Enigma of inflation

Thought for the day

"It is difficult to free fools from the chains they revere."

—Voltaire (French 1694-1778)

Word for the day

Concatenation (n)

A series of interconnected or interdependent things or events.

Malice towards none

Do the TV channels daily broadcasting sponsored programs of quacks and suspicious preachers have any moral right to speak against superstitions and malpractices prevalent in the society? Also do the newspapers carrying prostitution advertisement under garb of friendship clubs, massage services etc., should be heard on the matter of women exploitation?

First random thought this morning

Is it a mere coincidence or the current administration (both at center and state level) is making serious attempts to correct a number of distortions in the Islamic practices especially relating to mexploitation of Muslim women, like Triple Talaq, NIkah Halala, Nikah Mutah, etc.?

Regardless of anything this is a welcome development and should be appreciated by all.

Making it clear that establishment will not seek to exploit the issue for electoral advantage, may minimize the resistance from Muslim male too.

Enigma of inflation

For a common man like me on the street, who is blissfully ignorant of the principles of economics and public finances, inflation is nothing but an enigma. The rising prices do hit him hard, but that also lead to rise in his nominal income and hence social stature. Higher nominal interest rate on his savings, higher notional value of his house & jewellery; and higher rental for the spare room on the top floor provides him some psychological comfort, at the least.

As I see it, for a common man, inflation is more of an income inequality issue than anything else. For example consider the following:

(a)   A farmer should gain maximum from the food inflation. Given that over 60% population is engaged in the farming and related activities, theoretically consistently high food inflation should result in transfer of wealth from non-farm sector to the farm sector. But this has not been the case in any of the high food inflation episodes in past seven decades. The gap between rural and non-rural income and wealth has been consistently widening.

(b)   The food inflation should also benefit the urban middle class. The expense on food for a typical Indian middle class family is not more than 40% and a typical middle class household saves 25% of his income. If food inflation is 10%, a 5% rise in nominal income should be sufficient to offset that.

Besides, they would need sufficient rise in nominal income and asset prices and interest rates to offset the erosion in real value of their savings. This perhaps has not happened in past many decades, implying that nominal rise in asset prices and interest rates has not been consistent with the general rise in price levels. The wealth is thus consistently getting transferred from savers to borrowers.

(c)    One could argue that transfer of wealth from farmer and urban middle classes to trader and indebted industrialist is a function of risk they take.

But if we consider the history of NPA cycles, and exploits by moneylenders this argument gets weaker. Large borrowers have been consistently transferring the risk to public sector banks, and hence the common public, through frequent defaults. The money lenders in informal sector have been fairly successful in exploiting the household and farmer borrowers, not allowing any benefit of inflation to them.

The equation in energy inflation (mostly imported or arising due to state inefficiency) and core inflation is different, but impact is mostly the same.

In my view, therefore inflation has been a medium of wealth transfer from common man to the rich. The current raging debate over rise in prices of food therefore has to be seem from this angle also.

I have been highlighting that at the current productivity level farming in India is mostly an unremunerative business. A multifold rise in either farm productivity or prices can only correct this situation.

I would seek readers' view on this problem, before I take up it in some detail.

Whose history is it anyways - 4

Thought for the day

"The art of medicine consists in amusing the patient while nature cures the disease."

—Voltaire (French 1694-1778)

Word for the day

Oceanicity (n)

The degree to which the climate of a place is influenced by the sea.

Malice towards none

Could Trump do to Kim what Bush Jr. did to Saddam?

First random thought this morning

It is surprising to see that investors who were bullish on Indian equities due to "strong macro" fundamentals, seem even more bullish at the prospects of fiscal profligacy in the form of fiscal stimulus (now that government has finally admitted to the deterioration in economic health of the country). The current account has already joined the weak spots of the economy category.

Despite a "no show" for four long years (FY13-FY17), there are many who still feel earnings will present a gala show this year and the next. May the wolf come soon, while villagers are still listening to the shepherd boy!

Whose history is it anyways - 4        

I have received a large amount of hate mail for my views expressed in past three days. I am grateful to all those who took pain to write. This fully corroborates what I have been observing during my travels and trying to highlight here.

I do not want to engage in any political debate. I am certainly not concerned about the knowledge of our politicians about history and economics of India. I also do not wish to sermonize anyone or judge any party or organization by their recent activities, iterations, and ideologies, or lack of it for that matter.

I would like to limit myself to my economic interests and in my view, the rising insolence and cynicism in a society can never be a good news for its economy.

Many people would agree with me on my assessment that the incumbent government has introduced a fair degree of unpredictability in policy making in the country. The policy paralysis that was widely believed to be the hallmark mark of the previous government has been replaced by the elements of unpredictability and radicalism. Though not worrisome per se, this tendency has unwittingly put the administration and the people impacted by the fiscal policies on path of confrontation. Consequently—

(a)   Suspicious of future policy direction; unconvinced of government promises, and uncertain about the stability of current policy regime - people are deferring both investment and discretionary consumption decisions. One may argue that the growth in sales of automobile and white goods is not indicating much slowdown in discretionary consumption demand. To this I must reply that the growth trajectory of it has certainly moved down and lower return on recent capex (and any incremental capex) may make it conspicuous.

(b)   Confidence in broader India growth story supported well by global enthusiasm, juxtaposed to skepticism raised by unpredictability & instability of policy and general social distress, is creating a deal of cognitive dissonance impacting the decision making as well as disposition of businesses.

(c)    The economy faces a potential threat of getting pushed into a vicious cycle of lower growth-lower employment-lower income-lower consumption-lower investment-lower growth, if immediate steps are not taken to improve business and consumer confidence.

The dilemma however would be that it may challenge the fiscal discipline, which had been one of the most important rallying point for investors' confidence. An unmindful fiscal stimulus at this stage could disturb the inflation-growth equilibrium by pushing prices and rates higher.

I shall therefore continue to maintain an extremely cautious stance on Indian equities for next 12-18months. At the risk of facing ridicule from my peers, I would go underweight on NBFCs, capital goods, and lower middle class consumption, in particular.

Whose history is it anyways - 3

Thought for the day

"History should be written as philosophy."

—Voltaire (French 1694-1778)

Word for the day

Clandestine (adj)

Characterized by, done in, or executed with secrecy or concealment, especially for purposes of subversion or deception; private or surreptitious:

Malice towards none

Should we assume that Jadeja is now a "test only" player!!

First random thought this morning

It is commonly said that if you want to understand the immediate concerns of a society, you should watch most popular cinema and TV news. Going by this adage, I find the following as most pressing problems of Indian society this morning:

Rohingya refugees; Honeypreet Singh; Safety of school kids; ceasefire violation by Pak; Petrol prices; erectile dysfunction; open defecation.

Whose history is it anyways - 3

When a politician in power says that Mughals were plunderers who looted India, it is not just the misplaced perception manifesting itself under the garb of nationalism. It is much more than that.

It is frustration over steep degeneration of traditional Indian culture and values.

Any politician or social worker who has at least one of his feet on ground fully realizes that the data revolution created through advancements in the telecommunication sector is being used significantly for frivolities (mostly gossip and pornography) besides of course enhancing productivity.

It is a deep running desire to restore ancient Vedic culture in order to establish India as global superpower - economic, cultural, and strategic.

The unfortunate part is that those desiring restoration of Vedic culture suffer from ignorance and deep prejudices. They desire to downsize local Muslim populace, while keeping all the discrepancies (for lack of a proper word) that crept in the Vedic traditions during past 1200years of Islamic influence. Unequal place for women is widely noted as one such discrepancy.

The CM and Deputy CM of the largest state in the country, which has benefitted the most from the Mughal rule, saying that Mughals plundered India, raises serious questions. These assertions diminish our faith in the capability of the government to implement a sustainable development agenda. These also make us skeptical about law and order conditions.

For records, as per my understanding of history, all Mughal rulers after Humayun, were born and brought up in India. They lived, married, ruled and died in India. Almost all of them were of mixed race (Mughal and Rajput). After Maurayans, Akbar was the first ruler to unify India as a political entity. During 1500-1700AD, when Mughals ruled India, India's share of global GDP rose from 22% to over 24%. The first industrial revolution in India happened during Mughal rule, when Indian textile, leather and shipping industry flourished to become the leader in the world. Mughals invested heavily in infrastructure especially roads and unbranization. Our traders (mostly Hindus), riding on Mughal ships and horses travelled to the global markets, sold their produce for gold. That is how India became the Bird of Gold, given that we were never a significant producer of gold.

Influenced by the dialogues of 1960 Hindi movie Mughal-E-Azam, some leaders have tried to connect Mughal rulers of India with Turco-Mongol invaders Ghenghis Khan and Timur. I can guarantee it would take them at least 6months, if not more, to establish connection between Ghenghis Khan and Babur (who laid the foundation of Mughal rule in India), without using the internet.

My travels across the country in past three decades have told me that India is changing fast, but not necessarily in the direction many of us would desire. Not focusing on the direction of change could nullify the impact of the change itself, in my view......to continue

Whose history is it anyways - 2

Thought for the day

"Who serves his country well has no need of ancestors."

—Voltaire (French 1694-1778)

Word for the day

Masscult (n)

The forms of culture, as music, drama, and literature, as selected, interpreted, and popularized by the mass media for dissemination to the widest possible audience.

Malice towards none

Legendary Khushwant Singh loved to use the word Ch****a in his literary works.

Anyone coming from Cow belt would wonder what's in it to get offended about!

First random thought this morning

Mother Narmada had been particularly kind to our prime minister Shri Narendra Modi.

Her waters played a large role in acceleration of Gujarat growth in past decade or so. The double digit agriculture growth was not possible without her water.

The wealth effect created by the appreciation in land value and consequent construction boom also added materially to the world famous Gujarat story.

Whose history is it anyways - 2

Not long ago, history used to be mostly an academic subject. The educated elite wrote, study, discussed, debated, formed, and altered history as per their perception and affiliations. Their perceptions were perhaps deeply influenced by the political narrative and economic concerns of the times.

The common people were however mostly concerned with their cultural traditions. These traditions passed through generations and generally regarded as history. Popular art forms, like films, theater, drama etc. also had significant influence on the common peoples' perception about history.

For example, 1960 Hindi Movie Mughal-e-Azam is an indelible impression of Mughal history in common peoples' imagination. Anarkali, which historian still debate to be a totally fictitious character, lives in peoples' memory as a historical symbol of love and sacrifice.

As such, the history as taught or studied in schools and universities had little meaning for common people.

In past couple of decades, I have observed a gradual change in this paradigm. An intense struggle is taking place between the history and the cultural traditions as practiced by the common people in the country.

There is a conspicuous political endeavor to overwrite academic history books with traditional and cultural beliefs. The argument is that these history books are deeply influenced (read distorted) by the imperialist British academia who had interest in destroying rich Indian legacy; and in post independence era by left leaning elite who find traditional cultural beliefs regressive and unfounded.

On the other hand the cultural traditions have also shown a tendency of loosening roots with rising urbanization, labor migration and dissipation of cultural ambience (rivers, animals, trees, temple, priest, forest, time, faith, folklores passed orally, family, austerity, etc.) The younger people who are not rooted properly in their cultural traditions are commonly seen adhering to frivolities, ignoring the core ideas deliberately (for practical reasons) or ignorantly (for the lack of proper guidance and inheritance of culture).

This dissipation of traditional Indian cultures is allowing the politicians to manipulate people into believing that alteration of history books would restore their dissipating traditional cultures and thus reinforce their loosening roots.

I do not know, if this is the right approach. May be it is. Or maybe it is not. Only time could tell this. I am also skeptical about giving this political endeavor the garb of nationalism and patriotism.

But what I am sure about is that the process is introducing some serious discrepancies in the Indian society. The generally affable and compassionate populace appears somewhat condescending.

The friction in the society is rising as the grease of traditional beliefs (tolerance, hospitality, acceptance) dries up. ...to continue

Whose history is it anyways!

Thought for the day

"The wise man does not rest by the roadside inns."

—Swami Sivananda (Indian, 1887-1963)

Word for the day

Gramarye (n)

Occult learning; magic

Malice towards none

PM Modi invited his friend Shinzo Abe directly to Ahmedabad, to keep him away from RaGa's charm!!

First random thought this morning

"Human nature will not change. In any future great national trial, compared with the men of this, we shall have as weak and as strong, as silly and as wise, as bad and as good. Let us therefore study the incidents in this as philosophy to learn wisdom from and none of them as wrongs to be avenged."

Abraham Lincoln (in the context of The American Civil War of 1861-1865)

Whose history is it anyways!

A couple of days ago, the deputy CM of UP Shri Dinesh Sharma reportedly emphasized that Mughal emperors were not our ancestors but looters and the Uttar Pradesh government would change the syllabus accordingly to reflect this fact.

"Mughal rulers were not our ancestors but looters. We consider Mughal rulers who did wrong acts as looters. Those who have done good work, we praise. Babar and Aurangzeb were looters. We do not oppose Bahadur Shah Zafar as he extended support to Mangal Pandey," Sharma told reporters here.

He reportedly said the government planned to bring "necessary changes" in the school syllabus. "If Akbar had done any good work, it will remain in pages of history. It will be historians who will decide what place Akbar gets," he said.

"A culture where a son kills his father for the throne or the hands of Taj Mahal builder are chopped off cannot be our culture. Our culture honours artistes and scientists. Dr APJ Abdul Kalam is credited for the successful nuclear test, and we honored him."

As per media reports, the UP CM Yogi Adityanath had also stated in May that Akbar, Aurangzeb and Babar were invaders and that the problems of the country would disappear after the truth is accepted. He had in the same event also called Maharana Pratap, Guru Gobind Singh and Chhatrapati Shivaji role models.

Recently, Maharashtra state board had removed a chapter on the Mughals from its class VII history books.

These recent assertions of BJP leaders have been mostly seen from the prisms of secularism vs. communalism, bigotry vs. nationalism, majoritism vs. inclusiveness.

The critics have highlighted this as a dangerous trend and attack on the very core of the pluralistic and diverse Indian society. In their view, this could damage the social fabric of the country beyond repair thus endangering the integrity of the country itself.

The supporters are terming it as renaissance of sorts, whereby all malefic distortions, digressions and misconception created by the left leaning elite about great Indian history would be corrected, ending the whole debate over secular vs. communal divide and great Aryan invasion theory. In their view, these corrections should pave the way for holistic progress of the country.

In my view, the debate suffers from myopia aggravated by deep prejudices, insecurities and complexes. Hence, I find this debate at political level totally frivolous and avoidable.

Usually, I would not bother about issues which in my view are rather frivolous to the present day socio-economic context. But given the intensity of the debate and potential economic fall outs that it could have, I need to review my investment strategy in this light....to continue