Lessons For India From Anti-immigrant Sentiments Across The World

The odds increased last week on a Fed rate cut, as US Labour Bureau data on fresh non-farm jobs dwindled to 142,000 for August, significantly lower than the average figure of 202,000 for the previous 12 months. The yields on US treasuries tumbled, the volatility index rose, and, in conjunction with worry over the tech sector’s ability to live up to the high numbers for revenue and profitability baked into tech stock prices, stock prices fell on last Tuesday and again on Friday.

While Indian stocks, too reacted in sympathy, the effect of a rate cut in the US should be positive for Indian stocks, particularly in conjunction with weakening crude prices and a dollar slated to soften as US interest rates come down. Bajaj Housing Finance seems set to make a success of its IPO, with many analysts coming out with strong buy recommendations, and anchor investors having already given the issue their vote of confidence.

There is widespread debate in the US and elsewhere over the size of the rate cut the Fed would deliver later this month. Since the unemployment rate remains low at 4.2%, and US growth seems set to coast along in the positive territory, it is unlikely that the Fed would set off any alarm bells by resorting to a 50 basis point cut in the Federal funds rate. Indian investors should prepare for a 25 basis point cut in the Federal funds rate.

Even as India’s Prime Minister travelled to Southeast Asia to meet his counterparts there, more than 50 African national delegations assembled in Beijing. While China stopped short of loan write-offs, it expanded on its past lending programme to build infrastructure projects that both help African countries ship their mineral and other exports to the nearest port on the African coastline, and to lower the price of these imports for China. Chinese leader Xi Jinping promised green energy investments in Africa, as well as electric vehicle manufacturing plants. Such plants would help utilise the huge capacity Chinese EV makers have built up at home, and circumvent some tariff restrictions on Chinese EVs in Europe and North America, depending on the extent of localisation envisaged in such proposed African EV plants.

In India, attacks continued on Sebi chairperson Madhabi Puri Buch, with the Congress party accusing Ms Buch of receiving a salary from ICICI while employed at Sebi. A clarification from ICICI says Ms Buch has not been paid any salary after her superannuation at the end of October 2013, but that she had retiral benefits and employee stock options. ESOPs, of course, vest for a period before the employee can exercise her option to purchase the company’s stock at a pre-set price. The employee has a time window for exercising the option, which could stretch to several years. In Ms Buch’s case, her window to exercise her options closes in 2024. It is only natural that she would make good on the deferred payout for her services rendered in the past, and to call that a current salary payment is totally misleading.

Sensing an opportunity to transfer blame from themselves, others have joined the fray. Subhash Chandra has accused Sebi of scuttling Zee’s merger with Sony. It was in full public view that the deal had collapsed, following Zee’s refusal to let Sony appoint its own nominee as the merged entity’s boss, insisting that Subhash Chandra’s son would continue to be CEO. We should expect to see more honchos at the receiving end of regulatory action join Subash Chandra in pointing fingers at Sebi.

Fortunately, the Public Accounts Committee of Parliament has scheduled a hearing by the Sebi chairperson, giving her a chance to clear the air over allegations against her.

Around the rich world, immigration has become a lightning rod for public anger over crime, rising prices and seeming erosion of cultural integrity. In elections to two states in Germany last week, a hard-right, anti-immigrant party, the Alternative for Deutschland, emerged the largest party, even as members of the ruling coalition running the federal government suffered serious setbacks. In the US, the Republican presidential nominee threatens to throw out all illegal immigrants, if he becomes president. In Canada, Australia and Britain, immigrants are blamed for rising house prices. This has led to severe restrictions on visa policies for students, even as foreign students are a major source of revenue for these countries’ higher education systems.

Increased demand for housing should be seen as a growth opportunity, to build and prosper. Instead, increasing demand for housing only results in higher prices, making home ownership increasingly difficult for the young. For this, rigid zoning and town planning restrictions are responsible, rather than immigrants.

This has lessons for India, where a regionally uneven demographic transition and faster growth in the South and the West are driving internal migration from the North and the East to the areas of economic growth. India has the added prospect of large scale urbanisation, in which millions of people would migrate from village to town. If anti-outsider sentiments are not to mount in the host states, they must gear up.

Because millions of people would seek to resettle in towns, India needs to increase the supply of towns, not just of dwellings in existing towns. It would be useful to recall that China’s decade of double-digit growth was driven by extensive urban development, in which thousands of new towns came up, throwing up giant property companies and immense demand for steel, cement, paint and construction services. Supplying these and building the roads, high-speed rail and trains galvanised Chinese growth.

States need to plan for dozens, if not hundreds, of new towns, planned to account for climate change and water shortage. Accepting that India’s increasingly footloose workforce needs accommodation available for affordable renting, rather than ownership, the government could float special purpose vehicles to build public housing that would avoid slums and ghettoisation, and remain sanitary and amenable to effective policing.

New towns with efficient connectivity with older ones would reduce pressure on house prices, while accommodating immigrants in large numbers.