Yoga Day at Central Banks across the Globe

Dr. Manasi Phadke

Hi folks! The International Yoga Day was celebrated at all Central Banks across the globe, and how 🙂 Read more in my humour column Tweakonomics 2.0 in the Hindu Business Line. See https://www.thehindubusinessline.com/opinion/yoga-at-central-banks-across-the-globe/article65554301.ece. Else, read it right here!

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When I was young, there was only one type of Yoga. It was called Yoga. It was practiced mostly by the elderly and was very Indian in its orientation. Now, they tell me that there are 13 types of Yogas. These are mostly practiced by Central Banks and are fairly international in their orientations.

At No. 1, we have the Vinyasa Yoga, wherein the poses and breath flow in one regular continuum, complementing each other and reducing sudden, abrupt departures from each other. Think Surya Namaskars. Optionally, you might want to think European Central Bank. The Bank has been ultra-careful in trying to build market expectations so that yields do not show abrupt departures from their regular trajectories. The ECB’s statement reads like a Vinyasa dream-package. ‘The Quantitative Easing will end on July 1, and will be followed by an interest rate hike of 25 bps on July 21. The next hike is to happen on 8^th September, but the size of the hike will be decided closer to date.’ Of course, this particular Vinyasa has been so behind the curve that one can’t help thinking – Is this Shavasana? Or have they fallen asleep?

We move over to Power Yoga, which is less Yoga and more workout, less mind and more muscle. Power Yoga is more active and is done at a quicker speed than Vinyasa. Just like the Fed. On 15^th June, the Fed increased interest rates by 75 bps, the biggest rise in rates since 1994. This was led by inflation quickening to 8.6 per cent in May and consumer sentiment surveys indicating all-time low sentiments due to higher inflationary expectations. On cue, retail spending in the US had also dropped. The Fed responded actively to the issue through an aggressive rate hike – an American Veerabhadrasana as opposed to the Shavasana in the EU.

And then we have the Iyengar Yoga, named after it’s founder B. K. S Iyengar. Use of props to hold the positions for a longer time is a characteristic of Iyengar yoga. The RBI specializes in this form. In the post-Covid phase, it has been particularly showing off its ability to hold on to its interest rate stance. The monetary policy announcement in April 2022 was the 11^th consecutive time that the repo rates were kept unchanged. Props used included Fixed Rate Reverse Repo (FRRR), which, according to the Governor, was expected to ‘impart flexibility to the RBI’s liquidity management framework.’

The State Bank of Pakistan (SBP, the Central Bank of Pakistan) seems to be practicing aerial Yoga, also called as anti-gravity Yoga. In this Yoga form, the practitioner uses hanging silk cloth props to achieve traditional yoga postures, especially those that involve a heads-down feat such as Shirshasana. Key economic variables in Pakistan certainly seem determined to achieve anti-gravity. The headline inflation is at an unbelievable 13.4 per cent and is only surpassed by interest rates at 13.75 per cent. The Pakistani Rupee has been trading at Rs.208 to the USD and seems fairly determined to achieve even better errr…heights against the dollar. The silken thread by which the country hangs is Chinese, and unpredictable.

In the meanwhile, the People’s Bank of China (PBC) has been practicing Yin Yoga. If Power Yoga is about vigour, Yin Yoga is about stillness. The US favours Yang (Power) Yoga, whereas the Chinese favour Yin. Yang Yoga strengthens major muscle groups, Yin Yoga focusses on deep tissues. This is done through holding postures that suit the practitioner for extended time-periods. Whilst the world is grappling with inflation and subsequent rate hikes every month, the PBC has actually been toying with accommodative monetary policy stance. Given lower inflation levels and relative steadiness in the currency, it’s a mercy that the Yins haven’t actually slashed their rates by 75 bps in a mad world.

Nah, they’ve left that to the Russians. Meet the Russian Central Bank, the current ace practitioners of Hot Yoga. Hot Yoga is practiced in hot and humid studios that are artificially warmed to exact 105 degrees Fahrenheit, allowing more blood circulation. However, Hot Yoga can spell real trouble, causing heat-related illnesses and dizziness in the practitioners. On June 10^th, just when the world was experiencing dizziness due to inflation, the Russians slashed policy rates to ‘pre-crisis levels of 9.5 per cent’ with possibilities of ‘further easing’ in the next few months.

The Sri Lankan Central Bank is into Hatha Yoga. Hatha Yoga advocates multiple tools – asanas, pranayama, mudra, kriya and mantras. The strategies of the Lankan central bank include steady interest rates and multiple negotiations with multiple donors. Take a deep breath. Its Yoga time!

The author is a brave economist trying to laugh against the odds.

Cereal Killers and Crime Detectives

Hi there, Readers! What would happen if the RBI were to call in the best sleuths to handle the new ‘cereal killer’ in town? This piece appeared in my column Tweakonomics 2.0 in the Hindu Business Line last month. You can see it at https://www.thehindubusinessline.com/opinion/worlds-most-famous-detectives-solve-the-inflation-mystery/article65404982.ece .Else, read on!

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There is a new cereal killer in town. Everywhere he goes, he leaves 10 bps of inflation behind. The RBI has become the new FBI, trying desperately to find the identity of the killer. After many unsuccessful attempts at nabbing him, the RBI decided to take advice from the world’s best brains on the matter. And it is thus that a slim man in a tweed suit and deerstalker hat strode into the RBI, as always, accompanied by Watson.

‘The CPI inflation is now breaching 7 per cent, Mr. Holmes’, a visibly disturbed RBI Governor began talking. ‘Another 10 bps will be simply intolerable! We have done everything in our power, including a 40 bps increment in repo and a 50 bps increment in the CRR. Please help us, dear Sir!’ Holmes stared at the roof, as if seeing inflation push through it. ‘The problem is in the supply side of the story, and you are attempting an arrest through demand modification. Interesting. And perhaps, there was too much of a lapse in changing the rates?’ One saw by the Governor’s face that his attention had been keenly aroused by Holmes. ‘You consider that to be important?’ he [Governor] asked. ‘Exceedingly so.’ The Governor paused and then said,’ Is there any point to which you would wish to draw my attention?’ Holmes looked at him in his eye and said, ‘To the curious incident of the MPC meeting in April 2022’. The Governor was puzzled. ‘”The MPC did nothing in the meeting of April 2022.’ ‘That was the curious incident,’ remarked Sherlock Holmes delicately.

The Governor sat up and said, ‘But how could we have possibly changed anything, unless, unless you are saying that you could have guessed even then who the culprit was?’ Sherlock was quick to reply, ’I have no data yet. It is a capital mistake to theorize before one has data. Think of the CPI. What do you deduce?’ The Governor cleared his throat. ‘In March 2022, headline CPI moved from 6.1 per cent to 7 per cent and the food inflation increased by 154 bps to 7.5 per cent.’ Holmes narrowed his eyes, his face suddenly hawk-like. ‘And who has the highest weight within the food group? You need to have your finger on the pulse of that dataset!  Elementary, my dear Governor’. ‘Pulse!’ said Watson suddenly. ‘Check whether pulse prices have risen by 10 bps!’

Just then, a little man with an egg-shaped head and an enormous moustache stepped into the room rather pompously. ‘My name is Hercule Poirot, and I am probably the greatest detective in the world!’ ‘Ah, M. Poirot! We have been searching for the culprit. Dr. Watson was suggesting we track pulse prices.’ Poirot said to Watson rather kindly, ‘The mind is confused? Take time, mon ami. You are agitated—it is but natural. Presently, when we are calmer, we will arrange the facts, neatly, each in his proper place. And then you will see. You need to have your finger not on the pulse but on the cereal. It is natural to think of tur, chana and moong, the old-time inflation-mongers. But the tur, he is innocent. And chana, he is still waiting in his field. It is that wheat who is causing this inflation issue here! Indian wheat, he is getting sun-burnt due to the harsh summer and then is also getting exported off, causing a pressure point in the country.’ Watson sputtered, ‘Wheat? M. Poirot, we are sitting in India, the quintessential roti capital. Wheat has been such a friend. How can he, errr, it cause inflation?’ ‘Every criminal is probably somebody’s old friend’, observed Poirot philosophically. ‘You cannot mix up sentiment and reason.’ The RBI Governor looked unhappy. ‘So should the Government stop wheat exports?’

A fluffy old lady in the window stopped knitting. It was Miss Marple, looking a bit dithery and flustered as always. ’It does seem to be the right thing to do, doesn’t it, to stop exports so that prices stabilize in the country. But then, you know, you land up killing off markets altogether as you are just responding to events all the time. Policy has to go beyond mere response, I feel.  Maybe the Government can focus on you know, increasing the yield of crops through tech interventions. I mean, there are these apps with scientific decision support systems. You must be thinking what a silly old woman I am..’ There was stunned silence. ‘On the contrary, dear madam! Intuitions cannot be ignored; they represent data processed too fast for the conscious mind to comprehend’, said Holmes.  Poirot looked at her in quiet admiration. ‘Tres bien,’ he said.

The author is a brave economist trying to laugh against the odds.

Nadal and the WPI

Ever thought what Rafael Nadal and the Wholesale Price Index of India have in common? Both look unstoppable at 14! Read more in my humour column Tweakonomics 2.0 in the Hindu Business Line at https://www.thehindubusinessline.com/opinion/nadal-and-the-wpi/article65508257.ece. Optionally, putting up the piece here!

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What does Rafael Nadal have in common with the Wholesale Price Index of India (WPI)? A lot! For starters, both have crossed the 14 mark, the former at Roland Garros, and the latter in India. Both have huge teams backing them to move away from 14 – errr, albeit in opposite directions. Aggressive Serbians put both into a tizzy! Fortunately for Nadal fans and unfortunately for Indians, both look fairly unstoppable at 14.

But that’s not all. The WPI is an index number that tracks the movement of prices of goods traded in bulk by wholesale businesses to other businesses. The index is released by the Ministry of Commerce and Industry monthly. It categorizes commodities into 3 main classes – i) primary articles, ii) fuel and power, and iii) manufactured articles. Primary articles are further sub-divided into food and non-food category. Food inflation is important enough to be tracked and published separately. The fuel and power group contains petrol, diesel and LPG. The manufactured goods group contains a variety of products such as Paper, Sugar, Fats, Textiles and Semi-Trailers and Rubber products. The inflation averaged across the 3 classes should give the overall WPI inflation in India. However, a simple average will not suffice! If the transaction value of manufactured articles is, say, double that of primary articles, then inflation in manufactured articles would pinch the industry lot more. The WPI inflation has to reflect this reality. Hence, each of the classes within the index is given a ‘weight’ based on the net traded value of the item in the base year i.e. 2011-12. For the WPI, the primary, fuel and manufactured groups have a weight of 22.6 per cent, 13 per cent and 64 per cent respectively. The overall inflation is calculated as a weighted average of inflation from all of the classes. In March 2022, when the WPI breached the 14 per cent mark, inflation of 34.52 per cent in the fuel and power group was the major trouble-maker. Primary goods inflation was relatively calm at 15.54 per cent.

Rafael Nadal too has a WPI – a Winner Potential Index. This index number tracks the potential that Nadal can win against any other opponents in a Grand Slam final at Roland Garros. The index, never released in the public domain, is a closely guarded number within Team Nadal. The index categorizes opponents into 3 main classes – i) primary challengers, ii) muscle and power, and iii) miscellaneous threats. The primary group is further sub-divided into pure brilliance and Roger Federer. Federer is important enough to be tracked separately. ‘When Federer has these patches of utter brilliance, the only thing you can do is try and stay calm, wait for the storm to pass. There is not much you can do when the best player in history is seeing the ball as big as a football and hitting it with power, confidence, and laser accuracy.’ The muscle and power group contains Novak Djokovich. The wily Serb flexes brain muscles as quickly as the rest of his body. ‘He is a machine. He’s doing very well mentally everything’. The miscellaneous group contains a variety of players such as Puerta, Söderling, Ferrer, Thiem, Stan Wawrinka and Ruud. The wins averaged across the 3 classes should give the overall winning potential for Nadal at Roland Garros. However, a simple average will not suffice! If a win against Roger Federer, say, requires double the effort and concentration and creates (considerably more than) double the cheer as compared to winning against another player, then this win would mean a lot more to Nadal. The WPI has to reflect this reality. Hence, each of the classes within the index is given a ‘weight’ based on the number of wins against the player as a proportion of total wins (14) till the current year i.e. 2022-23. Of the 14 wins of Nadal at the Roland Garros finals, 4 are against Federer, 3 against Djokovich and 7 against the others. Thus, for Nadal’s WPI, the primary, muscle power and miscellaneous threats have a weight of 28 per cent, 21 per cent and 51 per cent respectively. The overall WPI is calculated as a weighted average of wins from all of the classes. In 2022, it was Novak in the muscle power group who was seen to be the major trouble-maker at Quarter Finals. Challenges from the primary group were relatively calm, with Federer not playing in the French Open this year at all.

Forget the Russian conflict. Don’t worry about oil. Don’t even think about wheat. There are still two more Grand Slams left in this year’s season. Nadal is in top form. The RBI better watch out.

The author is a brave economist trying to laugh against the odds.

Wheat Nikala, Gaddi leke

Dear Reader,

Hi! Food inflation rages on in India – however, as always, this time too, it’s different! In a country that has been used to inflation coming in mostly from pulses, milk and meat groups, wheat inflation has come in as a major challenge. When roti becomes expensive, humour really becomes scarce. Read my column with some dark, wheat inflation humour on this issue. This piece appeared under my humour column Tweakonomics 2.0 in the Hindu Business Line. You can see it at https://www.thehindubusinessline.com/opinion/wheat-nikala-gaddi-leke/article65318051.ece Replicating it here for you folks – comments, discussions welcome!

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(It is Rabi harvest time in Punjab. One of the grains seems mighty chuffed and excited about life and is lustily singing ‘Main nikala, O gaddi leke’, much to the amusement of the other grains.)

Grain 1: Oye Wheat Paaji! You seem to be very happy! Ki gaal hain?

Grain 2 (in a sing-song fashion): Ek mod aayaa, main uthe dil chhod aayaa! Had you ever imagined, paaji, that our lives would also get a twist and that we would reach Egypt?

G1: Ki kehende paaye ho tussi! Are we really going to Egypt instead of that crowded, noisy mandi? How exciting! But how did that happen?

G2: Arre yaar, its because of that Russi Munda Putin. He suddenly decided to invade Ukraine. Now, Russia and Ukraine i.e. the Black Sea Mundas are famous grain farmers. Together, they produce 14 per cent of total wheat output of the world.

G1 (snorting): Hmph, usme kya hain ji? India also produces 14 per cent of the wheat output of the world!

G2 (condescendingly): Yes, but how much do we export? Well, you see, most of the wheat is used internally to feed our own 134 crore people. Whereas the Black Sea walas have it easy! Their population is about an eighth of the Indian population. So, they export most of their produce. With a 14% share in production, the Black Sea neighbourhood manages to have 30% of the share of global wheat exports. Black Sea wheat feeds countries such as Turkey, Egypt, Indonesia and many African countries. However, with the exact same 14% share in production, India barely has a share of 1% in global exports.

G1 (glumly): Yes, I haven’t really heard of any of our mates leaving the Indian shores. Nahi Paaji, we are neither exported nor sold, we are normally ‘procured’! Which is alright, provided they house us correctly, but alas! Our lot is often at the mercy of rodents and the rains. Then, if you are lucky at all and haven’t sprouted, shrunk or got a black eye, you are pushed into PDS. Hopefully you land up in a ration shop and aren’t siphoned off illegally enroute to the shop. And even there, we are mixed with stone and sticks and what not. Ah, the indignity!

G2 (earnestly): This is all going to change now, Paaji! In the current scenario, Ukrainian farmers have been unable to harvest produce this year. The sowing for next season also seems difficult. The Russians have had a good harvest, but they are facing sanctions. So suddenly, 30% of global wheat exports have vanished! And what does that imply? Wheat prices are through the roof, Paaji! This is one of those few times when the MSP is below the international wheat prices. India has wheat exactly when the world wants it, the soft Rupee is just perfect for us and we are going to Egypt, Indonesia and Turkey! Mein nikala, o gaddi leke!

G1 (light dawning in the eyes): Oh, is that why we are getting tested for quality? I mean, it was quite a pleasant surprise for me to be in a lab and see the inside of a moisture meter. Indian grains rarely get to do that. For the humble Indian grain, you see, the Arthiya is the lab. He samples a fistful of grain in his hands; his fingers are the sieve. He has insta X-ray vision to determine extent of damaged seeds. And his teeth serve as errr, the moisture meter. Eww!

G2 (haughtily): All this will change rapidly this year, Paaji! Of course, its not that easy to break into new markets. Now, Egypt is the major importer of wheat in the world. The bread subsidy program in Egypt which helps millions to fight hunger depends on imported wheat. Egypt has an import dependency of nearly 80% on Russia and Ukraine. No wonder, that the Egyptian officials have been floating global tenders to explore other options of sourcing wheat. This is the exact G2G opportunity that India must clinch!

G1 (suddenly depressed): You mean all these years we were being procured by the Indian agencies, and now we will be procured by the Egyptian agencies? So once we are tested and certified, we will get into swanky ships and move to Egypt, only to meet Egyptian rodents, Egyptian sticks and stones and Egyptian ration shopkeepers? And from what I hear, wheat doesn’t only excite rats into action in Egypt, it incites riots as well. Oh damn, I am already missing my noisy, crowded mandi!

(Labourers pack G1 into export gunny bags)

G2 (changing song): Ghar aajaa pardesi tera des bulaaye re!

The author is a brave economist trying to laugh against the odds.