Sree Iyer: Namaskar, Hello and welcome to PGurus Daily Global Insights, episode 103. Today is the 22nd of February 2021. We have a lot of news items today for you. The main points are number one, the Democrats are planning on signing off on the 1.9 trillion stimulus package along party lines. President Trump addresses the conservative political action committee (CPAC), we will have some details on that. And in the National Heralds fraud case, Dr Subramanian Swamy gets high court to stay the order of the Magistrate on a specific document that the congress party leaders are refusing to allow, so, we have more on that and also Congressman Ro Khanna says that if you cannot pay $15 an hour, then you should not be in business, a great message to small business owners. For all these and more. Let us start with the first item, which is the stimulus bill. Sridharji, what is happening on the 1.9 trillion stimulus bill, sir?
Sridhar Chityala: I think the stimulus bill is the way it stands is, all those objections which were put in place by Republicans as a caveat have been having vetoed. So, the Democrats are going with their version of the bill as is. And they believe that they will have the majority to get it through because you remember that it went through both, it has come back. All it requires is a simple majority where the democrats have five votes. So what are some of those things is one is this $15 minimum wage, which will be in the bill. The second is pipelines. The third is the porous borders. The fourth is illegal aliens, so those things now seem to be out of the pack and the Democrats are going to push their way through the 1.9 trillion.
Sree Iyer: So, in his first public conference after the elections, President Trump addressed the CPAC. What were his thoughts there? Is he preparing for another run in 2024 or he has not tipped his hand but, is he encouraging the congressmen and Senators to get back both the House and Senate in 2022. What are the main points of the speech, sir?
Sridhar Chityala: This event is going to be held in Orlando from February 25th to 28th. It is the largest conservative pack. They are assembling in Orlando and President Trump will be speaking on the last day, which is February 28th. The key theme that he’s going to focus on is the imminent threat of China, so, the China issue is going to be front and centre. The second is going to talk about the manufacturing jobs that he has been progressively bringing, this is through tariffs. The third is going to talk about is the threat of the Chinese around the world; he’s going to speak about that. And the fourth is the sum of the lopsided programs that is getting in, into the small business. Now you alluded to one which is Ro Khanna’s statement, if you cannot afford to pay him $15 such small businesses are undesirable, what happens to McDonald’s? What happens to Walmart? What happens to the In-N-Out Burger, which is not too far from where you are? So what’s going to happen to all those? According to Ro Khanna, they are undesirable, in his kind of interview with CNN, this came out, whether he was smoking something when he gave his interview because that’s the constituency of everybody.
Then, the other thing that is also coming out is the whole issue around illegal immigration and the open & porous borders, which is causing progressive changes that the Democrats are announcing is causing problems, especially in the southern states. So, I think he’s going to address all these issues in effect, this is going to be the election plan to win back the House and the Senate as the first priority in 2022.
Sree Iyer: Thank you for that update, Sir. In meanwhile in News in India, Dr Subramanian Swamy who is the main petitioner in the National Herald’s fraud case had to move the Delhi high court to stay the order of the magistrate, preventing the Gandhi family from submitting data regarding their 404 crores income tax ruling. To know more about this, I have just published a book, It’s called National Herald fraud. I hope you can see it. It is available on Amazon. You can have the e-book or the print version. We are taking orders now, it will be shipping this week and we hope that you will support us because this gives you the complete picture of how a black-and-white case is now in its ninth year of getting dragged out. It is a very very simple case of theft of fraud is still being allowed to you know, make its way through the courts and we are only at the lowest court at this point, even if the Gandhi’s were to lose here one can expect them to go to the high court and again onwards from there to Supreme Court every step of the way, it will be dragged out multiple versions will be taken but, the point here that I’m trying to make is India’s court system serious revamp is needed and this is Justice denied is where it is. Even though we can say oh, it’s Justice delayed, that’s just my comment. Sir, if you have something to add, please feel free.
Sridhar Chityala: No, I think that you have summarized it quite well, and I think I made my point. I do not understand the way the court systems work in India. It seems to be layers of contradiction between one tier court to the other tier court. It’s almost like we are reluctant to render Justice because if we do then, we probably are committing a crime. So, everybody knows the truth what it is, but somehow the truth is not playing out.
Sree Iyer: Thank you for that, sir. In other news, we are going to take a look at what is happening in the next round of talks between India and China? We know that in the last episode we looked at the satellite maps of fingers 5, 6, 7 and 8, where we clearly saw that China had vacated these spots and now the focus is on other areas such as Depsang and in Depsang, the Chinese are refusing to vacate. So the ball is in India’s court, we have to wait and see what happens? Sridharji, would you like to add something to that before I go on to the other news.
Sridhar Chityala: I think we predicted that point of time which is namely to say China is the most or the least trustworthy nation in the world, least trustworthy nation in the world. It is despicable. It is Despicable for the world Community for allowing them to get away with what they are doing right around the work. This is not just the instance. India is not the only instance around the world, that the unit World Community cannot unite because the reason is they got deep penetration, we are problems in UN, we are problems in WHO, we have problems in the South China Sea. We are problems all around the world. There is only one common person, which is Chinese, especially the CCP. Why the world cannot act? They seem to be like the Indian justice system. The Indian justice system cannot despair cannot dispense the truth. And so, therefore, the same thing the world Community cannot dispense the truth and ban China from any world economic activity. You can ban Iran, You can ban Iraq. You can ban Saudi Arabia, you can ban Israel, you can ban anybody but, a community and a nation with a political party, which is a rogue nation in the world, cannot be banned. So, therefore that’s true that kind of comes out when you kind of cover, I’m sure you’re going to cover in-depth around this Depsang issue and I think India should stand firm and basically say, okay you want to war, we’ll have a war.
Sree Iyer: Yes indeed, Viewers, we are going to have an ask Abhijit session in about two and a half hours at 9 p.m. Indian Standard time. It will be a No Holds Barred Question-Answer session, please send in your questions, have a hashtag #AskAbhijit and send it our way and we will be able to try and respond to your questions, that is for the latest situation on the line of actual control. Sridharji, on global News, a lot is happening now, Boris Johnson is beginning to tell the British people the folly or perhaps the downside of Brexit and a few other things that are happening. Why don’t you kind of round it up for us on what is happening in Europe about this Brexit and the covid fallout?
Sridhar Chityala: Well, mostly I will touch on the geopolitics of Boris Johnson because he hosted the G7 meet then, I will answer your question around Brexit as well as Europe. First and foremost, I think he hosted the G7 meet and he has proposed a number of good ideas. This is also the same meet in which going into the G7 meet, Biden released his first official public statement, which is I think published on the PGurus website. So, getting to Boris Johnson, he has talked about getting the NATO bag and getting the transatlantic relationship back on track and knowing the working of the Quad, which seems to have been successful in an APAC or Indo-pacific. He has mooted the idea of a transatlantic quad very similar to Indo Pacific kind of quad. Obviously, Germany, France, Britain and the United States would be the key nations, looking at you know a range of issues such as the China threat, looking at Iran and looking also at much more economic kind of cooperation, you know cutting off the tariffs and reducing the tariffs and fostering much about larger trade. And last and least which is the pet topic, so, he has introduced this pet topic of rejoining the Paris Accord and using the Paris Accord as a framework, you know that discussion took place over the weekend.
With regard to Brexit, the delays and the covid situation is going to have some kind of short to medium-term economic consequences for Britain. But, having said that he has forged partnerships with Singapore. He has a bilateral partnership with Japan. He has now formed a bilateral partnership with India. He is standing number one in the queue for the trans-pacific partnership or comprehensive trans-pacific TPP partnership. So, therefore he is saying that they may be short term but in the longer term he is the British going back to its roots establishing the broader kind of the Alliance. When you look at the IMF map data, the UK is not doing that bad, the IMF forecaster relative to post Brexit scenario and relative to other economies. They seem to be will cover this in a bit in the end, but, they have contracted close to 10% but, their growth is forecast to be in the 4 to 5 per cent in the next two years, so, bringing them back into some level of economic parity.
Sree Iyer: A couple of quick things on Texas. The power grid is up and running. Biden is expected to travel to Texas to visit them at the end of this week and more importantly now it looks like water is still not completely available, but it is being made available. Hopefully, the worst of the storm is over and we can move on to other things. Sir, in the meantime as the election drama, was playing out looks like there were some back-channel talks between the Democrats and the Iranian Ambassador in Washington, DC. What can you tell us about it, sir?
Sridhar Chityala: I think there is a press note that is making rounds, it’s not yet received closer scrutiny, whether it will ever receive closer scrutiny remains a question mark. Very similar to North Korea, when President Trump’s team was engaged in a carrot and stick approach with the Iranians. There seems to have been at least a couple of former advisors of Obama who seem to have engaged. Mr Jafari who is a US ambassador as well as who represents the UN and probably a few other people and these questions being raised whether really compromised the ability of the Trump Administration, this is way back in 2019, whether it really compromised the ability of the Trump Administration to bring Iran to the table and make them be accountable because they were very vulnerable and they probably would have been but that seems to have been sabotaged. This is the press report and we can potentially share it on the PGurus website at some stage.
Sree Iyer: Thank you, sir. It looks like, also Iran is not allowing the global nuclear inspection agency to perform any kind of testing on their nuclear program. So that is also now beginning to bubble its way up.
Sridhar Chityala: Yes. I think this is the United Nations inspectors. You have IAEA which conducted and they made their case very clear that Iran is days if not months away from a nuclear weapon. They have already produced the metal. They very close. Natural to say Biden has got a progressive agenda to engage Iran. So the mainstream media quite conveniently suppresses that specific news and it just got into the back pages. One has to look and see whether there is a strong undercurrent of the Iranian surrogates in the United States who are pre-empting and prompting this type of agenda to make sure that some of these controversial issues don’t prop up. So this is you United Nations Agency on the back of the IAEA. When it says that it went for inspections Iran has basically stated, they will not be given the full quota or the full court access to some of the programs that are currently underway. So when you look at IAEA when you look at the United Nations, when you look at the satellite programs, when you look at the Israeli intelligence, Iran seems to be on its own track. There are also backed by China and Turkey. To some extent, they feel the present us Administration is quite sympathetic to them. That was seen when Biden approached whether we should be going back to the negotiating table with Iraq. He got cold shoulders from the EU or the Europeans.
Sree Iyer: China’s Coast Guard has entered the waters of Japan near the Senkoku islands, and the United States has also said that it is going to start getting involved. So now we seeing that China is opening its theatre of operations in the South China Sea and the East China Sea and in the Japan Sea. So perhaps there is a realignment of its objective which suggests that it is now withdrawing from the Indian border and looking at trying to do something on the other side. What are your thoughts, sir?
Sridhar Chityala: I don’t think I would say that. It’s like reprioritization is not a withdrawal, it is basically a temporary regrouping. It simply implies that they are bringing in the resources. They will pretend that they are making a withdrawal so they can get a narrow gap of the window to distract the opposition. I think India has read China exceptionally well, at least under Modi Administration contrary to many people’s views. India has built infrastructure, India has built reinforcement, India has built footprint. I have even seen some special Eskimo type tents which have 15 degrees centigrade temperature inside when the temperature outside is minus 15 or minus 16 degrees centigrade. So they’re making sure that the soldiers and the front command post are well organized and well-orchestrated in terms of staying their position and not losing their guard. China does not withdraw. It is not in its dictionary.
Sree Iyer: We’ll have to wait and see and talks about other places is continuing and we have to wait and see how those things progress. Let’s move on to markets and economy as we come to the end of this program. The first thing I want to bring out is a chart that shows the latest World Economic Outlook growth projections and this is about the estimate of what happened in 2020 and then 2021 and 2022 where this organization has put up all the expected growth in GDP. For example, it has two big categories Advanced Economies and Developing Economies, and it makes interesting reading. It says that the United States is expected to grow in 2021 at 5.1% and then the line goes on, everything seems to be showing Positive Growth. The interesting thing here is India will be growing at 11.5% this year. Any thoughts on what do you make of all the number projections?
Sridhar Chityala: I think these are IMF projections. I feel that for the first time I would say, I’m reasonably comfortable with the numbers as I see these numbers. There’s one topic that caught Twitter on war. This is by the economic intelligence unit, Simon Koster, I retweeted and the controversial nature of this is the UK will grow relatively higher in terms of value because of discounting the Indian rupee. So India will be lagging behind the UK in the next two years as you normalize growth to the currency. This is the Tweet. There was no data to back this up. So I basically took him on and said if you want please come down and we’ll have a chat with Mohan in the PGurus fireside chat. You are contracting more you are growing less. What should be the Dollar to Rupee discounting for you to make an assumption that India will be less? This was my rebuttal using this chart. There has not been any response from the EIU. My point is this, left-liberal economist, and you see a lot of these posts in the EIU economist and including Nikkei, they make the liberal theory assumptions. We expect this, so therefore we conclude this and that warms the headline. But he has no basis for the kind of data that you see. So, India will do well. 11.5 is conservative. I believe it’ll be somewhere between 12% to 13% based on the rate of flow of investments as well as some of the uptick in the manufacturing that one is seeing and also based on the production, the agricultural growth that is expected to be much higher than the last year. There is also a latent demand that is coming from the Southeast Asian Nations, which are impacted by the covid situation, for example, the Auto industry. There are exports going on behalf of the Korean manufacturers exporting to the adjacent West Asian Nations and Southeast Asia using the capacity from the Indian operations. So I expect it to be higher. As far as the United States is concerned, when you look at it the Goldman Sachs and JP Morgan is predicting, the numbers to be somewhere between 6% and 8% relative to the 5.1%, the number that you have seen. The central budget office has also projected the economic growth to be 5%. So when you look at the IMF numbers it is, but JP Morgan and Goldman is forecasting a higher growth especially for the United States before it tapers to point 2.5% or 2.8% growth. That’s my observation based on this number, sir.
Sree Iyer: And lastly, Janet Yellen says to expect more stimulus packages and the 1.9 trillion is going to take at least two quarters to have its effect felt. What kind of timeline do you think Janet Yellen has to unfold one more stimulus package. And in your opinion is that needed at this point or should we wait and see how the various packages that have been rolled out in the last 12 to 18 months have their effect on the economy.
Sridhar Chityala: Just to give you 3.1 – 3.2 trillion dollars went in of which 900 billion dollars went in December-January by the time the program, this 1.9 trillion-plus are maybe another 100 billion through earmarks, remember we talked about the earmarks. When you add the earmarks you are talking about close to five trillion dollars of liquidity in the US ecosystem, forgetting there are a 120 billion dollars of monthly buying program of the FED to feed the corporate sector. So we have slush with cash. In fact, the world is going to be slush with close to 30 trillion dollars of cash in 2021. So to all those people, I defend the United States, all those people who say the US prints money, the US has this, sorry, the world is printing. 84 trillion dollars is the size of the global economy in 2020. So, in 2021 we are going to pump 30 trillion dollars of cash into the system. So, naturally, you’re going to see those trajectories that you see in those, I’m not suggesting they’re not needed but I’m suggesting that there’s plenty of cash.
To respond to your specific question around Janet Yellen, Janet is saying that there is an imminent need for another larger stimulus to address infrastructure to put money into education and to also give money to the much poorer community who are not getting enough food on the plate. So, therefore, we need more money. When do I see it coming? I think I can see this coming, if not in Q2, but very soon somewhere between Q3 and Q4. You will see this bill being enacted. So I think the Democrats with a socialist kind of a treasury secretary getting actively engaged into, you would have seen Steve Mnuchin never touched on any of these kinds of topics. It let the political process run and his objective was to run the balance sheet in terms of managing the programs. But Janet is taking a much more proactive look in terms of being an advocate for some of these programs, just a little contrarian to an economist in my view.
Sree Iyer: Thank you for that, and we will be back again tomorrow, same time, same place, and we look forward to seeing you all at 9 p.m. IST on Ask Abhijit. Thank you very much, and Namaskar.
Sridhar Chityala: Namaskar, Thankyou. Have a wonderful day and a wonderful week.