Blogging about Society, individual and collective behaviour/herd mentality, nudges,economics,business,politics,sports and spirituality and on all the other subjects about which I know very little !!
The minutes of the recent meeting of Monetary Policy Committee of RBi which were released this week, contain some interesting mentions. One of the news columns said that RBI minutes mention 'uncertainty' 12 times, 'growth' 43 times and 'inflation' 147 times It has expressed concern over inflation and it seems to be valid as CPI has remained above 6% which is more than the tolerance limit of RBI. Alongside, India is experiencing severe GDP growth pangs as its IIP has remained in the negative territory in the first quarter and in July also. Services sector is in a deeper mess except of course ITES, SAAS etc. which have been affected to a lesser extent. It looks like only Agri sector has not been impacted adversely so far ,as the progress of monsoon has been satisfactory and the spatial dispersion also fairly good.
The RBI Deputy Governor Mr.Michael Patra had said : "If inflation persists above the upper tolerance band for one more quarter, monetary policy will be constrained by the mandate to undertake remedial action, including an immediate and more than a proportionate response to head off the build-up of inflation pressures and prevent it from getting generalized." So, to sum it up ,we have classic case of "stagflation"- a combo of GDP slowdown and inflation.!
CPI in India has a higher weightage for food and fuel indices and these two are certainly not amenable to monetary policy measures. In India fuel price is driven more by Govt . policy measures and it is feeding into inflation with its rippling effects on the rest of the economy widespread.When pandemic is restricting economic activities profiteering becomes rampant in vegetable and food prices. When the supply chain and free movement of people and commodities happen, the inflation tendencies will come down. Cost push inflation of food prices will not listen to monetary policy signals in the short term in Indian conditions. As India is driven more by cash , there is a quite a lag in food inflation responding to monetary policy measures, if at all it is significant. May be hoarding and black marketing of these vegetables,cereals ,staples etc. may come down a little bit.However Govt. initiatives through Essential commodities and anti-hoarding sticks used by Govt. through other means incl. emergency imports may be more effective in the short term to bring down food prices.
When the economy is awash with liquidity, the prices in general have tendencies to go north .More so when the supply constraints remain elevated due to lockdowns,e-passes and uncertainties compounded by fear for life and livelihood affecting the income. In these circumstances. RBI should look at high CPI as extraordinary during the pandemic period and should start looking at Core inflation now and then revert back to CPI only after the pandemic is seen plateauing.In the meantime, RBI may seek a temporary amendment for its inflation targeting, switching to Core inflation in times of extraordinary circumstances like a pandemic,global financial crises etc. and then have a glide path back to CPI inflation targeting after the crest of the crises is over.
Cricket has weathered many a winter and smothered many a vagary as a gentleman's game. Cricket was played during Spanish flu times also and UK's Wisden has not recorded any disruption in the progress of the cricket season in 1918 and 1919. But Cricket was severely restricted during World war 1 when all the major cricket playing nations were involved in the war.Cricket was also played less during World War II since England was involved in the war in full measure. But during all these periods of distress, Cricket was played in India with the least disruptions.
In fact, Wisden which has recorded death of English cricketers during World War 1 and 2 in all cricket playing nations , has not even mentioned one indian cricketer dying during Spanish flu days.This has to be seen in the light of total death toll of 17 million who died in india during Spanish flu years.
So even in 1918 and during World wars everybody around the world believed that India could somehow manage and survive humanitarian crises.
But this Covid 19 apart from being a dangerous pandemic , has also become a statistician's delight. of course not as enjoyable as cricket statistics. But still there is a everyday scorecard and the top states are vying with each other to remain on top with highest Covid 19 nos. Tracking, Tracing , Testing and Treating has given huge opportunities for multifold statistics and different tools to be employed across the country and the globe.
there are 3 day moving average, 5 day average, 7 day moving averages of tested, positive, discharged, active, deaths etc.etc. and colorful graphs of percentage growths of each one of them which compete with each other for eyeball grabs.
All the news channels have a separate ticker like in a Cricket match and hour to hour scores update pushes up your BP and make you a Covid patient , if not one already. Many people have stopped seeing news reporting in any channel and if they see one by mistake wait with bated breath,holding their chests with clenched fists as if hearing an India scorecard in a World cup cricket match.
Of course, the statisticians, epidemiologists, virologists give dire prediction every 15 days constantly reminding us that Covid nos. will surge and there will be a deluge in the next two months and this has been going on for the last 4 months.They have been predicting wildly exaggerated nos. and some statisticians can track all these predicted nos. of various agencies and give out the comparisons with the actuals. Such comparisons can provide another play with graphs, colours etc.
In all this round-robin play what is missing is character.Only few have been able to hold their forte not to rock the boat and rattle the gullible.Like lenders and banks looking for people with character to lend ,this pandemic has given a clarion call to those with character to come to the rescue. You can find people with capital, capacity to repay but finding a person with Character ,which is willingness to repay, is difficult. Character being a rare commodity in these days of rising NPAs, Bankers will nod their heads in agreement with me. In Cricket also we have seen people like Rahul Dravid, the Wall, VVS Lakshman, who have displayed great character to steady the ship, in crisis situations. Cricket captains like Mike Brearley of England, Pataudi and Dhoni of india, have shown stoic demeanour in the face of dire situations while leading their Teams. But a World cup winning cricket captain Imran Khan is the PM of Pakistan during this pandemic.But like in his heydays he is spitting venom at his rivals even outside the cricket arena. Is Cricket not making PM ,a gentleman?
However, I am not losing hope since our PM, himself, is a man who displays great Character even if he has not played cricket and is known to have sold & served Tea perhaps even during Tea breaks while others were busy playing Test Cricket!!
Be cautious and there is no need to spread fear and panic about both Covid and Economy! Drink hot Tea and take good rest!
"All animal are equal, but some animals are more equal than others," wrote George Orwell in his allegorical novel Animal Farm. the stody in short conveys the meaning that the absolute power corrupts absolutely.
His novel 1984 which is a classic dystopian novel, also wrote about Thought Police to persecute individuality and independent thinking . This novel and Aldous Huxley's "Brave New World" rank as two of the best dystopian novels of twentieth century. Huxley's novel describes a world where people are born and raised through engineered artificial wombs and childhood indoctrination into predetermined classes or castes based on intelligence and labour.
In all these novels, a world covered by intelligence which gives it an order and discipline predetermined by its rulers, is a dire prediction.
Coming to Covid 19 driven world of today, our ways and methods are directed by rulers assisted by doctors, epidemiologists and virologists , and we are not at liberty to do and act on our own. The overarching societal welfare notion constrains individual liberty and movements. Since it is viewed as a temporary measure many have been living with it.
But once Vaccine is made available, this may give way to more individual liberties and rights.
However there is a lingering question: "who will get Vaccine first".
Pl. read the opening sentence now again. Some people are considered more equal than others and they are the powers that be and those close to them.
But this notion is against the principles of natural justice and would not hold waters in a democratic society in a free world. The Vaccine adminstration should have a free protocol without any strings of power, money, position pulling it. This is very very important for the society or any country to think they are still democratic and free.Only then future is secure and people can look forward to prosperity guided by a truly compassionate Govts.
Initially, when COVID 19 started spreading in India, PM Modi announced a war on Covid 19 and every single citizen abided by his exhortation.
Many newspapers and media personnel screamed Modi is going hammer and tongs at Covid 19 virus in order to scorch it totally.
But after a few lockdowns, both PM and the common man understood with humility that Covid demands hammer and dance strategy to deal with it.
So we are now reconciled to the fact that we must learn to live with Covid 19 at peace instead of waging a losing war. Adapting to its speed and spread, the common man is now equipped with mask, social distancing etc. to tackle it and dance with it.
Govt adopts the hammer and the common man adopts dancing with it.
Hopefully, this will become a considered foreign policy also with China, the birthplace of Covid19. Hammer at LAC and then dance with it in commercial and trade space!!Also, dance with China to wean it off Pakistan!!
Policy prescriptions are flying thick and fast and on my part, I am adding one more .
All Economists including me are prescribing deficit monetisation, pump priming etc. taking a leaf out of Modern Monetary Theory.
As against this,Central Govt. has an alternative which is called Asset monetisation, according to me.Govt calls it Disinvestment/Divestment of PSUs. When the whole world is reeling under Covid pandemic , will there be a suitor for Air India?
Even if there is a good buyer will he be willing to pay the right price for Air India.What will be the benchmark for its valuation when the whole industry is bogged down by this pandemic and its repercussions on the travel industry.
In such unprecedented situations , it is best advised not to go in for outright sale transactions of Government stake in PSUs including Air India, BPCL,etc.
Similarly, other intangible but real assets are Spectrum waves (link), Mining/Abiotic ,Biotic Resources which are hidden inside the Earth, Ocean ,Space etc., Potential Renewable energy sources, which have future economic value and can add to GDP when suitably exploited without degrading the environment.
If these resources are valued properly, and India identifies these assets in terms of monetising its strengths, then India will have to look for its Enterprise value and raise suitable resources upfront for its current requirements in investing in its infra development.
In fact even lands owned by Indian Airports Authority can be used better by allowing usage of its land underground for commercial purposes.Even some of the defence lands can be wisely used under the ground for commecial purposes without in any way jeopardising defence security.
This Curve theory explains the process as to how people cope up with significant upheaval or life-changing or threatening situations.link
The process explains that people undergo five/six stages: the first stage is that of Shock, then going into Denial, then to Anger, moving into Depression. Up to this stage the performance of the individual or group of people will continue to deteriorate as time progresses. Once the inevitability of the Change dawns, then the people move to Acceptance and finally into Integration when the performance will again start regaining the original position or sometimes exceeding it if there are supporting enablers or incentives.
This is true for individuals as well as for a country or economy.
Since the nation received the pandemic shock in March middle, you may recount we have seen at least the first four stages. We start denying that this pandemic will affect us and once we realised that it is spreading we showed our Anger at China, TJ, and at all those epicentres. Now we are in the Depression stage slowly moving into Acceptance stage where we need to understand to live with this virus by being vigilant and exercising caution. We should not let our safety guard down .
One must also understand that when you are already in Depression stage, if there is another negative news the performance will again start sagging and another cycle /bout of Shock, Denial ,Anger and Depression will kick in .So, it is extremely important for the Govts and the people to navigate this phase without further unexpected shocks.
People are cautioned to listen to the TV news with a pinch of salt. They must look at the Covid nos as a percentage of tests made, active cases situation , infection per lac of population and death per lac.
