• Source - Economist, Nov 10, 2018: "India's shadow-banking crisis"     

    India's state-run banks are sitting on about $100 billion in bad loans. India's shadow banks rely upon the state-run banks for loans. If the government fails to support the state-run banks, India could face a major financial crisis.  

    India's financial sector: about half of all loans come from state-run banks. These banks face political pressures to buy government bonds, make credit readily available to rural borrowers (who are also voters) and make loans for government-approved infrastructure projects. These state-run banks are sitting on about $100 billion in bad loans. About one-fourth of all Indian loans come from "shadow banks" - these are institutions that make specialized loans (ex: housing sector) and are barred from taking deposits like a regular bank. Thus, they finance their consumer loans through borrowing from the state-run banks. Already, tightening credit in the state-run banks has caused the market value of the shadow banks to drop 40% this year alone. If there is a serious liquidity crisis caused by writing off the bad loans, the shadow banks are in deep trouble and 75% of India's loan could be in trouble. Note: 25% of all Indian loans are made by private banks which are generally well-run and in no danger.

  • Source: "The constant tinkerer"  

    India is a tough place to do business. It ranks 130th out of 189 on the World Bank's "Ease of Doing Business" report. The government controls most of the land and businesses must make deals with the government if they want any - a source of corruption. Nine out of ten Indian workers have jobs in the "informal" economy. One-third of all young Indians are not working nor are they in school, resulting in a low labor-force participation rate. Each Indian state has its own complicated labor laws and in some provinces, government approval is needed before workers can be let go. This makes it hard for Indian firms to scale up - only 270 Indian firms have sales over $125 million a year versus 7,680 in China. The state also controls banks - 70% of all loans come from state-controlled banks. India's judicial system is broken with 24 million cases pending, some have been waiting for trial for over ten years. As a sign of how loath Indian businesses are to deal with their government, 40% of all Indian firms generate their own power rather than plugging into the state-owned grid.

    Yet India's economy is booming, averaging growth near 8% over the last few years. Part of this is because of post-2014 cheap oil. India is a net importer of oil and cheap oil (less than $100 a barrel) is worth an estimated +2% to GDP. Prime Minister Narendra Modi is also trying to make things better through a series of reforms. A streamlined Goods and Services Tax (a kind of national sales tax or VAT) is being enacted, replacing a complicated tangle of state-level taxes, including internal tariffs. Last November, Modi demonetized large bank notes, taking 86% of all currency out of circulation in an effort to force "informal" businesses to come into the regulatory light (and start paying taxes). A biometric initiative known as Aadhaar links Indian citizens (and their bank accounts) directly to the government. This allows for direct cash transfers between the government and the citizen, eliminating bureaucracy and reducing the potential for corruption. 

    Narendra Modi is a member of the BJP or Bharatiya Janata Party. The BJP is labelled as a "Hindu nationalist" party. Their slogan under Modi has been "Minimum government, maximum governance". Modi is up for reelection again in May of 2019. 

  • Source: "A job of her own"  

    Female Employment

    India has one of the world’s lowest female employment rates at 26% - and this number has been in decline despite an Indian economy growing at 7% a year. The female unemployment has a “U shape” when viewed by education levels. Women with no education or lots of education tend to work. Those in the middle with only primary or secondary education, tend not to work.

    The primary reason is cultural. India is a patriarchy in which men work and women stay home. Indian women do 90% of the housework.Outside a small urban elite, the default position is for women not to work unless there is no other way for a family to make ends meet. This reflects an enduring stigma of women being seen as “having” to toil. A family’s social standing partly derives from women being able to stay at home. Indian women are not expected to have a job—41% of young Indians think it better if married women do not work. As the median age of marriage is 19, there is little time to experience the workplace. According to the World Values Survey, 76% of Indians agree that “when a mother works for pay, children suffer”, the highest figure outside the Middle East. In a survey in 2012 by Pew, a research outfit, 84% of Indians agreed that “when jobs are scarce, men should have more right to a job than women”. 

    There is an even darker side to the patriarchy - around 600 young girls a day die of neglect resulting from gender bias, according to a study published in the Lancet. The authorities estimate that India has 63m fewer women than it would otherwise because of differing survival rates between boys and girls as well as gender-selective abortions. Across India only 900 girls were born for every 1,000 boys in 2013-15, a ratio that is expected to worsen.

    There is also an institutional component. There aren’t very many factories in India. Industries that spawned tens of millions of female jobs in other emerging economies are largely absent from India. Antiquated labor and tax laws and a government fond of harassing big business are to blame for an absence of mega-factories spewing iPhones or T-shirts. Vietnam and Ethiopia, which have plenty of giant factories employing women, mostly making clothing and footwear, boast female workforce-participation above 70%.