RBI and the Onion!!

We are what we are!!

RBI was widely expected to cut the repo rate yesterday but it refrained from it springing a surprise. Central bank should always use monetary policy as a weapon and it is most effective when weapon is wielded with a veil of secrecy and surprise.

But to some extent RBI's prognosis of inflation seems to have been influenced in general by food inflation and in particular by onion .The skyrocketing prices of onion caught the eyes of the Governor and his monetary policy team to unanimously decide  against rate cut and push the pause button. Governor justified this decision by emphasising that the mandate to RBI given by Parliament is only to contain inflation.

There is a Taylor rule or principle in containing inflation by the Central bank. According to this rule Central bank tends to raise the nominal interest rate by more than 100 bps for every 100bps increase in inflation. So, in simple terms, Central bank will have to use a bigger weapon to tame the animal called inflation. However this can work effectively only in the short or short to medium term. There is a Golden Ratio that exist between the interest rate and the inflation rate and this ratio is delicate , flexible and brittle if not peppered with the element of surprise. If this is not deployed properly Milton Friedman and others cautioned us saying that inflation will tend to catch up with the interest rate which moves at higher proportion, when efficiencies and productivity in the economy are in low key.

Then what is effective in the long run? Keynes comes to our rescue by saying "in the long run we are all dead". Perhaps , that is why Economics is called "Dismal science"!! But Onions keep it lively!!

Movies and our Social behaviour and Cultural values!

We are what we are!

India has a long and rich cultural history. Perhaps it is the one and the only culture which has to its credit Lord Shiva coming down to our world to compose a poem in chaste Tamil , Lord Vishnu going behind a Tamil Poet obeying his command and Lord Ganesha  writing the verses composed by Ved Vyas, using His tusk as pen.

Such mystic stories weaved around mythological figures have been a tradition in India to highlight the importance of values and ethics in our day to day life. Ithihasas like Ramayana,Mahabharatha have her oes who have lived a dutiful life as shining examples for the common milieu.

Why this long preamble is required is due to the fact that stories have a strong influence on people in shaping their social behaviour .Since man is a social animal and as he is likely to fall prey to bad habits because there is a natural tendency for vile habits to take quick control of him.He has an attraction for such socially unacceptable habits and behaviour and so our ancestors understood this and wrote stories which will provide him a moral compass guiding him in his life journey making him useful for the society and the nation in general.

Even thirty years back our movies reflected our modern times but were grounded in age old ethical values and cultural heritage. But nowadays movies in the guise of being realistic, have started portraying anti-heroes as models. Such anti-heroes remain as bundle of contradictions- womaniser, drunkard, drug addicts,wayward and what not , but they yearn for the love of their lover!! They will not listen to their parents living a rowdy life  but will want to straighten the politicians and the corrupt.!! Not only heroes, heroines are also exhibiting such socially unacceptable behaviour like drinking, having sex with their lover before marriage .

What kind of degraded social and individual values we are bequeathing to our children in the garb of realism. Do we realise that we have not inherited this world from our parents but we have actually borrowed it from our children to whom we should leave footprints for them to follow with their baby steps and blossom.

Quo vadis!

Are we degenerating into a Cynical nation?

We are what we are!!

There are headlines screaming " Indian economy is in ICU", "India back to Hindu rate of growth" etc.All this scare mongering is to catch your eyes and blame Modi for the economy in dire straits.

When official CSO numbers were put out at 8%, some economists continued to say it is only 5.5% as it is overstated by 2.5% with their own back of the envelope calculations. In the past, when UPA was in Govt. its own FM doubted CSO methodology when GDP was down at 4.3% and now we are quoting and looking at him to offer solutions to today's GDP problem. Are we all suffering from dementia or selective amnesia?

When former CEA doubts GDP calculations , we tend to denounce CSO nos. but when Govt in power says NSS methodology for estimating consumer spending is not robust, we mock at the Govt. Why such double standards?

We collectively want to be "doubting Thomases" always and keep criticizing our own duly elected Govt. making fun of it.On top of it, we say it is intolerant when we make fun of it.

Without an iota of evidence, a group of bankrupt and the corrupt wanted to derail Rafale jet purchase and filed a petition in SC .Even after it has been thrown out by SC and the politician who called PM Chor, being censured by SC,we still write cock and bull stories about the deal by quoting few lines of one of the judges out of context. We are not bothered about IAF not receiving jets in time and thereby the nation's defence getting compromised. For a minute we do not want to hold previous UPA govt. for dithering in this crucial defence purchase and we have not questioned them for dragging on this purchase .

We all know that the previous UPA govts. went on and on in postponing GST implementation despite an Economist PM at the helm, who knew GST is good for India.Finally Modi had to bite the bullet in 2017 and when the Govt and GST council  faced a dilemma of half baked GST or no GST, everybody knew that it would be half baked GST .State GST council had Congress ruled states also and they were also party to this from day one of GST implementation. I am not for a minute justifying the GST goofups and bloomers and the myriad forms and reports our tax bureaucracy wants us to file. But did we question UPA as to why it kept on dragging its feet endlessly on GST implementation.

I think we are degenerating into a cynical nation!

GDP and Gross "Depression" Product !

We are what we are!

Lot of noise about GDP numbers released yesterday. All TV news in English and vernacular discuss about fall in GDP growth to 4.5% , in ominous tones and words from Economists including former PM,  threatening the people with dire forecasts for the country and the economy. Why should this add to Gross depression, desperation and despondency in the country. And when was the last time we were at 4.5% or thereabouts and that was not too long ago .It was Q3 Fy 12-13. Who were at the helm? our good old Dr.MMS and financial wizard & US educated Mr.PC. Mr.PC suspected CSO numbers and doubted its methodology.link another (link).

There are some methods by which this Growth recession can be tackled.Some of the good measures already brought in by the Govt will kick in with a lag.Many of them like corporate Tax cuts are supply-side and so will not address demand deprivation .
1) "Pump Priming" is a time tested method to boost the demand and consumption.Govt. by pumping money into the economy through building infrastructure is the best route possible since other alternate routes will be highly inflationary. Even though this can cause demand pull inflation temporarily,  in the short run it will follow Phillips curve which will reduce unemployment.

2) another important measure for Govt to do is pay all its Suppliers esp. in infrastructure sector like Power Generating Cos, Road Construction cos. and clear its dues.As an offshoot Govt must also look at indexing all the User charges it collects to inflation.This must include Electricity Tariff also in all the States.

3)Big Infrastructure projects which are stuck and small infra where the last mile completion is a challenge must be taken up to unclog the system. If they are stuck due to land acquisition disputes Govt. should try to invoke emergency powers to bring an ordinance for speed tracking these issues.

4) Also Govt must look at reducing IT for individuals and increase Sec 80C exemption limits for savings and investments or reduce all IT rates to just 10% of incomes earned whether the income is Rs.1 lac or Rs.10 cr.eliminating all exemptions.This will make IT wrinkle-free since all talk about progressive taxation is actually regressive in reality.This will bring demand back to the table in a big way.

5)Central govt should work with GST council to cut GST rates on Autosector. This can start with reducing Cess which is over and above GST at 28%.
Some of the suggestions mentioned above can lead to expansion in fiscal deficit this year and next year but they will have a salutary long term effect beneficial to the economy.

Where the mind is without fear and the head is held high!!

We are what we are!

whenever I read Tagore's great poem "Where the mind is without fear" many times I used to wonder what he meant by "where the clear stream of reason has not lost its way into dreary desert sand of dead habit!" .After seeing the see-saw matches in Maha politics I come to realise that habits die hard and we repeat the same mistakes again and again , thinking that this time it is different.

Beyond politics Tagore is relevant for Swaach Bharat mission also- "Where we tread without fear and the head is held high, where the potholes are filled and the manholes are closed dry, where the citizens do not spit and the litter is not thrown on the way, where the roads are levelled and rules of the traffic people obey, where the corrupt  realise their wicked way,  where the clear stream of future of young indians has not lost its way into the dreary desert sand of unemployed, Into that land of dream GDP and heaven ..."

God's language- Symmetry!

We are what we are!!

My title is symmetrical.It starts with "we are" and ends with "we are". Many of you would have also noticed that almost everything in this Universe is based on Symmetry.

Imagine how humans would look like if you have only your left side and there is no right side of your body. Or imagine if you have one big round eye in the middle instead of two eyes. The holy books say God created man in His form.

Even otherwise God has created everything with Symmetry as His language of expression. Perhaps some may say it is Nature's language.Be it flower or  leaf or a dancing peacock with its feathers panned out in full bloom or anything where nature has expressed itself, it is through the display of Symmetry.Under the microscope even DNA strands display symmetry.Nature simply loves this.Nature not only abhors vacuum but also abhors asymmetry.

Do you think it is mere coincidence. So, I call it the God's language!!

Murphy's Law!!

We are what we are.
There is an Universal law apart from law of karma and that is called Murphy's Law.If things can go wrong they will definitely go wrong. This law is applicable to Indian context more than any other country. Probably our politicians are adept at making this law true each time , every time. Take for example the Maha mess now. Just last year we watched the tamasha in Karnataka where the rank outsider Mr.Kumaraswamy suddenly being catapulted into CM's chair due to holy or unholy alliance with Congress after elections.They made strange bedfellows. Every day routine of Mr.K was to brief the media in the morning that the coalition was working fine, and in the evening media appearance to have his handkerchief handy and shed tears that nothing was alright in coalition and he would not continue as CM.This tamasha went on for nearly 8/9 months and we know what happened after that.

Now we are not learning anything from such past history and we want to repeat that at all costs.The theater is now Maharashtra and the stage actors are different but the screenplay is the same.Another tearjerker is in the offing!!

Even Ram temple will get constructed in Ayodhya and even J&K will return to normalcy but our politicians cannot but enact and repeat the same story line in every state. Is there anybody to disprove Murphy's Law.!!