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Indian farmers mass outside New Delhi to protest at Modi’s agricultural reforms



Thousands of Indian farmers massed on the outskirts of Delhi on Monday in a fifth day of protests against Prime Minister Narendra Modi’s agricultural reforms, which they say favour corporate interests.

Hundreds of police and paramilitary forces in riot gear were stationed at the state border to stop a convoy of tractors and trucks from descending on the country’s capital.

The farmers, from the grain-producing states of Punjab and Haryana, started their campaign in September after Mr Modi’s government pushed through three bills liberalising the agricultural sector, overriding demands from coalition partners and opposition parties for greater scrutiny of the legislation.

“When injustice becomes the law, protest becomes your duty,” said Naresh Sangnan, a 35-year-old farmer from Haryana, taking part in Monday’s demonstration. “All the farmers want the government to change.”

Police set up a roadblock to stop the farmers from marching to New Delhi
Police set up a roadblock to stop the farmers from marching to New Delhi © Sajjad Hussain/AFP/Getty

Under the new rules farmers can sell produce directly to private buyers instead of through government-controlled market yards. The reform’s proponents say it will make the market more efficient, but many farmers believe it will have a devastating impact on their already precarious livelihoods.

The farmers fear that the new rules mark the end of the minimum support price — which guarantees a fixed price for certain crops, mainly wheat and rice — and open the door for large corporations to set the prices. Mr Modi’s government has maintained that the minimum support price will stay intact, with public procurement to continue.

“The fear is that the bulk of buyers will shift to private markets, making the minimum support price system redundant and resulting in lower prices for the farmers,” said Himanshu, associate professor of economics at Jawaharlal Nehru University in New Delhi. “It’s creating a parallel market.”

The stakes for Mr Modi are high — the agricultural sector employs half of India’s workforce and rural distress has become a nationwide issue. In 2018, protesting farmers hung skulls around their necks to highlight the rising number of suicides.

Mr Modi insists the freer trade will benefit farmers by allowing them to earn higher prices by dealing with a greater number of potential buyers.

In his monthly radio address on Sunday, the prime minister said the reforms had “not only broken shackles of farmers but had also given new rights and opportunities to them”.

But the farmers are demanding the new laws be scrapped and are preparing for a prolonged stand-off with the government.

At Singhu border, where Delhi meets Haryana, the convoy of tractors and trucks stretches as far as the eye can see, in a protest that threatens to block five of New Delhi’s major arteries.

The highway has been converted into a makeshift camp, with laundry hanging on clothes lines strung between tractor mirrors, and farmers brewing sweet chai and cooking rotis over open log fires.

Sukhwinder Singh, a 38-year-old farmer, rode on his tractor from Punjab state. He says he is prepared to protest for months, even as the temperature drops during the cool winter nights.

“We have tents, we have our carpets, we have enough food for two months. We don’t feel the cold,” said Mr Singh, wearing a white turban and blue collared shirt. “We are coming here against Modi,” he said, “this bill is not a benefit for our farmers.”

New Delhi’s decision to rush through the legislation by using an emergency executive order has also eroded trust between the farmers and the central government, added Himanshu. “Farmers are suspicious, it points to a mistrust in the system,” he said.

Home minister Amit Shah has said the government will hold talks with the farmers’ unions on Thursday. Yet Bhubinder Singh, a 36-year-old farmer from Amritsar vowed to continue the protest until the reforms are withdrawn. “The government didn’t listen to us,” he said, “that’s why we have to come here.”

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Emerging Markets

Bond sell-off roils markets, ex-Petrobras chief hits back, Ghana’s first Covax vaccines




The yield on the benchmark 10-year Treasury exceeded 1.5 per cent for the first time in a year and the outgoing head of Petrobras warns Brazil’s President Jair Bolsonaro against state controlled fuel prices. Plus, the FT’s Africa editor, David Pilling, discusses the Covax vaccine rollout in low-income countries. 

Wall Street stocks sell off as government bond rout accelerates

Ousted Petrobras chief hits back at Bolsonaro

Africa will pay more for Russian Covid vaccine than ‘western’ jabs

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Petrobras/Bolsonaro: bossa boots | Financial Times




“Brazil is not for beginners.” Composer Tom Jobim’s remark about his homeland stands as a warning to gung-ho foreign investors. Shares in Petrobras have fallen almost a fifth since President Jair Bolsonaro said he would replace the widely respected chief executive of the oil giant.

Firebrand Bolsonaro campaigned on a free-market platform. Now he is reverting to the interventionism of leftist predecessors. It is the latest reminder that a country with huge potential has big political and social problems.

Bolsonaro reacted to fuel protests by pushing for a retired army general to supplant chief executive Roberto Castello Branco, who had refused to lower prices. This is politically advantageous but economically short-sighted.

Fourth-quarter ebitda beat expectations at R$60bn (US$11bn), announced late on Wednesday, a 47 per cent increase on the previous quarter. This partly reflected the reversal of a R$13bn charge for healthcare costs. Investors now have to factor the cost of possible fuel subsidies into forecasts. The last time Petrobras was leaned on, it set the company back about R$60bn (US$24bn at the time). That equates to 40 per cent of forecast ebitda for 2021.

At just over 8 times forward earnings, shares trade at a sharp discount to global peers. Forcing Petrobras to cut fuel prices will make sales of underperforming assets harder to pull off and debt reduction less certain. Bidders may fear the obligation to cap prices will apply to them too.

A booming local stock market, rock bottom interest rates and low levels of foreign debt are giving Bolsonaro scope to spend his way out of the Covid-19 crisis. But the economy remains precarious. Public debt stands at 90 per cent of gross domestic product. The real — at R$5.40 per US dollar — remains near record lows. Brazil’s credit is rated junk by big agencies.

Rising developed market yields will make financings costlier for developing nations such as Brazil. So will high-handed treatment of minority investors. It sends a dire signal when a government with an economic stake of just over a third uses its voting majority to deliver a boardroom coup.

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South Africa’s economy is ‘dangerously overstretched’, officials warn




South Africa is pushing ahead with plans to shore up its precarious public finances as officials warn the economy is “dangerously overstretched” despite the recent boom in commodity prices.

Finance minister Tito Mboweni hailed “significant improvement” as he delivered the annual budget on Wednesday and said that state debts that will hit 80 per cent of GDP this year will peak below 90 per cent by 2025, lower than initially feared.

But Mboweni warned that President Cyril Ramaphosa’s government was not “swimming in cash” despite a major recent tax windfall. The Treasury now expects to collect almost 100bn rand ($6.8bn) more tax than expected this year after a surge in earnings for miners. This compares with a projected overall tax shortfall of more than 200bn rand. Still, the finance minister made clear that spending cutbacks would be necessary.

“Continuing on the path of fiscal consolidation during the economic fallout was a difficult decision. However, on this, we are resolute,” Mboweni said. “We remain adamant that fiscal prudence is the best way forward. We cannot allow our economy to have feet of clay.”

The pandemic has hit South Africa hardest on the continent, with 1.5m cases recorded despite a tough lockdown. An intense second wave is receding and the first vaccinations of health workers started this month. More than 10bn rand will be allocated to vaccines over the next two years, Mboweni said.

‘We remain adamant that fiscal prudence is the best way forward’ – South African finance minister Tito Mboweni © Sumaya Hisham/Reuters

Even before the pandemic’s economic hit, a decade of stagnant growth, corruption and bailouts for indebted state companies such as the Eskom electricity monopoly rotted away what was once a prudent fiscus compared with its emerging market peers. 

Government spending has grown four per cent a year since 2008, versus 1.5 per cent annual growth in real GDP. The country’s credit rating was cut to junk status last year. Despite this year’s cash boost, the state expects to borrow well over 500bn rand per year over the next few years. The cost to service state debts is set to rise from 232bn rand this year to 338bn rand by 2023, or about 20 cents of every rand in tax.

The fiscal belt-tightening will have implications for South Africa’s spending on health and social services. On Wednesday Mboweni announced below-inflation increases in the social grants that form a safety net for millions of South Africans. “We are actually seeing, for the first time that I can recall, cuts in the social welfare budget,” said Geordin Hill-Lewis, Mboweni’s shadow in the opposition Democratic Alliance.

The finance minister is also facing a battle with union allies of the ruling African National Congress over a plan to cap growth in public sector wages. South Africa lost 1.4m jobs over the past year, according to statistics released this week. The jobless rate — including those discouraged from looking for work — was nearly 43 per cent in the closing months of 2020.

The South African treasury expects the economy to rebound 3.3 per cent this year, after a 7.2 per cent drop last year, and to expand 2.2 per cent and 1.6 per cent next year and in 2023 — growth rates that are widely seen as too low in the long run to sustain healthy public finances.

“The key challenges for South Africa do however persist, clever funding decisions aside,” Razia Khan, chief Middle East and Africa economist for Standard Chartered, said. “Weak structural growth and the Eskom debt overhang must still be addressed.” 

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