"If God created us in his
own image, we have more than reciprocated."
—Voltaire (French,
1694-1778)
Word for the day
Apatetic (adj)
Assuming colors and forms
that effect deceptive camouflage.
Malice towards none
What is more worrisome for
Americans at this point in time:
(a) Trump may become the
president of the country; or
(b) If Trump gets Republican
Party's nomination, then a woman might become the president of the country?
First random thought this morning
After ECB, the BoJ has also cautioned the market about the poor
economic outlook. All eyes are on FOMC meeting outcome today. If Fed also holds
rates and uses a similar language to express its concern over global economic
outlook, the alarm bells may begin to ring rather raucously.
The best case for markets would be if FOMC decides to stay on
course by hiking 25bps and shows flexibility by assuring in "whatever it
takes" language.
Could it be different this time - 2
Since past two years, we have seen some material changes in the
Indian economic policy framework. The impact of these changes, though not yet
being acknowledged publically by anyone for obvious reasons, is far reaching.
Though, I do not want to ascribe these changes to any political party, it would
be unfair to deny the role of the strong commitment of the current leadership
in enforcing and accelerating the pace of these change. And it is this pace and
intensity of the changes that is giving me confidence that it could be
different this time.
I would highlight few examples to explain my point:
Like all other emerging economies, the debate in India has always
centered around “crony capitalism”. All political parties have accused each
other of pursuing crony capitalism. I have always maintained that this debate
is completely misdirected, for (a) it leaves the biggest scam out of the purview
of debate and (b) it does not focus on “crony socialism”, which to my mind has
harmed the country more than anything else.
Maintaining the negative real rates for households (household
inflation minus term deposit rate) for a very long period is the biggest scam
perpetrated on the poor people of this country. The inflation tax, as I call
it, paid by poor and middle class savers for cheaper financing of “crony
socialism” for the benefit of politicians and "crony capitalism" for
the benefit of unscrupulous businessmen, has caused tremendous damage to the
fundamentals of the Indian economy.
It has resulted in wasteful public expenditure, misallocation of
capital, and unsustainable economic growth (that is visible mostly in the
statistics). Not many social and qualitative indicators corroborate the kind of
growth politicians claim to have delivered.
For years, poor and middle class households have probably funded
almost the entire subsidy bill of the government through this inflation tax.
Whereas it is common knowledge that large part of subsidies has historically
gone to enrich a few. For records Rajiv Gandhi put it at 95%. Current claims
range between 50-70%.
The best way to understand "crony capitalism", I often
use the example of a typical municipal school child in Mumbai or Delhi wearing
a worn necktie, torn & dirty shirts, and plastic or rubber Chappals.
Politicians and administrators have sought to achieve the equality
between government and private schools by prescribing a necktie as part of
uniform for poor kids who cannot even afford to wash their uniform thrice a
week!
To make the matter worse the parliamentary debate is focused on
“who is the supplier of the neckties” instead of “how to improve the level of
education in government schools”.
The current political dispensation at the center is taking both
the menace - "crony capitalism" and "crony socialism" -
head on.
...to continue tomorrow
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