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The need for private investment to fund infrastructure growth in India.

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India's car market is expected to surpass Japan's by 2016, with estimated sales of 4.88 million vehicles in 2016. Sales were 2.91 million vehicles in 2011. Sales in China are expected to increase to 19.2 million vehicles in 2012, passing an estimated figure for Europe of 18.15 million for 2012. Sales estimates are by IHS Automotive.

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Elections in 5 Indian states and India's ruling Congress party in Feb. 2012.

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The WSJ Dollar Index tracks the U.S. dollar's performance against 16 other currencies. It surged by 12% in 2014 with a strengthening U.S. dollar. The rise in the dollar is likely to adversely affect the 15% of U.S. GNP that comes from exports and the $200 billion plus tourism industry in the U.S.

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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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GDP per capita levels in the U.S. expected to return to pre recession levels in 2007 by the end of 2013. Gradual recovery in housing and consumer spending expected in 2013.

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Corruption in the election and democratic process in India.

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Krugman points to financial deregulation, cross border financial flows, private debt in dollars and depreciating currencies, and the U.S. Federal Reserve's low interest rate policies, as the main culprits for bubbles and the emerging market crises in the 1990's and 2013.

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India had 11 interest rate increases in 18 months, but this has not slowed the rise of inflation. The Wholesale Price Index is around 10%. Inflation expectations as measured by the Reserve Bank of India are around 12% in mid-2011.

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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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The Aam Aadmi anti-corruption party led by Arvind Kejrival won 67 of 70 seats for the Delhi legislative assembly. The BJP won 3 seats. In the natonal parliamentary elections of 2014 the BJP led by Mr. Modi won in Delhi and the rest of the country. The Aadmi Party won the election by gaining the votes of ordinary people who were willing to give Kejrival another chance after an earlier stint at governing that lasted a few months. Kejrival's platform is for giving better access to electricity and water to the people of Delhi, and limiting corruption. In 2011-2012 Kejrival was part of the Anna Hazare anti-corruption movement in India that conducted nationwide protests against corrupt officials in the Congress Party led government. Following this effort which led to the election losses of the Congress Party in parliamentary elections, he setup a political party to contest elections on an anti-corruption platform.

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High on the agenda for the G-20 Feb. 2013 meeting in Moscow is how to fund infrastructure projects in emerging market countries. About $191 billion in infrastructure investment is needed annually in South Asia alone, according to the World Bank. India's Economic Affairs Secretary, Arvind Mayaram, points to the need for finding innovative ways of funding and reducing the risks for private companies by some kind of joint effort from developed and emerging market countries. The needs are extensive especially in transportation, water, electricity, sanitation. Growth lower than potential is facing India- with estimates of growth at just around 5% for the fiscal year ending in 2013. This affects Europe and the U.S. as there is less demand for exports of developed countries. Transportation projects critical to easing congested overloaded rail lines in Jakarta and Manila could not get financing under existing arrangements, making this problem a serious priority.

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In a first at Davos World Economic Forum, China's president Xi Jinping uses the 2017 meeting to give a one hour long spirited defense of the world trading system, critical of U.S. president elect Trump's protectionist views without naming him. Xi pointed out that "no one will be winners in a trade war." And went on to add that restricting world trade was like "locking oneself in a dark room, keeping out wind and rain from outside but also light and air." For the first time Jinping stated that China would take the U.S. role of defending the world trading system from attack as needed. On climate change Xi defended the Paris accords, and gave China's commitment to pursue changes regardless of what the U.S. under president Trump does. This follows Chancellor Merkel of Germany's statements on the issue critical of the views of president elect Trump, and taking the lead to defend the world trading system. Xi also pointed out that many of the ills that led to voter discontent in the West were not really from the freeing up of trade but from the pursuit of excessive profit with the financial crisis of 2008.   ...

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The Indian economy is expected to grow by 8.5% this year compared to 6.5% in 2009. But a major problem looms in the high inflation facing India. The poor monsoon in 2009 led to higher prices for foodgrains, lentils, and sugar. And the government's cut in the fuel subsidies will lead to more efficient use of energy, but will lead to one additional percentage point in wholesale price inflation according to the Reserve Bank of India, India's central bank. The whoesale price index in India went up by 10.5% in June from the prior year, and this after a 10.1% increase in May. Bloomberg's tracking of consumer prices in the Asia-Pacific region shows India at the top of 17 countries in inflation, and consumer prices paid by industrial and farm workers in India are shown to be increasing at 14% annually. The government is coming under criticism for not releasing more grains from its stocks to soften the impact of last year's monsoon. The Manmohan Singh government finds inflation at above 10% unacceptable and is looking for further action from the central bank. Reserve Bank of India governor Subbarao has raised rates 3 times since March 2010 to 5.5%, and a further increase is expected at its next meeting on July 27. A better harvest in September, from a better monsoon season, could help lower food prices. If this does not happen, more tightening by the central bank could hurt economic growth, putting the government in a quandary....

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Raghuram Rajan, former chief economist at the IMF, and William White, former head of the economics department at Bank for International Settlements, both see the need to raise rates. But expert opinion on the other side sees the need for caution as the economic outlook worsens, and supports ECB and US Fed's efforts to counteract a deteriorating economic situation.

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Experts in the U.S. say the U.S. made a mistake in not supporting the idea of a new financial institution to meet the urgent needs of development and infrastructure financing of Asia's developing countries. India, Australia, S. Korea, Britain, Germany, France and Italy are joining as founding members in 2015. China has offered leadership in providing resources for the new bank. Jane Perlez says China is looking for the best talent worldwide to help write the charter for the bank and to run it. It is a project pushed forward by China's president Jinping, and was discussed at the 2013 G-20 meeeting in Moscow as a critical part of the agenda. Laurence Brahm, who supported Chinese premier Zhu Rongji in 2001 for entry into the WTO, says it is natural for China to look for ways to use its extra capacity in steel, concrete and pipes to build projects in other parts of Asia, which would mutually benefit China and the region. Paul Haenle of the Carnegie-Tsinghua Center in Beijing, says the U.S. lack of support is shortsighted, as the existing U.S. sponsored institutions World Bank and the Asian Development Bank are sorely lacking the resources to deal with the huge infrastructure challenges in Asia. China's Finance Ministry is looking for the best talent worldwide to write the charter and run the bank. Natalie Lichtenstein, a lawyer with 30 years experience working at the World Bank will write the bank's founding charter. ...

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Moody's Investor's Service downgrades China's credit rating to A1 from Aa3. Moody's predicts a slowdown in growth for China. GDP growth for 1st quarter 2017 was 6.9%. Total debt has grown from 149% of gross domestic product in 2008, to 213% in 2013, and is now 253%, according to JP Morgan. The problem is that ever higher levels of credit have supported growth and more of this is coming from the shadow banking sector. Higher levels of debt in future years from the already high levels will weigh heavily on growth, leading to an eventual slowdown in the economy's growth rate.

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Friedman reviews Acemoglu and Robinson's new book, "Why Nations Fail." Acemoglu says that nations fail when wealth and opportunities are concentrated in the hands of few people, that a condition for societies to succeed is to create opportunities for more people. For this to happen it is important to create inclusive political and economic institutions. This is an important insight, but for Western society this is an insight as old as Adam Smith when he pointed out the importance of this aspect of western societies after the feudal period in his "Wealth of Nations." For Smith it was the failure to create inclusive societies that led to the gradual unravelling of societies in the river valleys of the Yangste and the Ganges, in China and India, of increasing poverty and the gradual disappearance of what constituted the middle class in India and China. Chapter 8 titled "Of Wages and Labor" in the "Wealth of Nations" makes specific reference to this.

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Saying that these countries had significantly cut imports from Iran, the U.S. government gave exemptions from the sanctions on Iran to 10 European countries and Japan. Exemptions were given to Belgium, Britain, Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland and Spain. This leaves 11 countries facing possible sanctions including China, India and S. Korea, with negotiations underway with these three major importers. The sanctions law passed by the U.S. Congress gives the government room to avoid damage to global oil markets and U.S. allies.