Two to Tango: IPL and GST, a match report!

Dear Reader,

Hi! Here’s a piece on what happens when Parliamentarians are gripped by the IPL fever 🙂

This piece appeared in my column “Tweakonomics” in the Hindu Business Line today. You can read it at http://www.thehindubusinessline.com/opinion/columns/two-to-tango/article9631178.ece, or read it here directly. Cheers!

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Team FM was celebrating. They’d pulled off the GST feat in record time i.e. before the IPL began. Many of the NDA MPs had threatened not to be present if the Bills were not introduced before April 5. That had got FM Jaitley really worried. He had been pushing his team hard, and yet, some of those clauses looked tricky. “A strategic time-out, that’s what we need,” he told his beleaguered team, working out the clauses yet again to make them Chidambaram-safe. “Such express pace! If only there was an assured follow-on in 2019. Then we’d have done this in style!”

But the PM was pitching it hard and had asked him to put his best foot forward. He had to deliver not only the doosra and the teesra, but also the choutha! The Central GST Bill, Integrated GST Bill, Compensation (to States) GST Bill and the UT GST Bill, all at the same time. And all this with the Delhi Daredevil mufflers breathing down his neck.

To add to his troubles, there was Chennai Super King P Chidambaram in the Rajya Sabha muttering about how he’d goofed up in writing the clauses of the GST, especially with the wording of the anti-profiteering clause. With the anti-profiteering clause, the FM had just wanted to make sure that if companies were not passing on reduction in the GST rate to the consumers, there would be a third umpire to examine the case. “The presence of the third umpire is ok,” said the Super King snootily. “Who is the selector, is what worries me. Unorthodox and draconian, is my verdict. Howzzat!”

The BSP had another set of issues. In the first year of implementation, an offence, if compoundable, should not be non-bailable, they kept on hankering. Normally, the stumps hold the bails, grinned the FM to himself. But here the bails have them stumped. Heehee!

But his team had delivered. On March 29, all four supplementary GST Bills were passed in the Lok Sabha by voice vote. It was actually just a noisy out-break of relief that the damn thing was done before April 5. It meant that the entire “Wah bhai Wah” IPL season could now be enjoyed happily in front of the TV without worrying about how to ask intelligent questions and participate in the debate tomorrow just as Lasith Malinga came out with that Yorker. “Neat thrownnnnnnn,” roared the Gujrat Lion, pleased with the new phrase, new bill and new year. It sounded very English, and yet, had the pleasant Mitt-rrron impact on the Parliament.

The FM was super pleased. Here was the ultimate legal boundary- all four Bills passed at the same go! In the meanwhile though, the scene had shifted to Rajya Sabha, where there was a lot disappointment because Sachin Tendulkar didn’t turn up.

“He never turns up in the other sessions. That is ok. But it should be made binding on him to turn up in March. After all, we want to discuss important issues here. What are the prospects of the Mumbai Indians winning this season, we really want to know,” said a Rajya Sabha MP.

“It’s ok, we still have Dhoni,” said Super King cleverly.

“What? Now when did he become MP? Tch, tch, I really must start reading newspapers again!”

“Idiot! I’m talking about Sakshi Dhoni making that comment on Aadhaar. Oh, we’ll raise privacy issues now. Silly point to the rescue! You want the GST, eh? We’ll catch you, alright! How? Simple! Gully, Slip and the Third man!

It’s Showtime! Sarabhais and the Markets

Dear Reader,

Hi! I resume the Tweakonomics column in the Hindu Business Line today, after a hiatus of about three months. A very, very special thank you to my Editor Raghuvir Srinivasan for thoughtfully sending in the sweetest email I ever got from the Business Line, asking me to drop whatever it is I’m busy with and get down to writing pronto! Thanks, Raghu!

So, here’ s a piece for Sarabhai fans ONLY 🙂 What happens when popular CNBC TV anchors start talking like the crazy Sarabhais?

You might want to see the article directly at http://www.thehindubusinessline.com/opinion/tweakonomics-on-rbi-fed-and-the-rate-hikes/article9591444.ece

Else, read on here, directly. Enjoy!


That the Sarabhai vs. Sarabhai Season 2 is set to make a comeback after 7 years has taken the Indian public by storm, as the RBI Governor discovered, much to his dismay on a regular, boring, nondescript working day in the RBI. Janet Yellen raised the rates and thankfully, the markets, which had already factored in the move a week earlier, did not show a knee jerk reaction. There was no major outflow from stocks, and the Governor found himself breathing a bit easy. “Let me see what news analysts are saying,” he thought, and switched on the TV.

“OMG! Janet Yellen has raised the interest rates, Mummyji!” shrieked a female spokesperson of Franklin Templeton Investment Funds, in a Monisha-esque voice. “Sahil, mein ghar chhod ke jaa rahi hoon!” Sahil, which in this case is supposed to be the Sensex, reacted positively and went up a few points. “Waaaaaaaaaaaaaa,” wailed Monisha Templeton. “Here I am thinking of leaving home, and your mood is upbeat. Now I know Indian markets don’t value me!”

“Gawd, what the hell is the matter with these folks!” thought the Guv and flipped channels to CNBC, where Lata Venkatesh was looking at the Franklin Templeton move of selling on Indian bourses. “To sell and move just because Yellen has behaved predictably is Foreign Institutionally middle-class”, she said with an upturned nose. “The least they could have done is looked at the UP story and what it means for the speed of reforms in India. What do you think, Rosesh beta?”

Udayan looked simply delighted. “I’ve written a poem on this, Momma,” he squawked. Lata didn’t look too pleased at being addressed thus, but just maintained a stoic silence. To have reacted to this would have been professionally middle-class.

“Janet Auntie has acted like a hawk/ Now the markets will listen to Momma talk!”

Lata was now simply quivering with the effort, but didn’t react to the poem.

“And here’s another one, Momma.

Us waali auntie, US waali auntie, kitna bhi kar lo rates ko hike, hike, hike/

FB par Sensex ko hi milenge like, like like!”

Deafening silence on the show.

“How is it, Momma.”

“Why don’t you take a break, Udayan,” said Anuj Indravadan Singhal, with clenched teeth, “before I break somebody’s head here. This show is called the closing bell, but any more poetry from you, and we’ll have the show closing before the markets do. And yes, Maya, let’s have a cheeseburger on the Breakfast show today!”

“I thought we’re here to discuss the heavy weight stocks, and not ourselves become heavy-weight, Indu,” said Lata, icily. “How about food for thought?”

“Here’s Maya in top form, folks! Why don’t you take a break while my heart breaks from the lack of sympathy on this show..”

“This is it! Everybody has gone complete nuts!” thought the Governor, switching off the TV as his special hotline rang softly. The ring tone was Mittrrrrron.

“Looks like politics is controlling economics, Urjit. Markets are up, Congress is down. I sometimes wonder about the NCP though. Can it pose a threat at the local level?”

“NCP? Unki ghadi kahaan kaam kar rahi hain?” said the Governor, before he’d realized he was being Dushyant. Horrified, he tried to cover up. “I mean, Sir, errr…”

But he was met by a chuckle at the other end. “You’ve been watching too much TV, Urjit!” the PM said laughingly. “Ye jo najar aate hain, Mittron, Ye toh woh hain nahi…”

 

 

Demonetized Shaadi: Bollywood Style!

Dear Reader,

Hi! Here’s a tweak piece on the demonetization and the immense opportunities it has created for Karan Johar 😛 This piece appeared in my column titled “Tweakonomics” in the Hindu Business Line today. You can read it at http://www.thehindubusinessline.com/opinion/black-money-and-political-parties/article9374624.ece; else read it here directly. Enjoy!

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The scene opens in Netaji’s office, where Netaji is sitting glued to the TV listening raptly to the debate on demonetisation. Such is his interest that he has consumed only seven cups of tea since the morning, instead of the usual 11. A particular piece of news makes him sit up suddenly straight and holler for Clever Guptaji.

Netaji (in a deafening noise): GUPTAJI, GUPTAJI, where are you? Come in here. ASAP!

Clever Guptaji (scared): What happened, Sir? Have you discovered yet another stash of ₹1,000 notes? I was telling you, Sir. We can’t have only ₹40 crore in cash. There’s bound to be at least another ₹50 crore somewhere. But you wouldn’t listen to me, Sir. The moment they announced that only those with a clean image and less than ₹50 crore cash would get an LS ticket for next season, you had to shoot off your mouth about how squeakily clean you are. Tch, tch, at least you could have said ₹49 crore! But just ₹40 crores! The others were looking pityingly at you, Sir. You have now really lost your image in the party.

Netaji (annoyed): GUPTAJI! Stop talking nonsense! See what they are saying here in the news! Families with marriages can get up to ₹2.5 lakh in cash.

Clever Guptaji: Errrr, so?

Netaji: So? So? Go out immediately and tell all our karyakartas and partymen to book marriage halls, gardens and lawns. And it must look like the bookings were done in September itself. Even if you get 200 of our party workers to book halls, we can get at least ₹5 crores converted into the new currency. Ha! Do this immediately, before the other parties start looking for marriage avenues.

Clever Guptaji (protesting): Sir, this is getting really, really difficult. Our party workers are tired from so much stress, Sir. The moment they see me, most run in the opposite direction.

Netaji (annoyed): What nonsense, Guptaji! What stress do they have? Getting rid of just ₹20-30 lakh should not cause any stress at all, Guptaji!

Guptaji (panicking): But Sir, please understand the field reality! Our partymen have already posed as housemaids, drivers, gardeners in the last one week. Some have even acted as construction workers, truck drivers and even mine workers, Sir.

Netaji (impressed): Wow! Mine workers!

Guptaji (wincing at the memory): The problem is that since it worked in Bihar, the idiots thought it’ll work in Mumbai as well. Anyway, we next moved them to villages where they’ve already acted as farmers, shepherds, landless labourers, shopkeepers, tailors and even as MNREGA workers. Till that indelible ink started getting used, they were working three shifts, Sir. Farmer in the morning, landless by afternoon and driver in the evening. Some dedicated old handers even switched genders. Karan Johar is now recruiting all extras exclusively from our party, Sir.

Netaji (interested): That’s extraordinary! I must ask him to endorse me when I get my LS ticket next season! But, coming back to business, if we have such talented people, it is now easy. Just book the halls, and get some really nice wedding cards printed. And tell them to go into the banks wearing nice jewellery. Half of them can be parents of brides and the other half will be the parents of grooms.

Clever Guptaji (muttering): Let me call Karan Johar. He can start casting for Demonetised Dulhaniya Le Jayenge.

Kahani Contract Ki: Holmstrom’s Sholay connection!

Dear Reader,

Hi! Here’s a tweak piece arguing that the Contract Theory of the Nobel Laureate Bengt Holmstrom is but a spin-off of Sholay 🙂

This piece appeared under my column Tweakonomics in the Hindu Business Line today. You can read it at http://www.thehindubusinessline.com/opinion/columns/tweakonomics-on-nobel-prize-for-economics/article9211922.ece; else read it here directly. Cheers!

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The modern world rests on the foundations built by contracts. Contracts, when completed, when partially honoured, when inefficiently designed, lead to different scenarios that can be used to describe situations in the world of economics and sociology. It is for “launching contract theory as a fertile field of basic research” that the Nobel Prize in Economics for 2016 has been awarded to Oliver Hart and Bengt Holmström.

Year 1975. As fate would have it, Holmström, then a professor at Kellog’s Graduate School of Management, was bored. Life had become but a bowl of cereal. Paul Samuelson had already received his Nobel for unifying static and dynamic analysis. There was Kuznets who had had the last word in growth, and Kenneth Arrow who took the system from growth to welfare. In the process, if there were any fluctuations at all, Myrdal and Hayek had already explained them. Milton Friedman had had the last word on most of stabilisation theory and Ohlin broke the trade barriers. Aaaarrrrgh! Was there anything at all left to be analysed?

Frustrated, Holmström went home and idly flipped channels on TV. Lady Luck was watching. Had Holmström decided to watch the many antics of Lucille Ball, she would not have helped him. The world would then be a different place.

A certain Cambridge economist would go on to become FM and then, against all odds, the PM of a developing country. Quite a strange contract it would be. The intense political economy situation would lead him to pen the theory of political contracts and later to a powerfully silent Nobel acceptance speech. After all, a lot rested on whether he would flip over to the next channel or not. Holmström hesitated, paused, and flipped.

An Indian movie was being aired. There were people dancing to a song. And then suddenly came dacoits. The villagers ran helter-skelter and two good-looking young men shot at the dacoits, who were forced to return to their lair to face the wrath of the Sardar. “Kitne aadmi thhey?” asked the Sardar spitefully. How interesting! This guy, who is the principal dacoit, does not really know what his agents face in the field. The main fella has an objective function of dominating the local area with the help of Kalia et al., whose main objective is to bully and snatch food from villagers. How non-optimal! A breach of contract is imminent. Hmmm. How will the principal control his little gang of agents? “Jo darr gaya, samjho marr gaya.” Ouch!

But see how the coin flips (ahem, quite literally too, in the film). There’s this cop, who too is a principal working with the agents. He is not only armless, but also pretty much blind to field issues. But he is smart. He has the objective function spelt out: “Mujhe Gabbar chahiye. Zinda.” He keeps the money part of the contract simple. Half the amount to be paid at the beginning, half once the job is completed. This thakur tests his agents’ capabilities, gives them information over a spiffing cabaret performance to complete the contract, and in the end also uses the verbal promise made by one friend to emotionally fortify the terms of the contract.

“Brilliant!” thought Holmström feverishly. Every situation is basically an outcome of a contract, wisely or unwisely written. Let me put this down into an academic paper. As the thakur would have said, “Loha garam hain. Maar do hathauda.” The rest is history.

Yours truly…When Raghu wrote a letter!

Dear Reader,

Hi! Now that Urjit Patel takes over as the Governor, Raghuram Rajan wanted to share those wicked tips on handling the high profile job properly! Read the heart-to-heart, Governor-to-Governor letter in my humor column “Tweakonomics” in the Hindu Business Line at http://www.thehindubusinessline.com/opinion/columns/yours-truly/article9022386.ece#comments. Else, read it here directly. Enjoy!

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Dear Bro,

Hi… ummm, let me firstly do the right stuff and welcome you to this super-high profile job. It’s obviously every economist’s dream job, and yes, highly gratifying, intellectually satisfying, policy-oriented and autonomous as well (err, at least on paper)!

Okay, formalities over, let me now talk plain truth. This job is the most thankless, frustrating, annoying and the most unenviable post an economist can ever hope to man. And while I’m extremely proud of you, I must convey that what I feel for you right now borders between high anxiety to plain paranoia. Friedman help us all! Why did you accept this, man?

Well, so I thought that I’ll be a good friend and share some of those few experiences that you may benefit from, as you step into the ring to try and control inflation, growth, employment, currency, exchange rates, FOREX reserves, bond yields, bank assets, RBI pay-scales, central banking autonomy as well as the Government’s ego, all at the same time, while still managing to look completely unruffled and fit from your squash game last evening.

The media is the undoubtedly most exasperating part of the job and will insist on calling you Santa Claus (post rate-cut), inflation warrior (post rate hike) and rockstar (when you maintain status-quo). Hehehe, I may be the rockstar, but you are the quintessential rapper, eh?

There’s news from the RBI, Yo! It’s sure lookin good/

Sentiment is up, so is the market mood!

China is down, but the US looks bright/

 

We’ve got a new warrior, Yo! A corporate-wala knight!

Rap…….Patel Rap!

All the best, Bro. I never quite knew how to react to these crazy things they wrote about me. So here is my first advice. It is alright even if you do not plan your post-policy review speech, but you MUST plan how you’ll react to the rapper analogy. Will you be white-lipped and disapproving, or give just a plain bored look, or will you laugh outright? My personal strategy was always “review with a smile”. That humour quotient always works. And oh boy, are you going to need that humour!

A word of caution. Avoid idioms and phrases and just talk plain ole repo. You’ll do well to steer clear of the land of the blind, one-eyed, two-eyed or any kind of king completely. Also stay away from regular birds like hawks, doves, owls; run in the opposite direction on spotting the black swan.

What can I advice you about inflation targeting? It was you who spearheaded the entire process and helped set the bandwidths around the 4 per cent inflation mark. But Bro, there is this other targeting I have to caution you about. Tch, tch, tch, you are too international for this profile. Born in Kenya, graduated from LSE, an MPhil from Oxford, and a PhD from Yale? A stint with IMF and BCG? Are we in trouble! Earlier it was only me who was “unIndian”, but now there’s also Brett Lee and you. Wonder if they’ll invite Brett next. Anyway, welcome to the madness. I am sure you will deal with it with your usual good sense, and set those bandwidths of tolerance around your profile.

Don’t let the volatility in markets lead to volatility in your mind. Let statisticians worry about the ARIMA models. Remember, GARIMA is more important that ARIMA. A final word: When you are having a hard time, read ‘Tweakonomics’ in Business Line.

Sincerely,

Banker on the move.

Tax tamasha!

Dear Reader,

Hi! Here’s a farce on the passage of the GST Constitutional Amendment Bill, which appeared under my column “Tweakonomics” in the Hindu Business Line today. You can see it at http://www.thehindubusinessline.com/opinion/tax-tamasha/article8943703.ece; else read it here directly.

Cheers!

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GST, Amma Tax and a lot of farce!

Clever Guptaji (in concern): What is it, Sir? I’ve never seen you this tired before! Tch, tch, they really shouldn’t make innocent, lazy people attend Parliament. It is such exhausting work!

Netaji (groaning): Oh, the boredom! I tell you, the FM went on and on about “streamlining the cascading effect of taxes and the move from origin-based to destination-based taxes”. I can never quite figure out what the man is saying. There was only one interesting moment in his speech, when he spoke about “compensation for the revenue loss”. I agreed with him heartily on that, but Chidambaram wouldn’t allow me to express my gratitude.

CG (alarmed): Oh, Sir, thank God that Chidambaram Sir restrained you! The States with high levels of industrialisation collect VAT and sales tax. But they stand to lose out, as GST will imply that the destination States get the revenues. Thus, developed States opposed GST till they were assured that they would be compensated for the loss. The FM was talking about compensating the States, Sir, not compensating you! I hope you listened to PC and did not utter a word!

Netaji (uncomfortable): Oh, now don’t you start boring me, Guptaji. I have had enough of this stuff to last a lifetime.

CG (smiling): So Sir, could you participate in the debate at all?

Netaji (indignant): Participate? I tore the session apart with my yelling! You see, I am one of the few Chosen Ones by High Command.

CG: What? You are Harry Potter? The Chosen One?

Netaji (turning red): Now don’t you start getting clever, Guptaji! I meant, we are a small group of people in the inner circle of the High Command. So, when Rahul Baba pretended to fall asleep (that was our signal), we immediately started yelling that GST cannot go through because the PM himself opposed it when he was CM.

CG (dismayed): But you’ve been yelling the same thing for the past two years! What did the PM do?

Netaji (uncomfortable): Oh, he gave us a little wave from the other end of the House and smiled at us. (Suddenly gleeful) But heeheehee! He too became uncomfortable when The BJP Rajya Sabha Economist made a grand entrance into the Parliament later.

CG (interestedly): And, what was HE saying now?

Netaji (laughing heartily): He said the GST is not really a game changer. It is already implemented in 160 other countries, so the tax is not really “Indian at heart”. He also threatened to expose 27 other levies that seemed to be non-Indian. Heehee! That made them uncomfortable. Their own economist!

CG: Sir, did the AIADMK agree to the idea? Tamil Nadu says that as a “producer state”, it stands to lose out crores if the GST gets implemented.

Netaji (face clouding): Oh, they were making a noise alright. Chidambaram made an innocent statement that the GST should be debated properly as it is the “Mother” of all indirect tax reforms. And then, these AIADMK people got aggressive. One of them said they will support the Bill , but you have to name the tax as the “Amma tax”!

CG (mumbling): Yeah, only that was missing. Amma canteens, Amma water, theatres, and now, Amma tax! What did you do, Sir?

Netaji: Baba fell asleep. So on cue, we shouted that the GST cannot be passed because the PM opposed it when he was CM.

CG: Aaaaaaaaaaaaaaaaaaaargh!

The Book Clash of Titans: Reimagining Subbarao and Chidambaram

Dear Reader,

Hi! Ever since Dr. Subbarao published his memoirs, Mr. Chidambaram has lost his sleep. This piece was published under my column “Tweakonomics” in the Hindu Business Line today. You can see it at http://www.thehindubusinessline.com/opinion/columns/bookclash-of-titans/article8902443.ece; else read it here directly. Enjoy!

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It’s memoir time, much to the horror of the UPA in general, and P Chidambaram in particular. D Subbarao, the ex-Governor of the RBI, the original inflation-warrior of India is back, and how! In his book Who Moved My Interest Rates, Subbarao gives a dekko into the strange undercurrents between the Government and the RBI.

Faced with back-to-back droughts, high inflation figures, a scam-ridden coalition Government unable to take decisions and a global crisis, this RBI Governor was known not only for keeping the interest rates high, but also for sticking to his stance unfailingly.

Students of macroeconomics are often taught the IS-LM model, with the IS curve representing the fiscal side of the economy and the LM curve representing the monetary side. But, never have the IS and the LM curves cut each other so sharply, as in the time of the great Subbarao-Chidambaram tussle. The Government was worried about growth, and the RBI, about inflation. Repo rates were high, tempers, higher. Chidamabaram was red with anger. Subbarao shrugged calmly, and raised the rates some more.

Back in the rum old days of the global crisis, Chetan Bhagat was not yet decided whether to become an environmentalist, feminist or a plain economist. But the Subba story inspired him. Looking at some of those super high repo rates in the 8 per cent range, Bhagat decided to go the economist way. He had then offered to write Subbarao’s biography, Eight Point Someone. Subbarao considered the offer with his usual calm countenance, shrugged, and increased the rates promptly.

But this time, despite upping the rates, he was not very calm inside. The writer’s bug had caught him. Bhagat’s offer had stuck to his mind. “But I’ll be damned if I allow this man to write A Fort-Night at the RBI for me. Nah, I’ll write all of this myself! And God knows, there’s enough material here to create an encyclopedia! An entire Chamber of Secrets to be opened. Pride and Prejudice, unlimited. Malice in Wonderland. Oh, I’ll be the definitive Interpreter of Maladies. And to write the Lion, the Witch and the Wardrobe full of skeletons will be so much fun!” His thoughts complete, he was at peace. And he Atlas(t) Shrugged, and raised the rates some more.

He initially had thought of writing the 7 Habits of Effective Central Bankers. It would be a simple book with only one page:

Keep interest rates high.

Keep interest rates high.

Keep interest rates high.

Keep interest rates high.

Keep interest rates high.

Keep interest rates high.

Keep interest rates high.

Even as Subbarao was contemplating the title of his book, Chidambaram started reading The Game of Thrones. He was thrilled by the cutting dialogues, and feeling clever, called up Subbarao. “Inflation is so terribly final, while growth is full of possibilities.” But he had underestimated Subba. The RBI Governor simply said, “Spoke to Modi yesterday. Winter is coming.”

Chidambaram, enraged, tried the Scarlett O-Hara track, “Sir,” he cried, “You are no gentleman! You will be Gone with the Wind!”

Subbarao commented, “Frankly, my dear, I don’t give a damn.”

Chidambaram, ever the wily lawyer, changed tracks to Iron Man. “What’s the point of owning a race car if you can’t drive it?”

But this is Subbarao we talk about. He simply shrugged (Chidambaram turned white) and said quietly, “Jarvis, do me a favour and increase the rates some more.”