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The huge risks the misallocated stimulus capital from real estate speculation poses for the Chinese economy. China's government rapidly expanded lending after the 2008 global financial crisis. One estimate is that about 10 trillion yuan in new loans were made in 2009, over twice the amount of 2008, expanding the loan portfolio and money supply by one third. A major problem is vacant homes as Chinese put their money in second homes as an investment. Chinese are not investing in the stock market because of the volatility, and with the low yields in bonds and banks money is going into real estate. According to a Morgan Stanley economist, about 25-30% of private commercial and housing space is vacant. This happens just as middle class Chinese are being priced out of the housing market. Prices went up by 12% in the housing market this year according to the China National Bureau of Statistics. Couples wanting to leave their parent's homes find it difficult to do so. It was the topic for a Chinese TV series "Dwelling Narrowness." ...

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Individual investors reacted strongly to declining prospects for emerging markets with slowing growth, depreciating currencies, corruption and political uncertainty in 2013. As of the beginning of June, retail investors pulled $18.1 billion from emerging market bond funds, about one third of the amount that went in to emerging markets since the financial crisis in 2007, according to fund tracker EPFR Global. Institutional investors have pulled out less, about $9.3 billion, or 10% of their investments in emerging markets bonds since 2007. A similiar pattern is seen for investment in the stock markets of emerging market countries. The U.S. Federal Reserve's monetary expansion helped pull more money into emerging markets such as India, Indonesia, Brazil and Turkey. As the Fed shifts away from these policies in 2013 emerging market countries have large current account deficits and less money to finance imports and debt.

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This article by Saeed Shah and Syed Hasan describes the Taliban factions from the tribal areas that control parts of Karachi, Pakistan's main commercial city on the Arabian Sea. It provides a detailed map showing the outlying areas around the city centre, especially the shantytown areas and the areas with Pashtun majority population controlled by Taliban with roots in the tribal areas. The Taliban charge taxes and adminster law in the areas they control. A major operation was launched since Sept. 2013 by the Sharif government to free this key city of Pakistan from Taliban control and the wave of kidnappings, extortion and other violence from Taliban members. About 168 police officers have been killed in the efforts to control the city, but areas under Taliban control are still hard to patrol by government police and special Ranger force. Karachi anxiously awaits the result of peace talks of the Sharif government with Taliban. If the talks fail and an operation is launched against Taliban in tribal areas the repercussions will be felt in Karachi. Shah and Hasan provide a excellent picture of the tribal loyalties, religious extremism and entrenched culture of violent activity that extends from the border tribal regions of Pakistan into the commercial centres such as Karachi that is a vexing problem for the Sharif administration, police, business and ordinary citizens....

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The 2018 elections in the southern state of Karnataka with the software centre of Bangalore, are seen as setting the stage for the national elections in India in 2019. The ruling BJP party of prime minister Modi is making an effort to oust the opposition Congress party in that state. BJP won the state in 2008 and lost it in 2013. Modi is basing his efforts in the state on fighting corruption and building infrastructure, boosting the economy. Both sides appeal to caste based politics even as they support development efforts. 

At stake are the big leap infrastructure development, and inclusion efforts for the rural and urban poor of Mr. Modi, leader of the BJP party, if the party loses power in the 2019 elections. As a result it is mounting an effort in Karnataka that also includes caste based politics by supporting the Lingayat caste group, and raising election funds that are reported to be five times that of the Congress party in the state.

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In a major policy move India's Modi government makes major changes for foreign investment in India. In different sectors, pharmaceuticals, defense, civil aviation, and retail stores, the move is designed to attract investment and create new jobs. Foreign investors can now take 100 percent ownership in defense, civil aviation, and food products sectors with government approval. In pharmaceuticals foreign investors can take upto 74 percent ownership with no government approval needed. In retail stores, such as for Apple and Ikea, the rules offer new incentives. From now on the requirement that Apple and other companies buy 30% of their supplies locally for single brand retail stores will be relaxed with a 3 year exemption on local sourcing, which can be extended to 5 years if the products sold are "state of the art" and "cutting edge technology," according to a government announcement. The changes were made by executive order. Apple CEO Tim Cook visited India and lobbied for this change recently. In combination with a national GST goods and services tax to be passed in July 2016, which is to be instituted nationally to replace a old set of state by state requirements and taxes, the two changes could have a bigger impact than the 1991 reforms that moved India away from a socialist managed economy. Poor job report numbers may have increased the pressure for taking action. In the defense sector the earlier change to allow 49% ownership had resulted in few new proposals. The changes in foreign investment rules also follows the resignation of the head of the central bank, Raghuram Rajan. ...

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A Pew Research Center poll before April elections shows 70% of Indians dissatisfied with conditions in the country. 63% of those polled say they prefer the opposition BJP party to lead the next government, compared to 19% for the ruling Congress party. More significant was the favorable view of Narendra Modi by 78% of those polled, with only 16% holding an unfavorable view of Modi, the chief minister of the state of Gujarat which has seen fast growth rates. The Congress party has been hurt by a series of corruption scandals, weak leadership and poor management of the economy as growth slowed in 2012-2013.

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China plans $29 billion of local bond sales (200 billion yuan) through the central government, to meet the needs of cash strapped local governments. Its proceeds would go to projects approved by Beijing, for airports, power plants and railroads. In earlier year local governments depended on land sales as abig source of money. China's tax system sends most revenue to the central government, while provincial and municpal governments are left to handle most of the spending on education and healtcare, which is why these needs may not be getting the funding they need. Land sales are now drying up as asource of money as the property market declines. This does not mean that the local governments are not indirectly taking on debt. Chinese law prohibits cities and provinces from taking on debt without Beijing's approval, but companies owned by local governments have borrowed heavily to fund public works projects. Shanghai Chengtou Corporation, a municipal government company that builds infrastructure has taken on 200 billion yuan in debt in 15 years. Economists say this kind of debt may be 20% of annual GDP, which added to the central government debt of 20% of GDP, would bring the combined debt to 40% of GDP. What this new effort does is make the taking on of new debt official and more transparent. The principle behind the earlier tight control of debt issued by local governments was to prevent local governments going overboard and the central government having to take responsibility, as happened in the 1990's in India, Mexico, Russia and in the USA....

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In China since 1981 the poorest people making below $1.25 a day fell to 207 million in 2005 from 835 million in 1981. In India the number of people below $1.25 a day increased to 455 million in 2005 from 420 million people in 1981. The share of the people in poverty fell to 42 percent from 60 percent during the same period. Corresponding figures for East Asia including China show a drop from 80% of the people in poverty in 1981 dropping to 18% in 2005. The proportion of people living below the $1.25 a day poverty line worldwide fell over the nerarly 25 year period from 1981 to 2005 from 52% in 1981 to 26% in 2005. In subSaharan Africa, now the poorest region half or 50% of the people live under the poverty line of $1.25 a day in 2005 almost where it was in 1981. In absolute numbers the region had 380 million people living below the poverty line in 2005 compared to 200 million people in 1981. Note that the World Bank this year changed the poverty line from $1 to $1.25 a day, to make allowance for the inflation that is hitting the poorer countries. Is China a rich nation after the Olympics? Some parts of China, the coastal regions and the regions around big cities like Shanghai and Beijing are relatively affluent with pockets of poorer people but in the rest of the country there is poverty as defined perhaps in terms of deep poverty, poverty, poor middle class without health insurance or any kind of savings for emergencies. With 200 million people in 2005 below the poverty line a question could be asked how many people in China below say $2.00 a day which could be seen as being poor at a time when inflation in food and fuel costs has been significant in developing countries. If its somewhere in the range of 300 and 400 million people in China this explains why in relative terms China would identify with India and the rest of the developing countries and it also explains its stand in the WTO trade talks acting as a developing country protecting the rights of agriculture and farmers within China. And it also explains the reasons why China sees a long transition before it ceases to be a poor developing country and why there is real concern that these 300-400 million people as well as others adversely affected by the rapid industrialization and exercize of state authority, corruption and increasing gaps between rich and poor, adverse effects on environment, that these people adversely affected are listened to and accomodated in the interests of stable progress and fairness. Much of recent history has shown that countries open to foreign trade have done better given the right conditions and careful policy measures. China opened up around 1981, and India around 1991. Also progress and gains are more significant in infrastructure building and in poverty reduction in the latter phases of development as the synergies increase, capital pool increases, and the development accelerates, this shows why China's gains look significant compared to India's at this point in time. In ten years or fifteen years a better assessment could be made and then some points may favor China and some India, and the results will be a result of different history, experiences and problems faced and routes taken because of prior developments in each region and varying complexity. ...

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Simon Denyer's interview with Vinod Rai, the Comptroller and Auditor General of India. Rai has persisted in uncovering corruption in India. He was appointed by prime minister Manmohan Singh from India's Finance ministry five years ago, and runs an organization with 63,000 employees with accountants in all Indian states. Reports by his agency have uncovered giving away of natural resources and telecom licenses worth billions of dollars. He describes the amounts involved as huge and attributes the increase in accountability of politicians and ministers to active citizens groups. The Indian media and Supreme Court have supported efforts to increase accountability. The CAG has constitutional protection. Rai sees the CAG's role as examining government spending to uncover irregularities and make it accountable to parliament. India is rare in this respect compared to China, Russia and other emerging market countries because of its vibrant media and democracy. A 2010 report uncovered corruption in giving away mobile phone network licenses and a 2012 report uncovered allocation of coal land without a competitive auction, with loss in government revenues estimated at $30 billion. The reports showed prime minister Singh aware of the irregularities but unable or unwilling to call for transparency and proper process. Rai's six year term expires in May 2013. ...

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Most of the comments to this editorial in the Journal attributed it to the editorial writer's lack of understanding of local conditions in India. The editorial writer would have to read carefully the draft of the Indian Congress government's anti-corruption bill and understand each of the clauses in the light of local conditions to realize why they were drafted - to make the anti corruption body totally ineffective. The Hazare bill couod be improved but not by taking out its powers in the light of local conditions and rendering it meaningless, which is why there is strong support from public opinion among students, small businessmen, housewives, farmers and the general public for an effective version of the bill.

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Bill Keller of the Times talks to Kiran Bedi of the Anti Corruption Movement in India, and compares that movement with the Occupy Wall Street movement in the U.S.

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Coal India, is a state run monopoly which is a huge stumbling block for India's economic development. India lags behind Brazil, Indonesia, Thailand, Vietnam and Malaysia in the percentage of the population having electricity. Production methods do not use modern technology similiar to mines in other countries, and the average age of the 333,000 employees is 45-50 years. An eight hour shift at some mines produces as much coal as a mine in the U.S. does in 5 minutes, because of the lack of modern technology. About 300 million Indians lack electricity. The Modi administration's focus is on improving efficiency, introducing competition, and bringing major technological changes to the coal industry. Piyush Goyal, India's Coal minister faces one of the biggest challenges in the Modi administration. His focus is on efficiency, and the Modi administration has set a target of 1 billion tons for 2020, a 15% increase in production each year for the next 5 years.

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The BBC looks at some of the claims made by president Trump about India's rapid progress in delivering services to the people in electricity, sanitation, roads infrastructure, cooking gas, internet connections. BBC confirms that the economy size is now 6 times that in 2000, as Mr. Trump stated on his visit to Ahmedabad. It was in terms of the total value of all goods and services in the economy or GDP at $477 billion (IMF figures) in 2000. In 2019  it is $2,940 billion.  270 million fewer people were living in poverty in 2016, this is confirmed in a UN report. Here is the list for services as checked by The BBC. 1. Providing electricity to every one of the 600,000 villages in India. By 2014 most of the villages were electrified- at 96%. It is defined as having schools, health centres and 10% of households having electricity in each village. 2. About 600 million people having access to toilets under the Clean India mission launched in 2014. 100 million new toilets were built. 3. 70 million women were given access to cooking gas. 80 million new connections were built. 4.  320 million new internet subscribers. The figure is low about 600 million total internet subscribers. 5. It is true that infrastructure building is moving quickly says the BBC. About 10,000 kms were built in 2018-19 double that in 2013-2014 under a previous administration. The Mumbai Metro is mentioned in the WSJ as a project that has made remarkable progress. A bullet train project is moving ahead with Japanese financing and technological help from Mumbai to Ahmedabad.  Access to banking accounts and direct deposit of government transfer payments to all Indians is another project. Healthcare access through health care payments directly for health care costs incurred for low income families is another more recent project to reduce the uncertainty and improve finances of poorer citizens. ...

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India's ruling Congres party suffered losses in the two major states of Uttar Pradesh and Punjab. In Uttar Pradesh, the socialist Samajwadi party gained an absolute majority of 224 seats in the 403 seat assembly. The Bahujan Samaj party of Kumari Mayawati lost its majority winning only 80 seats, the BJP won 47 seats and the Congress won only 28 seats. Rahul Gandhi of the Congress party campaigned heavily in the state and the results show that his campaign against Mayawati did not result in Congress gaining enough seats to form a coalition government with the Samajwadi party led by Mulayam Singh Yadav and his son Akhilesh Yadav. Yadav has held the position of chief minister three times before, and campaigned for greater rights for lower castes and for a quota in education and jobs for Muslims. His other campaign promises included increasing electricity production, and improving the business climate. In the Punjab state, the Shiromani Akali Dal party won 56 of 117 seats, with the Congress getting 46 seats. National elections will be held in 2014, and the results reflect a repudiation of the Congress party after corruption scandals, slower economic growth, and lack of clear policy direction....

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The Economist points to a second hit from bad debt in the post 2008 stimulus binge of spending in China. This is after an earlier hit, that was absorbed as a result of high growth rates and high savings. About $420 billion was injected into 5 state owned banks since 1998, according to one estimate, as a result of the first hit to China's banks from bad debt. In this second round of bad debt, covered in more detail by David Barboza in the New York Times, and merely alluded to here, many bad loans to infrastructure projects were rushed through by local governments. The Economist considers this one of the successes of the state directed banking system, that loans were quickly made and projects started in the post 2008 crisis period; and expresses the view that this hit will be absorbed just like the last hit. However the more detailed account by David Barboza and in Business Week, points to the working of a system of incentives gone astray in a capitalist system without the necessary controls or regulation. Local governments used investment companies to take on loans, which were then used to prepare properties to be auctioned off at a profit and speculative prices to state owned companies in different industrial sectors. This is part of rampant speculation in China in real estate markets. Can China with its high savings and growth absorb a second hit? This depends on the magnitude of the hit and the size of the bad debt, which depends on how long this speculative market continues to operate, and how bad debt is hidden in the books. The difference this time is that large state owned companies in different industrial sectors are engaged in this speculation. The other difference is that the high growth rates in China depend on continued large trade deficits with the USA and Western Europe, something which is not likely to continue for long, as consumers in Europe and the USA with high debt are becoming cautious spenders. This suggests that China, like the US with the mortgage crisis, faces the same effects of unregulated or uncontrolled speculative behaviours, that can endanger the banking system....

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The Economist points out the shortcomings in Indonesia's effort to attract foreign investment and increase growth under the Widodo administration.