Sree Iyer: Namaskar, today is June 30th, Wednesday, and Welcome to Daily Global Insights with Sri and Sree, Episode 193. Sridharji, Namaskar and let us start with global news. The first news that we have is Vaccines and Rifts around Nations dominate, the G20 meeting that took place after two years. Vaccines, climate, food security, transparency dominated
the meeting. Sir, your thoughts on what’s going on and what to look forwards to as a resolution for this meeting.
Sridhar Chityala: Good morning to everybody, welcome to all of you for yet another DGI show. The G20 meeting in Italy, after two years, Italy is chairing the G20 meeting. We just concluded yesterday. It is as usual as you can say, G20 is an asymmetric setup country, contrary to G7 with is much more homogeneity. Obviously, China dominated the issue, both from Coronavirus, as well as some of the other issues that are plaguing the world. They discussed a number of topics ranging from climate Accord to food security, to vaccines, and transparency and product flow of capital across to other countries, China accused the nations of holding and impacting its own domestic market in terms of exports that it relies on. So the net result of all of this is that each country made their own specific pitch. There was no outcome that if that came out of it, except for increasing the vaccine supplies to especially the African nations.
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Sir, let’s go on to the next topic, Top US general says that security is deteriorating in Afghanistan. We knew that once the Taliban gets legitimacy that this is going to happen, isn’t it? So what is so unexpected about it? Why is the US now surprised? what do you think was not factored in?
Sridhar Chityala: It’s a continuation of the dichotomy between the political and the army, or national security as it pertains to Africa. It appears that most of the critical districts have already fallen into the hands of the Taliban. With the army that is left prior to each complete departure, they have the capacity to defend the capital but they see your fast deteriorating situation. Probably in six months, either close to a civil war or, you know, entire Afghanistan falling in the hands of the Taliban. That’s what, what is envisaging. This is just a mere reinforcement of the series of events rather than anything to do with any strategic change in the perceptions of the reality on the ground.
Sree Iyer: The United Nations should not work with CCP agencies that are known for violating human rights says the rights group. Is this right now from the United States and which way are they leaning, Democrat, or Republican?
Sridhar Chityala: Yeah, the international Human Rights group. It is the global body that basically stating that look, the US is very silent on many of these matters while they have rhetoric here in the local press. But you find most often that when it comes to the global stage, they take a silent view but it is the global human rights group which has made this specific statement which is because there have been compromises, as you can see on WHO, there have been compromises on some of the UNHR issues that on the Geneva side. So, therefore in the Geneva meet, when the issue of Uyghurs came up, I think China lined up a whole bunch of Nations including Russia, Turkey, and some African Nations to veto the decision. And so the general observation is including CCP as an integral part of some of these human rights issues is not going to generate the right outcome.
Sree Iyer: South African constitutional Court finds Zuma guilty and sentences him to jail. If I remember correctly, sir, Zuma was one of the presidents of South Africa, is that correct?
Sridhar Chityala: He was a president of South Africa, he reigned for eight years and during his presidency, there was rampant corruption and a number of issues. The South African commission was appointed to conduct under the auspicious of the South African courts, he refused to cooperate, he refused to turn up at the hearings. He actually even refused to turn up for this verdict hearing. So he has now been sent to jail for contempt of court for refusing to participate. And he has been given five days to surrender, the police station and if he fails to do so, then, I think they would be force enforcement or implementation of the court edit. What happens then we’ll see.
Sree Iyer: Ethiopian government has declared a unilateral ceasefire in Tigray. This is an internal strike if I remember correctly, within Ethiopia, correct, Sir.
Sridhar Chityala: It is. It is the reason why we continue to cover Africa is because of this Sahel region, and some of the looming threat that is going on between the state forces and the civilian population in some instances, you have Rebels. In some instances, the government is considered to be favourable. In many instances, you also find Rebels to be, you know, favourable in terms of Human Rights Etc., Here in this instance, the Army which is I think under the auspicious of the government has been blamed for a number of Human Rights issues and acts on the population. It is a small nation of 6 million. Often, this is, when you have fundamentalism takes over. There appears to be a ceasefire with the Army, retreating back to the camp.
Sree Iyer: South Korean presidential Contender seeks to have a grand bargain with Japan. South Korea and Japan, are sort of uneasy Partners, but they always need a big brother the US perhaps to keep the peace and this is a new trend perhaps, it’s a welcome trend. Your thoughts sir.
Sridhar Chityala: Well, given the geopolitical situation, given the attempts that are being pursued by the US Government. So the presidential Contender feels that it’s time that they have a deal with Japan in the broader interest of the ecosystem around that region, you know when you look at North Korea, South Korea when you look at South Korea, Taiwan, South Korea, China, when you look at South Korea, Taiwan and Japan, Japan is the big gorilla in town in addition to China. So it’s important and Japan has a significant amount of investments in South Korea too. So, therefore it is important that there is some bargain that is in a place where they can cooperate. Across not non-business sectors, this is more around security and other governmental programs. There has been this attempt by the US to bring South Korea and Japan together and they call these three Nations as you know, three critical Partners in that specific region, and let’s see what happens. First, post the elections and then what happened to Moon Jae and then what the consequences that emerge as outside of the elections,
Sree Iyer: Myanmar faces a Covid surge amid, lack of medics and jobs. Thailand says that defective Chinese-made Sinovac coronavirus vaccine came filled with lumps of gel. So this is the other problem. The shipments could have some contamination, was this something like, you know, water just Jiffy Jill. It sounds very suspicious that China would be Shipment of lumps of gel sir. Maybe production went wrong. What are your thoughts?
Sridhar Chityala: My thoughts are this again G20 meet China came up and said you know we have supplied 450 million vaccines to 100 Nations etc., When initially, India gained momentum in terms of traction and vaccine diplomacy, China put India down, you know, with almost like disdain by saying, India is trying to colour and paint the influence the people then came Covid 2 issue in India, then, China took over and started to supply Sinovac. This is notwithstanding the fact that Chinese basically say Chinese themselves Sinovac has less than 50% or somewhere around the 50 per cent plus efficacy. Now, you are beginning to hear stories of some of the vaccines not being in line with the medical formulation and some of them even have come with lumps of water or gel as was the case in Thailand, I think they seem to have studied a sample of 110, they found that to be the case and they said, you know, people have to be very careful and make sure that the quality and you know, the vaccines are put through whatever is the rigour that needs to be put through, to make sure that people are given the right vaccines. China doesn’t support any adverse PR at all. It is almost like benign in the world, nobody cares. What anybody says about China. It continues to do what it needs to do. This is just one more example.
Sree Iyer: The United Kingdom, aims to gain TPP Trans-Pacific Partnership entry in 2022, says the trade secretary of the United Kingdom. Sir, what does the UK stand to gain by joining TPP?
Sridhar Chityala: The UK is no longer in Brexit. So, therefore, UK now will have a separate, bilateral, partnership, and being part of the TPP. It has all the benefits of tariffs and preferential trading arrangements with the PPP Nation. So that’s a significant factor for the UK after it left Brexit. So that’s why it is very important for them to part of it. Also, security is, you know, that whole area five I’s, many Pacific nations are members of that, ASEAN is a member of PPP. So, therefore, I think it gives them access to a number of things around, trade, commerce and security, and a seat at the table.
Sree Iyer: Let’s take a look at the United States news, Biden mistakes, 8 days European trip to 13 days. The Supreme Court says no right to hearing from some illegal immigrants, the SCOTUS says that government can indefinitely detain them if they say that they will be persecuted in their countries. So these are some of the initial rulings that are coming down on the illegal immigrants of perhaps who approach the court. So this is very similar to what happens in India’s Supreme Court, sir. There will be people in India pleading for the rights of Rohingyas who are illegals in the first place and then suddenly the court weighs in on that. Your thoughts on this. I’m a little confused about this an illegal immigrant cannot be, detained means what.
Sridhar Chityala: So, basically, the two issues I think Supreme Court very categorically and clearly states. First and foremost, it is not a Court established for dealing with human rights issues of people who have fled to the United States, human rights in their respective countries. SCOTUS it is not the Forum. Second, as a result, they will not be entertaining such cases in SCOTUS. So that’s number two. Then they are saying, okay, you have you decide what you want to do, you want to keep them and keep supporting them, keep supporting them. So until somebody says this has become a burden to us, then, you know, then the
The Federal administration would say, don’t worry, this is not a burden to the states. I will keep them in separate Federal locations and look after them. So what SCOTUS is he saying you deal with it as you think is appropriate. But this is not a case that will take it up. It’s constitutionally irrelevant and invalid as far as SCOTUS is concerned.
With regard to Biden, Biden was addressing the DNC me. And he seems to have rambled on to say that he spent 13 days of each 5 days in Cornwall for the G7 meeting. He said I discussed a number of things, but many of those things, I mean it’s irrelevant to the specific audience because you will feel all bored, this is addressing a virtual meet of the DNC members.
Sree Iyer: White House supports Olympian Gwen Berry’s Anthem protest. She protested during the playing of the National Anthem at the Olympic trials, on Saturday, turning away from the flag before draping a t-shirt on her face. Grandstanding, in my opinion, just to want to try and bring you to know, attention to something here. I think this person is transgender if I’m not wrong, can you clarify a little bit for us, Sir, what exactly is the problem here?
Sridhar Chityala: No, she’s not a transgender. I think that basically, the situation with her is that she is saying that I am, you know, there’s a lot of interviews, post this controversial, this Pro and against, effectively she is saying I love my country, it’s nothing to do with contempt for my country. But I’m just making my observation for the sake, of my people, if I’m not respecting the country, I would not be here. All I’m saying is that I’m using this occasion to represent the views of my people, which is basically to say they are suppressed oppressed and they have not been given due recognition. So she was wearing an activist t-shirt and she turned up and showed that rather than being showing respect to the national flag.
Sree Iyer: South Dakota and Iowa join other states like Florida to send forces to the southern border. Now, you are seeing more and more Republican Governments coming to the aid of Texas and LA County strongly recommends wearing masks for vaccinated or non-vaccinated People over Delta 19 Covid variant. So, look like Delta is now spreading in the LA area, we have been lucky so far the Bay Area has not had much of an impact. But we have to wait and see how things develop your thoughts, sir.
Sridhar Chityala: I agree and believe it or not, folks, when I talked to a number of my fellow Americans here, including some of my family members, just refuse to acknowledge or be aware that we still have 4.8 million active cases in the United States, of which 1.68 million active cases are in California. So, therefore, no wonder maybe they are listening to Daily Global Insights. We talked about this yesterday, we talked about this last week and we even showed the graph. Effectively, now LA County is saying that there are rising Delta variant cases and so therefore everybody has to wear a mask irrespective of whether you’re vaccinated or not vaccinated. By the way, this is also the WHO directive. This is also a CDC directive. Many still believe wearing masks doesn’t change the situation but WHO and CDC firmly believe wearing masks does matter. It is possible that there are rising cases in LA county. The data is not available or the data is a bit sketchy. They’re saying that the Delta variant could be quite serious given the number of active cases. So it’s important to wear masks.
Sree Iyer: Mitch McConnell is losing grip on GOP as the Democrats pursue a dual path on infrastructure budget. The Democrats want to spend 870 million for a middle east border wall but no funds have been allocated for building the US border wall. So this doesn’t make sense at all to me, sir. US border wall was half done. And again I’m a little confused about the border wall. You can’t build a border wall in some places just because the terrain doesn’t allow it also isn’t it? I mean whatever it is, I find it strange that covid relief funds are going to build a wall in the middle east when it is supposed to be directed at the United States.
Sridhar Chityala: It is just a reflection of the political sentiments, as well as some members of the House from the progressive group with a strong leaning towards certain countries, are driving the policy-making framework of the agenda. You would have never seen this type of money being allocated to specific Nations outside of the United States at the cost or at the detriment or at the exclusion of the United States. This is an example. I don’t want to second guess who these people are, but the fact is, close to a billion dollars has been allocated while on the contrary that you have the border funding that has been withdrawn in the United States. We will report more tomorrow once President Trump visits the border areas. Now, Vice-President Kamala Harris visited El Paso area where there is the wall and so there is a minimum impact of surges, whereas Trump is going to the El Grande area where there is a maximum amount of issues as a result of the border wall not being in place.
Now to your question which is, are you going to be in a position to address the issues of some uneven terrain? I think they have factored all of these in with some type of laser and drone monitoring and all these types of issues where there is the terrain issue in terms of building the wall. But it was agreed that the wall would be built at least to deter if not to completely avoid.
Sree Iyer: Just for our viewers benefit, there are places where the wall cannot be built right on the borderline. So what the United States does is it builds a wall within its side perhaps sometimes as much as half a kilometre inside and then what happens is the illegal immigrants come and occupy all the way up to that wall. So they are essentially in US territory, but they are not within US territory because there is a small world that is separating them from one side to the other. A lot of stuff like this is happening. This has been going on for a long time. This is not a Biden phenomenon, but you just see the kind of challenges that exist.
I think the next news item that I’m going to read is going to blow your mind. Ilhan Omar says I don’t regret grouping US, Israel with terror groups. I sometimes feel she forgets that she is a congresswoman of the United States of America and not some other third-world country. This is very, very, very disappointing that a US congresswoman forgets to speak for all of her constituents. This is really, really regrettable. I hope somebody does something about it. Your thoughts, sir.
Sridhar Chityala: My thoughts are, this new Progressive generation doesn’t believe in nationhood, statehood, identity, Flags, etc. Are they pushing their own specific agenda? What is that agenda? Perhaps, only Ilhan Omar or some of her entourage of the squad members can tell us. But this is the second or third time that she has made this statement. She first made the statement and now she again was asked the question. She says I do not regret so I don’t need to apologize. I don’t need to regret it. When you listen to some of these Progressives, you don’t believe that they are representing the United States. They are representing themselves and their views by creating ghettos of like-minded people. By pushing these people into those ghettos, they get their rights to represent themselves in the house. Many of the programs, the funding programs that these progressives are touting for is around this agenda of creating self-centred, voter groups, which gives them consistent legitimacy to be in the house and make these types of statements.
By the way, we will be reporting in the next couple of days, the issue around the skimming and the harvesting votes. The Supreme Court is going to take up the case and it will be interesting to see what comes out of it and some direction is expected to come out. While this is going on, on the Ilhan Omar case just jogs the memory there is still work going on in Arizona, there is work going on in Georgia, there is work going on in many of these Battleground states which all witnessed some of the challenges around voting and the election loss, etc. That is going on as we speak. While these people make provocative statements on a range of topics including listing the US as part of the terror group.
Sree Iyer: In Indian news, India to acquire Israeli anti-drone technology to combat the menace from across the border after a spate of recent incidents. Again, you will not read this in India’s mainstream media. Now, you’ve heard it here first. Sridharji, your thoughts. I think this was much needed. I thought India already had these things, but at least in the recent events where multiple drones have been directed at the Indian Air Force Station, it’s high time, Indis equips itself and starts countering these things, sir.
Sridhar Chityala: I don’t believe that they had the anti-drone technology. They had Drone surveillance technology and Drone capabilities to deter. This is the one that acts like a dome against the incoming Rockets, very similar to that. These are technologies that enable deterring and working against this specific rogue drone which comes from the other side of the Border, loaded with all kinds of things. It’s good news that they have gone straight. All the issues that India deals with, Israel has either dealt with or addressed it completely and they have the capabilities to deter. I think we have covered it yesterday, if you recall, that Iran announced that it has got 7000 kilometres or 4000 kilometre Drone technology capability where the drones can travel that kind of a distance to carry out any specific tasks that it is asked to do.
Sree Iyer: Economists cast doubts, whether the current loan guarantee programs are adequate to stimulate growth. Despite inflation on the rise, the Indian Central Bank is unlikely to raise rates till the fiscal year 2023. So taken together, how is India’s industry looking? Is the stimulus reaching the right people? I think they are still not looking at the demand side. They’re still looking at the supply side. These are just my thoughts. Please set me right if you think that the Indian government is looking at the demand side also.
Sridhar Chityala: Well, I think first and foremost, the interest rate issue is harmonization. I think there have been consistent attempts to say that you can’t have asynchronous interest rate movements. So 2023 is consistent with what Fed saying is when it will witness the first two hikes in 2023 is what they said. So Indian Monetary policy people are aligning with that decision, which is to say that the interest rate hike will happen in 2023. The inflation is only temporary basically because of the upsurge in sudden demand. As far as the loan guarantee and credit guarantee programs are concerned, usually, it takes a lot of time. As you correctly observed it is the cash in the hands of the people that provides the immediate stimulus by way of activity in the economic system. But we have to also remember that India is an unusual combination of social and capitalistic economy, and you have 800 million people being given free food for a considerable period of time. So there is some element, the need being met but is it adequate in terms of is it consequential in terms of the economic activity picking up. Certainly, exports seem to be one of the drivers. Many of the Agro segment seems to be… But for the industrial and the mid-market services activity, I think clearly some cash stimulus is probably needed on the demand side. So I’m sure that plans are put by the Indian government to address that.
Sree Iyer: Moderna makes applications to enter the Indian market. Indian covid management platform Cowin sees a wide demand for its usage from many countries. India and Bhutan signed a joint agreement for joint development projects, keeping the Chinese dragon away. This news is welcome because I thought we saw that Bhutan was drifting away from India and towards China. I think this is a welcome sign. Hopefully, this will continue. Your thoughts, sir.
Sridhar Chityala: I think India and Bhutan share a much stronger relationship, relative to the fluctuating India and Nepal relationship for that matter. So I think that there is a constant and continuous engagement between Bhutan and India. Bhutan recognizes the challenge of China. Given a little bit of circumstance, China is ready to engulf everybody that comes on the way. Be it Nepal, be it Bhutan, be it any other specific nation that is concerned that comes along its way. So this is a good joint development. I think there’s work going on around the water, there’s work going on around the alternate energy, which is particularly solar. There is a lot of small infrastructure developmental plans are afoot in Bhutan. All this augurs well as far as the continuous engagement with Bhutan and cementing the strategic relationship.
Sree Iyer: In markets news, The Five-Year breakeven interest rate is now at 2.42% and the 10-year break-even interest rate is at 2.33% indicating that the market sees inflation falling over a longer time. This is likely going to fuel a new market rally in the United States. And once the US has a rally other countries follow suit. So as far as Tuesday is concerned stocks finished with a little change even after a rise in home prices and an increase in consumer confidence. Sridharji, I have some inputs on this but I’ll let you first take a shot at the long-term inflation. Why does the long-term inflation rate look so mild, sir, in your thoughts?
Sridhar Chityala: The long-term inflation rate looks mild for three specific reasons. One, the demand is stimulated because of cash that has been put into the hands of the people by the government with no economic activity. So therefore that’s the first. The second one is the surge or the variability or the volatility in the demand. The volatility in inflation is caused by people being shut down due to the pandemic and the economy coming back to its normalcy. So there is a surge in inflation. That’s the second I think the third reason is, the unemployment level still has not reached the levels of pre-pandemic. They expect that it be taking a little longer time to reach the unemployment levels of 3.2-3.4%. Adjacent to the same third point, there is this battle that is going on between people refusing that they’ll come back to work because they are all getting the benefits. So still there is this asymmetric nature of labour demand versus labour benign unwilling to participate. All this will play out and economic growth is not going to be 6% in the outer years. The United States has never achieved that in the recent past. In fact, in the eight years of the Obama Presidency, it never crosses 2%. In the 4 years of Trump presidency, it averaged between two and three per cent, this is the GDP growth. So the inflation numbers that we are talking about are very much within the limits of what you call headline inflation, which the FED looks at and usually is 2-2.2%, but they are now setting it to 2.4%. They say that if they do anything on the monetary side by tingling with the interest rates it’s going to push the demand down quite dramatically.
Sree Iyer: With that, today’s segment of Daily Global Insights comes to a close. Sridharji and I will be back tomorrow bright and early. Same time, the same channel, Namaskar.
Sridhar Chityala: Namaskar. Thank you. Have a wonderful day and we look forward to seeing you all tomorrow.