Haq's Musings

Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://www.southasiainvestor.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Showing posts with label Adani. Show all posts

Monday, September 8, 2025

Trump's Tariffs on India: Can China or Russia Make Up For Lost Exports to US?

The United States is the biggest export market for India. Among its top 5 trading partners, the US is also the only country with which India runs a trade surplus. This surplus is now at risk with the 50% tariff recently imposed by President Donald Trump on imports from India. Can Prime Minister Narendra make up for it by cozying up to China and Russia? Recent trade data shows he can't.

While India has enjoyed a significant surplus in trade with the US, the South Asian nation has been running large trade deficits with China and Russia. Last year, for example, India had a $100 billion trade deficit with China and a $62 billion deficit with Russia. On the other hand, India ran over a $40 billion trade surplus with the US. Given these figures, it's hard to understand what India hopes to achieve by getting closer to Beijing and Moscow. The fact is that the US is the world's biggest economy that offers the largest and most profitable export market for most countries. Loss of the US export market spells major trouble for any economy in the world. President Donald Trump knows this and he is using it to make new trade deals to America's advantage. Europeans, Japanese and Koreans have essentially accepted higher tariffs in return for continued access to the US market, while China is negotiating a trade deal with Washington.

The loss of the US export market also means heavy job losses in India's major sectors like textiles, shoes, gems and jewelry and shrimps exports. Christopher Wood, the global head of equity strategy at the investment bank Jefferies, puts the economic blow at £41 billion-£45 billion, according to the Guardian newspaper. He singles out textiles, footwear, jewelry and gems, all of which are highly labour-intensive, as “the most negatively impacted”. Tens of millions of jobs are at risk in these industries. "The stakes for India’s government are political as well as economic. The prime minister, Narendra Modi, has pitched manufacturing as a way to provide jobs to the millions of young Indians who join the labour force each year. These industries employ tens of millions, directly and indirectly", the Guardian reports.

Explaining the punitive India tariffs, US Treasury Secretary Scott Bessent has said: "India came to the table early. They’ve been slow rolling things. So I think that the president, the whole trade team has been frustrated with them. And also, you know, India, India has been a large buyer of sanctioned Russian oil that they then resell as refined products. So, you know, they have not been a great global actor".

Indian Prime Minister Narendra Modi clearly misjudged what he needed to do with Trump 2.0. He continued business as usual, counting on his "bromance" with the US president to get a favorable deal. He thought the US policy of "strategic altruism" with India will continue as it had under the Trump 1.0 and Biden administrations. Modi let his billionaire friends Adani and Ambani rake in billions in profits on Russian oil trade. The discounted Russian oil Adani and Ambani bought was refined and exported for a huge profit to buyers around the world. Now the ordinary Indians are paying the price for Modi's folly.

Worried about a slowing economy, the Modi government is now trying to stimulate domestic consumption by cutting GST (general sales taxes). It is a good move but it will not make up for dollars lost from the precipitous fall in exports to the US market. This fear is causing the Indian currency to fall against the US dollar. There are tough times ahead for the Indian economy.

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Saturday, December 10, 2022

India's Crony Capitalism: Modi's Pal Adani's Wealth Grows at the Expense of Ordinary Bangladeshis and Indians

Prime Minister Shaikh Hasina has agreed to buy expensive electricity from India in spite of a power glut in Bangladesh, according to a report in the Washington Post. The newspaper quotes B.D. Rahmatullah, a former director general of Bangladesh’s power regulator, as saying, "Hasina cannot afford to anger India, even if the deal appears unfavorable." “She knows what is bad and what is good,” he said. “But she knows, ‘If I satisfy (Gautam) Adani, Modi will be happy.’ Bangladesh now is not even a state of India. It is below that.” The Washington Post report says: "Facing a looming power glut, Bangladesh in 2021 canceled 10 out of 18 planned coal power projects. Mohammad Hossain, a senior power official, told reporters that there was “concern globally” about coal and that renewables were cheaper".

Gautam Adani (L) and Narendra Modi

India Ranks High on Crony Capitalism Index. Source: Economist

Hasina recently visited New Delhi to seek political and economic assistance from the Indian Prime Minister Narendra Modi. This summit was preceded by Bangladesh Foreign Minister Abdul Momen's trip to India where he said, "I've requested Modi government to do whatever is necessary to sustain Sheikh Hasina's government". Upon her return from India, Sheikh Hasina told the news media in Dhaka, "They (India) have shown much sincerity and I have not returned empty handed". It has long been an open secret that Indian intelligence agency RAW helped install Shaikh Hasina as Prime Minister of Bangladesh, and her Awami League party rely on New Delhi's support to stay in power. Bangladesh Foreign Minister Abdul Momen has described India-Bangladesh as one between husband and wife. In an interview with Indian newspaper 'Ajkal,' he said, "Relation between the both countries is very cordial. It's much like the relationship between husband and wife. Though some differences often arise, these are resolved quickly." Both Bangladeshi and Indian officials have reportedly said that Sheikh Hasina "has built a house of cards".

Shaikh Hasina (L) with Narendra Modi

The Washington Post reports that the Modi government has changed laws to help Adani’s coal-related businesses and save him at least $1 billion. After a senior Indian official opposed supplying coal at a discount to Adani and other business tycoons, he was removed from his job by the Modi administration, according to the paper. Modi has continued to support Adani's business with discounted coal even after telling the United Nations he would tax coal and ramp up renewable energy. India is the world's third largest carbon emitter.

World's Top 5 Carbon Emitters. Source: Our World in Data

While the coal prices have declined to the level before the start of the Ukraine War, Adani’s power would still cost Bangladesh 33% more per kilowatt-hour than the publicly disclosed cost of running Bangladesh’s domestic coal-fired plant, according to Tim Buckley, a Sydney-based energy finance analyst.

India's Crony Capitalism: Adani Enterprises Stock Up 56,000% on Modi's Watch

Gautam Adani has become India's richest and the world's second richest person (after Elon Musk) since the election of Prime Minister Narendra Modi in 2014. Financial Times calls Adani "Modi's Rockefeller". Adani's rise owes itself to India's crony capitalism, according to France's Le Monde. Here's an excerpt of a Le Monde story on Adani:

"Adani has not invented some revolutionary technology or disruptive business model. His meteoric success cannot be attributed to innovation. In each sphere of activity among his conglomerates – airports, ports, mining, aerospace, defense industry – the Indian state plays a significant role, whether in allocating licenses or signing contracts. He is known as a close friend of Indian Prime Minister Narendra Modi, who also hails from Gujarat, a state in western India".

Adani has lent his personal airplanes to Modi for BJP's election campaigns. Adani has also recently taken over NDTV, the only Indian major TV channel known for its independence from the BJP government. This takeover has forced Prannoy and Radhika Roythe, the channel's founding couple, to step down. It has also forced out Ravish Kumar, a harsh critic of the Modi regime who hosted a number of popular shows like Hum Log, Ravish ki Report, Des Ki Baat, and Prime Time.

Income Inequality Map. Source: World Inequality Report 2022

India is one of the most unequal countries in the world, according to the World Inequality Report 2022. There is rising poverty and hunger. Nearly 230 million middle class Indians have slipped below the poverty line, constituting a 15 to 20% increase in poverty. India ranks 94th among 107 nations ranked by World Hunger Index in 2020. Other South Asians have fared better: Pakistan (88), Nepal (73), Bangladesh (75), Sri Lanka (64) and Myanmar (78) – and only Afghanistan has fared worse at 99th place. Meanwhile, the wealth of Indian billionaires jumped by 35% during the pandemic.