George Soros Has Got a Backache Again and This Time It’s Because of China

George Soros has got some of the biggest macro calls right over the years. How does he do it? If you were to get around to reading all the books that Soros has written over the years, you will come to realise that he follows something known as the theory of reflexivity to get in and out of financial markets.

Nevertheless, his son Robert, offers another explanation for his success in Michael Kaufman’s Soros: The Life and Times of a Messianic Billionaire. As Robert puts it “My father will sit down and give you theories to explain why he does this or that. But I remember seeing it as a kid and thinking, Jesus Christ, at least half of this is bullshit, I mean, you know the reason he changes his position in the market or whatever is because his back starts killing him. It has nothing to do with reason. He literally goes into a spasm, and it’s his early warning sign.”

Soros himself has had his doubts about how he makes money. As he writes in The New Paradigm for Financial Markets – The Credit Crisis of 2008 and What It Means: To what extent my financial success was due to my philosophy is a moot question because the salient feature of my theory is that it does not yield any firm predictions. Running a hedge fund involves the constant exercise of judgement in a risky environment, and that can be very stressful. I used to suffer from backaches and other psychosomatic ailments, and I received as many useful signals from my backaches as from my theory. Nevertheless, I attributed great importance to my philosophy and particularly my theory of reflexivity.”

And from the looks of it, seems like George Soros has had a few backaches of late. This time his worries are coming from China. Speaking at an economic forum in Sri Lanka, Soros recently said: “When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008…Unfortunately China has a major adjustment problem and it has a lot of choices and it can actually transfer to the rest of the world its own problems by devaluing its currency and that is what China is doing.”

Over the years, the Chinese yuan has been largely pegged against the American dollar. The People’s Bank of China, the Chinese central bank, has ensured that the value of the yuan has fluctuated in a fixed range around the dollar. This has been primarily done in order to take away the currency risk that the Chinese exporters may have otherwise faced.

In a world where so many things have changed in the aftermath of the financial crisis which started in September 2008, the value of the Chinese yuan against the dollar has been one of the few constants.

Over the last few months, the value of the Chinese yuan against the dollar has gradually been allowed to fall. In August 2015, the People’s Bank of China pushed the value of the dollar against the yuan, from 6.2 to around 6.37. In November 2015, one dollar was worth around 6.31 yuan. By the end of the year, one dollar was worth 6.48 yuan, with the yuan gradually depreciating against the dollar.

In the new year, the yuan has depreciated further against the dollar and one dollar is now worth around 6.58 yuan. So what is happening here? It is first important to understand how the People’s Bank of China has over the years maintained the value of the yuan against the dollar.

When Chinese exporters bring back dollars to China or when investors want to bring dollars into China, the Chinese central bank buys these dollars. They buy these dollars by selling yuan. This ensures that at any given point of time there is no scarcity of yuan and there are enough yuan in the market, in order to ensure that the value of the yuan is largely fixed against the dollar.

Where does the People’s Bank get the yuan from? It can simply create them out of thin air, by printing them or creating them digitally.

The situation has reversed in the recent past. Money is now leaving China. Hence, the total amount of dollars leaving China is now higher than the dollars entering it. And this has created a problem for the Chinese central bank. Between July and September 2015, the net capital outflows reached $221 billion. “[This] occurred for the sixth straight quarter and reached a new record of $221 billion,” wrote Jason Daw and Wei Yao of Societe Generale in a recent research note.

The fact that more dollars are now leaving China than entering it, changes the entire situation. When investors and others, decide to take their money out of China, what do they do? They sell their yuan and buy dollars. This pushes up the demand for dollars. In a normal foreign exchange market this would mean that the dollar would appreciate against the yuan, and the yuan would depreciate against the dollar.

But remember that the Chinese foreign exchange market is rigged. The People’s Bank of China likes to maintain a steady value of the yuan against the dollar. What does the Chinese central bank do when more dollars are leaving China? In order to ensure that there is no scarcity of dollars in the market, it buys yuan and sells dollars. This is exactly the opposite what it has been doing all these years, when more dollars where entering China than leaving it.

The trouble is that China cannot create dollars out of thin air, only the Federal Reserve of the United States can do that. China does not have an endless supply of dollars. The foreign exchange reserves of China as of December 2015 stood at $3.33 trillion. In December 2015, the foreign exchange reserves fell by $107.9 billion. They had fallen by $87.2 billion in November. In fact, between December 2014 and December 2015, the Chinese foreign exchange reserves have fallen by a huge $557 billion, in the process of defending the value of the yuan against the dollar.

While, China has the largest foreign exchange reserves in the world, it is worth asking what portion of these reserves are liquid? The Chinese central bank has invested these reserves in financial securities all over the world. As of October 2015, $1.25 trillion was invested in US government treasuries.

The question is how quickly can these investments be sold in order to defend the value of the yuan against the dollar? As economist Ajay Shah wrote in a recent column in the Business Standard: “For a few months, reserves have declined by a bit less than $100 billion a month. We may think that, with $3 trillion of reserves, the authorities can handle this scale of outflow for 30 months. Things might be a bit worse. Questions are being raised about the liquidity of the reserves portfolio. There are only a few global asset classes where the Chinese government can easily dispose of $100 billion of assets per month. A lot of the reserves portfolio might not be in these liquid asset classes.”

Given this, China does not have an endless supply of dollars and cannot constantly keep defending the yuan against the dollar. This explains why it has gone slow in defending the yuan against the dollar, in the recent past, and allowed its currency to depreciate against the dollar.

The question is why is all this worrying the world at large, Soros included? A weaker Chinese yuan will make Chinese exports more competitive. This will mean a headache for other export oriented economies like Japan, Taiwan, South Korea, Germany, and so on. They will also have to push the value of their currencies down against the dollar. Hence, the global currency war which has been on a for a while, will continue. Further, a weaker yuan might lead to China exporting further deflation (lower prices) all over the world.

But what is more worrying is the fact that residents and non-residents are primarily the ones withdrawing their money out of China. The non-residents withdrew $82 billion during the period July to September 2015. The residents withdrew $67 billion, after having withdrawn $102 billion between March and June 2015.

When any economy is in trouble it is the locals who start to withdraw money first. This is clearly happening in China. And that has got the world worried. Also, China is a major consumer of commodities and any economic slowdown in China, will lead to a fall in commodity demand. This isn’t good news for many commodity exporting countries in particular and global economic growth in general.

The column originally appeared on the Vivek Kaul’s Diary on January 13, 2016

Indian education’s Prussian problem

One of the questions that I have often asked myself is what portion of the classroom education that I received, has really turned out to be useful? The simple answer is not much.

My MBA years were clearly a waste. Almost all of what I was taught in my graduation course in Mathematics has turned out to be of no use.  The basic education I received in classrooms up until standard tenth has been of some use.

Over the years I have learnt much more outside the classroom by reading, writing, thinking, doing, watching, copying and so on. But none of this is called education. As Matt Ridley writes in The Evolution of Everything: “Education…is always a top-down activity…When you think about it, it is rather strange that liberated, free-thinking people, when their children reach the age of five, send them off to a sort of a prison for the next twelve to sixteen years. There they are held…in cells called classrooms and made, on pain of…punishment, to sit at desks and follow particular routines.”

And this is how education is delivered to us from school to college. Interestingly, the classroom model of standardised education has been in vogue for a little over two hundred years, when the French emperor Napoleon defeated Prussia [now in Germany] in 1806.

As Ridley writes: “Strung by its humiliation, the Prussian state…devised a programme of compulsory and rigorous education, the purpose of which was mainly to train young men to be obedient soldiers who would not run away in battle.”

This system included teaching students by year and not ability. The teacher stood in front of the class and the students sat in chairs with desks in front of them. The teachers taught a syllabus. Several subjects were taught during the course of the day.

Soon the system found its way into Great Britain. The country at that point of time was looking for clerks to run its global empire and that is how it found its way into India. In fact, the British push to the Prussian education system in India left India more illiterate than before.

As Ridley writes: “A survey in the 1820s found a widespread privately-funded school system reaching more boys than was the case in some European countries, long before the British introduced a public education system in the subcontinent. Mahatma Gandhi complained later that the British had ‘uprooted a beautiful tree’ and left India more illiterate than before.”

In fact, the classroom education that the British introduced to India has stayed and it is one of the reasons behind the sordid state of India’s public education system. As per the Human Development Report 2014, the average Indian male has around 5.6 years of schooling and an average Indian female has around 3.2 years of schooling. This is primarily because after a point students just drop out. One problem is clearly the rampant absenteeism among teachers. The other problem is the focus on completing the syllabus.

Economist Abhijit Banerjee recounted an experience at a literature festival few years back: “We did one experiment in Bihar…The teachers were asked that instead of teaching like you usually teach, your job for the next six weeks is to get the children to learn some basic skills. If they can’t read, teach them to read. If they can’t do math, teach them to do math…At the end of six weeks, the children had closed half the gap between the best performing children and the worst performing children.”

What brought about this change? As Banerjee put it: The teachers were asked to teach the children what they don’t know. The usual jobs teachers are asked to do is teach the syllabus…Under the Right to Education Act, every year you are supposed to cover the syllabus.”

Given this, the sooner we make improvements to the top-down Prussian education system that we have inherited, the better it will be for us.

(Vivek Kaul is the author of the Easy Money trilogy. He can be reached at [email protected])

The column originally appeared in the Bangalore Mirror on January 13, 2016

Of Jaitley, Fiscal Deficit and a 19th Century French Economist

Fostering Public Leadership - World Economic Forum - India Economic Summit 2010
Lawyers who become politicians are extremely eloquent speakers. But do they ‘really’ mean what they say? Or is it just something that sounds good at a given point of time, like a film dialogue?

The finance minister Arun Jaitley in his maiden budget speech in July 2014 had said: “We need to introduce fiscal prudence that will lead to fiscal consolidation and discipline. Fiscal prudence to me is of paramount importance because of considerations of inter-generational equity. We cannot leave behind a legacy of debt for our future generations. We cannot go on spending today which would be financed by taxation at a future date.”

Most governments spend more than what they earn. In order to bridge the gap, they borrow money by selling governments bonds. These bonds are repaid in the years to come. If the government borrows more today, the more it has to repay in the years to come.

This repayment is carried out of the money the government earns from taxing the future generations. This means that the benefits of borrowing are received by one generation but the debt is repaid by another. And this is why Jaitley talked about “considerations of inter-generational equity”. Or so it seemed.

The only way of respecting inter-generational equity is to borrow less today, so that the future generations don’t have to repay it, in the days to come. Borrowing less is only possible if the government is spending less today.

In his July 2014 budget speech Jaitley had talked about precisely this. He had said: “Difficult, as it may appear, I have decided to accept this target as a challenge. One fails only when one stops trying. My Road map for fiscal consolidation is a fiscal deficit of 3.6 per cent [of the gross domestic product (GDP)] for 2015-16 and 3 per cent for 2016-17.”

Fiscal deficit is the difference between what a government earns and what it spends. This difference is made up through borrowing money by selling government bonds. Hence, a lower fiscal deficit means lower borrowing and in the process the “considerations of inter-generational” equity is take into account.

In the budget speech Jaitley made in February 2015, the considerations of inter-generational equity took a slight backseat. He postponed the achievement of the fiscal deficit target of 3% of the GDP for 2016-2017, by a year.

As he said on that occasion: “Rushing into, or insisting on, a pre-set time-table for fiscal consolidation pro-cyclically would, in my opinion, not be pro-growth.  With the economy improving, the pressure for accelerated fiscal consolidation too has decreased.  In these circumstances, I will complete the journey to a fiscal deficit of 3% in 3 years, rather than the two years envisaged previously.  Thus, for the next three years, my targets are: 3.9%, for 2015-16; 3.5% for 2016-17; and, 3.0% for 2017-18.  The additional fiscal space will go towards funding infrastructure investment.”

What the government had set out to achieve in a period of two financial years, Jaitley said would now be achieved in three years. This was in February 2015, when the budget for the current financial year 2015-2016 was presented.

In the recent past, there have been news-reports as well as statements which suggest that the government will again postpone, the fiscal deficit targets it had set for itself. “I am not particularly worried about the fiscal deficit target,” Jaitley said in early December.

A Reuters news-report quotes a senior finance ministry official as saying that the “the minister[i.e. Jaitley] has been advised to increase its fiscal deficit target to 3.7 or 3.9 per cent of gross domestic product (GDP) from 3.5 per cent.” “The economy is still suffering from slack demand…It needs a conducive fiscal and monetary policy,” the official added.

The industrial as well as consumer demand are seeing slow-growth and hence the government should be spending more, and in the process incurring a higher expenditure and a higher fiscal deficit. The higher government expenditure will push up economic growth. This is what the senior finance ministry official meant.

This is something Jaitley has also said recently: “Public investment has been stepped up in the last year and it will continue to remain stepped up… When you fight a global slowdown, public investment has to lead the way.”

In a year when the government will have to incur significantly extra expenditure to implement the recommendations of the Seventh Pay Commission, implement one rank one pension for the armed forces and pay pending, fertilizer and food subsidies, where is the money for public investment going to come from?

It is worth recounting here what the French economist Frédéric Bastiat had said in his 1874 book That Which is Seen, and That Which is Not Seen. “In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause–it is seen. The others unfold in succession—they are not seen. It is well for us if they are foreseen.”

When we talk about the government abandoning the fiscal deficit target and spending more, this is precisely how things are playing out. The immediate effect or that which is seen is that higher government expenditure will create economic growth in an environment where industrial and consumer demand growth continues to remain slow. This is the effect that is being ‘seen’.

But there are other effects which are not being seen. The entire issue about inter-generational equity that Jaitley had talked about in his July 2014, seems to have taken a backseat.

Let’s go back a few years in order to understand this point. In 2008-2009, the government spent 51% of what it earned in paying interest on its existing debt and repaying the debt that was maturing. In the aftermath of the financial crisis that started in September 2008, the government increased its expenditure and its fiscal deficit. When the government talked about increased government spending it was only in the context of economic growth. This effect was seen.

Nevertheless, increased government spending meant more borrowing. In 2015-2016, the government will spend around 60% of what it earns in paying interest on existing debt and repaying the debt that matures. The higher borrowing of 2008-2009 and the years that followed is now having an impact. This was the effect which was unseen or wasn’t foreseen in 2008-2009, when the government decided to spend more. This is what Jaitley meant when he talked about considerations of inter-generational equity.

When one government borrows more it leaves a problem for another government in years to come. Also, as more money goes towards debt servicing it leaves little money for other things, unless more money is borrowed.

Further, the government doesn’t have any separate access to borrowings. As economist M Govinda Rao wrote in a recent column in The Financial Express: “This year, the Union government’s deficit is set at 3.9%, and with the states together having a deficit of about 2.2%, the aggregate fiscal deficit of the government works out to 6.1%. It is reported that 21 distribution companies are likely to join the UDAY scheme and the deficit on that account could be about 1%.” If we were to add all this the real fiscal deficit of the government would come at 7.1% of the GDP. The household financial savings in 2014-2015 stood at 7.5% of GDP.

This means that if the government borrows more it will automatically lead to higher interest rates for everyone else who wants to borrow. When the finance minister talks about public investment and not being bothered about a higher fiscal deficit, these points also need to be ‘seen’. Currently, they are not being seen.

As Bastiat put it: “Between a good and a bad economist this constitutes the whole difference—the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee.

Of course, politicians are in the business of winning elections not in the business of foreseeing or in the business of practicing good economics.

The column originally appeared on The Daily Reckoning on January 12, 2016

Here is One Chinese Story that Narendra Modi Needs to Listen to

The Chinese economic growth story started in 1978 with Deng Xiaoping taking charge of the Chinese Communist Party. Interestingly, Xiaoping did not hold any official post. Nevertheless, he was looked upon as the Supreme Leader of China between 1978 and 1992.

Most accounts of China’s astonishing double digit growth for close to three decades give credit to Xiaoping for initiating Chinese economic growth and pulling out millions of people out of poverty in a very short period of time.

History when it gets written is built around the idea of Great Men doing great things. But things are never as simple as that.

As Matt Ridley writes in The Evolution of Everything: “If you examine closely what happened in China in 1978, it was a more evolutionary story than is usually assumed. It all began in the countryside with the ‘privatisation’ of collective farms to allow individual ownership of land and of harvests. But this change was not ordered from above by a reforming government.”

In the village of Xiaogang, 18 farmers came together. They despaired the dismal production of their farms under the collective system. And they did not like the fact that they had to beg for food from other villages. Given this, one evening they gathered together to figure out what they could do. This was at a time when even holding a meeting was considered a serious crime.

As Ridley writes: “The first, brave man to speak was Yen Jinchang, who suggested that each family should own what it grew, and that they should divide the collective’s land among the families. On a precious scrap of paper he wrote down a contract that they all signed…The families went to work on the land, starting before the official’s whistle blew each morning and ending long after the day’s work was supposed to finish.”

And this soon stared to show results. “Incentivised by the knowledge that they could profit from their work, in the first year they grew more food than the land had produced in previous five years combined,” writes Ridley.

Of course, the local communist party bosses soon came to know. The regional communist party chief intervened to save Yen and at the same time recommended that the same experiment should be copied elsewhere as well. “This was the proposal that eventually reached Deng Xiaoping’s desk. He chose not to stand in the way, that was all. But it was not until 1982 that the party officially recognised that family farms could be allowed – by which time they were everywhere,” writes Ridley.

The economic incentives of private ownership rapidly transformed farming in China and industry soon followed. While the Communist Party still continues to rule the country, the economic success of China wasn’t built on socialism. And there is a thing or two that Indian politicians can learn from this, given their obsession with socialism.

Private firms are normally better at running businesses than the government. This is something that politicians including prime minister Narendra Modi need to understand. As TN Ninan writes in The Turn of the Tortoise—The Challenge and Promise of India’s Future: “The last quarter century’s experience has shown that when the private sector is asked to provide telecom services, run airlines and airports, build and run ports, undertake banking, distribute electricity and even undertake water supply, the result is usually (though not always, for there is no shortage of private banks and airlines that have failed) a substantial improvement on what, the government was doing until then.”

This is basically means two things. One is that the government should be getting out of all the businesses that it has been trying to run for all these years. This is a point that I have often made in the past. There is no point in the government running more than 25 banks. There is no point in the government running a phone company or an airline for that matter.  It does not serve any purpose.

As Ninan writes: It is a matter of regret that Narendra Modi, who got elected on the promise of ‘minimum government, maximum governance’, has shown no taste for radical change or minimizing government…The government system continues to run loss-making airlines and hotels, three-wheeler units and Mahanagar Telephone Nigam.”

Also, in its effort to do everything, the government doesn’t pay adequate attention to many important areas. As Ninan writes: “There is too little of government attention paid to core areas like law and order, education and health—too few judges, too few teachers who teach, too few hospital beds; also too few trade negotiators and too few policemen, especially those with proper training. It should be obvious that there are many things that the state does inadequately or badly, and many tasks that the state has needlessly taken on itself.”

The second point here is that the government should be encouraging entrepreneurship in all possible ways. One point against entrepreneurship are India’s multiple labour laws. But they may not be as much of a problem as they are made out to be.

It is often argued that Indian entrepreneurs do not expand beyond a certain point because it is very difficult to fire workers once they have been taken on. The Chapter VB of the Industrial Disputes Act, 1947, makes it very difficult for companies with 100 employees or more, to fire an employee without the permission from the government. This, it is argued, prevents entrepreneurs from expanding.

Economist Pranab Bardhan makes an interesting point in Globalisation, Democracy and Corruption: “It is not clear that the rigid law on retrenchment is always the binding constraint on manufacturing expansion. Take the highly labour-intensive garments industry, for example. A combined dataset [of both the formal and informal sectors] shows that about 92 per cent of garment firms in India have fewer than eight employees…Labour law cannot discourage an eight-employee firm from expanding to an 80-employee firm since Chapter VB of the Industrial Disputes Act does not kick in until the firm reaches the size of 100 employees.”

So what is stopping these firms from expanding? “The binding constrains on the expansion of that eight-employee firm may have to do with inadequate credit and marketing opportunity, erratic power supply, wretched roads, bureaucratic regulations etc. There are good statistical studies by some economists which show that states with more rigid labour laws have had lower industrial growth and that labour laws can be a constraint. But these studies do not show that they are the only or even the main constraint,” writes Bardhan.

What this tells us very clearly is that the Modi government should work towards removing these binding constraints. This will allow entrepreneurship to flourish. That will lead to more jobs, better pays, higher spending and in the process, higher economic growth.
The column originally appeared on Vivek Kaul’s Diary on January 11, 2016

Eight Economic Indicators which Tell Us that the Indian Economy is Not Doing Well

There is a very interesting story about current Chinese premier of the State Council Le Keqiang. In 2007, when Keqiang was the head of the Communist Party of the Liaoning province, he was once unusually candid with the American Ambassador to China, about the local economic data.

The American Ambassador sent a confidential memo after the meeting. This was later leaked and published by WikiLeaks. As the newsagency Reuters reported in 2010: “The U.S. cable reported that Li…focused on just three data points to evaluate Liaoning’s economy: electricity consumption, rail cargo volume and bank lending.”

“By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are ‘for reference only,’ he said smiling,” the cable added. The data points that Keqiang looked at was promptly dubbed the Li Keqiang Index, writes Satyajit Das in The Age of Stagnation.

Over the years, doubts have always been raised regarding the veracity of the Chinese gross domestic product(GDP) numbers. GDP is a method of measuring the size of an economy. But the lack of credibility of Chinese data is not the issue I am trying to raise here. The bigger point is that the GDP is ultimately a theoretical construct and given that there are other ‘real’ data points that we need to take a look at to figure out the ‘realistic’ state of any economy.

In the Indian context the tendency in the recent past has been to look at economic growth (GDP growth), which has been higher than 7%, and say that we are the fastest growing large economy in the world. Another version of this tendency is to say that we are now growing faster than China.

The trouble is if we were to look at ‘real’ data points (or the Indian version of the Li Keqiang index), the economy looks clearly to be in a weak territory. Let’s look at some of the data points.

a) New Car Sales: New car sales are a very good indicator of consumer demand in urban India. In December 2015, new car sales grew by 11% to 2,32,000 units. The leading pink paper splashed this news on the front page, where it said: “Besides being a large direct employer, the automobile sector has crucial interlinkages with a raft of sectors and its performance is a crucial barometer of economic confidence.”

New car sales are a reliable economic indicator which tells us whether the economy is starting to pick up. People buy a car only when they feel certain about their job prospects and hence, feel financially secure. Further, once car sales pick up, sale of steel, tyres, auto-components, glass etc., also starts to pick up as well. New car sales have a multiplier effect and hence, are a good indicator of economic growth. At least that’s how one would look at things theoretically.

While new car sales are an important economic parameter to look at, they are clearly not the only parameter, especially in a country like India where owning a car continues to remain a luxury. There are other data points which the pink paper should have also splashed on its front page, but it did not. But no worries, you can read up about them, in what follows.

b) Two wheeler sales: Two-wheeler sales are a good indicator of consumer demand both in rural as well as urban India, given that they are more affordable than cars are. Two wheeler sales of five leading two wheeler companies (Hero MotoCorp, Honda Motorcycle and Scooters, Bajaj Auto, TVS Motor Company and Royal Enfield) fell by 3.41% in December 2015 to 12,46,356 units.

This tells us very clearly that the consumer demand for a larger section of the population continues to remain subdued. This is a clear reflection of weak rural demand. And it is worth remembering here that half of India’s population stays in rural areas.

c) Liquor demand: Consumption of alcohol is another good data point to look at. This is primarily because people are addicted to it and don’t give up on its consumption so easily. The trouble is that this data is not so easy to get.

A recent newsreport in the Mint newspaper points out that: “For the first time since the start of the millennium, the volume of liquor sales in India declined in 2015…Liquor sales volumes, which grew in the low single digits in the two previous financial years, are down 1-2% for the eight months to December, according to data gathered from executives at liquor companies.”

As Vijay L Bhambwani, CEO of, told me regarding these numbers: “Going through the numbers, two things emerge – resistance to spending by consumers and down-trading by consumers (sales of higher price brands falling & lower priced brands rising). Remember the economic survey by the government in mid-2008? The sales of toothpaste had fallen & tooth powder had risen. Consumers down-traded high priced brands. A big fall in consumption followed soon. Demand for alcohol tends to be inelastic due to addictive nature of intoxicants. These aren’t great signs.”

d) Bank loan growth: This is one of the point that the Chinese premier Le Keqiang liked to look at. The loan growth of scheduled commercial banks has been in single digit territory for a while now. Between November 2014 and November 2015, bank loans grew by 8.6%.

They had grown by 10.5% between November 2013 and November 2014. In fact, given the fact that bad loans of public sector banks have been piling up, lending to industry has grown by just 5% over the last one year. It had grown by 7.3% between November 2013 and November 2014. This slowdown is a clear indication of weak industrial activity in the country.

e) Steel output: This is another data point which tells us how things are looking in the manufacturing sector given that a lot of steel is required to manufacture things. Data released by the Joint Plant Committee shows that steel production in November 2015 fell by 8.5% to 7.1 million tonnes.

f) Declining investment announcements: Data from Centre for Monitoring Indian Economy (CMIE) points out that “investment proposals to set up new capacities declined substantially in the quarter ended December 2015. 381 new projects with investments worth R.1,05,000 lakh crore were announced.” This was 74% lower than in three-month period ended December 2014. Such a huge fall is also because of a large number of projects had been announced in December 2014. “The largest being Indigo’s 250 aircraft purchase from Airbus worth Rs.1.5 billion. Investment in this single project was more than one third of the total aggregated cost of all new projects announced in the quarter,” CMIE points out.

g) Decline in project commissioning: This is a very important lead economic indicator and tells us whether economic revival is on the anvil. The latest data doesn’t indicate anything like that. As CMIE points out: “Project commissioning in December 2015 quarter dropped 44 per cent on Y-o-Y basis. 269 projects with investments worth Rs.496 billion were commissioned. According to CMIE’s CapEx database, quite a few large projects were scheduled to get completed in December 2015 quarter, but latest information on their status is yet to come in. Companies are expected to disclose information on commissioning of their fresh capacities along with their December quarter results. With information on project commissioning coming in with a lag, the aggregates are expected to go up. However, chances are less that the aggregates will reach the year ago levels.”

h) Electricity consumption: This is another economic indicator that the Chinese premier liked to look at. As CMIE points out: “According to tentative data released by the Central Electricity Authority (CEA), India’s power generation grew by 2.7 per cent from 86.9 billion units in December 2014 to 89.3 billion units in December 2015.” Things have improved a little on this front, but it is very difficult to say whether that has been because of the revival in industrial demand.

i) Corporate earnings: The financial results of companies for the period October to December 2015, will soon start to be published, from next week onwards. Crisil Research expects revenue of companies (excluding banks and oil and gas companies) to grow by a measly 2%. This will be driven by “low-base effect (growth in the corresponding quarter of last fiscal was just 5%) amid crushed commodity prices, weak investment demand, flagging rural consumption.”

As Prasad Koparkar, Senior Director, CRISIL Research, put it: “Sectors more focused on urban consumers such as automobiles, media, retail, and telecom are projected to post healthy double-digit topline growth…But in general India Inc is grappling with poor demand sentiment. With lower input costs and intense competition, pricing has also been impacted. This is evident across a range of sectors airlines, FMCG, textiles, cement (except south India), and IT services. In addition, the heavy rains that disrupted normal life in Chennai will impact the December 2015 quarter numbers of consumer discretionary sectors as well as IT services, auto components, and engineering.

What these numbers clearly tell us is that the Indian economy is in a bad shape and there is no way we could possibly be growing at greater than 7%. We might be the only bright spark globally when it comes to economic growth, but we are clearly not growing as fast as is being made out to be.

The column originally appeared in Vivek Kaul’s Diary on January 8, 2016