Do it yourself: DeMo, SIP and Jalebi

Some food for thought

Nature does not hurry, yet everything is accomplished.

—Lao Tzu (Chinese philosopher)

Word for the day

Sweeting (n)

A sweet variety of apple.

First random thought this morning

Gulab Jamun and Jalebi are two of the most popular sweets in many parts of India. Incidentally, these two are most unhealthy sweets available in the market place. Imagine, —

(a) Maida (refined flour): widely perceived to be very harmful for digestive system and metabolic health;

(b) Deep fried in hydrogenated oil: The oil is often used multiple times making it much worse as the oil turns rancid and the proportion of trans-fatty acids increases with repeated heating of oil;

(c) Soaked in sugar syrup: The fried Gulab Jamun and Jalebis are soaked in sugar syrup. The sugar used for this purpose is usually is low quality. The sugar syrup once made is also used for many days (sometimes weeks).

To make the matter worst, many people like to eat these two things with Rabdi (thickened milk with added sugar, full of saturated fats).

Moreover, most towns and cities in the country have their own famous Jalebi and Gulab Jamun makers, usually located in the most crowded market of the town. Reaching these shops is usually difficult and tiresome.

The question is why someone would take so much trouble, pay so much to buy these health bombs; and serve these to their dear friends and family?

The answer to this question would help explaining our political and social structure well.

It would explain—

(a) Why do we elect and reelect same people whom we strongly believe to be corrupt, underperforming and hence undesirable;

(b) Why we adhere to social customs and practices, knowing well that these customs and practices may be redundant to the current social milieu and harmful to the overall social fabric; and

(c) Why as a society we are willing to sacrifice long term 'sustainability" for "immediate comfort" and "vanity" reasons.

Chart that caught my attention yesterday

DeMo, SIP and Jalebi

In past two years, increased participation of the domestic household sector in the stock market investment has been a matter of great comfort for most market participants. Most market observers, in fact, have attributed the relative resilience of Indian stock markets vis-á-vis other emerging markets, to the domestic household flows only.

As per the recently released annual report of RBI, the net financial savings of Indian households in FY18 were 7.1% vs. 6.7% in FY17 and 7.2% in FY12. But the share of 'Shares and Debentures" in household financial savings jumped to 0.9% of gross national domestic income (GNDI) as compared to just 0.2% of GNDI in FY17 and 0.2% in FY12.

The households are now holding much more currency in hand as compared to past many years. In FY18, the currency holding of households was a whopping 2.8% of GNDI, vs. an average of 1.1% during FY12 - FY16.

Pension and PF contributions have also seen some jump in past 3yrs.

The increased currency holding, investment in shares and contribution to PF has mostly come at the expense of deposits and insurance. Deposits have fallen almost 50% from 6% of GNDI in FY12 to 2.9% in FY18.

Another notable feature is the significant rise in household financial liabilities. From an average of 3% during Fy12-FY18, the household financial liabilities have risen to 4% of GNDI in FY18.

This confirms my views, which I have been sharing regularly, that—

(a) Household finances are becoming much less secure as compared to even a decade ago. Worst, the trend looks structural.

(b) The cheapest source of funds for the Government (to fund fiscal deficit), for corporate and lenders may be drying faster than anticipated.