Econ Mom on dismantling the PDS: Pigeons, Doves and Squirrels :)

Last year we installed a bird feeder in our terrace with great gusto. The lil one and I spent the next 36 hours doing almost a Shikari Shambhu-esque stalk-step around it. Ah, those were the days; those 3 ones, in any which case. Enter the Phadke residence, and if there is no human presence, all you have to do is go to the pillar around the terrace and you’d be sure to find at least one Phadke there, lurking for a bird. And after all that lurking and pining, not a single avian species came even close to our feeder. Gave us the bird, royally, I am tempted to say. On day three, the only thing with wings that came close for an inspection was a wayward dragonfly and after getting disappointed with the bajra filled into the feeder, buzzed close to the lil one’s head causing him to jump and yell madly, in the process repelling the only fan our feeder had ever attracted.

Sigh, such is life. After 3 months of complete inaction on the feeder, a little squirrel discovered it, much to my delight! Now the feeder is designed in such a way that its supposed to be accessible only to little birds that can perch daintily on the feeder support for a snack. Al least, that’s what their ad campaign claims. In fact, the whole point of getting a bird feeder is not to support the squirrel feeder program. However, Squirrel Phadke (as we call her…and we’ve decided in the honour of Beti Padhao Beti Bachao that it’s a she) is quite a squirrel, God bless her soul and her furry tail! She has found out a way of hanging upside down whilst enjoying the snack deviously, in a way that would make Ramdev Baba in the Shirshaasan pose jealous.

Now, when Squirrel Phadke started helping herself to the bajra, I didn’t really mind. In fact, I so enjoyed seeing her at our place that I started also placing some peanuts on the feeder plate; that’s a seriously expensive squirrel feeder program by the way. In the process of eating the bajra, however, Squirrel Phadke managed to topple the feeder jar and quite a lot of bajra spilled onto our terrace. Now, this is where the issue arose because pigeons around the house now started to come in for the bajra spilt on the terrace. Well, well, well. In fact, I realized that pigeons are in fact not as dumb as they seem to be, despite those idiotic guttural, grunting sounds that they make which positively drive me crazy. They now wait for Squirrel Phadke to get to the jar in her unique Jackie Chan- Ramdev Baba style so that they would also get a bite of the bajra. And much as I associate Squirrel Phadke with the Beti Bachao, I associate pigeons with ahm…the Swachh Bharat abhiyaan. Jahaan soch, wahaan….pigeon….GRRRRR!

Now, the lil one has strong anti-pigeon leanings. From suddenly yelling at them to running towards them making horrible sounds on the terrace, he has in the process got himself a special anti-pigeon voice of the R D Burman timbre. Ooooooooo, he yells and I, by reflex dish out the Mehbooba, mehbooba (much to hubby’s amusement and horror) on the poor unsuspecting birds that fly away in total alarm when they see the mom-son duo at their Burman best. But despite such musical protests, we are unable to control the pigeon menace. Exasperated, my lil one said the other day, “We put up the feeder for the little birds. But the squirrel gets in and in the process the pigeons dirty our terrace. And the little birds are nowhere to be seen! Can’t we devise a plan so that the bajra gets only to the birds or the squirrels but not to the pigeons?”

Omigosh, what an age old question! Hmmm. How do we devise a plan so that the food gets to the beneficiary directly, without causing spillovers, literally speaking? According to the Economic Survey of India (ESI), nearly 15 per cent of PDS rice, 54 per cent of wheat and 48 per cent of the sugar is lost in leakages. Three-fourths of the subsidised LPG cylinders are used by the pigeons, the richer half of the population.

What we really have to do is change the design of the feeder so that even if it tilts, it does not really allow the spillover to happen. The name of the program at the national level is obviously, JAM. The JAM trinity that, again according to the ESI, promises subsidy “nirvana”. Jan Dhan, Adhaar and Mobile transfers. Today’s papers tell me that now 82 crore of the Indian population is covered by Adhaar, making it the world’s largest UID program. What the Government plans to do is eventually move out of offering food to the little birds and instead, transfer equivalent amount of cash into their Adhar enabled Jan Dhan accounts; that should hopefully keep the squirrels/ pigeons away from a system that was never meant for them in the first place.

In the meanwhile, the Phadke household is also trying to dismantle the PDS; the Pigeon- Dove- Squirrel trinity. However, much as with the national program, looks like it’ll take a long time.

 

An afternoon at the Gokhale Institute with Dr. Rajan and Dr. Subramaniam

What a day! The one dominating thought in my mind was that this was an event to parallel the likes of the Sawai Gandharva Music Festival, that Pune hosts so very graciously every year. Why should I even say it paralleled the Sawai? It was the Sawai, except that it was an Economics Sawai, hosted by the Gokhale Institute of Politics and Economics. The convocation of the Masters’ students of GIPE is accompanied by the very prestigious Kale Memorial Talk; the speaker this year for the Memorial Talk was none other than Dr. Raghuram Rajan, Governor, RBI.

Dr. Rajan chose today to speak of the Global Economic Changes and their implications on Emerging Market Economies (EMEs) and on India. The talk was typical Rajan, more in a story format that kept the audience engaged through the one hour that he spoke. He broached the topic by saying that typically, rebounds that follow sharp declines such as the one the globe witnessed in 2008 are normally extremely sharp and so, the current soft growth of the globe comes to be something of a surprise. The post WWII scenario in the globe was followed by a very sharp growth phase, especially in Europe and the US, a phase that saw women getting absorbed into the work force, more industrialization, more consumption, larger families and definitely, more trade. The Smoot Hawley legislation as well as the beggar-thy-neighbour policies were typical in the aftermath of the Depression; these were however rapidly replaced by the GATT and an understanding that faster exports would facilitate faster recoveries.

The decade of the seventies saw major turbulence and high inflation periods creep into the industrialized nations. The policies and policy makers of the likes of Paul Volcker were geared towards disinflating the systems so that growth could be re-started. Governments tried to push more growth through public spending; however, the weak growth meant that taxation would not really by available as an option. The only tax option left for the Government was that of inflation tax; print more and finance more spending. And therein was born debt. On one hand the public sector took on more debt; on the other, companies too started financing their operations more through debt as cash flow disturbances continued to prevail. There is no problem with debt driven growth when it works; if it fails though for whatever reason, it fails with a pretty big shock to the economic system and players.

There is another fairly interesting part connected to corrective reform actions that happen in the aftermath of such failures. When the process of correcting excessive debts starts, there is high amount of taxes that the younger labor force has to bear.

Switching to the 2008 shock, we find that the world was already in a debt balloon when this shock happened. Many countries tried to go Keynesian, to create public spendings but were unable to do so in the face of the huge outstanding debt. The only option left was to move into unconventional monetary policy, the types that has been followed by the US, Eurozone and Japan.

Now, the implications of this kind of behaviour on rest-of-the-world are broad ranging. Whenever Central Banks of the industrialized nations are quizzed about the rationale behind unconventional monetary policy, the responses are normally of the following types:

  1. The world will be a better place if we grow well. So unconventional policy benefits not only us, it benefits everyone over a period of time!
  2. We are inflation targeting economies. So long as inflation is under control, what could be the problem in following unconventional monetary policy?
  3. Corrective reforms are important and required, but they may inflict unnecessary pain on the system. So, QE can well be the panacea for creating the necessary momentum.

The point really is, that whenever EMEs have experienced any such kind of a crisis, structural reforms as a solution have practically been thrust on us. However, when the same kind of issues are faced in developed economies, suddenly the global institutions tend to take a much softer stance, talking about the “pain” quotient of the structural reform process. This really needs to change and EME Central Banks probably need to sit up and talk more about these issues at global meetings.

And for this, we need to consolidate our learnings, study the implications of these unconventional policies on our economy more sharply, so that we can formally present our views in international forums.

Whew! These were effectively, the main points that came through. There was of course, also a lot of talk for the new graduates. About enjoying the journey, about making sure that you enjoy whatever work you do, about making sure that while you yourself develop as a professional, you also try to give a bit back to the society. The young economists on the other hand were simply thrilled to have Dr. Rajan in their midst. The cheers and the clapping that happened when he entered the auditorium was something else!

Once this was done, we had a smallish break in which frankly, I was really wondering whether I could feel better than this at all. It was exactly the feeling that one would have after Kishori Amonkar had just wrapped up Raag Bhoop. The air would be filled with the swaras and every breath would be laden with musical oxygen.

I enjoyed myself talking shop with other economists, catching up with other friends/ faculty and of course students and was really a bit apprehensive about attending the second talk; I wanted to savor the thoughts for a while. The second talk on Making of the Economic Survey of India was by Dr. Arvind Subramaniam, Chief Economic Advisor, a friend of Dr. Rajan’s and also a collaborator on many a piece on economics that they’ve co-authored. As we re-settled in the auditorium, Dr. Subramaniam started by saying that he’s often wondered how much the ESI is worth. And he actually proved its worth some $48 billion; the market climbed 2% post ESI and pre-budget! The light note was perfect to connect to the audience; his style was so engaging, so intense and at the same time humorous, that it was a treat to watch him deliver the main points of the ESI.

Since the private investments in the country have been falling, the onus of creating growth would have to be necessarily taken up by the GOI. However, could this be done with limited fiscal space, given that more tax sharing would have to be done with the states? Yes! Since state record of fiscal consolidation is much more superior than that of the Center, despite this limited fiscal room, there would actually be an overall plus for the Indian economy. So, the ESI this time, redefines the concept of fiscal federalism.

The pedestrian notion of fiscal federalism is that states have to be given a share in the revenue of the Center and states very often grow at the cost of the Center. However, this time around, the ESI looks to understand whether the states grow and thereby enable the Center to do a better job in terms of delivering crucial output.

Another very interesting “factoid” that he chose to share was the interesting idea that those CMs who have been elected 3 straight times in state elections have all been those who post an agricultural growth rate of more than 8%. Clearly, agricultural growth by now, is not an economic priority, but a political one.

I found the comment on the new GDP series particularly wonderful. The new GDP series created by the CSO has shown a sudden blip in the growth rates. There has been a genuine effort to change the base to a relevant, recent year; to broad base it, to cover more manufacturing sectors in it and to benchmark it internationally. However, despite the genuine effort and willingness of all agencies to create a more relevant pattern, the results have been a bit mystifying. That, said Dr. Subramaniam, does happen in life. Processes are impeccable, but outcomes tend to be mystifying. Democracy is an example of the same type.

He also spoke about the almost irrationally obsessive nature of ratings agencies towards fiscal consolidation parameters. He was emphatic in pointing out that consolidation has to happen for consolidation sake, not really to please any agency. Having said that, good processes would automatically earn brownie points from the rating agencies in any case!

The content of the talk was pure pleasure; but the delivery matched the content head on. The light way in which he was handling questions, fun but extremely earnest, was pure sublime genius. Dr. Subramaniam talks economics with his whole body; I was reminded a bit of Pt. Bhimsen Joshi literally physically riding on the swaras of Shuddha Kalyan. Shuddha Kalyan to effortlessly replace the Bhoop swaras. ESI effortlessly added on to the monetary policy gupshup.

It was an evening to remember. A hall filled with economists. A stage reigned by geniuses. Thoughts concerned with optimum policy issues. And pure, pure happiness. Sawai kind of happiness.

 

 

 

 

 

 

 

 

 

 

 

My Choice, says the RBI!

My repo, my CRR, my choice. Not to offer a rate cut, even if the corporate spirit roams unrevived.

My choice, to be size 7.5% or a size 4%. They don’t have an optimum interest rate size, and they never will. To use CRR or the repo to trap inflation is to believe that you can halt the expansion of monsoon induced prices. Or capture growth in the palm of your hand.

Growth is caged, let it free. Interest rate is not; let it be. My choice. To cut or not to cut. To have a rate cut before policy review, out of review or not to review at all. My choice.

To cut temporarily, or to cut forever. My choice.

To use the CRR or the repo, or both. Remember, the cut is my choice. I am not your privilege. The PDMA to be created, the Monetary Policy Review Committe to be set up, adding your inflation target to mine, they’re all ideas and can be replaced- My commitment for inflation control cannot, so treasure that.

My choice; to declare a review every month. Don’t be upset if I don’t do a review every month. Don’t be fooled if I give a review every week.

My choice, to support growth or not. To pick it up from 2 trillion dollars or not. So don’t get sassy. My inflation control might be your pain; my steadfast rates, your bane. My order, your anarchy. Your sins, my controls.

My choices are like my fingerprints. They make me unique.

I am the central bank of this country. I am the emerging market, not the globe. You are the emerging market. Wake up. Get out of the stagflation storm. I choose to empathise. Never indifferent. I choose to be different. I am the currency. Infinite in every direction. This is my choice.

The curious case of the missing RaGa :)

Scene opens at the Congress Office, Akbar Road, New Delhi, where Sycophant Neta walks in to office to find Madam watching a Hindi masala film.

Netaji: Madam, we are really missing Baba…We miss his errr…errrr…his ..dynamic..errr..his sweet presence Madam. Oh! Is it true Madam? Is Baba coming back on the 12th?

(Ma)dam : Karan Arjun aayenge..God, what am I saying? I really need to cut down on watching films in all this spare time I get these days. That long walk to Manmohan’s the other day was a better idea than this.. Ahm…Yes..Rahul Baba aayenge..

Netaji: Madam, where has he gone? Oh, I know, there must be a definitely lofty reason for his disappearance…you were saying that he wants to introspect?

(Ma)dam: Yes, yes, a deep desire for introspection overtook him that afternoon. In fact, the poor dear has been constantly introspecting. Last year, you remember how the BJP accused him and the media sensationalized his introspection and said that he was snoozing? Oh, his mind was never meant for mundane things as price rises. Price rises? Price rises? Blah, what are price rises when the heart has fallen Mama, he asked me.

Sycophant: Yes, absolutely. And just as they rose, now they have fallen. Does that mean that Baba’s heart has now risen Madam?

(Ma)dam: Errr..Absolutely, Netaji. And now you will really see the new ummm.. phoenix rise from the ashes. He shared some of his sensational new ideas with me yesterday… he was elucidating to me deeper thoughts on women empowerment wherein we will call for a movement from kitty politics to gritty politics.

Netaji (in a dumbstruck tone): Madam, this is revolutionary indeed! And in this way, we will also be able to give a severe setback to Smriti politics Madam. Politics of fab to politics of gab, madam.

(Ma)dam: Speaking of gab, Netaji, I really think that its time to arrange one more interview of Baba in this new sensational avataar with that loud obnoxious fellow, what’s his name? The Nation demands an answer guy. The fellow’s mind is singularly mundane, I have often noted. Loud voice and mundane thoughts…hmm, he could be a good fit for the UPA, Netaji. But, I am upset with him because the last time he kept on asking poor Baba whether UPA will win and by how much margin and how and when and why. When all that Baba wanted to talk was women.

Netaji (cleverly): But Madam, now that we have lost so spectacularly, even he will have to sit back and listen to Baba talking women. Brilliant, Madam. I will call up Times Now Madam.

(Ma)dam: And while you are at it, also put the Birlas online. I want to congratulate them on their new education venture. What an idea, Netaji!

Netaji: Why are you so enamoured with the Birla education model, Madam?

(Ma)dam: Because that is what Baba is doing these days, God bless his pure, unadulterated soul. He told me decisively “Mama, I have so many degrees from so many international schools till date. But due to security reasons, both the Universities and I were not told that I study with them. But how long, Mama, how long can this go on? I have decided that I need a degree to my name. And that too in 45 days” And he bowed and kissed his phone reverently.

Netaji (with tears in his eyes): IIN, he’s from IIN..

(Ma)dam (sobbing with maternal pride): Its been a tough ride, but Baba won’t give up. Do you know, Netaji, that they even made the poor dear read seriously tough literature before they would accept his enrolment. He told me that he has been reading inspirational stuff from stalwarts like Bhagat Singh, instructing him on how to become 4 point someone. Oh, Baba! I am so proud of you!

Netaji (in tears himself): When the going gets tough, the tough get going, Madam!

(Ma)dam: And he’s got good peer group, I tell you. All these celebs that disappear actually do their IIN courses before going back to dazzle the globe with new talents. Do you know whom Baba was hobnobbing with just a week back?

Netaji: Oh Madam. I am sure that the peer group must have consisted of terrific intellectuals. Who was it, Madam? Who was it?

(Ma)dam: It was Putin, Netaji. From Russia with Love. That’s what they bond-ed on. Putin had come there to do a 12 day course on sensation or something..

Netaji: Do you mean cessation, Madam?

(Ma)dam: Ahm…yeah, something like that Netaji. Baba gave him a lot of help. After all, the connections with the Russians go back to Baba’s great grandfather, Netaji. They had a lot of high level chats on many issues like dealing with small troublesome bands in mufflers and brooms. Putin immediately recommended persecution in labor camps. And the only way to counter mufflers is go shirtless in Delhi winters. Baba, on the other hand, has suggested that Putin empower women with immediate effect so that the embargo problems can be handled. After all, no country can develop without women. Cult Baba.

Netaji (by now moved to a choked throat): Madam, madam, at the pace he is going, he will be re-writing the Discovery of India again, the little genius!

(Ma)dam: Yes, after all, they encourage creativity at all levels at the IIN. And he has great alumni to look up to. After the lungi dance, when Yo Yo Honey Singh had that fight with Shahrukh Khan and disappeared, where do you think he had gone Netaji?

Netaji (humbled before such shattering truths): IIN, he’s from IIN..

(Ma)dam: RaGa (what a musical name!) is currently writing critical appreciation of the Yo Yo works. “Lungi ko uthana padega, step karke dikhana padega”. Here, the lungi symbolizes the soul, that has to rise from the ashes to reach the sky, Netaji. Even Yo Yo himself started crying when he read Baba’s thesis. And he and Putin together have written a treatise on “4 bottle Vodka, Kaam mera roj ka” I heard that Yo Yo is now planning to give up his musical career altogether to start a spiritual camp at Delhi. Baba has personally set up his meeting with Ramdev Baba, so that it can go ahead, my helpful little angel!

Netaji: Madam, madam, do not starve us of his company anymore! Oh when can I meet him?

(Ma)dam: Oh Netaji, I too am waiting eagerly for him. He just has one final meeting with Yo Yo tomorrow. They have gotten into an intellectual branding argument about what works better: The goatee or the shadowy stubble. For final placements at IIN last year, this was the GD topic “Can the goatee look create overkill amongst empowered women voters.” Baba supports the stubble bubble of course.

Netaji: Baas, Madam. Let our dear leader come back. Let us launch a new Rajiv Gandhi Women Empowerment Yo-jana in his honour!

80 years of RBI operations…The boot on the other foot

So there was this lady, who needed to be fitted with new shoes. We’ll be the left, said the newly formed Government in 1947 and we’ll give you the right one (pun intended absolutely, in every which way) in a couple of years time. But the right one exists already. From 1935 itself. Yeah, sure, said the left indignantly, but it needs to belong now to the rightful (I mean…leftful) Government! Let’s nationalize it…hmm..all shares in the capital of the right were transferred to the left and the right was created so that it would walk the same way as the left. The left would reverse its stance; the right was to reserve judgement. The left would sometimes be undependable; the right was bank-able. The left was left, and the right..well, right.

Right, so we go on…

So they walked their lady, her Achilles Heel being the left one. The lefty was the one with lofty ideas. Lets adopt a socialistic pattern of society and create equitable, Russian kinda footprints on the sands of time. So the lady swerved left and for the next 30 years walked into huge capital intensive steel mills and a fiercely protected industrial structure in front of her. She socked trade and tied her laces more securely against those dainty western ideas. The right lagged behind, dragged into the dance of the left. The left wanted to create this grand growth math; the right was just correcting the inflationary aftermath. The left created deficits; on the anvil of the right were the tools of CRR and SLR.

And in 1978….the lady looked a bit north east and saw these HUGE Chinese boots left behind by Mao. Around those shoes were equitable and negligible small footprints belonging to the populace of one of the most populated country in the world. It doesn’t matter that one is hungry; so long as all are hungry. Surely these are not the equitable footprints I wanted, she thought. And then she looked to the South East…and saw those laces were coming undone. The original Russian shoes were in tatters. The left shoe realized that the time has come to change the step. And, in 1991, even as the lady groaned and moaned taking only 3 steps at a time, the left changed sides and became the right. The original right was delighted; now they could walk together! Walking together did change things; they were now averaging 7, sometimes 8 steps at a time…

2008..Only housing rubble as far as the eye goes. Every step the lady took, there was a resounding gravelly liquidity crunch under those shoes. The left turned right Government now wanted to go extreme right. Maintaining 8 steps was crucial, a national priority. True, said the original right; but our steps fall on dry roads. There’s no monsoon, there’s high inflation, let’s slow down a bit. So the left-turned- right danced a hop with 8 steps and the right-always-right tried to slow down the rhythm a bit. The lady didn’t quite know what to do, with both feet marching her away into different paces; a jig, a walk, fast, slow, excited, sedate…7, 6, 5 steps was where she could manage.

Oh, we will walk alone if we have to, said the left-turned-right haughtily and forced the right-always-right to change material. So they got IMF-cut leather for the shoe and it now shined intellectually and calmed down everyone with its inherently good common sense and communication. However, it essentially continued to bring inflation to heel. IMF cut leather with new nails became something of a warrior. Our nails are neither hawkish nor dovish, it said. We have owl-like, see-by-night wisdom nails fitted into our system, it said. In the meanwhile, those left-turned-right silent shoes also changed fabric and donned on modi-fied textures, a tad saffron, but increasingly fashionable and with lot more squeak than before. Oh, the saffron fashionable and IMF shiny will ne’er ne’er get along, seemed the popular refrain. But time and again, they tried to create one common rhythm, one common pace…and steadily, it looked like the lady would get her glint back in the eyes.

The left-turned-right promised that we won’t swerve too much to the right. That particular number is popularly called the FRBM. And asked the right-always-right to also commit to a manageable dance. A targeted dance.

And today, whilst celebrating 80 years of being the always-right-right, the left-turned-right gave impassioned speeches on what is now expected so that the always-right can be always right in the future as well. What’s this? Is the right-always using firang paper in its moneyed lining? That is so unlike what the Mahatma would like. Lets use Make-in-India lining to boot up this system. And, it said, do the increasing number of farmers’ suicides not shake the very soles of the always-right-rights? They ought to. Let the right put its footprints everywhere in the villages so that these suicides can stop immediately.

To blame slow growth on the poor soles of the always-right, I can understand. But to now hold them responsible for farmer suicides as well…sure knocked my socks off, that one.