Apple alone is now worth about two-thirds of India’s annual GDP. It’s bigger than the GDP of Canada, or Italy, or Russia.
It’s twice this week that we’ve heard that figure of two trillion make headlines. Whatever it describes, headlines anything in trillions is very likely to make—a trillion is, after all, a million million, or a thousand billion, if that makes it any easier. We heard that Apple is now worth two trillion dollars, it was worth ‘just’ half of that only two years back. Rather differently we admitted that the British national debt is now two trillion pounds. Also, risen sharply now, if less happily.
To most of us the figure two trillion would mean little if the number had been twenty trillion rather than two. There are some who deal in humble billions who would no doubt have a better sense of what a thousand billion could be like; a few more learn to comprehend such numbers. To the rest of us, these numbers are just a metaphor. Money that multiplies on and on begins to sit beyond the reach of mind, not just means.
But consider comparatively that Apple alone is now worth about two-thirds of India’s annual GDP. It’s bigger than the GDP of Canada, or Italy, or Russia. Apple and Amazon, which is only slightly behind, are between them worth more than all that India produces in a year.
To view that metaphor in rupees, Apple is now worth one and half crore crores of rupees. Good luck with figuring out what that kind of money could buy around us. Or with working out what it can be like to owe two crore crores of rupees as Britain now does. Either way, COVID has accelerated the numbers.
Apple has reported a 55 percent growth just this year, much of it through the lockdown. This could have been expected, seeing how many products it offers by way of a window into the online world, the only world accessible to most over a long stretch. That you can’t step out much to spend on travel and clothes made Apple prices less forbidding. Its growth is expected to rise. Who knows, next year Apple could be worth more than everything of money value India produced in a year.
Minus Two Trillion
This side of Atlantic Britain is getting close to owing as much as India produces. In dollar speal the British debt hit $2.6 trillion. The debt now equals Britain’s GDP, so the country owes as much as everything it produces in a year.
At just the time Apple has been selling more and more through COVID, the UK government has been borrowing more and more to pay for its COVID furlough scheme and other measures to support the economy. Apple sales have soared in Britain too, so some of the money the UK government has paid out to plunge it deeper in debt has been spent on adding a small fraction to that Apple trillion. The two sets of trillions are not perversely parallel but some loss to one has added some swelling to the other.
COVID has no doubt accelerated the British debt but it had been rising just fine without this unexpected boost this year. The national debt was less than a quarter of this in 2004, not that long back. For long now the government has made it a natural course to spend very much more than it earns through taxes. This year brought a spike to an already steady rise. The government has borrowed about three times more to date than it did in all of last year.
The numbers worry no one more than Chancellor of the Exchequer (as Britain’s finance minister is called) Rishi Sunak. The numbers, he said, “are a stark reminder that we must return our public finances to a sustainable footing over time, which will require taking difficult decisions.” Difficult they will be given lower taxes resulting from failing businesses and reduced personal earnings corresponding with demands for continued government support to businesses and individuals beyond October when the COVID support schemes are due to end.
The government is really borrowing from its future, on the strength of people’s faith in that future. Government bonds are a principal channel to borrow on the market. A chunk of bonds are typically bought by financial institutions, others by the Bank of England and by foreign investors, both institutions and individuals. Once repayment becomes due, the government is most likely to borrow to finance that repayment.
Some of this borrowing is oddly in-house. The Bank of England has stepped its purchase of gilts (as UK government bonds are called). From less than a quarter last year, its share is now about 30 percent. The Bank of England carries the handy tool of just printing currency. Quantitative Easing will inject more money into the market. But at some point, the economy itself will have to take over. When and how far it can are questions Sunak would love to find answers to.
—London Eye is a weekly column by CNBC-TV18’s Sanjay Suri, which gives a peek at business-as-unusual from London and around.
Read his columns here.
First Published: IST