COVID-19 - status quo change

This pandemic is now two months old and we are still not out of the woods. It will take some time for the world to rid itself of this scourge.  The problem is our patience does not count for anything. The virus has its own timetable and it will go away when it is good and ready.  The world had no inkling as to the scale or speed with which virus spread across the world.  It was no doubt helped initially due to the lack of transparency shown by the Chinese government by pressurizing WHO to water down its report on the lethality of the virus.  The world did not take the initial guidelines seriously and the results are there for all to see.  An unprecedented lock down across the globe and all economic and trade activity coming to a halt has resulted in the world stopping in its tracks.  While there is no denying the favorable environmental impact due to the stopping of world trade and transport, it has caused a lot of hardship and its effects will be felt for a long time to come.

Of late there has been a realization that this could have been avoided. If China had been more forthcoming on sharing data on the corona virus disease. But due the penchant of a dictatorial regime for showing that the government can do no wrong, the communist party published false data on the disease, letting it spread in the whole world. In hindsight the Chinese Communist Party (CCP) must be regretting its initial secrecy that it advocated regarding the disease because the world is now coming to realize the extent of the damage done and the real price it will have to pay. Whether the virus was spread by accident or design, the Chinese government now knows that it has done something wrong as there is a perceptible backlash against it the world over. It revised the Wuhan death figure by fifty percent almost twenty days after freezing it. This shows that controlling the narrative on the pandemic is more important to the CCP than saving lives.

 The world opinion now has a distinct tone which suggests that it does not approve of Chinese actions since the start of the pandemic. There is a marked shift in the foreign investment policies of major economies. Any strategic investment by China will now be scrutinized by the host government before being approved. Against the backdrop of the Huawei controversy, this had to come sometime and the COVID-19 pandemic has provided the trigger. Another realization is that the world has put all its eggs in one basket. Low manufacturing cost and favorable supply chain logistics made China the workshop of the world. But the pandemic dried up a lot of supplies of essential goods due to the lock downs imposed in the Wuhan area. China now has a monopoly on most medical supplies. But there is talk of diversifying the supply chain through more countries to avoid bottlenecks in emergencies.

Unconfirmed reports of a second outbreak in China are now being published, also, there are other conspiracy theories which suggest that the corona virus leaked from a Wuhan chemical lab experimenting in biological weapons. How this pans out in the near future remains to be seen, but it is now obvious that the world is seeing China in a new light. 

The Corona Shift

When I wrote my last article on the corona outbreak, little did the world realize that it will suffer a pandemic at a scale which is unprecedented, will bring everything to a stop and kill thousands. It started in the Wuhan province in China and now has spread across the globe in no time. 

Since the beginning of modern times mankind has never had a chance to look back and take stock of where it was headed. The so called progress kept on happening and man just went along with the flow because all seemed to be hunky dory.

Progress in Scientific, economic, sports, business, technology spheres have accrued a lot of gains and we started to take the world for granted. Never in our wildest imagination did we ever expect that the world as we know it will come to an end. That actually has happened. Investment plans going forward months and years have come to a naught overnight. The stock market, the economy, the epidemic situation all are crying out for solutions which are just not forthcoming. There is no precedent. It seems nature has called a halt to the breakneck pace at which mankind was traveling.

Even at the best of times man on this planet hardly knew where he was going. The analogy of a car traveling at night at high speed with weak headlights comes to mind.  Suddenly a pandemic has come into view and now there is panic braking all over the globe. Markets tumbling, washing away billions of dollars overnight. Businesses coming to a grinding halt, supply chains getting disrupted. Humans never have experienced such a situation in recent history. No person alive can remember such a calamity in their lifetime.

As a race on this planet we were so used to having our way that it is extremely frustrating to see that we are not able to go about living our normal lives. As mankind progressed the pace of innovation increased, which added fuel to the fire of economic progress. This exponential growth in world economy and the inherent confidence in our ability to solve all our problems using technology, lulled mankind into a sense of false security. This confidence has now been shattered. Perhaps nature has called a halt to the entire madness that was happening. The breakneck pace has been slowed. 

 Mankind was obsessed with trade, commerce, margins, profits and stock indices. Its onslaught on nature is a known fact. Issues like greenhouse gasses, pollution were discussed and debated but no drastic steps have yet been taken to prevent potential natural disasters related to pollution. Mankind was not ready to take a hit to conserve nature.
This outbreak has caused a lot of economic/financial hardship. We have finally taken a hit, inadvertently. Perhaps this will bring to the worlds attention the bigger and urgent problems that it faces regarding the environment and make it realize that the world will have to sacrifice its profits, and incomes if we are to really make any progress in tackling the environmental issues.
Amidst all the chaos there are some bright spots. Nature seems to be claiming some of its spaces from our civilization. Dolphins were seen very close to the Mumbai coast as well as in Venetian canals which is not in anyone’s memory today. Air pollution in several cities across the globe has gone down due to lock downs. Though the world will take a big financial hit, nature will get a bonus. One other thing is becoming obvious. Contrary to the received wisdom, it seems the earth can heal itself. This was not unknown to scientists, but it is now becoming clear that all man has to do to clean up the earth is stop all his activities.When mankind retreats, nature takes over and starts the process of healing. Man need not spend billions of dollars in research to heal the earth. 
There have been some upsets in the conventional hierarchies in the economy. All the high rollers of the economy like actors, business community, high profile sportsmen like footballers, cricket players have taken the back seat. They are remembered remotely. Those who have taken the center stage, are the run of the mill people. Sanitation workers, healthcare staff, and those engaged in work which keep big cities running in lock downs. They are the new celebrities. 

The lesson to be learnt from this outbreak is that man cannot forget that nature is all powerful and it will assert itself in no uncertain measure if it does not get the due attention and respect. This cognizance will have to be at the back of our mind as we pick up the pieces and move on. 

The Corona Shift

The Afghan Peace Deal

The Afghan Peace Deal

It is now time again to write about the US–Afghan(Taliban) deal. This time the signatures have been made after the aborted first attempt. The deal has come out of the US compulsion to get out of disputes the world over. Wherever America is involved in a dispute, it inevitably bogs down. The Americans are known to go in with full commitment, pump in a lot of money for a number of years and even if it is a wholehearted effort, it  is generally lacking a thorough understanding of the ground realities. This results in a long drawn operation, military and civilian combined, which achieves nothing, and eventually a withdrawal of troops with no tangible solution. Many a times the Americans leave with far greater problems for the region than what existed on ground before they came to the place.

Whether the Afghanistan peace deal will go the same way will be hard to predict at the moment. The irony is that the Americans went into Afghanistan to fight the Taliban. The Taliban were the enemy number one. Today the Americans gave negotiated with the Taliban and according to many, have left the Afghan people in the lurch. This deal is compared to the Vietnam peace deal where the Americans left the South Vietnamese to deal with the North as domestic public opinion began to go against the war in Vietnam. The ultimate withdrawal from Saigon was definitely not a feather in the US cap. Where ever the Americans go they have an abysmal record of negotiating a successful peace deal. After 9/11 the Americans went into Saddam Hussein’s Iraq on the pretext of finding their (Weapons of Mass Destruction) WMDs. They never found any. Saddam was removed from power and a political vaccum was left, which go filled with the ISIS. Today the region is in turmoil with consequences being felt in Europe. The refugee influx has caused a lot of social and political turmoil.

Looking at this record it does not give any studied observer confidence that this deal will bring any lasting peace for the Afghan people. Already cracks are beginning to show even as the ink is still drying on the accord. A big glitch in the peace deal is that the Afghan government has been kept out of it. This deal is essentially signed between the US and the Taliban with the aim that the Taliban does not target the US and its allies. The allies are probably defied in secret.  The US probably thinks that the current Afghan government is expendable.   President Ashraf Ghani has said that there will be no exchange of prisoners with the Taliban, which is actually an important clause in the deal. He says the US does not have the jurisdiction to decide on the release of Taliban prisoners with the Afghan government. Also other terrorist groups like the ISIS and the Jaish-e-Mohammed would get the wrong signals. Any terrorist group worth its salt will now think of becoming a legitimate political entity. Whether they will be committed to peace or not is another matter.

Probably this deal is not about peace at all. It has a lot of secret clauses. One could surmise from this, that it is a agreement between the USA and Taliban to let American troops withdraw from that region with some semblence of dignity. It is not known what the Deal promises and to whom. One will have to wait and see if the people of Afghanistan get their lasting peace. The certain thing is that this accord has caused a question mark to be put on the stability of the region, which would entail another write-up on the subject. 

Coronavirus II - Fallout

The ongoing corona story seems to have many angles which hitherto have been revealed to the world at large. While containing the epidemic has been the priority of everyone, some seemingly innocuous aspects have been noticed as regards China’s tackling of the disease. China’s conduct has not been exemplary during these trying times. As the disease started spreading, the countries in China’s neighborhood especially in South East Asia started imposing restrictions on Chinese tourists and business travelers. The visitors were screened for infections and even banned from travelling inside their country. China took offence to these measures taken by the countries which were basically just preventive measures. Due to the long incubation period, these countries were justified in taking these precautions. But China threatened to take retaliatory action saying that it has a long memory and will remember this kind of behavior.  In fact China has been greatly worried about its prestige and foreign image and is unnecessarily sensitive about how its citizens are being treated abroad. It is trying to bully smaller countries into towing its own line on how they should conduct themselves in this crisis.  

There is also a political angle to this. In a dictatorial system like in China, everything is done by the government. The government draws its legitimacy from the success of its policies rather than an electoral process, as in a democracy. If the population is well provided for in all respects, everything is fine. However in an emergency situation like the current outbreak, any mishandling will cause a massive political fallout as the people who have been micromanaged in all aspects of their lives suddenly find their infallible leadership making mistakes which affect them adversely. In the current scenario the Communist party of China could be fighting for its own legitimacy.

This existential crisis has made the Chinese Communist Party take offense to any precautionary measures taken by other countries. The Chinese propaganda machine has not slowed down in this crisis. In fact it has got into higher gear. One private conglomerate, namely Tencent, recently published data which showed the number of people infected and those who have died to be vastly higher than what the government authorities have been saying. The company removed that data after some time. Now it has denied publishing any such figures on its site.

The death of the whistle blower doctor Li Wenliang who first messaged his colleagues about the new virus but was accused of spreading rumors, has blown a storm on Chinese social media. There is an out poring of grief for the doctor. People are calling him a hero and are criticizing the government for accusing him, instead of listening to him in those early days when the infection could have been better contained.

The political impact of the virus seems to be worse than the human or economic one for the Chinese government. Some citizens are demanding the right to free speech. Will this grow into an online or even offline movement for more personal freedom? Only time will tell. On the economic front experts say if China can control the epidemic in a month or so the impact could be restricted to a couple of quarters. However if the disease spins out of control, the impact could be more profound. The story is still unfolding and updates keep coming 24/7. There may have to be another part to this story if the number of new infections does not go down soon.

Cornavirus I - The Show Stopper

The outbreak of the Coronavirus has been a bit of a shock to the world. There have been pandemics before, but this one looks serious. It has already affected more than 20,000 people across China and as yet does not show any signs of abating.  The number of people who have died has crossed 400. Medical laboratories, hospitals and other institutions across the world are racing to find a treatment.

The infection was detected by a Chinese doctor in Wuhan. He warned his medical school group alumni on social media about the new virus and asked them to take care. This message went viral. The Chinese authorities who monitor each and every word uttered or written on social media, arrested the doctor. He was charged with spreading rumors. The authorities obviously did not want the world to know that something was amiss. The result was, this initial clampdown on the outbreak prevented effective measures which could have been taken immediately. It took the Chinese authorities a month to acknowledge the new outbreak. The virus was already spreading then. Only after the Chinese government realized this was something which could not be hushed up, did they declare the presence of the new epidemic.

Moreover it was the holiday season and a lot of people went out of the Wuhan city area, as well as to other parts of the country. This helped spread the virus to other parts of the country. Now after almost two months from the initial outbreak the world is fully alerted and measures are being taken to contain the spread. The virus spreads by air, so close proximity to the infected person can give you the infection. Similarly confined/closed places help to spread the disease.

While diseases and epidemics are not new the world over, they are getting more severe. The Coronavirus though less lethal than the SARS, is spreading rapidly. Within a month at least 30 countries have reported confirmed cases of the virus. This just shows how much the world is integrated. International travel of course exacerbates any epidemic like this.

While measures are now being taken to control and find a treatment for the disease, another dimension to this has come to the fore. The economic fallout. Trade and commerce have been affected by disease outbreaks since ancient times, but in our world with its fast paced life everything gets magnified. This is the first time the economic fallout has made headlines in a big way. Even during the earlier epidemics like Bird/Swine flu and SARS the economics of the epidemic did not come into the picture so much as this time.

Countries have started evacuating their citizens from China, especially from Wuhan city and its surrounding area. The city has been locked down with severe restrictions on movement of people. Companies have had to stop production and distribution of goods and services. Businesses outside China have been affected because supply chain logistics have gone haywire. In today’s complex world a health emergency spills over and affects every other field. World stands to loose billions of dollars in trade especially where China is involved, because of the preventive measures which have kicked in across the globe.

A seemingly insignificant snippet of news appeared in the press regarding information about the disease. Tencent, the Chinese conglomerate has published figures which they claim to be ‘real data’. According to their data the real number of infected people are about 1,54,000 and the number of dead is around 24,000 as on 8^th of February. After publishing, this data was removed by the company. These figures are a lot higher than put out by the Chinese government. Though the authenticity of this data is yet in question, it shows that even in a pandemic situation the Chinese propaganda machine is working at full throttle.

While a clinical profile of the outbreak is awaited which will help to tackle the disease effectively, the future of human/animal epidemics may have to be viewed with some pessimism. In the history of human epidemics the corona virus is not a new story, but the latest chapter makes for some grim reading

US Iran crisis - the India angle

The latest edition of the gulf crisis between Iran and America has put India in a spot. At the best of times,  a very delicate balance needed to be maintained when dealing with any country in the region. India has had to play a balancing act with Saudi Arabia, Iraq and Qatar on one side, and Iran on the other. It cannot afford to take sides in this conflict. It has to watch from the sidelines and hope the crisis does not spill over into the rest of the region. It’s a complex chessboard and with many players. Maintaining diplomatic relations with all the players in the region is like walking on thin ice at the best of times.

Iran is India’s largest supplier of crude oil. India also purchases considerable amount of crude from Saudi Arabia, Kuwait and Oman. So India’s crude basket is well spread in the region. Iraq is a recent supplier which came into the picture after India stopped buying from Iran due to American sanctions. Recently the USA has also become a supplier of crude. This has diversified India’s oil purchases which may or may not be strategically significant, but it is said, that this purchase is a consolation for the Trump administration in order to play down its refrain against India regarding the balance of payments between the two countries.

India has been developing the Chabahar port in Iran as a gateway to landlocked Afghanistan, as Pakistan is  not considered to be a dependable conduit for passage of goods. The project got delayed due American sanctions on Iran on account of its nuclear program. Recently however, the US was willing to exclude this port from the sanctions on the condition that the Revolutionary Guards of Iran are in no way connected to the project. This port is in direct competition to the Gwadar port in Pakistan’s Balochistan province, which is being developed by China as a part of their CPEC project (China Pakistan Economic Corridor), and which China wants to continue into Central Asia and Europe. The current crisis has cast a shadow over the Chabahar project. This project is crucial for India, both as a corridor to central Asia and as an alternative trade route to what China is building in Pakistan. Now India’s apple cart will certainly be affected if matters get out of hand. An encouraging development is  that the call President Trump made to PM Modi to discuss the situation. It shows that the US is sensitized to the concerns of its allies in the region. It knows that India is directly affected by any disruptions in the gulf region. 

There are other more subtle factors which have had their effect on Indo Iran relations. Iran is not happy as India has taken a long time to develop the Chabahar port. This happened due to American sanctions on Iran. No international company was ready to invest in the port or even provide equipment for the project as that would bring US retaliatory action. Work on the project started only after the US and Iran signed their treaty which constituted a delay of several years. The Trump administration recently had shown its readiness to exclude the port from the the re-imposed sanctions. But after the US drone strike which killed the Iranian General Suleimani, the project has come under the shadow of war clouds again. Iran has indicated that if India is unable to take up the project work expeditiously, it will consider handing it over to China for completion. This does not fit anywhere into India’s plans, as it would thwart India’s primary objective of a trading route with Afghanistan and central Asia. The region is throwing new challenges and it remains to be seen how Indian foreign policy deals with them. The recent news that Iran has pulled its punches and pared down its attack on US bases in Iraq should come as a relief to all in the region. Since this retaliatory attack by Iran on American assets did not kill any personnel, but only damaged some structures, it can be reasonably assumed that the leadership in Iran is taking action to vent public anger, and that it is fully aware of the consequences of escalating tensions. There is too much at stake here for any country to take unilateral action.  War is simply not an option.

The tension in the region appears to be subsiding but the situation is fluid and there are new developments happening everyday. It would not be wise or prudent to try to predict anything, however obvious it may look. Hence this article may have to have a sequel, as and when the turn of events merit.

Indian economy – the focus on reforms

The slow down in the Indian economy has been debated endlessly for the last four months or so. Ever since the growth slipped from a peak of around 7 percent in 2016-17 to less than 5 percent in December 2019. The picture that is being painted is rather bleak.  The economic parameters are predicted to get even worse.  While there is no telling when the cyclical graph will swing up, it would do good to take a look at some of the good things that have been happening. In the din of the naysayers, we have been missing some positives affecting the big picture. While they may not be a remedy for the, situation at hand, it could be a silver lining to an otherwise grey cloud.

There is now more clarity regarding the bankruptcy laws. Earlier any big business group finding itself in trouble  had just to call some high level secretary in the finance ministry and get its problems solved. A company facing financial difficulties would take the help of minister or a senior secretary in the ministry and try to get some conditions waived for the benefit of its troubled business. But after the introduction of the bankruptcy rules, this is no more possible.  No politician or any person holding public office can give succor to an ailing business, however big it may be.  Case in point is the Essar Steel company owned by the Ruias.  Having piled up debt due to operating losses the company is about to be taken over by the Arcelor Mittal group. No political interference has been allowed in this deal. All the heavy political connections of the Ruias have not helped them to keep the ownership of their business. This game is now played by the rules.

The sales figures of Automotive sector has seen some growth for three consecutive months, ending December.  This growth is attributed to the heavy discounts given by various manufacturers during the festive season. Not all the manufacturers have managed to sell more but the overall growth of the sector has been positive.  This sector is considered the bell weather of the economy. Not too much should be read into this trend but the feel good factor definitely gets a boost here.  

One more positive is that the inflation in the economy has been largely controlled. The government has not given in to the temptation of increasing the money supply in the economy in order to kick start spending. Oil prices have been largely favourable for the country and that has helped to keep overall  prices in check.

All is not well in the economy, that is obvious. Indian economy needs structural changes. The government has to sell off its loss making businesses.  One good example is the BPCL sale. This is a profit making PSU. The fact that the government has put it on the anvil shows the commitment of the government to get out of running businesses.  

Another positive is that the accuracy of economic data is being questioned. An overhaul was needed in the  methodology adopted by the various government agencies to gather economic data. A new expert panel will pave the way to improve accuracy in the whole process.   

Job creation is still not happening at the rate it is expected to. But there are indirect forces at work here. The world economy is sluggish and there is uncertainty regarding future investments. The US China trade war is affecting markets in no small measure.

The Indian economy will not be out of the woods in the short term considering that the world economy finds itself in a cyclical trough. But it is encouraging to know that the government has not lost sight of the reforms that it set out to implement. This bodes well for the country in the future.