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India’s consumers bear the brunt of New Delhi’s inflation paradox



Along a lane in a Mumbai neighbourhood lined with chai stalls and vegetable carts, visitors usually have to dodge commuters, motorcycles and even animals to shop. But now, like so many streets in India, it is unsettlingly quiet.

Vijay Kotian, a 35-year-old selling vegetables, fruit and pulses from his roadside perch, faced a paradox. There were fewer buyers for his fare, but prices were higher.

“Customers are getting angry because prices are increasing from Rs20 to Rs40 to Rs50 [$0.20-$0.68],” he said, citing tomatoes as an example. “They ask why I’m increasing my prices. But it’s not me.”

Mr Kotian’s predicament encapsulates a challenge for India since the coronavirus pandemic struck in March: stubbornly high inflation despite a huge economic contraction.

Retail inflation remained above the Reserve Bank of India’s mandated target of 6 per cent for eight months from April, soon after the country entered a months-long lockdown. It touched a six-year high of 7.6 per cent in October.

The consumer price index finally fell within the RBI’s target at 4.6 per cent in December, thanks partly to a drop in vegetable prices, providing some respite to low-income shoppers struggling to fill shopping bags and politicians fearful of popular outrage.

But economists have warned that India, which for years has struggled with runaway price increases, must balance the urgent need to revive growth with keeping food, transport and commodities prices under control.

“The key question that comes with inflation is: is this a return to the dark ages or are these passing dark clouds?” said Aurodeep Nandi, an economist at Nomura.

While he did not believe it was the former, Mr Nandi warned that “there are still dark clouds looming ahead”.

High inflation has long been a source of concern to Indian authorities as demand from the fast-expanding economy and population exacerbated goods shortages. After years of mixed responses, the central bank in 2016 adopted an inflation-targeting mandate in order to try and manage the imbalance.

Anger over high onion prices has been linked to the downfall of more than one government. In September, Narendra Modi’s government banned onion exports because of concerns over soaring prices.

Retail inflation has been led by volatile food prices

The drop in food inflation in December partly reflected the patching up of supply chains that were upended by India’s strict lockdown, which limited the availability of transport and labour.

But other measures of inflation have showed signs of pressure that predate the pandemic, picking up after several years of comparatively tame price rises. Core inflation, which excludes food and fuel, remained stubbornly high last month at 5.6 per cent, compared with 5.8 per cent in November, according to brokerage Edelweiss.

That continued even after the lockdown brought growth to a halt. India’s economy is expected to shrink more than 10 per cent in the year ended March, according to the IMF. The country has recorded more than 10m coronavirus cases, the world’s second-highest tally, and more than 150,000 deaths.

Anxiety over inflation has prevented the Reserve Bank of India from cutting interest rates since May, and many economists expect it to continue holding off in the months to come — due partly to accelerating commodity prices.

The economy has shown signs of improvement from its lows last year, with indicators including manufacturing, railway traffic and tractor sales picking up.

India’s economy is expected to contract sharply before rebounding

But Shumita Deveshwar, an economist at advisory firm TS Lombard, said inflation could complicate India’s recovery.

Tepid private investment, which has been trending lower since 2018, has exacerbated the country’s chronic supply-side shortages, such as the infrastructure needed to get vegetables from farms to shops. This results in significant price mark-ups that stoke inflation, she said.

“This is an age-old problem for India,” said Ms Deveshwar. “As growth recovers and demand starts to pick up, what we will see is supply lagging demand, which basically recreates the conditions” for inflation.

Recent agricultural reforms introduced by Mr Modi and aimed at allowing farmers to sell directly to private buyers rather than state-backed market yards could streamline supply chains and reduce some of these inflationary inefficiencies.

“If [the reform] is run the way it’s meant to be, I’d think we’d be in for much better-behaved food inflation,” said Radhika Rao, an economist at DBS.

The contentious laws, however, were suspended by the Supreme Court following a backlash from farmers.

Inflation in other areas continues to cause problems. Many automakers, such as India’s largest, Maruti Suzuki, raised vehicle prices this month citing, in part, high commodity prices.

A survey of manufacturers by IHS Markit in December found that inflation in input costs, such as materials and labour, had risen to the highest level in two years.

All the while, India’s economic recovery remains tentative. Industrial production in November dropped 1.9 per cent, according to data released this month.

Even as Covid-19 infections have dropped from nearly 100,000 a day in September to fewer than 20,000, some economists fear that a resurgence in cases could hamper the turnround.

For Vinod Prasad, a 57-year-old vendor selling towels in Mumbai, inflation remains a worry, with prices about 20 per cent higher than before the lockdown.

And there were few signs of an economic revival. On one recent evening, he had yet to make a single sale for the day. “No one comes,” he said.

Additional reporting by Andrea Rodrigues

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Emerging Markets

White House warns of ‘large number’ of victims in Microsoft hack




The White House has warned that hackers may have compromised a “large number of victims” in the US by exploiting recently disclosed vulnerabilities in Microsoft software. 

Jen Psaki, White House press secretary, said on Friday that there was currently an “active threat” from hackers exploiting four flaws in Microsoft’s Exchange email application, which the tech group disclosed earlier this week. Microsoft has blamed a Chinese state-backed hacking group for the attacks.

“This is a significant vulnerability that could have far-reaching impacts,” Psaki said. “We are concerned that there are a large number of victims and are working with our partners to understand the scope.” 

Brian Krebs, a cyber security researcher, claimed in a blog post on Friday that at least 30,000 organisations “including a significant number of small businesses, towns, cities and local governments” had been hacked in the past few days following Microsoft’s disclosure, citing multiple sources briefed on the matter. 

On Tuesday, Microsoft published a blog post in which it said a group of hackers had launched “limited and targeted attacks” to gain access to emails. It also said the hackers had tried to go deeper into victims’ computer systems in order to lurk there unnoticed for a long period of time.

Microsoft has attributed the campaign to a group of Chinese state-sponsored hackers called Hafnium. China on Wednesday denied responsibility, according to a Reuters report. The White House did not link the campaign to any particular country.

It is unclear who has fallen victim to the attacks. Microsoft said that Hafnium has tended to target “infectious disease researchers, law firms, higher education institutions, defence contractors, policy think tanks, and NGOs” in the past.

Late on Thursday, Jake Sullivan, National Security Adviser, said in a tweet that the White House was “tracking . . . reports of potential compromises of US think tanks and defence industrial base entities”. 

He and Psaki urged the government, private sector companies and academic institutions to patch their systems after Microsoft issued fixes for the vulnerabilities. 

The concerns come after revelations in December that a sprawling cyber espionage campaign, likely backed by Russia, had been targeting US government agencies and businesses unnoticed for at least a year.

Authorities are still struggling to understand the scope of the fallout from the SolarWinds hack, which has prompted calls for President Joe Biden to prioritise US cyber security. The Biden administration is now preparing sanctions and other executive orders in response to the hack. 

James Lewis, a cyber expert at the Center for Strategic and International Studies, said it appeared that Microsoft and the US government had uncovered the Chinese attack while “poking about looking for SolarWinds”.

“This is the downside of a big hack by somebody else as it increases the chance that you’ll be found out,” Lewis said. “The Chinese should send the Russians a bill.”

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Polish women count cost of tough abortion curbs




Even before Poland all but outlawed abortion, Zofia has been thinking about moving abroad. But the near-ban that took effect earlier this year helped her make up her mind: this autumn she plans to move to Prague in the Czech Republic.

“I feel better there, freer, and being a woman there doesn’t make me feel weaker or worse,” she said. “I love my life in Warsaw. But when the [abortion ban was mooted], I thought, I don’t want to live here any more . . . And I don’t want my kids to live here.”

The 31-year-old artist is one of thousands of Polish women outraged by the tightening of the country’s abortion laws which, even before the overhaul, were among the strictest in the EU. Their anger centres on a ruling by the Constitutional Tribunal in October last year, which declared that a 1993 law allowing abortions in the case of severe foetal abnormalities was unconstitutional.

The ruling came into force in January, leaving only two grounds for an abortion in Poland: a threat to the mother’s health or if the pregnancy is a result of rape or incest. Such cases made up just 2.4 per cent of the 1,100 legal abortions in Poland in 2019.

Hundreds of thousands of Poles took to the streets when the ruling was announced in October, and activists have called for another round of protests on International Women’s Day this Monday. Polling suggests that a majority of Poles back some form of liberalisation.

Anti-abortion campaigners, often guided by their religion in what remains one of Europe’s most strongly Catholic countries, say the change was needed to protect the rights of unborn children.

“An unborn child is a separate person, which has its own body and its own rights. A child must not be deprived of the fundamental right of every human being — the right to life,” Kaja Godek, one of Poland’s most prominent anti-abortion campaigners, wrote on Facebook last month.

A pro-life poster in Krakow. Many Polish opponents of abortion are guided by faith in one of Europe’s most strongly Catholic countries
A pro-life poster in Krakow. Many Polish opponents of abortion are guided by religion in one of Europe’s most strongly Catholic countries © Omar Marques/Getty Images

But activists say the ruling will force women to give birth to babies with such severe abnormalities that they have no chance of survival. They also say the government has done too little to help the families of children born with disabilities, who receive only limited support.

“I’m terrified because for me as a woman in reproductive age, it means getting pregnant in Poland became dangerous. And I’m afraid for my sister, for my colleagues and friends, for my relatives and for many other women I meet every day as clients,” said Kamila Ferenc, a lawyer from the Federation for Women and Family Planning, a women’s rights group.

“They will be in a horrible position . . . they have lost the possibility to decide freely on their own, because it’s not so easy to have an abortion outside the system.”

In the past, Polish women who could afford it were able to seek abortions in neighbouring countries with more liberal laws, such as the Czech Republic or Slovakia. But with the pandemic limiting travel, experts say women are likely to turn to the internet to buy drugs from overseas that would allow them to carry out abortions at home. Women are not prosecuted for self-managed abortions carried out before the 22nd week of pregnancy.

“It used to be the case that illegal abortions were through surgical procedures by doctors and back-alley providers. Then abortion tourism rose in the early 2000s after Poland joined the EU. Now we are seeing an increase in self-managed abortions, which can be less of a financial and emotional burden,” said Maria Lewandowska, a researcher into reproductive health at the London School of Hygiene and Tropical Medicine.

Justyna Wydrzynska, from Abortion Dream Team, a group that helps women who want to terminate their pregnancies, said that since the abortion rules were tightened in January, the organisation had received three times the normal number of calls from women seeking help.

“We get around 600 to 700 phone calls a month. Around 100 of them need to go abroad [for an abortion], and for the rest, . . . these are mostly people in need of pills, assistance in taking pills or post-abortion care,” she said.

“Often they are human dramas. Some people approach it in a task-oriented way, others very emotionally. Sometimes it is very difficult.”

Despite the huge protests last year, women’s rights groups acknowledge that as long as Poland’s conservative-nationalist Law and Justice party remains in power, the prospect of the laws being loosened is minimal. But they hope that in the long run, the debate sparked by the ruling will lead to greater support for liberalisation.

“The factual situation of pregnant women is worse. But on the other hand I think we are now on a better track to change the situation than when [the previous government led by the centre-right] Civic Platform ruled and everybody thought everything was all right,” said Ferenc.

“There is more courage in society to speak about abortion. People educate themselves and each other. I think that we now have more solidarity and strength in society to fight for reproductive rights. ”

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Hong Kong dropped from economic freedom index after crackdown




Hong Kong has been dropped from a prominent index of the world’s freest economies, underlining growing concerns over Beijing’s tightening grip on the Asian financial centre after it introduced a national security law last year.

The announcement from the Heritage Foundation, a conservative US think-tank, came as the majority of a group of 47 pro-democracy politicians were refused bail in a case that critics say shows the rapid decline of civic freedoms in the city.

The Heritage Foundation also dropped the Chinese special autonomous region of Macau, a casino hub and former Portuguese colony, from the rankings.

The foundation in recent years has been aligned with the administration of former US president Donald Trump.

“No doubt both Hong Kong and Macau . . . enjoy economic policies that in many respects offer their citizens more economic freedom than is available to the average citizen of China,” the Heritage Foundation said. “But developments in recent years have demonstrated unambiguously that those policies are ultimately controlled from Beijing.”

Beijing imposed the national security law on Hong Kong last year in response to anti-government protests that engulfed the city in 2019.

The measures are part of a clampdown on civil and political freedoms guaranteed to the city for 50 years following its handover from the UK to China in 1997. Authorities are targeting anyone viewed as disloyal to the Chinese government in politics, education and the media.

The Hong Kong government has long taken pride in studies showing its economy to be one of the most liberal in the world, with the city marketing itself as an international business haven given its low tax rates and open port.

The Heritage Foundation last year replaced Hong Kong at the top of its “Index of Economic Freedom” with Singapore, toppling it from a position it had held for 25 years, but still included the territory in the rankings in second place.

The Hong Kong government said it was ‘dismayed’ by the Heritage Foundation’s decision and said it was “politically biased”.

The case against the 47 pro-democracy lawmakers and activists has been seen as a test of whether the city’s legal system can withstand pressure from Beijing.

Authorities charged the group with subversion, alleging they aimed to topple the government by staging an unofficial primary vote to select candidates to run for election to the city’s legislature. Subversion is punishable with up to life imprisonment under the national security law.

The bail hearings, presided over by a judge appointed to oversee national security cases, entered their fourth day on Thursday.

Victor So, the judge overseeing the case, only granted bail to 15 out of 47 defendants under harsh conditions, but the prosecution immediately appealed the ruling, returning them to custody until the appeal hearing takes place. 

On top of the usual bail conditions, the court ordered the defendants to not participate in elections or make any public political statements.

Sessions have often stretched late into the evening, including one that continued until 3am before the defendants were hauled back before the court the next day. At least one defendant collapsed inside the courtroom and six others were sent to hospital for treatment.

As they exited the court, some defendants shouted: “Political criminals are not guilty, Hong Kongers will not die!”

Simon Young, a law professor at the University of Hong Kong, said the treatment of the defendants was “most unsatisfactory”. Jerome Cohen, a Chinese law expert at New York University, said the way the hearing was conducted “makes a farce of procedural fairness”.

Some of the defendants have faced multiple trials simultaneously and were forced to shuffle between courtrooms.

The defendants’ lawyers said on Tuesday their clients had not bathed in three days, forcing the judge to delay the hearing to allow them to wash.

Hong Kong has tight restrictions on reporting the substance of bail hearings.

Hundreds of supporters have queued each day in an attempt to watch the proceedings in person. Many held placards and chanted banned political slogans, risking prosecution under the security law.

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