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 Ambani. 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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Monday, July 15, 2024

Ambani Wedding: Billionaires, BJP and Bollywood

Last few months have seen a grotesque display of obscene wealth in India, a country with well-documented levels of extreme poverty, hunger and unemployment. Indian billionaire Mukesh Ambani has splurged hundreds of millions of dollars on his son's wedding attended by top politicians including Prime Minister Narendra Modi, Hollywood and Bollywood celebrities and Ambani's fellow billionaires who have accumulated vast amounts of wealth in one of the world's most unequal countries. Experts blame it on Mr. Modi's policies promoting crony capitalism. Viral Acharya, former deputy governor of Reserve Bank of India, told the BBC that their ability to acquire large distressed companies, a growing appetite for mergers and acquisitions, and India's conscious industrial policy of creating "national champions via preferential allocation of projects and in some cases regulatory agencies turning a blind eye to predatory pricing".

Indian Prime Minister Modi at the Ambani Wedding in Mumbai. Source: ANI

Between 2014-15 and 2022-23 on Mr. Modi's watch, the rapid rise in inequality in India has been particularly striking in terms of wealth concentration, according to World Inequality Lab. The top 1% now control over 40% of total wealth in India, up from 12.5% in 1980, and they earn 22.6% of total pre-tax income, up from 7.3% in 1980. Almost 90% of the country's billionaire wealth has been found concentrated in the hands of the upper castes. The Inequality Report concludes: "This spectacular rise of inequality (in India) makes the “Billionaire Raj” headed by India’s modern bourgeoise more unequal than the British Raj headed by the colonialist forces. It also squarely places India among the most unequal countries in the world".

Bollywood, the powerful Indian film industry, has become a key enabler of BJP's billionaire-friendly and Islamophobic policies. In a piece titled “India's theatrical politics: Bollywood, billionaires and the BJP", authors Sehr Rushmeen and Wanya Sidhu write: "By shaping narratives that subtly endorse “Hindutva” ideologies, sometimes even employing Muslim actors to deliver skewed messages, Bollywood contributes to a socio-political echo chamber in favor of Modi’s BJP...... Bollywood movies transcend mere entertainment; they convey narratives cleverly crafted to align with the BJP’s political agenda. By consistently portraying Muslims and Pakistan in a negative spotlight, these Indian blockbusters perpetuate a cycle of fear and nationalistic fervor to garner votes for the BJP while discarding the imperative of forging national unity".

Meanwhile, India's child-wasting rate of 18.7% is the highest in the world, according to the Global Hunger Index (GHI) 2023 released last year. The South Asian country’s child wasting rate is higher than that of war-torn Yemen (at 14.4%) and Sudan (at 13.7%), which are ranked second and third in the world. Pakistan's child wasting rate is 8%. It represents the share of children under age five who have low weight for their height, reflecting acute undernutrition. The child wasting rate of the South Asia region is 14.8%, the highest of any world region and more than twice the child wasting rate of Africa. India is home to a quarter of the world's most undernourished people. According to the United Nations, India has nearly 195 million undernourished people. This is more than any other country, including China.

India Tops in Child Wasting Rate. Source: The Wire

India Tops the World in Child Wasting. Source: Global Hunger Index 2023

India's Hindu Nationalist government of Prime Minister Narendra Modi wants to project India as a superpower launching moon missions and hosting G20 summits. Since the GHI 2023 report runs counter to this PR exercise, New Delhi has rejected its findings. But its own National Family Health Survey 5 (NFHS 5) says that "Thirty-six percent of children under age five years are stunted; 19 percent are wasted; 32 percent are underweight; and 3 percent are overweight. Children born to mothers with no schooling and children in the lowest wealth quintile are most likely to be undernourished".

Overall, India ranks at the 111th position out of 124 countries, with neighboring Pakistan (102nd), Bangladesh (81st), Nepal (69th) and Sri Lanka (60th) faring better than India in the index. India has slipped four notches from its 107th position in 2022.

India has slipped 4 places, from 107 in 2022 to 111 in 2023, on GHI. Pakistan's ranking has also slipped 3 places, from 99 to 102. It is not a huge surprise since the country is still facing the aftermath of the disastrous floods of 2022. It is also suffering from a serious economic crisis. Meanwhile, India's Modi government is making claims to being the world's fastest growing economy. And yet, Indian children are the most malnourished in the world.

India Malnutrition Indicator Trends. Source GHI 2023

Pakistan Malnutrition Indicator Trends. Source GHI 2023

There's a close relationship between hunger and poverty. At the $3.65 poverty line, India accounts for 40% of the slight upward revision of the global poverty rate from 23.6% to 24.1%, according to the World Bank September 2023 Global Poverty Update. It is the same update that made the following recent headline in the Indian and Pakistani media about Pakistan: "Pakistan's 40% Population Lives Below Poverty Line, Says World Bank". Fact: 45.9% of Indians and 39.4% of Pakistanis live below the $3.65 a day poverty line as of September, 2023, according to the latest World Bank global poverty update that takes into account the impact of inflation on poverty rates. But neither the Pakistani media nor India's compliant "Godi Media" reported it. Nor did they question why poverty in India is growing despite the Modi government's claim to be "the world's fastest growing economy".