EP-113: Biden to chair 1st QUAD meeting, Texas scrambles to curb illegals, Arunachal border roads

Sree Iyer: Namaskar, Hello and welcome to PGurus Channel. This is Daily Global Insights episode number 113, March 8^th, 2021 and I have with me Sridhar Chityalaji. Sridharji, I would just like to start with some main points and then let you expand on those.

The first thing is Arunachal Pradesh is going to take up an East-West Industrial Corridor Highway, which will be funded mostly by the centre and this kind of covers almost the edge of Arunachal Pradesh towards China.

Texas surges resources to border amid migration crisis and also develops plans to combat smuggling.

India INC business confidence is at its highest in a decade the rise in consumption leads the way.

The United States defence secretary Lloyd Austin to visit India after the quad meet. The first quad meeting scheduled after Biden takes power it will an e-meeting.

In US and LATAM news, the Senate passes a 1.9 trillion stimulus bill, the notable exception in this is the fact that the $15 an hour minimum wage requirement across the United States has not made it. Sridharji is now a point where everything will be frozen and things will start moving forward. What about the previous stimuli? All those money has been spent. What are your thoughts, Sir?

Sridhar Chityala: Well, first and foremost our congratulations to Democrats and the Republicans. Republicans for zero votes and Democrats for 50 votes, where the tiebreaker by Miss Kamala Harris as the vice president. So, the stimulus bill is now passed even in the Senate. So it is passed without any Republican votes. The only victory for Republicans is the $15 minimum wage and there were at least a couple of Democrats who supported the notion of why $15 minimum wage doesn’t make any sense.  Now, it will be drafted into law and the stimulus checks of $1,400 will go out before the end of the month and Biden has touted this and tweeted about this. This doesn’t preclude the unspent one trillion dollars, which will also be going out because if you remember it is 600 plus 1400, the 600 runs for a period of time. Then, the other aspect of it here is there’s also the unspent money on the small business that would be preserved, that would also be rolling through this program. The most important message coming out of this stimulus is and Washington Post has tweeted.  The Washington Post calls it the poverty breaking barrier and their whole concept is around these child credits, which is 3,000 dollars for kids about six years and 3,600 dollars for kids below six years old and in this would be fairly a lifelong tax credit. Remember some of these laws can be re-amended. So, the stimulus is here and markets are breezing in already. I think the future is about 200 points.

Sree Iyer: In Texas, there is a surge of illegal immigrants and also in smuggling and the state is rushing resources to tackle this crisis. At this time, was it necessary for Biden to do this? Could he have not waited until the covid came under a little bit better control?

Sridhar Chityala: I think Mr.Biden is on a very specific targeted progressive agenda. The question is how much of it is being driven by him and how much of it is being driven by other people, you know remains a question because he’s yet to give a press conference by which I mean meeting the Press rather than, you know remotely speaking with people. So, I think that there is a question mark even around his kind of health and why he is rushing all these things at one given stroke. Especially immigration the three important reforms that are bothering people one is immigration, the second is voter reform and the third is the whole electoral reform. These three things are bothering people at the pace at which it is being done and with actually no input from the Republicans. So, is it necessary? The answer is no, sir.

Sree Iyer: And now the Senate hasn’t still passed HR 1. What is your prognosis? Do you think it’s also going to go down party lines?

Sridhar Chityala:  I think, it will go down party lines in the Democratic chamber. In the Senate chamber also, it will go along the party lines. However, for it to be enacted into law, it requires close to 60 votes to make it work. So, they’re probably going to have four-five Republicans who may vote with the Democrats just as it happened in the impeachment, so they still would require another five votes from the Republican side to make it. So, HR1 seems to be a little bit on the loose ground. But, who knows they may come up with other types of measures by which they may be able to get this passed.

Sree Iyer:  The House has requested documents from Twitter reflecting Trump’s positions or policies. Twitter has now permanently banned Trump. What good is this going to be? Why is the House wasting time on this?

Sridhar Chityala:  So I think that there is still this, you know, they would go through, it’s a political as well as to do the fact-finding. The objective is to determine whether this is the tip of the iceberg and whether there is broader agenda at play with Twitter and Facebook, where they could start choosing to ban one after the other, other Republican members who they consider as a threat to the Democratic and the left and the liberal and social agenda, were on the basis of the evidence, the tech platforms seem to be in cahoots with the Democratic Party.

Sree Iyer:  And once again China asks Biden to reverse the dangerous what it calls as dangerous Taiwan policy. Is this a reaction of the fleet now doing up and down the first inland chain and the second inland chain.

Sridhar Chityala:  There are two reasons, one is they are continuing to assert this policy and I think next year if I’m correct, there is the China Congress, which is the biannual kind of Congress meeting comes up where Xi Jinping proposes to announce the 2035 railroad network interconnectivity into Taiwan, which effectively means that they don’t expect Taiwan to be separate or an independent country as it is the expected to be integrated. And Taiwan red flag has been raised by a number of countries. So China is increasing the rhetoric.

Sree Iyer: And in other news, the US deploys B-52 bombers to West Asia that is the Middle East, in warning to Iran, the US will defend troops and interest. So I am again a little confused with the Biden administration’s policy. Are they reaching out to Iran or they also sabre-rattling or is it a mix of both?

Sridhar Chityala: I think that has been a persistent and consistent kind of attacks on the green zone and has been persistent attacks on the US base and the US Embassy around the Kirkuk the Northern Western Syrian City and the region the borders. So I think the US saying enough is enough. We’re not going to tolerate it any further. We have every right to protect our interests and our troops because they have been a couple of deaths both one, civilian and one military serviceman. So I think that’s what they’re saying is we’re not going to take it, so we reserve the right to defend and we will attack.

Sree Iyer: So, you think these are all like posturing before Iran and the US will again sit down at the negotiating table. What are your thoughts?

Sridhar Chityala: The United States seems to be taking a policy that it wants to bring Iran to the negotiating table. There are a lot of lobby groups, which are advocating this to the Biden Administration. They would not even get a seat at the table or a hearing with Trump and Trump was emphatic to punish Iran more. So I think what is going on here is a carrot and stick kind of an approach which is to say unless they’re stopped everything including an in Houthi including the Houthi rebels in Yemen, you know, they’re not going to pursue. There is tremendous pressure from the world that Iran should not be at the table before they meet the UN obligations. There are soft tones in the EU that align with Biden’s policy that’s the reason why you are seeing all these flip-flops. As far as Israel is concerned, it is very very clear. It cannot afford to have Iran armed with nuclear weapons. It is made it very clear and its defence minister made it amply clear that it will choose the moment and the time to attack so that they don’t become a threat to the state of Israel.

Sree Iyer: And India news, India incorporated business conference is at an all-time or highest in a decade. The rise in consumption is leading the way and we will just come to this one minute sir. We are at the end game of the covid-19 pandemic in India, according to the health Minister Dr. Harshwardhan and this seems like it’s very good new sir that India Inc’s business confidence is at a decade high.

Sridhar Chityala: Well, I think they are two components, one is they say that there’s a huge amount of demand, this is the recent survey that’s just come out over the weekend. There’s a tremendous pent-up demand. There is stimulus money, there is a fair amount of corporate profits. And so I think that is also a lot of capital flowing in, we had talked about in the last week in one of the shows, you know close to 60 billion dollars of 63 billion dollars of new capital has come in by way of Foreigner Direct Investment and also by the way the private Equity flows in the first nine months of the year. So I think there is a substantive amount of capital. There is also a pandemic related to low-cost low interest. So there is expending going on. Also, India tapping into the market of exports. The PLI program has attracted investments into pharmaceutical has attracted investments into Mobile, has attracted into solar and also, defence manufacturing. Now, they have opening up for the chemicals which is another area that is required both for industrial as well as for pharmaceutical purposes. So what you are seeing is that all this money does flow in some way into the demand side of the system, not are just purely on the supply side and even corporations have come out and said that they would support the covid vaccine programs for all their kind of staff. So what you are seeing is India along with the United States who had one of the very big stimulus program close to 10% of GDP and all that, you know has the bearing on the demand side. This is not permanent. This will be in this pandemic year and which is why the GDP of India is expected to be north of 12% somewhere between 10 and somewhere greater than 10 to 12 per cent predicted by IMF and even financial industry.

Sree Iyer: Indian foreign exchange reserves rise to 585 billion and in the next news Arunachal Pradesh is going to take up an East-West Industrial Corridor Highway project. And Sridharji, I am putting up the map now of the Arunachal Pradesh and as you can see here, it starts from Tawang and goes all the way along the border with China. Please go ahead, sir.

Sridhar Chityala: Well, I think that you are right along with Tawang in the Northwest border going to you know, East and then going along the way if you can see in map at one point there is a Green Arrow and that is the Tibet. Then, circles all the way back as you can see on the Eastern side finishing up near the Myanmar border. This is the Eastern Corridor project and this connects into the Eastern Corridor which goes into Myanmar and then all the way up to Thailand in the roadway. The roadway is already built around Myanmar to Thailand it joins that. This should be the game-changer for India and on two fronts. One it also builds infrastructure, which it has not had along the border on the Arunachal Pradesh site where China is also stepping up its kind of infrastructure. It has got a fast train project. It has got have seen some buildings come up not too far from upper I think if I’m right the Earth or offer. I’m trying to read this graph, let me see if I can read the graph better in the uppers Shannan region this is where you have the Proximus infrastructure being built. So the story is that it is great, that is also called Frontier Highway by Prime Minister Modi and he is grateful that Arunachal Pradesh has accepted & co-developed this project with the centre.

 

Sree Iyer: So it’s about 1,800 kilometres long. And do you have any idea about when it is going to be completed, sir? It’s just been started. So I think that this is about a 3-4 years project. I would be surprised if it is not completed before 2024. You mentioned briefly the bullet train project that China has been planning and I have got that map now. The bullet train starts from Lhasa and comes all the way up to Nyingchi which is very close to the Arunachal border and viewers, you can see it. If you look south of Nyingchi, that’s where the Arunachal border is. So China also is trying to see how quickly it can get close to the Arunachal border. What state of completion is this one, sir? Has it started or is it yet to start?

Sridhar Chityala: It is well advanced and expected to complete by July this year. That particular railway line is expected to be completed by July this year. From Lhasa to Chengdu is expected to be connected by 2030, which will effectively mean that they have rapid transport by rail all the way from Chengdu past Lhasa into this specific border region very close to Arunachal Pradesh in Nyingchi.

Sree Iyer: Sir, as much as India can be expressing concern that China is rapidly trying to get accessibility towards India’s border this cuts both ways. If India manages to beat back China it can use the same train lines, it can use the same infrastructure and go and hit it to strike at the heart of China. So this is not a one-way thing as I see it. It is essentially at the end of the day who wins the conflict at what point? What are your thoughts, sir?

Sridhar Chityala:  That’s exactly what it is. Thus far they did not expect an India had neglected this entire region for a considerable period of time. Modi quite correctly gave the priority to bring infrastructure to this Northeastern Corridor. Right from the LAC all the way to the Arunachal Pradesh to the Myanmar border. If you recall, ‘Look East’ or ‘Go East’ was his strategy. ‘Go East’ strategy is the road and the port infrastructure that they were planning to have from the Northeastern Corridor going all the way up past Vietnam, Myanmar, and Thailand and then eventually they wanted to connect it all the way to the eastern tip of the Indonesian Island and along the bend they may go to Laos and Cambodia too. So this is the Eastern strategy project. The reasons are very simple. The South China Sea is cluttered is occupied. The South China Sea has got all these different nations that we mentioned have the Naval footprint. India does have by virtue of QUAD. So India has covered the gap on two fronts; one to harness and build its own infrastructure and face China eye to eye along with this from LAC all the way here, but it also has built a trade infrastructure so that they can interconnect potentially as had mentioned with Tibet, Nepal, Bhutan, India in that, Bhutan, Nepal, Bangladesh, India Corridor. Because as you can see Bangladesh is right adjacent to Assam on the eastern side. So the whole goal was, this Eastern Infrastructure Corridor both on the port as well as on the roadside. It had both strategic deterrence as well as a strategic trade map for all the specific states to come together. We haven’t quantified what the GDP of this entire region can look like as it navigates its way into Myanmar. This also is the reason why both China and India are more silent on the ongoing Myanmar coup and the confusion and chaos that prevails there along with ASEAN. It is more United States, Japan and to some extent the European nations that have expressed concerns.

Sree Iyer: And in other news, Biden will be chairing the first QUAD meeting in his administration. And this is going to be happening this week. We let you know about the details as it is still evolving, And after that, the US defence secretary is going to be visiting India. I have a hunch on what he’s going to be talking about in that visit. But what are your thoughts and then maybe I can compliment them?

Sridhar Chityala: Well, I think that at least both in the United States and India the indications are that a planning meeting has already commenced between, remember Lloyd Austin is defence. This TwoPlusTwo meeting, an extension of the TwoPlusTwo meeting post Quad has both external affairs minister who covers Trade in general, Partnerships along with the Security which is covered by defence and National Security advisor. So I think that the groundwork has been laid to reaffirm that the United States will stand by the defence commitments. It wants closer cooperation on the defence side, continued cooperation of the defence side and its commitment to QUAD later. I think that there’s a lot of pressure on the Lloyd Austin side that they should not be let down having done all the good work thus far and allow Russia to come in.

Sree Iyer: And to complement that there’s one other evolving situation that is happening. And this is regarding Afghanistan. And if a letter that has been written by the Secretary of State to the premiere of Afghanistan is to be believed the United States wants to have a meeting of countries including India, – that’s the first; usually, they used to exclude India, even Trump excluded India in Afghanistan related talks, but this one is being planned for six countries; United States, India, Pakistan, China, Russia, and Afghanistan. This is to try and contain the Taliban’s growing influence in Afghanistan, how to go about making sure that they don’t inflict any further damage because there is supposed to be a spring offensive in the offing. So we will wait and see how that goes. Would you like to add to that sir?

Sridhar Chityala: No, I think that’s a great piece of complementary information that you have shared Sreeji. Thank you.

Sree Iyer: And in Myanmar, unions are urging members to shut down the economy in protest. So unions are generally identified with communist China, right? So this sounds a little different. What are your thoughts?

Sridhar Chityala: Well, I think this is people versus an army. Suu Kyi is representing broadly the social communist type of agenda, which is probably one of the reasons why you have so much contention. I don’t know whether it’s fair to say that India has closer connectivity with the Junta and China and some of the Eastern European countries probably have a close connection with Suu Kyi. So, how close and how warm is the relationship between India and Suu Kyi remains a question. So I would say that the union supporting is more the Suu Kyi kind of model and broadly with people who do not go back to the Junta regime.

Sree Iyer: And in Europe, the Middle East, Africa news, Israel is updating a plan to attack Iran. The plan planning is going to be independent of any other country according to defence minister Benny Gantz. Austria has suspended AstraZeneca after a batch causes deaths. The Swiss narrowly vote to ban face coverage in public. This is a very significant vote. I think this is now beginning to spread across Europe. I’d like you to give your inputs, sir, at this point. I have a couple more news items, but please feel free to chime in. I think the key headline here is that Israel has effectively read the riot act. It is not going to allow a nuclear Iran, which is an existential threat to the state of Israel. So it will choose appropriate actions if it has to go alone in the world to do so.

Sree Iyer: In other news. Londoners want the shutdown to be removed or ended soon. The Russians are targeting Western vaccines with this information, so this is now not just China but Russia also indulging in similar news.

In markets FED chairman, Jerome Powell’s new scorecard is driven by labour markets more than the conventional methods. What are your thoughts about that, sir? Why is the FED chairman doing that?

Sridhar Chityala: It’s very interesting. If I have to read it, it is more going towards the socialistic approach. We probably will have a separate session to deeply analyze, what exactly are the transformative changes. They want to look at unemployment at the deepest level. When I say deepest, what is deepest which is namely those who have been unemployed for a  long-term,    has that been addressed? You can have a 6%, 7% or even a 5% unemployment rate it leaves two data points out. One, how many have remained permanently unemployed for a long period of time. How is that gap going to be addressed? Number one, how many people have re-entered the workforce and or have remained outside the workforce which have not been factored in? How many young graduates and how many college leaving students have been able to find jobs? What is unemployment levels in those are passed College, those who have passed the school, those who have even done post-graduation or graduation? So I think, he’s saying that they will be looking at the economic policies driven by a scorecard that represents this unaddressed universe rather than the aggregate universe that historically we have focused on. Remember, there’s also going to be 12 million illegal migrants coming in or illegal migrants who are sitting in the United States irrespective of the status that maybe they will also be looked at as he assesses the monetary policy of the Central Bank.

And quite quickly, just to add to that adjacent point, Janet Yellen has come back and said that Bond Market Yields are a result of the economic recovery not because of the inflationary trends. It’s almost like one after the one and the 1 and the 2 which is the treasury secretary and the head of the FED Reserve are going tiptoe on this. Remember, Janet Yellen was the previous FED Governor succeeded by Jerome Powell. What it lays down is the socialistic kind of monetary and fiscal policy framework that is on the anvil of being rolled out because there is further consideration on the stimulus that includes minimum wage, universal minimum salary, there’s a whole raft of programs that they are looking at. Life is not ending with the stimulus. So the FED chairman statement has a much deeper context relative to how the interest rates are going to be handled in the country.

Sree Iyer: And last line item is the $1400 stimulus checks are expected to reach everybody in the United States by the end of this month. Sridharji, that’s all we have for today. If there is anything else you’d like to add, we can do that now or we can call this a wrap.

Sridhar Chityala: Fantastic. I think that we have more to come this week as the market digests Jerome Powell’s statement and as markets evolve and understand what Janet Yellen is saying relative to Mr Powell. And we will also have the rollout of the stimulus and the political drama in Washington DC will continue on the next two things that are going on, which is the electoral reforms and the voter reforms.

Sree Iyer: Thank you very much, sir. And as always we’ll be back tomorrow. Same time same location. Namaskar.

Sridhar Chityala:  Namasker and have a wonderful day.