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.

Econ Mom as the confused driver!

Aaaaaaaaaaaaaarghhh! It’s been such a nutty week and poor Econ Mom is a complete, total, confused mess.

It all started a couple of weeks ago, when my car started making strange noises on applying the brakes. Now, a good ole Honda doesn’t ever create any which noise, forget strange noises, and I was spooked. I tried applying the brakes fiercely, gently, with a smile and with a professional pan-face. Nope.

The car wouldn’t be persuaded and was taken off for an overhaul. In the meanwhile, the Hubs sweetly offered me his car. I’d have liked it with the Hub-chauffeur, but no such luck. I got only the machine minus the man. And the main problem is that it is German.

We, of the Honda tribe, detest German engineering. Gott im Himmel! Hubby’s Polo doesn’t start till you apply some serious muscle tension to the key; and the reverse gear is the first gear plus tension. I tell you, I was unused to such tension in my regular driving life and it was freaking me out.

But, you don’t know the worst yet. The Polo indicator controls and the wiper controls are on the wrong side. The Germans may be marvellous at engineering, but the idiots don’t know their left from the right. OMG. This is magnificiently spooky. I was feeling like a right wing economist being forced into writing a poem “In Praise of Marx and Controls.”

The first day on the Polo and some weirdo who came from the opposite side of our super narrow street flashed his headlights at me. Now this, is a pure-ghee Indian driving phenomenon. The person flashing lights first apparently has the moral right of way, other things be damned. “Oh yeah, I’ll show you who goes first,” I thought viciously and flashed the light indicator viciously to be met by a most efficient German water jet on my windscreen, causing me to jump madly in my seat. “Hell,” I thought, automatically moving my left hand towards the wipers, in the process switching on some indicator lights. “Oh, this is really quite merry”, I thought with gritted teeth as cyclists and bikers behind me started to swear, not quite sure where I might eventually turn. By now, in addition to switching on all possible headlights and indicators, I had also started the wiper on the backscreen. My car does not have the feature and I was terrified. Germans, you back stabbers!

I had a real bad first week with the Polo. Even the radio wouldn’t play soothing songs and after listening to that idiotic woman pleading “DJ waale babu mera gaana bajaa do”, followed by Yo-Yo Honey Singh informing me conversationally in the middle of the downpour that “Din Hain apparently Sunny Sunny Sunny Sunny Sunny Sunny”, I was completely disheartened. I had had it.

Hubby was absolutely enjoying the whole process and had started taking unusual amount of interest in my daily “Aaj ki Polo khabar” ravings and rantings. After listening to my conspiracy theory on how the same radio stations were playing different songs for the Polo drivers, he couldn’t control his glee at all. “You could try writing “Who moved my indicator controls? We’ll get Subbarao to write the foreword for your book,” he suggested wickedly. “Oh, shut up. I’ll write Econ Mom and the Cursed Car instead,” I muttered darkly.

Sigh! As if I did not have enough on my plate, J K Rowling, of all the people, had decided to come out with a badly written book.  Lil One and I had quite a merry little boxing bout the day it arrived home, which I won mostly by virtue of tickling him (“That’s cheating, Mom!”) and then packing him ceremoniously off to school. But I was so badly, badly disappointed. The max humor content the book has to offer is when Albus Potter tells Scorpio, “Yeah, you can’t be Voldemort’s son. You’ve got a nose!”

Oh, really. C’mon, is this Rowling? To read a Potter without the witticism and the detailed plots and well-developed character nuances was such a culture shock. It was exactly like putting a Honda driver into a German car.

And then, the GST Constitutional Amendment Bill was passed. Such a rude shock for us economists! I mean, how could they? The monsoon session had started properly enough, with Rahul Baba dozing off and the rest shouting madly. Now, technically, this fervour had to be followed up with paper balls, flinging of chairs, and well, maybe pepper spray for high drama. Chidambaram had to shout that the NDA does not know its economics, and Subramaniam Swamy had to follow it up by saying that nobody in the world knows economics. An apoplectic-with-moral-rage Arnab, falling markets and a witty Tweakonomics piece by Yours Sincerely would wrap it up nicely.

So there I was, waiting for the Amendment not to go through, when it went through! Unanimously! And that is BIG news. It’ll mean a lot of changes in the short run, but the longer run gains should make up for the trouble. A single-window for indirect taxation, lesser administration, more transparency, lesser subjectivity in assessments, lesser time in transit and hopefully, a fair sharing-between-states system. It is what every economist had dreamt of.

And yet, there I was, confused. How can the UPA behave so professionally? Now whom will we blame for the low-pace in reforms? When you have all politicians rooting for taking reforms ahead, rather than play their own silly partisan games, it creates a rude shock in the minds of innocent citizens like me. Exactly like putting a Honda driver into a German car.

Epilogue

After driving the Polo for about 10 days, I got my car back. Oh, the feeling! I could have run to it and honked in slow motion! God must have sensed the romance and sent a small drizzle my way.

I immediately sat in my car and then, to my horror, started reflexively moving my right hand to start the wipers. To my consternation, the indicator lights started ticking, while the wipers wouldn’t budge. The radio informed my frayed nerves that “Hafte mein chaar Shaniwar hone chahiye”. OMG. Now I’m a German driver in a Japanese car. Help!

 

 

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.”

Econ Mom, Brexit and the Wimbledon finals

OMG. It’s that time of the year again, when Team Phadke moves into Antagonism Extremis.  As the loyal blog reader must know by now, we, the Phadkes, have never quite taken to the Amicable Extremis family model of the Smriti Irani prototype TV shows. We hate each others’ guts, and we’re superbly candid and proud about it. Even Lil One does not quite like his parents. Even when he was in third grade and all the ickle ones wrote reams and reams of stuff on “What I like about my mom”, Lil One had sat in school with a puzzled expression on his face, really not sure what he quite liked about Mommy dearest. He had finally ventured to write “My mother is funny. She makes faces while telling stories. She looks weird. I think I like her.” I hadn’t quite known whether to fret or be proud of the boy.

Well, so, to come back to the point, we don’t normally see eye to eye on most things, me n Hubby. But our usual arguments (which are fairly Ouch!) seem almost….sweet in comparison, when June arrives. Why? Because, June is TENNIS! The French Open followed by Winbledon, back to back. It’s enough to send our household into a complete, no-holds barred war scenario.

About a decade ago, when the Roger Federer – Rafael Nadal rivalry was at its peak, the June season at our place used to spark some of the worst marital issues ever. Even worse than who’ll do the dishes at night. Even worse than who didn’t fill the icecube tray after last use (That, single handedly is the cause of 73% of the famed Phadke arguments. BTW, it’s always Hubby. Though he’ll never agree to it. I am now thinking of putting in a mini camera in my ice-cube tray just to prove him wrong. Hehehe.) Even worse than who’ll clean the toilets. And that’s saying something. Sigh!

What with me supporting Nadal and Hubby dearest supporting Federer, emotions used to run sky high. French Open and the clay courts would normally bring out the best form in Nadal and the best scowl in Hubby. Oh God, after Nadal won the French Open final against Federer in 2007, Hubby had sulked and sulked and didn’t speak to me till Federer beat him back in the Wimbledon season. That I didn’t speak to him for an entire 2 month period post-Wimbledon is just a logical extension of the argument. Hubby is quite fond of that particular memory and gets this glassy eyed expression whenever he thinks of those two blissful months with me not shrieking at him.

This year’s been no different. “Nadal not playing French Open due to injury!” Hubby piped up suddenly, over morning tea whilst reading the news. “Tch. Tch. Tch. The poor man’s getting old. He should retire.” That came in a gleeful, teasing tone.  He spent most of the day passing idiotic comments on me and singing, “Mujhe buddhaa mil gayaa” and generally making me mad. Heehee. The next day Federer crashed out due to injury. I now joined in the singing fairly enthusiastically. By day end, we were getting on each other’s nerves and had a mother of a fight that evening. Even with both of them NOT playing, we again stopped talking to each other. AAAAAARRRRGH!!!!

Wimbledon was to start on the 27th June; in the meanwhile the Brexit referendum was held on the 23rd. The leave lobby won by a very slight margin; it was 52% voting for leave as compared to 48% voting to remain. I wasn’t amused. “I really don’t understand what they are going to gain by exiting.”I was talking to one of my colleagues on phone. “45% of UK exports are vis-a-vis Europe. How can one expect to create that kind of an export share with some other country? They are worried about the Syrians coming in and taking their jobs. But frankly, if Brexit happens, there won’t be too many jobs around in the first place for anyone to come in and grab. Brexit is so not a good idea!”

I have been reading up by the ton on Brexit analysis that is coming through and the more I look at the issue, I get a feeling that this is going to be one major setback for the EU in general, and UK in particular. Colossally bigger in scale and management than Greece was. The Grexit was about a fiscally indisciplined, small problem-child wanting to exit the family. UK has a fairly big presence in the EU and will create multiple issues upon exit. There’ll be something of a case that EU will want to make out of it and will make it painful for UK to exit, just so that others do not entertain similar fanciful ideas. The pain will obviously come in through squeezed out market access, high tariff and non-tariff barriers against UK, lower accessibility to capital flows etc. UK, which will be at the receiving end of the cold shoulder, does not have an immediate ally such as the US to help them tide over the crisis. Hmmm, Brexit is going to be fairly painful for UK.

“Mom! Are you coming here?” yelled Lil One from the living room. “The semi-final is just starting! Raonic vs. Federer!” OMG. Of course. I hurried into the living room. The tension was palpable. Hubby and Lil One turned blue, green and a delicate shade of yellow as Raonic unleashed those aces on Roger Federer. It was sad. Federer lost the semis and the final would now be between Raonic and Murray.

“I hope Murray beats him 6-0. 6-0, 6-0.” That was Hubby, brooding with a dark gaze on the dinner table. This is interesting. Hubby has never quite supported Murray, whereas I am well, not too fond of him, but I like his game.

“Gosh! Does that mean we ALL support the same player in the finals?” Lil One was quite impressed by the uniqueness of this situation. The poor boy has never quite seen his parents support the same player during tennis season. I wonder if he’ll be able to handle this spirit of bonhomie during Wimbledon finals.

“Yes, Lil One,” said Hubby winking at Lil One wickedly. “I so totally agree with Mom. Brexit is such a bad idea!”

 

 

 

 

 

 

 

 

David Cameron and the Half Blood Prince

Dear Reader,

Hi! Here’s another Tweak piece on what happens when the British PM meets with Cornelius Fudge, the Minister for Magic! Being a huge Potter fan, it was tremendous fun for me to put this up for my column “Tweakonomics” which appears in the Hindu Business Line. You may want to read it at http://www.thehindubusinessline.com/opinion/columns/tweakonomics-muggle-muddle/article8784435.ece; else read it here directly!

Enjoy, Ye Potter Fans!

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Muggle Muddle

It was nearing midnight and the British Prime Minister was sitting alone in his office, reading about Article 50 of the Lisbon Treaty to get the Brexit going. In his mind he could see the gloating face of Nigel Farage, his political opponent from the UK Independence Party.

Farage had been vehement about the incompetency of the government. It had allowed too much immigration, he said, leading to loss of jobs for the British. The terrorist threat had increased. British sovereignty had been compromised. Of course, the young knew better. They knew it was an advantage to be inside the EU. But they hadn’t turned up for voting! So many accusations, the referendum and now, the Brexit. It seemed almost magical.

It was then that he heard a soft cough. He froze, he knew that cough. He turned very slowly to face the grate, wherein green flames were already bursting into Sterling pounds. Seconds later, Cornelius Fudge climbed out of the flames. “What a week, what a week,” he said, looking distinctly careworn compared to when he had seen him earlier.

“Had a bad one too, have you?” asked the PM stiffly. “Yes, of course,” said Fudge, rubbing his eyes morosely. “I’ve been having the same week you have, Prime Minister. Accusations, monsoon failures, a Rexit and a Brexit.” “You.. er.. your.. I mean to say, your people were.. were involved in those things, were they?” Fudge fixed the PM with a stern look. “Of course they were,” he said, “Surely you’ve realised what’s going on?” “I…” hesitated the PM.

It was precisely this sort of behaviour that made him dislike Fudge’s visits so much. He was, after all, the PM and did not appreciate being made to feel like an ignorant schoolboy. The first time Fudge had emerged from those flames, he’d said, “The world is moving into a crisis. Albus Rajan has already forecast the sub-prime. But we will control the Dementor attacks using dragons. Don’t look so scared, Cameron.” “Dragons?” The PM wasn’t quite sure he’d heard right. It was only after Mario Draghi took over at the ECB that he had started appreciating Fudge.

The second time he’d seen him was just before the 2013 Wimbledon finals. “Wimbledonium Murraysmus” he’d muttered, enabling Andy to give magical replies to Djokovic of Durmstrang fame.

But this time the Wizard looked tired. “It’s been an unprecedented week all over the world. The Dark Forces are strengthening. They put the Muffliato Charm on your campaign so that no one could really hear your arguments for staying within the EU. Use of the tricky Fidelus Charm on young people has also been detected. The young population couldn’t see the voting booth till the secret keeper decided to reveal it to them. The Secret Keeper was Farage!”

“That’s why he was gloating!” thought Cameron. “Why only us?” he asked.

“Oh, no no! It’s everywhere! They apparently managed to put the Imperius Charm on this Indian parliamentarian, after which he imperially started blaming economic wizards for things they hadn’t done. Quite a menace. And then, the Rexit happened.”

“So, has Rajan decided to retire?”

“It’s not Rajan! It’s RaGa! He’s apparently finally learnt to disapparate. Rumour is that he’s coming here to steer you through the Brexit. He says that only the Rexit can prevent the Brexit.”

“What? OMG! Arrange a press conference for me immediately, Fudge. I resign as Prime Minister of the UK.”

Dear Reader,

Hi! This presentation was prepared to support my talk to MBA students on the Brexit. It contains the basics of what the Brexit is all about. I have attempted to give a quick historical background to the European Union and the Eurozone, and have then created slides on the pros and the cons of the Brexit.

It is possible that you feel a disconnect while browsing through the slides, because the connections are meant to be created through the talk. If such an issue arises at all, just write in, and I’ll take care of your query pronto!

Brexit June 2016