Surgical, Purgical and Mergical Strikes in the Indian Budget

The surgical strikes carried out by the Indian Army have taken the imagination of the country by storm and rightly so.

In the meanwhile, “Surgical strike” has become the absolutely new buzzword in town. Such is the lure of the word that Chetan Bhagat has immediately decided on his new book: Surgical Strike-Point-(at)-Someone. The fellow is simply incurable.

Newshour has declared 8 weeks of Surgical Strike analysis and apparently been calling up Pakistani politicians furiously to book their dates for the period. This single-handedly has caused dizzying levels of relief for Indian politicians, who for the first time in many days, feel completely free to make idiotic statements and mini-scams without fear of being grilled by the One and Only. The PR team of the UPA scion’s Kisan Yatra is said to have collapsed amidst mingled tears of joy and relief. The Kisans though, are on the run.

B-Schools, tired with meaningless terms such as “leveraging marketing strengths to enhance ground zero” are simply overwhelmed by the discovery of such a powerful new word. Harvard Business School has now officially included a new strategy in the corporate mantras: The Strike with a capital S. Bewildered students are now being asked to “leverage marketing Strike potential to enhance ground zero”. Financial Management Journals, which hitherto described “Strike Price” as the price at which a security can be purchased due to an option, now also include the definition of the “Surgical Strike Price”. This is the price at which security can be enhanced when no options are left with us anymore.

Amidst such corporate celebrations, however, the FM has been sulking. Had he known the term before, he could have leveraged it to enhance ground zero, errr, to highlight main points of the fiscal policy. How? Well, getting the GST passed was no less than a surgical strike, was it? To trump the Opposition in LS elections so as to get the majority in the Lower House, and then to diplomatically isolate them by highlighting their attempts to stall the Bill, was just the start. And then, those incessant sessions with the State Committees to understand the sticky issues and accommodate the sensible demands. Hadn’t he too, spent sleepless nights, before the passage of the Bill?

Take the case of removing the Plan – Non Plan design of the Budget.  For the first time, the Budget will be presented, way before its usual February date, without the usual priorities as suggested by a Five Year Plan. The Budget accounts will only be classified into the Revenue and the Capital Accounts, with zero mention of the legendary Plan and Non-Plan Expenditure classification. To remove the influence of the Five Year Plan from the Budget as well as do away with a separate Railway Budget has been no mean feat; a “purgical” strike, anyone?

Hmmm. And that masterstroke of creating the Monetary Policy Committee (MPC), while at the same time allowing the Governor the autonomy of a casting vote. He had simply changed the dynamics of the game; now there would also be growth combatants together with inflation warriors within the RBI. He had successfully merged growth objectives with inflation management, and how! “Oh, I should have called it my “mergical” strike” he thought wistfully.

Of course, the decision of the MPC, in its very first policy review, to slash rates has not gone down well with all economists. Dr. Rajan, the erstwhile Governor shuddered delicately in Chicago, when quizzed about his reaction to the rate cut. “It’s more of a “splurgical” strike,” he said. “A classic case of too many cooks spoiling the Booth.”

 

Hemline Economics

Dear Reader,

When Rabri Devi made that errr…awkward observation about the length of the RSS trousers, most took it to be a political gimmick. But did you know that she did this because she wants to be RBI Governor?

The real connections in hemlines and GDP cycles appeared in my column “Tweakonomics” in the Hindu Business Line today. You can read it at http://www.thehindubusinessline.com/opinion/hemline-economics/article8377758.ece, else read it here directly. Enjoy!

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Trousers today, growth tomorrow?

The market crash of 1928 created a slump hitherto unseen and as the GDP of the US went into the Great Depression, women, who could no longer afford silk stockings, chose longer skirts to cover themselves.

It’s a debate that has been around for long. Are the cyclicality in GDP and fashion really interrelated? Economists sniggered, feminists roared, designers shrugged and the debate raged on. As the global economy bettered after WWII, hemlines continued to rise and the mini-skirts as we know them today, made their entry into the fashion world in the 1960s, coinciding neatly with one of the most expansive phases of the globe.

Come 1970s and skirts lengthened to reflect the oil shocks and stagflation. The lost decade of the 1980s is also best remembered for the “maxi” wave with full length skirts, whilst the housing boom in 2005-06 saw hemlines rise madly. Full length “peasant” skirts made a comeback in 2011, only after the economy failed to recover after the great financial crisis, prompting the CNBC to carry a feature titled “Hemlines are plunging, is economy next?”

The “vital statistics” on this one came as late as 2010, when Marjolein van Baardwijk and Philip Hans Franses from the Econometrics Institute, Erasmus School of Economics, decided to “figure” out the truth using data based research. They actually went on to collect monthly data on the hemline from 1921 to 2009 and then contrasted it with the monthly GDP cycle as indicated in the data by the National Bureau of Economic Research (NBER).

The “long and short” of the debate, they conclude, is that hemlines are led by the GDP by around three years globally. Thus, a low growth rate today could prompt longer skirt lengths in 2019.

“That is exactly what our leader was saying!” reacted the spokesperson of the RJD. “And they accused her of being a woman of the 19th century! But this is a truly forward looking leader with terrific economic insights.” The economy is not doing well at all under the NDA Government. The decision of the RSS to shift to full length trousers is an acknowledgement of the state of the economy.

The GDP is plunging today, the trouser length will plunge tomorrow! The RJD has also gone on to say that Rabri Devi may well be on her way to becoming the next finance minister of Bihar and if things go right, will eventually head to Mint Street to become the RBI governor. “It’s really rather easy,” said the spokesperson. “All you have to do is watch the hemline. When hemlines fall, the interest rates have to fall pro-cyclically.”

The RBI reacted sharply by stating that any decisions to slash or increase rates are only taken after rigorously analysing multilateral causalities in economic fundamentals within a general equilibrium framework. When the RJD did not understand, a special statement was issued in the vein of popular economics. “Relationships in hemlines and GDP are fictitious. Any resemblance to correlations, past or present, is purely coincidental.”

Econ Mom becomes the FM!

“Sssshh! Can you reduce the volume, guys? I am reading something important!” I yelled to Lil One and Hubby, who were watching some crazy TV show with great gusto.

“Mom, come join us…what are you reading anyway which is so important?” Lil One sounded hurt that Mommy wasn’t joining in the fun.

“Oh, she is reading news pertaining to the Budget,” said Hubby, in a maddening, condescending fashion. “As if she’s going to be the next FM.”

The words stuck to my mind. As if I am going to be FM. That would be a disaster of an order unknown. Econ Mom could almost see the entire circus unfolding.

A couple of days ago, the Halwa party was held at North Block. Well, that’s kinda traditional. The halwa party marks the printing of the budget documents. About a 100 officials who are involved in the printing of the budget documents stay at North Block from the halwa party upto the budget day so as to maintain complete secrecy regarding the same.

If Econ Mom were to be the FM, the first unmitigated disaster would be awaiting me at the halwa party in the format of Hubby’s Aunt, the Cook, who believes that she is the Only One who can..Cook.

“Oh no no no, is this the way to make halwa,” she would grumble, causing all the bureaucrats and budget experts, already weak from the crazy work schedule, to cower visibly before her towering persona. “And this is not halwa, to begin with. This is Sheera. Your cooks don’t even know how to make halwa.”

I would be busy trying to pretend I do not know the woman and do some intellectual talk on the fiscal consolidation path.

“Beti, next year, whether you are FM or not, and looking at your track record, I am really not sure you will be, but I am going to teach this joker to cook halwa. Tch, tch, tch…when the boss doesn’t know how to cook, how can I expect this poor man to be cooking properly!” This last bit would be probably addressed to Arvind Subramaniam, the Chief Economic Advisor, who would start to explain that he was NOT the cook. “No, no, no. Don’t give me excuses, young man. You are a very poor cook!”

Eve of the budget. The entire team would be discussing the last minute issues. “And Madam, be forceful when you make that announcement about cancelling the LPG subsidy for the richer households!”

And in the midst of the Chak De! huddle, Hubby would call, just to take stock and generally shake me up with the most stupid details. “Sweetheart, our washing machine stopped working today.”

“Ohk, look, I really can’t talk about this…we are in the midst of the LPG subsidy strategy..”

“Good you reminded me!” This, if I know him, will come in a super booming voice. “Say, sweetheart, we’ve run out of both cylinders. I know you asked me to book a refill, but I don’t have the number….errr, do you?”

“What? Gawd, how can you? Forgot to book a refill? I am really going to levy a special tax on Company Secretaries tomorrow.” That last bit would be hissed in that poisonous tone I generally reserve for him.

“Hey, cool down, honey…just joking…what are you so tense about? It’s just a budget!”That’s SO typically Hubby.

“Just a budget? JUST a budget? I have to announce it in the midst of antagonistic opposition members and later there’s a talk scheduled with Arnab Goswami…I am scared…”

“What are you saying? Scared of Arnab? Arre, don’t you worry, just imagine its me you are talking to and you’ll tear him down to pieces in that rude, impossible, toxic, inimitable fashion of yours, sweetheart. I give him 2 minutes at the most. He is going to meet his match today!”

Sigh! Was that a compliment?

Day of the budget. I reach the Parliament with the suitcase in hand…nnnnah, make that a purse, a real classy one. Hmm, I am dressed up and am walking up the steps when the cell phone rings.

“Moooooommmmy, I forgot to tell you…we had to take Geography maps to school today, else I’ll get a remark!” That was typically Lil One, who ALWAYS remembers what’s to be taken to school whilst at the doorstep or in the school bus. Grrr!

Gawd, this is so stressful! “Listen, I am going to be on TV. You can tell your friends too. And a remark or two is ok!”

“What? They finally gave you that lead role in Kabhi Bahu Kabhi Daayan? Dad was telling me! How embarrassing! I am not telling my friends. They’ll laugh at me. So now I’m getting a remark and plus everyone’s going to laugh at me….Aaaaaaaaaaarrghh!”

It’s final. Econ Mom really doesn’t want to be FM.