Yoganomics!

Dear Reader,

This article appeared in the Hindu Business Line under my column titled “Tweakonomics.” You can see the article directly at http://www.thehindubusinessline.com/opinion/knotty-problem/article7339329.ece. Enjoy!

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Sigh! This International Yoga Day is really getting to the economists. The closer it gets, the more hassled they look.

And now that it’s here, even as the world celebrates the uplifting art and science of the body and the mind, the economists will be seen frozen in a corner, with numb bodies and dumb minds. Why, you may ask. Why, you may wonder. Why, you may well say with that snooty indifference which only muggle non-economists can have.

It’s simple. Our hopes stand crashed. We were told that Yoga is the most generic solution to any problem, personal or interpersonal. But we have been conned. And we are now sore as hell. Because it looks like Yoga does offer solutions to all types of issues, so long as they are not of the economic type. The UN Secretary General Mr. Ban Ki-Moon (BaMo) says that the singular act of getting the tree posture (Tadasana) right gave him that “simple sense of satisfaction” of having set the world right. Just try getting that GDP series into the tree posture.

So, imagine, how Baba Ramdev would react on seeing the GDP growth series. OMG! That would be like seeing a seriously distressed patient, with pathetic levels of energy. “Anulom Vilom!” The commanding voice will bark and while all 3500 participants at the Nehru Stadium will demonstrate the sharp intake of the breath, the GDP series will give out a huge sigh and continue on its way out of the stadium, looking more depressed than usual.

Send in the WPI. Hell lot of negativity all over. The Ramdev solution? Immediate pranayam to get the positive vibes back into the series. The entire RBI is now breathless doing Pranayam for the past 6 months, but WPI hain ke manta nahi. Perhaps the right thing is to get the Arabs into Pranayam mode, so that they’ll not swamp the markets with crude.

And just look at the exchange rate series. Like a temperamental artist, it goes all over. It’s so volatile, surely Yoga can help us to calm down this hyper energetic model? “Padmasana!” says the Master. The Lotus will help to stabilize the exchange rate. Really, now. Ahm, that’s too politically correct, isn’t it? No, let the exchange rates dance their zumba.

Baba will have to really think when he sees the interest rate though. Firstly, there’s a schizophrenia issue. Sometimes, the series is a repo, at times it can convert itself into lending rates, and sometimes it dons on an international personality like the LIBOR. “Shavasana!” The posture of the dead body. The classic remedy to calm down mental issues. But surely, we can’t afford a lifeless interest rate, can we? They have been in a dead state in Japan for nearly 15 years now and still the gloom persists.

Further, this is a series that is not in great form physically either; it’s seen too many surgeries for its own good. It is sometimes raised to a great height and pegged to a target and then slashed. Hmm, post-surgical Yoga. Tricky, this one. But no problem. We have a solution, says the Master. “Ardha Titaliasana!” The butterfly posture. But that is recipe for chaos theory. Fluttering of a butterfly in Indian banks causing a storm in businesses, you see. Thanks, no thanks!

Bring in those tricky blighters. The fiscal deficit and public debt. The sweetmeats you consume everyday and the total added up weight of the body. The diagnosis is immediate. Obesity. “Shirshasana!” The headstand. And view everything upside down, eh? And then you’ll claim that economists are freaks and need Yoga to calm down.

 

 

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The New Contagious Crisis called GDP Revision!

Pssst. The IMF team is here on a two week visit to study India’s data collection process. Why? We have’em running scared, that’s why. The poor devils cannot fathom how a country that was stuck at the jinxed sub-5% growth rate with “macroeconomic vulnerabilities” could suddenly show a 7.4% growth for FY15, and expect 7.9% for FY16, give or fashionably take 20 bps. It’s not only them; the UPA too is scowling how they couldn’t have seen it before. According to the new series, the GDP growth rate for FY14, the election year no less, was also a healthy 6.9%. Ouch! And to think they lost the election because they apparently didn’t perform on growth!

The IMF is now seriously scared. They have realized that the developing economies now have got hold of the Elder Wand with which they can create magical growth rates. It’s simple, really. The idea is not to revise the base year of the GDP series, come what may. So you stick around like a leech to a base year for 9 or 10 years and so, new products and services that the economy is creating are automatically not included in the GDP calculations. You get depressed GDP calculations and the west eyes you with pity and tries to give you the encouraging boost by calling you hearty and false sounding names like emerging markets and sunrise economies and stuff, when well, you in fact have already emerged, the sun has risen and the bric-mason is laughing all the way to the bank.

The rest, as they say, is economics. After around 10 years, you suddenly wake up from the GDP hibernation and declare in that tone of stellar surprise, “Omigosh, has it really been 10 years? Well, time to change the series.” But careful, here. For, while the tone of surprise is sufficiently necessary, it is not necessarily sufficient, you see. Because these multilateral and especially ratings agencies have got the habit of asking those nasty awkward questions like why you didn’t have this brilliant idea before. So, think about answers. If the party in power has changed, great! It was THEY who were lazy, right? Add to it useful words like policy paralysis, and you are through! Hmm, however, not every country has such wonderful luck. In that case, build up your case. Tell’em how no year in the past 10 years has been “normal” enough to be classified as the base year. After all, the US sub-prime crisis affected the EMEs too, making revision almost impossible. Twas the US, not US! That’s the line to take. That’ll make them go on the defensive and not ask too many deep questions. And if even that doesn’t work, there’s always good ole climate change. Climate change has positively made all years in the past 5 abnormal.. And please, do NOT call it bin badal barsaat, for heaven’s sake. The El Nino and the La Nina. That should do the trick.

And then, revise. That’s it. With a straight face. Further, “benchmark the series for ease of international comparisons”…oh, just use the GDP at market prices rather than factor cost. Increase the sample size for “statistical robustness.” The Sub-Saharan Africans discovered the trick a couple of years ago; Ghana posting a 19% growth rate was creating palpitations in a recessionary world, thanks to changing base after about 18 years, when the Nigerians announced wickedly that their base was as old as 25 years. With Africa revising, Modi Sarkar cannot be behind. Today’s visit to China has been fast-tracked so that we can crow about this before the Chinese cotton on and decide to put in their own revision. Won’t be surprised if, before long, the world is clocking global growth rates of about 7%.

The IMF is stumped. You see, there is a new contagious crisis episode in the globe. Its the GDP revision crisis.