such as MGNREGA and forbids any regional content. In Engineering too, the national curriculum for civil engineering is the same for Himachal Pradesh and Maharashtra. The national governing body for engineering has now determined that Virtual Reality and Quantum Computing are important emerging areas! Thus, the Centre decides the curricula, the teachers and their salaries. The states pay.

The MHRD and other central government agencies quest to exert control and regulate national development and economic growth at the cost of the agency of state and local governments is most certain to backfire.

13. The Chinese bullying of Australia should be a wake up call for the Europeans sitting on the fence, if at all any such call was needed. Ananth points to this article about how the Australian government is waking up to tighten restrictions on Chinese engagements in the country.

14. I have blogged about this earlier. A rare example of Indian manufacturing success is that of motorcycles. Three manufacturers - Hero MotoCorp, Bajaj Auto, and TVS - dominate the global market. In the Indian market which forms 40% of the global market, these three account for 77% share. All three started out with partnerships with foreign companies (Honda, Kawasaki, and Suzuki respectively), gradually mastered the production technologies, exited the partnerships and struck out on their own.

Besides, all three have had the vision to invest in R&D to develop in-house capabilities to stay ahead of the global market as well as cultivate their suppliers and a supplier eco-system that is critical to stay competitive in any such market. This and this are two very good articles that explain the story.

15. On substantive economic issues, the returns from India's investment in President Trump may not be much to shout about,

Trade relations have been a major casualty with Mr Trump terminating, in March last year, India’s preferential trade (essentially duty-free) status for a range of products under the Generalised System of Preferences programme, impacting about $5.6 billion worth of Indian exports, mostly from small and medium enterprises. A trade deal, which was likely to address this issue, has proved elusive principally on access to agriproduct markets. At the same time, Mr Trump’s crackdown on immigration in general and his June executive order freezing access to H1B visas, topping months of warnings that the system would be overhauled to limit these permits, has hit the Indian IT industry at an inopportune moment, with the pandemic shrinking job opportunities.

16. Finally Jerome Powell gave the much-awaited Jackson Hole speech on Thursday where he announced a paradigm shift in Fed's monetary policy assumptions. This about inflation,

Our statement emphasizes that our actions to achieve both sides of our dual mandate will be most effective if longer-term inflation expectations remain well anchored at 2 percent. However, if inflation runs below 2 percent following economic downturns but never moves above 2 percent even when the economy is strong, then, over time, inflation will average less than 2 percent. Households and businesses will come to expect this result, meaning that inflation expectations would tend to move below our inflation goal and pull realized inflation down. To prevent this outcome and the adverse dynamics that could ensue, our new statement indicates that we will seek to achieve inflation that averages 2 percent over time. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.

In seeking to achieve inflation that averages 2 percent over time, we are not tying ourselves to a particular mathematical formula that defines the average. Thus, our approach could be viewed as a flexible form of average inflation targeting. Our decisions about appropriate monetary policy will continue to reflect a broad array of considerations and will not be dictated by any formula. Of course, if excessive inflationary pressures were to build or inflation expectations were to ratchet above levels consistent with our goal, we would not hesitate to act.

And this about unemployment rate,

... our revised statement says that our policy decision will be informed by our "assessments of the shortfalls of employment from its maximum level" rather than by "deviations from its maximum level" as in our previous statement. This change may appear subtle, but it reflects our view that a robust job market can be sustained without causing an outbreak of inflation. In earlier decades when the Phillips curve was steeper, inflation tended to rise noticeably in response to a strengthening labor market. It was sometimes appropriate for the Fed to tighten monetary policy as employment rose toward its estimated maximum level in order to stave off an unwelcome rise in inflation. The change to "shortfalls" clarifies that, going forward, employment can run at or above real-time estimates of its maximum level without causing concern, unless accompanied by signs of unwanted increases in inflation or the emergence of other risks that could impede the attainment of our goals.

These may appear small shifts, but they can have significant consequences. More on this later.