Weekend reading links

1. M Govinda Rao makes the case for an Independent Fiscal Council for India, which was advocated by both the 13th and 14th Finance Commissions.

2. The Economist has an article on Hollywood and China. Cinema too has been characterised by the spectacular growth that is a feature of China's emergence,

In 2005 China had 4,000 theatre screens, slightly more than Britain at the time. Last year it had nearly 70,000, according to Omdia, a market-research company, almost equal to America and Europe combined.

Like with foreigners in all other sectors, foreign film companies too face the same type of excessive restrictions in China, even as Chinese companies enjoy far more liberal environments elsewhere,

It is strictly enforcing rules that require co-productions to have at least one-third of their investment from Chinese partners, at least one scene shot in China and a cast that is at least one-third Chinese... usually only domestic films are awarded slots during the four main holidays—spring, summer, national day and Chinese new year—when around half the year’s tickets are sold.

Even release dates and advertisement budgets of foreign productions are regulated. Then there are the  overt and covert censorships, which often involves significant changes to storylines. But all these restrictions have not dimmed Hollywood's commercial interest in the massive Chinese market. Like other parts of corporate America, the short-sighted commercial allure overcomes these restrictions and risks of being armtwisted on intellectual property and/or outmuscled by local competitors who copy from Hollywood. Broader national interest though has never been a major consideration to American businesses.

While Hollywood's themes are dominant in China, there are serious limits to Chinese soft power projection. Sample this about its biggest production so far,

Chinese productions, by contrast, seldom make much money outside China. “Wolf Warrior 2” (2017), China’s highest-grossing film, produced by cfgc and others, took less than 2% of its $870m haul overseas. (Its tagline—“Anyone who offends China, no matter how remote, must be exterminated”—will not have helped.)

3. Good report on the recent catastrophic landslide in Idukki district of Kerala and how the state may be the experimental laboratory for climate change in India,

According to an estimate, the rain gauges of the Kannan Devan Hills Plantation (KDHP) recorded a high of almost 62 cms rainfall on August 6, the night the landslide took place. If the statistic is true, it validates the changing pattern and nature of monsoon rainfall Kerala has been getting over the past three years: extreme amounts of rain in a short period of time in a particular area.

4. Apart from motor bikes, another rare Indian manufacturing success is tractors. India is the world leader in tractor production and the leading exporter. Ashok Gulati has a good article about how tractor production took off after de-licensing in 1991 and bank credit became available.

5. Another neighbourhood problem facing Indian foreign policy - the impending $ 1 billion Chinese loan to Bangladesh for Teesta river management, thereby getting China involved in the hydro-politics of India-Bangladesh relations. 

6. Anshu Prakash has an oped which outlines how India lags behind in global R&D spending.

7. The NHAI announces much needed changes to its highways contracting terms to mitigate risks of construction risks. Among the changes, NHAI will have to hand over at least 90% of the site before work starts, remaining 10% within 180 days of work starting, and fines for any delays; review the average traffic once every five years instead of the current 10 years; and extending tenure in case of average traffic declines.

8. Good compilation of 140 school education interventions in Africa since 2014. Expectedly nothing jumps out in terms of actionability.

It is one more example of the limits to the idea of evidence-based policy making. Real world development is hard and requires prudent application of what is already known and, more important, the single-minded implementation of anything decided.

9. Interesting graphic about how unaffordable housing and forced longer commutes have been increasing across England.

10. Boris Johnson's appointment of 41 year old Simon Case as the new Cabinet Secretary, or head of UK civil service, appears to be one more in the series of decisions on personnel management and administration that have upended conventional wisdom. It is hard to imagine anything good coming out of this.

11. On the National Digital Health Mission

12. A summary of China's "dual circulation" strategy (DCS) of economic development, outlined at the May Politburo meeting.

The strategy, which envisions a new balance away from global integration (the first circulation) and toward increased domestic reliance (the second circulation), stems from Beijing’s belief that China has entered a new paradigm that combines rising global uncertainty and an increasingly hostile external environment with new opportunities afforded by a floundering and listless United States, which China has long viewed as its most important geopolitical rival... Chinese leader Xi Jinping declared in April that China must “take the initiative to seek change, and successfully capture and create opportunities in the midst of the crises and difficulties before us." This new worldview sees the continued decoupling of global supply chains as an enduring trend, and so Beijing now seeks to attempt a new “big thing”—balancing emphases on both internationalization and self-sufficiency (自力更生) that marks China’s own version of “hedged integration.” This model entails engaging international capital, financial, and technological markets when advantages can be gained while simultaneously bolstering indigenous capabilities to avoid overreliance on the global economy—due to national security concerns or the vagaries of global economic cycles.

It appears to be a two-track strategy. One, focus on servicing and tapping the potential of the domestic market. Two, prioritise external engagement to support the pursuit of Chinese leadership of advanced technology sectors. 

See also this and this.

At least the first part looks like the Chinese version of India's Aatmanirbhar Abhiyan and President Trump's Make America Great Again.

13. I have blogged on multiple occasions pointing the problems of focusing on PCR testing for Covid 19. Here is the latest article which highlights more challenges and argues in favour of faster and simpler antibody tests

14. Rahul Mazumdar compares India and Vietnam on international trade,

Vietnam’s total merchandise exports grew at an annualised average rate of 18 per cent in the last 10 years till 2019, as compared with India’s 5 per cent. During the same period, Vietnam attained a trade surplus of $47 billion, which again was a significant improvement over the trade deficit of $13 billion in 2010. While Vietnam started delivering trade surplus, India’s trade deficit increased to $156 billion in 2019 from $130 billion in 2010. Vietnam’s top exports, in 2019, comprised electrical machinery and equipment (with 41 per cent share), apparel (11 per cent), footwear (8), and machinery and mechanical appliances (5). The highest increase in exports during 2010-19 was in electrical machinery and equipment, the share of which in Vietnam’s total exports rose from 10 per cent in 2010 to 42 per cent in 2019 — within which the highest exports were recorded for mobile telephone (with a 13 per cent share), followed by electronic integrated circuits (7 per cent) and parts of mobile phones (6)... India’s top exports comprised largely low-tech manufacturing products like mineral fuels (14 per cent share), pearls (11 per cent), machinery (6), organic chemicals (5) and vehicles (5)... Hi-tech exports as a percentage of manufacturing in Vietnam stands at 40 per cent, whereas in the case of India it stands abysmally low, at 9 per cent in 2018... During 2009 and 2018, India’s exports to EU increased 1.6 times as against Vietnam’s 4.4 times.

The recently signed FTA with EU further increases the competitiveness of Vietnamese exporters.

15. Ananth points to this Andrew Batson blog that examines the legacy of Zhu Rongji. The part about the reforms to the state owned enterprises (SOEs) is interesting. The official policy was ‘grab the large, let go the small’ (zhua da fang xiao 抓大放小). Zhu Rongji undertook the latter and Li Peng led on the former. The two objectives were distinct, requiring people with different ideological bents of mind.

But without the latter, could the former have succeeded? And if Zhu had succeeded more with his liberalisation and competition, it would have perhaps started to conflict with the promotion of the biggest ones?

An intriguing aspect about the Chinese development trajectory is how they have managed to strike the balance on reforms across several sectors and areas of development. I don't think these have happened by conscious actions, but neither has it been due to plain good luck!

16. Vivek Kaul points out that a psychology of recession may have enveloped the Indian economy,

As per the CMIE’s Consumer Pyramids Household Survey, over 85 million people lost their jobs between March and June 2020. The third national multi-institutional survey on micro, small and medium enterprises (MSMEs) in India estimates that even at a conservative level, around 35 million jobs, close to a third of the jobs in the MSME sector, may have been lost as of the end of August. Other than people losing jobs, there have been salary cuts as well as reduced or zero increments. Job offers have been rescinded on. This has ensured that the psychology of a recession has set in. Even those individuals who have jobs have seen others get laid off and want to save more for a rainy day. Businesses have also lost their appetite to expand and invest... The impact of this psychology can already be seen in bank data. Both individuals and businesses are saving more. The time deposits (or fixed deposits) with banks between March 27 and August 14 jumped by a huge ₹6.7 trillion. In fact, last year, between March 29 and August 16, a similar period, they had increased by around ₹3 trillion, or around 45% of the current year. How do things look on the lending side? Between March 27 and August 14, the total outstanding loans of banks contracted by ₹1.5 trillion. This means that people are prepaying old loans and not taking on new loans on the whole... Retail loans between end March and end July have contracted by 0.9%. During the same period, the loans to industry and services contracted by 3% and 1.9%, respectively. Hence, despite what businesses say, their actions speak otherwise. So, the country as a whole is saving more and borrowing less, which means it’s spending less.

17. The story of Naspers is fascinating and is arguably the most spectacular success of the venture investing world,

Naspers, a South African media group founded in 1915. In a prescient bid to diversify away from newspapers in 2001 it paid $32m for a large stake in a piddly Chinese startup. Tencent, the startup in question, has since morphed into a gaming and messaging behemoth worth over $670bn. Dealing with the windfall presents unique management headaches. The unexpected upshot of a South African investment in China is a European consumer-internet giant. A year ago Naspers listed Prosus, a vehicle for its online bets, in Amsterdam. By dint of owning 31% of Tencent, worth about $208bn, as well as other investments made since, Prosus is the EU's fourth-most-valuable firm.

18. Finally, in a truly important reform, the Andhra Pradesh government has decided to meter agriculture connections, bill the consumption, and transfer the amounts to the farmers as a direct benefits transfer. The opposition across the state will be strong. The state is wisely trying to implement it in one district to start with.

Farm power metering is the small step for man but big step for mankind moment for farm power reforms.