Vijay Kumar Gaba

Wednesday, February 15, 2017

Why Trump is a worry

Thought for the day

"If you don't know where you are going, any road will get you there."

—Lewis Carroll (English, 1832-1898)

Word for the day

Chanticleer (n)

A rooster

Malice towards none

Unfortunately, in the name of comedy, most Indian standup comedy artists seem trying hard to legitimize vernacular cuss words, even at the expense of their families, especially mothers.

First random thought this morning

Budget 2017: More objectivity should be introduced in the tax assessment process. To minimize litigation, assessing officers should be strictly instructed not to go against orders of High Courts and Supreme Court. They should violate ITAT pronouncement only under compelling circumstances.

Why Trump is a worry

Recently, a standup comedian popular in Mumbai circuit, ridiculed the Indian media, and the Indians who stay glued to it, saying that we unnecessarily bother about the world affairs, even on issues which do not concern us at all. Election of Mr. Donald Trump, being one of the even cited in support of his point.

While accepting the comical spirit of his act, and regardless of the eccentricities of Mr. Trump, I feel it would be ominous for us to ignore the changes that are taking place in global social, economic and political spheres. These changes, in my view, are not ephemeral by any means. They are in fact of far reaching consequences, and could very well result in dramatic changes in the global order that we today, rather quickly.

Noted columnist and author, Martin Wolf, in an article published last year (see here), had launched a scathing attack on Donald Trump. The title of the article "Donald Trump embodies how great republics meet their end" summed up the narrative.

Wolf portended "Mr. Trump is a promoter of paranoid fantasies, a xenophobe and an ignoramus. His business consists of the erection of ugly monuments to his own vanity."

Wolf quoted Robert Kagan's argument to extend his assertion. Kagan, had argued in a powerful column in The Washington Post, "Mr Trump is also the GOP’s Frankenstein monster. He is the monstrous result of the party’s wild obstructionism, its demonisation of political institutions, its flirtation with bigotry and its racially tinged derangement syndrome over President Barack Obama. We are supposed to believe that Trump’s legion of ‘angry’ people are angry about wage stagnation. No, they are angry about all the things Republicans have told them to be angry about these past seven-and-a-half years”.

Going many steps further, Wolf cautioned - "This is not about the last seven-and-a-half years. These attitudes were to be seen in the 1990s, with the impeachment of President Bill Clinton. Indeed, they go back all the way to the party’s opportunistic response to the civil rights movement in the 1960s. Alas, they have become worse, not better, with time."

Serving a stark reminder, Wolf said, - "During the first century BC, the wealth of empire destabilised the Roman republic. In the end, Augustus, heir of the popular party, terminated the republic and installed himself as emperor. He did so by preserving all the forms of the republic, while he dispensed with their meaning."

I mostly endorse these views. I believe that vote for Brexit and election of Trump are material events in the history of democracy. The elections in Germany, France, Italy this summer may create the Watershed. A repeat of US and UK verdicts there might create, rather precipitately, deep fissures in the global society. Trade & commerce that has bound the disparate ideologies together since WWII.

I shall share my thoughts on this in few days.

Going Nowhere

Thought for the day

"That man is not truly brave who is afraid either to seem or to be, when it suits him, a coward."

—Edgar Allan Poe (American, 1809-1849)

Word for the day

Intrapreneur (n)

An employee of a large corporation who is given freedom and financial support to create new products, services, systems, etc., and does not have to follow the corporation's usual routines or protocols.

Malice towards none

Trust me, if Priyanka Gandhi was a political force in UP (outside Amethi & Rai Bareilly), Congress would have used it many elections back.

First random thought this morning

Budget 2017: Make service tax paid by individual Assesses having total income upto Rs10,00,000, as deductible from the income for calculation of tax payable on such income.

Going Nowhere

About two decades back, I had a chance meeting with a group of visitors from Pakistan. Most members of the group had their ancestral roots in Delhi and nearby areas. During discussion, I asked them why is it that despite being so rich in natural resources, favorable geography and brave & enterprising people, Pakistan is not able to grow to its potential. The answer was thought provoking.

They said, "The feudal nature of politics has made the society ominously unequal. There is huge trust gap. The gap is rising with every flight going out of the country, as it carries few good people, who would probably never come back to their homeland. With all educated people capable of thinking without prejudice; capable of innovating; capable of promoting enterprise, moving out - the country is left with few feudal lords who have captured all the resources and therefore need not leave the country, and ‘the vulnerable’ who could add little to the growth - economic or otherwise."

Trust me, I find the conditions in UP and Bihar no different today. I do not have statistics to support my argument, but anecdotally I know that even middle class parents do not want their children to stay here. The routine education of children has therefore become a mission for all middle and rich class families. People want their kids to get good degrees and migrate from these places, to never come back.

This is in contrast to the southern states, Gujarat and Punjab, where people are keen on migrating to foreign shores but stay connected to their roots. They yearn for returning someday. Here, it is not only foreign shores - Delhi, Bengaluru, Hyderabad, Mumbai are equally desirable destinations. Once out, no one thinks of returning back to or even investing some money in their birthplace. The remittances are usually limited to the support money for old parents and renovation of house.

By highlighting the present day condition of the holy city of Kashi, the point I am trying to convey is that perhaps the direction and paradigm of development we have chosen needs to be reviewed.

In my personal opinion, the present model of growth may not be the appropriate one, for two simple reasons:

(a) It completely ignores the sustainability concerns. (A homeopathy doctor in Kashi told me that the noise pollution in the city due to chaotic traffic is making more people sick than anything else. The worst part is that no one is bothered about this.)

(b) The present model is bound to fail, as it mostly ignores the strengths of Indian society and economy.

The development model adopted by us seems to be mistaking the means for goals. Electricity, roads, bridges, motor vehicles, communication network etc. should be used as means to improve the quality of human life, minimize socio-economic inequalities, and enable people to work for evolution of mankind. Mistaking means for the goals, takes us nowhere.

Growing like ginger

Thought for the day

"All religion, my friend, is simply evolved out of fraud, fear, greed, imagination, and poetry."

—Edgar Allan Poe (American, 1809-1849)

Word for the day

Froideur (n)

An attitude of haughty aloofness; cold superiority.

Malice towards none

Two innocent queries:

(a) Is Jallikattu part of Tamil culture or Tamil Nadu culture?

(b) Why do important regional issues in India fail to evoke a national response in India? E.g., rehabilitation of Kashmiri Pandits.

First random thought this morning

Budget 2017: Increasing the IT exemption limit from current Rs2.5lacs to Rs4lacs will completely defeat the purpose of enlarging the tax net, as it will result in 96-98% citizens staying out of the tax net. The better course would be to reduce tax rates with a lower exemption limit. To keep the administration cost low, all Assessees with income below Rs10,00,000 may be exempted from filing compulsory return. Instead they may be required to just e-file a self attested affidavit that they have calculated and deposited the tax due on their income as per the prevalent law. The department may select 2% of these Assessees every year on random basis and ask them to file the return in prescribed form with required details.

Growing like ginger

The moment you exit from the Babatpur Airport in Varanasi, you see the modern symbol of development - A concrete six lane highway being constructed to link the city (30kms) with the airport; large showrooms of automobile; Delhi Public School; etc. As you reach the city after a 90-120minutes of arduous drive, you fail to find the Kashi, you have been hearing, reading and imagining about.

The city has become a generic Tier 2 north Indian city of India. You would struggle to tell a difference between Kashi, Patna, Bareilly, Moradabad, Aligarh, Agra, Panipat, Hissar, Jhansi, Allahabad. The city is growing like ginger - unplanned and unmindful.

The main streets are dotted by showrooms of large apparel, appliances and food brands. There are 50x more private coaching centers than schools. It appears that all people just want to learn to speak English, and become doctors, engineers, CAs and IAS officers.

If you try on your own, it might take 2-3 days to find a place that teaches Indian languages, religion, classical music & dance, silk weaving, or sculpting etc.

The city is dotted with the symbols of Clean India mission. But to the dismay of all visitors, these symbols are dirtier than the city itself. Many accept that city has become cleaner in past two years. But "cleaner" is not necessarily "clean" per se. It is hard to find any change in the mindset of people, who spit red anywhere and everywhere, litter with freedom, sweep their shops and homes to throw the garbage on the road. The entire city has open drains that remain filled with sewage water and choked with plastic bags. Stray animals are found in abundance.

I spoke to many religious men on various famous ghats. No one, yes None, wanted their children to study Sanskrit and religion. One of them had four children - two are studying medicine, one preparing for civil services and the fourth one is running a gym.

The sign boards make it abundantly clear that the city is desperate to shed its traditional image and look progressive with English.

For time immemorial the city has been associated with "Faith" and "Devotion". A 7km walk from Bhairasur Ghat to Assi Ghat anytime during the day would tell you that the "Faith" and "Devotion" are now mostly constricted to the Old, Rural, Illiterate and Poor populace. Save for unmindful rituals and fearful compliance, the young, urban, educated, middle class people are cynical about "Faith" and lack "Devotion".

I met a group of visitors from Kyoto, who had come to Kashi with great expectations. Trust me, they are carrying a message that will demotivate many prospective Japanese visitors.

The point I am trying to make is that we would need to rise above symbolism, if we want to grow as a society, and hence as economy. Moreover, the straight road to prosperity is through our strengths and not weaknesses or imitation of others....more on this in following post.

The soul of Kashi appeared leaving the body

Thought for the day

"In one case out of a hundred a point is excessively discussed because it is obscure; in the ninety-nine remaining it is obscure because it is excessively discussed."

—Edgar Allan Poe (American, 1809-1849)

Word for the day

Talisman (N)

Anything whose presence exercises a remarkable or powerful influence on human feelings or actions.

Malice towards none

I can say one thing with complete certainty - "Donald Trump is not an inspiring leader. He is least likely to leave a legacy when he demits White House."

Regardless, for four years, the USA and the world will have to put with him.

First random thought this morning

Budget 2017: The government must realize and accept that manufacturing sector cannot create the number of jobs India would need in next couple of decades. The sooner they shift focus on the services and farm sector, better it would be. The focus in manufacturing sector should be on global competitiveness in terms of quality, productivity and efficiency. The fiscal incentives should accordingly be reoriented.

The soul of Kashi appeared leaving the body

Kashi (also Varanasi and Banaras) is widely known as the spiritual capital of India. Traditionally believed to be the chosen abode of lord Shiva, this city has significance for believers of Hinduism, Buddhism, Jainism, Sikhism, and the followers of the Bhakti movement (Kabir panthi, Raidasi).

The city nourished by the sacred waters of Mother Ganga, and protected by Lord Shiva, Lord Hanuman, Kaal Bhairva, and Goddess Durga, has inspired immortal souls like Gautam Buddha, Mahavir Swami, Tulsidas, Kabir, Ravidas, Guru Nanak, et. al.

Historically, many Hindu and Muslim rulers patronized the city, making it one of the prominent center for study of religion, art and culture. The city produced many legends in the fields of science, music, dance, art, literature and spirituality. Since ages, the city has been attracting students, research scholars, knowledge seekers, curious and enthusiasts from world over.

In recent time, the city gained popularity as the incumbent prime minister chose it to represent it in the parliament. Subsequently, it has been designated as the partner city of Kyoto (the second largest city in Japan); and also a Smart City under the urban development program of the central government.

Admittedly, I have been madly in love with the city for decades. Like a passionate lover I cherished almost everything about the city. But as Geoffary Chaucer famously said seven centuries ago, "All good things must come to an end".

On my recent visit to the city early this week, for the first time I felt like breaking up. To me, the soul of Kashi appeared leaving the body.

Mother Ganga appeared old, tired and frustrated. First time I felt that she is no longer willing to absorb the sins of her delinquent children.

The city appeared terribly chaotic. The people were in general inconsiderate, insensitive and indifferent.

The melody of divine music has surrendered completely to the cacophony of endless traffic snarls. Everyone appeared in a hurry to reach nowhere; leaving the fellow citizens struggling on road. I experienced more road rage and profanity than humanity and spirituality in the city.

The traditional arts and textile have been pushed back to the narrow, dark and filthy by-lanes, as the global apparel and electronics brands have encroached the main markets.

The traditional food that I loved is struggling to survive the onslaught of global giants like McDonalds, Chicago Pizza, Dominos, etc. Italian, Chinese, and continental food has become a 'must have' in parties and family gatherings. There are disproportionate number of pharmacies, indicating towards the deteriorating health of the dwellers.

Most disturbingly, the primary characteristic of the city - "the Faith", appeared to have become largely Old, Rural, Illiterate, Female and Poor....to continue tomorrow

Knocking at wrong door

Thought for the day

"We are what our thoughts have made us; so take care about what you think. Words are secondary. Thoughts live; they travel far."

—Swami Vivekananda (Indian, 1863-1902)

Word for the day

Katzenjammer (n)

Uneasiness; anguish; distress.

Malice towards none

If RaGa kurta is torn, it does not affect him, as he or his family do not have to pay anyone for anything.

First random thought this morning

Budget 2017: High service tax to align service tax rates with proposed GST rate of 18% and withdrawal of a multitude of exemptions for business assesses so that the marginal rate of tax could be brought down to target 25% are two agenda that need to be pursued in right earnest. These will definitely result in marginally higher incidence of taxation for businesses. Though, in medium term the benefit could more than mitigate the damage.

Knocking at wrong door

The finance minister is like CFO of a business corporation. His job is to keep account of the receipts and expenditure of the government; manage resources necessary for executing the plans approved by the Cabinet; ensure optimum utilization of available resources; and keep adequate provision for meeting contingencies.

He is accountable to all the stakeholders, insofar as the transparency of accounts is concerned. His discretions are however limited to choosing the sources of revenue needed for executing the plans of the government.

In specific Indian context, FM has to decide how much resources to raise from (a) taxation; (b) sale of national assets; and (c) borrowing.

In taxation, a balance has to be maintained between direct and indirect taxes to keep the incidence of tax just and equitable.

Sale of national assets (mines, airwaves, PSE shares, land etc.) has to meet the criteria of sustainability, development, transparency, viability, socio-political expediency; etc. and depends heavily on the current market conditions.

Borrowing depends on consideration of fiscal discipline, servicing capacity, and market conditions. Historically, we have borrowed from domestic lenders only. However, in recent years the role of foreign lenders has been rising; the exchange rate volatility has therefore become a consideration. The FRBM Act also guides the extend of borrowing.

The importance, or otherwise, of the annual budget presentation must be seen within this framework. Although, the attention that is paid to the annual budget speech has diminished in past decade or so, it still evokes intense interest from the financial market participants. I feel it has more to do with the marketing success of business news channels rather than anything else. A number of TV shows are hosted to propagate an environment of expectation, hope and fear amongst market participants.

The anticipation, that is sometimes far beyond the realm of reality, guides the market volatility. The representatives of various interest groups and lobbyists for pressure groups demand from FM, what he has no jurisdiction to give. For example, someone asks FM to allocate more money for infrastructure spending. Whereas, this request should logically be made to the concerned ministry and departments, which shall make a plan, and get approved by the cabinet. FM will be obliged to provide resources for a plan approved by the cabinet. A defiance could see him losing his job.

I believe that it is high time that the development agenda of the government be completely separated from the budget presentation. Let budget be an accounting exercise with a reasonable degree of predictability and transparency.

Let public appraisal of the development agenda be a continuous process through regular reporting by the concerned departments and ministries.

Friday, January 13, 2017

The dark fortnight is little longer this time

Thought for the day

"You can learn more about human nature by reading the Bible than by living in New York."

—William Lyon Phelps (American, 1865-1943)

Word for the day

Myrmidon (n)

A person who executes without question or scruple a master's commands.

Malice towards none

Trump says he has engaged the best dealmakers in the country to run the government.

Good dealmakers are always on look out for opportunities. They never shut the door on anyone or anything.

First random thought this morning

Budget 2017: It would be a great idea to leave lot of cash in peoples' hands. Lower direct tax, direct transfer of subsidies, cash incentive for buying first house, incentive for monetizing 200gms of gold, no fee on credit card usage, interest free 10yr loan for higher education of one girl child, etc are some suggestions.

Refrain from hiking service tax pending GST implementation.

The dark fortnight is little longer this time

I have written it couple of times before. The historical correlation between inflation, interest rates, currency exchange rates, terms of trade, demand and supply of credit, risk & cost of credit, fiscal policy, trade competitiveness, economic growth, commodity prices, etc. have weakened considerably, in past one decade. Economic forecasting, and investing & trading on that basis has become all the more difficult.

During this period, some European countries audaciously threatened to default on their debt obligations; defied many conditions of the bailout agreement and brought the global financial system on the verge of collapse; on more than one occasion. Even after 5-7yrs of bailout, these economies are nowhere close to be able to move out of ICU walking on their own feet. The sovereign bonds of some of these countries lost 50-80% of their value in the aftermath of 2008-09 global financial crisis (GFC). Some of these countries have been able to sell 30yr bonds at miniscule yield.

An unprecedented amount of money has been printed in the developed world, since first round of quantitative easing (QE) in 2009. In conventional sense, with this deluge of money, we should already seen couple of episodes of hyperinflation. But, what we have seen so far is episodes of disinflation. OPEC is producing much below its potential. Chinese factories have been shut down. Australian and Latin American mines are either shut down or producing below potential. On global basis, the unemployment is higher - not what Keynes would portend.

We witnessed a colossal amount of debt trading at negative yield. But it has apparently not catalyzed any amount of economic growth. Leave aside lot of opportunistic buybacks by many global corporations (to make their RoEs look great and consequent rallies in stock markets), the cheap credit has not led to any real investment. Only bond & stock prices have rallied. The world is still awash with huge unutilized capacities.

The threat of tiny economy like Greece exiting EU; or even smaller Iceland defaulting on a few billion dollar worth of debt, shattered global markets wiping off hundreds of billion dollars from asset prices. But when a larger and relevant economy like UK has decided to exit EU, the markets are mostly sanguine (after reacting nervously for couple of days).

Conventional and non-conventional monetary policy tools used by the large global central bankers are becoming increasingly redundant. Consequently, many leading currencies are presently valued far from their economic value . For example, even with persistent deflationary pressures, negative bond yields, and almost no economic growth - BoJ has to struggle a lot to weaken JPY. Despite enjoying trade surplus with most of its trading partners, China is able to devalue its currency.

I strongly believe that the present breaking of economic correlations is transitory in nature and order will be restored in due course. However, it is difficult to see that happening in next 4-5yrs.

Remember the famous dialogue of Hindi film Aandhi - Is baar Amavasya thodi lambi ho gayee (The dark fortnight is little longer this time)

Thursday, January 12, 2017

This time India is in playing 11

Thought for the day

"There is a strange reluctance on the part of most people to admit they enjoy life."

—William Lyon Phelps (American, 1865-1943)

Word for the day

Draconian (adj)

Rigorous; unusually severe or cruel

Malice towards none

UAE Army contingent in Republic Day parade, when ex Pak army chief Raheel Sharif is leading the Saudi led military alliance - interesting times.

First random thought this morning

Budget 2017: After so much threatening and posturing, it would be totally in order, if the government introduces some meaningful incentives for promoting voluntary tax compliance in the forthcoming budget. Materially lower tax rate could be ne such incentive.

This time India is in playing 11

In past one century, the global community has done many experiments to find a suitable global order. The year 2017, marks 100yrs of two very important global events.

In 1917, Russian revolution successfully dismantled the Tsarist autocracy and laid the foundation of USSR. In the following decades, many smaller independent European states would become subservient to a mighty Russian socialist army, and together become one pole in the emerging bi-polar world, forever shrouded by the specter of cold war.

In the same year, USA decided to join the War as an associate of the Allies - a development that tilted the scale in favor of the Allies, bringing the War to an end in 1918. In the following decades, USA would evolve into a formidable military and economic power, that would lead the democratic allies to become the second pole in the emerging bi-polar world.

The imperialist global order that existed since past couple of centuries, began to dismantle. Many colonies of European empires would get freedom. The British empire that was built in three centuries and covered almost one fourth of the world population and area before the War, would completely dismantle in the following three decades.

It took three decades for the new order to consolidate. The new order was characterized by UN, NATO, WARSAW, Mao, Israel, NAM, Bretton Woods, World Bank, Cold War, energy cartel (OPEC), et. al. The globalization that was a norm prior to the first War, was completely overpowered by the forces of nationalism and protectionism.

The new order lasted till the German Wall fell and USSR disintegrated. This unleashed a new wave of globalization. Global Trade (WTO), Internet, dematerialization of assets, Europe integration into a single market, China's entry into mainstream global trade (through WTO), free flow of capital, G-20, BRICS, numerous FTAs, global war on Islamic fundamentalism, energy security, climate control and global financial crisis, dominated this phase.

The recent events, especially in the past one year, give an impression that the extant global order may be crumbling under pressure, as the forces of nationalism and protectionism are rearing their head again.

There are two prominent debates that are currently going on.

The first debate seeks to challenge the very premise - "whether the current state of globalization is reversible at all?"

The second debate accepts the inevitability of the de-globalization, and is therefore focusing on the shape of the new order that would be emerging in next few years.

On previous occasion, when India was mostly a controlled and closed economy, we just suffered some collateral damage. This time our exposure to the global economy and geo-politics is little higher and deeper; and so would be the impact. I would like to share my views on this in a later post

Wednesday, January 11, 2017

Expect occasional "Attaboy" and few cookies

Thought for the day

"If I were running the world I would have it rain only between 2 and 5 a.m. Anyone who was out then ought to get wet."

—William Lyon Phelps (American, 1865-1943)

Word for the day

Etiolate (v)

To cause to become weakened or sickly; drain of color or vigor.

Malice towards none

RTI for BJP: How many BJP members have questioned the #Demonetization move?

If none, then the party is in serious need of introspection, as the very core of democracy may be weakening.

If there are voices of dissent, why don't people hear it?

First random thought this morning

Budget 2017: To promote investment and entrepreneurship, the government must introduce greater deal of predictability in policy and tax regime. It should definitely lay to the rest all scope for speculation about the policy matters.

One good beginning would be to irrevocably specify the treatment of capital gains on transfer of securities for next 10years, whatever it may be.

Expect occasional "Attaboy" and few cookies

The next two month are likely to be one of the most interesting phases in the global financial markets. The markets participants shall be keenly observing what the US president elect Donald Trump would say (won't say) or do (won't do) after his inauguration on the coming 19th January.

The participants shall also be keeping a close watch on the US Federal Reserve Chairperson Janet Yellen and Chinese leadership, especially the premier Li Keqiang.

It is widely expected that we may almost immediately see a trade war between US and China; build up of tension between White House and FOMC; rise in protectionism leading to disruption in global corporations; and realignment of US strategic partnerships. Drastic changes in policy towards foreign workers and capital flows are also feared.

The unusual personal bonhomie between President Trump and President Putin is also keeping the analysts busy.

A number of reputable experts have warned that a trade war with China could drag the world into 1930s' like severe recession.

FOMC meets on 31 January and 1st February and then again on 14-15 March. So far, the Chairperson Yellen has not been supportive of the fiscal profligacy proposed by the President Trump. A higher than warranted rate hike by Fed, could actually damage the fragile recovery US economy has witnessed in past 6 quarters. The bond market appears to be already factoring higher deficit, and hence higher yields in midterm.

A dramatic tightening of VISA rules and immigration policy, could hugely disrupt the businesses, especially the technology business that depends hugely on low cost skilled foreign workers and construction business that is supported by low cost foreign labor (including illegal immigrants). A temporary demand-supply mismatch in labor market, at a time when businesses will have incentive to relocate manufacturing to US, may lead to materially higher wages.

Intuitively, I am not losing my sleep over it, as of now.

In my view, a lot of Trump rhetoric may remain just that, rhetoric. Like Arvind Kejriwal, he will spend a better part of his 4yr term in managing the numerous conflicts of interests and personalities.

From India viewpoint, I feel - a US-China trade war could possibly benefit India, as Trump cannot expect to win this war without help from India, Russia, Japan, UK and many others.

A stronger USD, consequent to higher rates would eventually be deflationary, helping India on current account.

In his acceptance speech Trump, said if you are not with us, you are against us. We Indians are more than eager to be him. Expecting occasional "Attaboy", and few cookies would not be unreasonable.

In between, we have union budget for FY18 on February 01 and MPC, makes a monetary policy statement on February 08.

May also read:

"What Trump can do or cannot do"

"Why INR may remian resilient to the Trump Trade"

"US bonds: Possible long -term trend change"

Tuesday, January 10, 2017

Advantage BJP in UP

Thought for the day

"The belief that youth is the happiest time of life is founded on a fallacy. The happiest person is the person who thinks the most interesting thoughts, and we grow happier as we grow older."

—William Lyon Phelps (American, 1865-1943)

Word for the day

Fallal (n)

A bit of finery; a showy article of dress.

Malice towards none

In his attire, PM emulates the popular leaders like Jawaharlal Nehru and Indira Gandhi and not the great leaders like Gandhi, Shastri and JP.

Surely, he will be mentioned in the history books as a great prime minister who changed the course of economic policy and foreign policy of India. But not as a leader who was venerated by 125cr Indians.

But who cares!

First random thought this morning

Budget 2017: Under the given circumstances, the government could take either of two approaches in the forthcoming budget:

(a) Give a big dose of steroid to abate the pain caused by the currency ban in an already slowing economy.

(b) Inflict a bigger pain, so that people forget the pain caused by the currency ban.

Advantage BJP in UP

The general elections in India are famously projected as the final match of a tournament, in which many semi-finals are played. The strange part is that most of these semi-finals are inconsequential for the final match.

One such semi-final for the final match schedule to be played in summer of 2019, is going to start soon. In this five game match, the game to be played in Lucknow is being cited as the most important. The popular projection is that the winner in Lucknow game will be the favorite to win 2019 final. There is though little empirical evidence to substantiate this claim. In past three decades in particular, the results of the Lucknow game were mostly inconsequential for the subsequent finals in New Delhi.

In my view, the semi-finals to be played later this year in Gandhi Nagar, and next year in Bhopal and Raipur would be more interesting and relevant for the 2019 finals.

Anyways, since the Lucknow game is trending these day, it is better that I talk about that game only.

I visited the battlefield UP during my year end break. Incidentally, this was the time when the team currently holding the title (Samajwadi Party or SP) announced major injuries.

While driving through the vast expanse of the state glittering with the golden mustard flowers, I met many people, observed a lot things and formed some opinions. I may share some of the key observations and opinion with the readers.

Politics

1. The political consciousness of the people of Uttar Pradesh, has evolved materially in past one decade. Contrary to the popular narrative, the caste and religion, though still relevant, are not the primary considerations in the voters' mind. Nowhere, the voters are inclined to elect a candidate purely on the basis of caste or religion.

2. SP has been successful in projecting a strong personal identity of the CM Akhilesh Yadav, as distinct from the traditional caste-religion based political identity of Mulayam Singh Yadav and his brothers. BSP chief Mayawati has mostly failed in getting out of the old caste-religion paradigm. Rahul Gandhi led Congress continues to be as confused as ever. BJP is going into the fray hiding behind Pm Modi mask.

3 It is clear that the main contest is between Akhilesh Yadav led SP and PM Modi motivated BJP. A Congress and BSP alliance could add a third dimension to the contest, but such alliance would not be in contention. The only positive in favor of BSP is the better law and order record of previous BSP government.

4. In the last elections, the principle opposition SP had set the agenda and all other parties just responded to it. This time agenda has been set by PM Modi himself. Financial inclusion, compliance and fight against corruption is the primary agenda, with the usual development plank providing an active sub-plot.

5. I observed good support for PM Modi amongst the youth, in the Yadav majority areas of Central UP; women in the BSP's stronghold areas in Bundelkhand and Rohillkhand and Congress pocket Burroughs of Amethi, Sultanpur and Rai Bareilly. Leaders like Uma Bharti, Smriti Irani (surprise!), Rajnath Singh, Kalyan Singh are known and remembered. Atal Bihari Vajpayee continues to be popular, especially amongst minorities. Amit Shah is unpopular with the locals. Like 2014 general elections, RSS is working overtime in these elections, unlike the 2012 assembly elections.

6. Mayawati appears losing support amongst her core dalit support group, especially young women.

Economy

1. The economy of the state is tough to understand. The trade and industry (except sugar) are generally stressed, like in other states. The rural sector does not appear buoyant either. But that might have something to do with recent factors like poor realization of potato crop; poor quality of cane crop and less than expected rise in cane support price. Otherwise, rural populace appears satisfied with the development on the front of electricity, road connectivity, primary education, government support for old, girls, and minorities. This is visible in stable public and private sector consumption.

2. Employment condition continues to be poor. The tendency to migrate is rising much faster amongst the educated.

3. The currency ban has been mostly forgotten and forgiven, except by traders. There is little impact on the farm sector, but trade is hurting badly.

4. Real estate sector in the state is in distress. But it has more to do with the excessive rise in prices and euphoria during 2007-2010 phase, and less with the change in normalized demand. The urbanization is progressing well and demand for housing remains good, especially in urban areas. The lower interest rates are seen helping the demand further.

Society

1. The social divide on religious lines has strengthened in past few years.

2. The social divide on caste line is weakening.

3. Contrary to the popular perception, the social divide appears stronger in urban areas, as compared to rural areas. College going youth appears to be in favor of discrimination on the basis of religion.

To sum up, though it is still early days, I would give my customary assessment of the election outcome.

In my view BJP will emerge as the single largest party, if Congress allies with SP or BSP. Otherwise, BJP is poised to get a strong majority on its own.