min-myinnersoul

Yeah Yeah, I am that sort of a nerd. While much of India is agog with the spot fixing scandal that broke yesterday, this blogger ruminates on the economics of it. Yes, he is a weirdo ! Having got that out of the way, a few words on the scandal, for the 3 million non Indian readers this blog gets :)  There is a nonsensical game (anybody who suggests the word cricket in this connection will be personally bashed up by me) in which there is a cash machine called the Indian Premier League. Yesterday three players were caught, allegedly  hand in glove with bookies, manipulating results. That's all you really need to know. What is baffling me is the economics of it. There are all sorts of reports, but I think it is safe to say that at least Rs 20 lakhs (some $40,000) was allegedly paid to the players to give away a minimum number of runs in an over. Let us say, for this to be profitable to the crooks who are betting on it, they must wager at least an equivalent amount at odds of say ...

The law is an ass. Governments are a bigger ass. Ramamritham is the chief ass. But even by those standards this takes the cake. Those familiar with India knows that this poor country indulges in wasteful expenditure of the worst sort. Free colour TVs, grinders, etc have made the news. But the criminal, inexcusable and worst sort of government waste is the subsidy on Liquefied Petroleum Gas (LPG). If there was a word stronger than criminal, I would use it. LPG  is supplied to all and sundry at a subsidy. It is sold at roughly half the cost - the government is supposed to pay the balance half to the oil companies , but it does so as and when it feels like it, or not at all. It is actually quite difficult to estimate how much the total subsidy is as the government hides this in different pockets but my estimate is that this monstrosity costs us some Rs 30,000 crores. The really poor don't use any cooking fuel at all - maybe firewood. The poor use kerosene. Only the relatively rich use...

What is man's greatest weakness. No, its not sex. No, its not even gambling.  It is his uncanny ability to fall for every "get rich quick" scheme. Take the case of the collapse of the Saradha   (and probably numerous other such schemes) in West Bengal. This was a classic Ponzi scheme. Investors were attracted by fantastic returns (15-50% !!!). The early investors were paid off with money collected from subsequent idiots. Bingo. An avalanche started. Two years on, it has collapsed leading to much hand wringing and vociferous shouts of indignation. What attracted my attention was not the scheme per se. They are dime a dozen. Remember the Emu farm scheme a little while ago in Tamil Nadu. Emu farming I believe - never mind that not one soul who put money into it had seen an emu in his life. But what has really got my attention is the response to the affair after it broke news. There has been much clamour for regulation of such funds and criticism of governments for not regula...

Infosys was , is , and will be a great company. Unarguably. But even great organisations suffer from malaise. Surprisingly, Infosys suffers from the malaise that you would not normally attribute to it - the Lala problem. Yes, I know, I am throwing mud at a great company, but you have to expect it if you lose 20% of your market value in one day. Wait a minute. Isn't Infosys one of the most professional of companies ? A company that sets the standard for corporate governance. The company that raised the bar on ethical business. The company with the middle class values ? All true. But Infosys suffers from the same problem that family run companies have - the company is handed down from one  "family" man to another. Only in Infosys' case, the "family" is not blood related, but the group of founders who set up Infosys. The peerless Narayana Murthy established it. The relentless Nandan Nilekani drove it to the status of a world leader. Kris Gopalakrishnan then too...

My state is coming into election time. The politics of it - who will win; who will lose, etc is beyond the purview of this blog. But this blog will certainly muse on the economics behind it. I am foxed as to why anybody wants to stand for any election - for the economics behind this is akin to a Las Vegas casino. On a conservative estimate, each candidate would spend about Rs 15 crores in each assembly seat ( see this speech as evidence of such numbers). More than three quarters of it is not for campaigning, but to bribe the voters (shame on you and me). Traditionally it used to be just cash and liquor.  But apparently now even water drums, watches, sarees and T shirts feature, as evidenced by this photograph and this article from The Hindu today. The number of assembly constituencies in Karnataka is 224. There are four political formations in the fray. So that makes for 900 serious candidates. At Rs 15 crores per candidate, that amounts to an expenditure of Rs 13,500 crores ....

I am in trouble because my KRA with CDSL consequent to having submitted some change of KYC, is apparently pending, which I have no recollection of. Therefore I am stuck with my DP who is quoting arcane SEBI rules to make my life miserable.   If you don't understand one word of all this, welcome to the club. I don't understand it either ! And I am supposed to know something of finance !!   This perfectly sums up the status of how consumer unfriendly the financial sector in India has become. Try doing anything - opening a bank account, or buying a mutual fund  or even changing your address. You will tear your hair in frustration. Such is the state of affairs.   This is all because Ramamritham and his political masters have , over the last five years, exclusively been framing rules for catching Kasab.  The starting assumption is that everybody is a Kasab unless they prove otherwise. Rules and procedures have become so complex that an honest simple  m...

 There are times when you have to feel good about India. In the prevailing atmosphere of extreme negativity, it is easy to fall into the trap of despair. Patriotism may be the last refuge of the scoundrel (no thanks Samuel Johnson), but it has its uses and I don't mind being a scoundrel. The Republic Day parade is one such occasion, to feel good. I know very few watch the parade these days, but it is an eminently watchable spectacle. Other countries put on a show like this - the Bastille Day parade in France and the Victory Day parade in Russia, being the more prominent. But the Indian parade is extremely impressive and can raise goose pimples, especially if you can understand the honour and significance of it. It all begins with the laying of the wreath at the Amar Jawan Jyothi - the tomb of the Unknown Soldier and the sounding of the Last Post - a tribute to the fallen. The Parade itself is rich in tradition. The President's bodyguard gives the order for the National Salute a...

What does Ramamritham have against coffee ? I would have thought the caricature of Ramaritham included a cup of coffee and The Hindu. Yet here's this venerable gentleman having an angst against coffee . Why ? I am referring to IKEA's application to open retail stores across India. You may recall that the move to allow foreign owned retailers to set up shop in India is a recent one (Didi notwithstanding).  IKEA has been one of the first to submit their proposal, willing to bring it no less than Rs 10,000 crores of investment. You would have thought that they would be welcomed with open arms  - it is difficult to see boxed furniture being a threat to national sovereignty. But what they got was not a red carpet - instead they were treated with the full attention of Ramamritham. (in the guise of the Foreign Investment Promotion Board - FIPB) I am no fan of IKEA stores. If you've been to one, they are all predictably the same format. You are forced to walk along one km of windin...

India is embarking on a major revamp of its social security system - replacing subsidised food, fertiliser, fuel, etc etc with direct cash transfers to the bank accounts of the "poor". Is this good or bad ? The current system involves heavily subsidised foodgrain, fertilisers, fuel, etc being made available to ration card holders through the public distribution system. This suffers from a whole host of problems. Bribery, corruption, pilferage, etc ensure that only a fraction of the stuff ends up in the hands of the targeted people.  In some areas like fuel, cooking gas cylinders are widely misused and the diesel subsidy lands into the pockets of rich car owners. The waste is so incredible that something ought to be done. The solution proposed is to eliminate all subsidies progressively and instead simply transfer cash by electronic transfers to bank accounts of the target population. Initially it will cover various anti poverty schemes, then extend to cooking gas and kerosene...

I don't know what to make of this story. An economics soap opera ? How the most unexpected things can happen  ? How sometimes prosperity can hit you from the strangest of directions ? Read on - judge for yourself. The story starts in a very boring manner. Everybody knows Americans guzzle gas. With the Sheikhs turning the screws, Americans are feeling the pinch. Ouch - the price of oil is hurting. Drill baby drill , is fine, but oil is, alas, not to be found. Need new forms of cheap energy so that Americans can continue to guzzle away. Suddenly they discovered a new "source" - Shale gas .  Apparently natural gas is  found in rocks called shales. And apparently shale gas is rather plentiful in the US. Wonder of wonders, use of shale gas even releases lower greenhouse gases than evil Oil.. Voila, the new gold rush is on.  All very good. What's new. This sort of thing happens all the time. The real interesting bit is that, in order to extract this gas, you have to do ...

Mitt Romney is in a  soup over his 47% remark . In some remarks he made at a private meeting he said that 47% of Americans do not pay income tax (fact) and implied that these were scroungers (rubbish). But he was factually accurate in that 47% of Americans do indeed not pay income tax - although to be fair about that half of that lot do pay payroll taxes which is a form of income tax meant for funding social security and Medicare. The purpose of this post is not to wade into the political controversy. But simply to point out the fact that if Romney were in India, he would say 97% of the population does not pay income tax. That's right - only 2.8% of Indians pay any income tax . That's not to say 97% of the population does not pay any tax at all. Indirect taxes like VAT, Sales Tax, Octroi and a whole host of devilish taxes are levied on everything. Even a beggar buying beedis is paying all these taxes. But income tax, the largest revenue earning component of the budget is paid b...

My good friend Sriram , appears to have become a fan of Ramamritham, just like me. Sriram is an excellent blogger of incredible energy ; who else can keep the scorching pace of 2 or 3 quality posts a day. His post of a few days ago, On the life sucking bureaucracy in India ,  makes a very good read. Heartily endorse the post for readers of this blog. Its a telling comment on our respective energy levels that by the time I have summoned up the effort to cross post, he has already made 3 newer posts despite the fact that he is traveling ! Ah, the advantages of being a younger man !!

End corruption; a favourite slogan in India, especially in the recent past. Really ?? Beware , what you wish for.  If that really happened, it would profoundly alter life in India, as we know it. Are we actually ready for it ? If we don't pay the bribe to get our driving license, we really have to learn driving to get one.  It is an absolute certainty that if the driving test were to be strictly administered, 90% of Indian drivers will fail We have to really declare the right price of your house when registering the property. Is anybody ready for that ? We probably have to vacate the house you live in - chances are that few of them meet statutory safety requirements. Fire safety - what's that ? If we are "rich" we can't slip those crisp ones to witness/cop/judge and stay out of jail , every time we get up to mischief If we are "poor" we can't accept the Rs 500 and one bottle of liquor at election time We are  most likely evading tax. Even the salarie...

Politicians will do anything to win elections; even good things ! You can't blame them , for after all that is the objective in politics. As I observed in the previous post, an economic blueprint is of no use unless a political way can be shown as well. So the task is to show that an economic plan will win an election. Or at least not lose one. I believe the time is ripe for that in India. The Congress government is almost certain to lose in the next general elections due in 2014. They have no plan to win it. No amount of cash doled out to the voter is going to help them win. Therefore they have nothing to lose. Ideal conditions to try something drastic. Make a fresh beginning. Manmohan Singh should retire and a grateful nation should say thanks for a lifetime of public service. Pranab Mukherjee can be kicked upstairs. Chidambaram, Anthony , Pawar etc are to exit with a 21st century Kamaraj Plan . For the lack of any other leader, Rahul Gandhi should take over as Prime Minister. He...

It isn't enough to just criticise. A critic must also state what is the alternative.There have been lots of criticism of India's economic performance in recent times and the government's seeming inability to do anything right, economically. The blogger has been one such critic too. But precious few have really laid down a comprehensive argument of what needs to be done , and equally how this can be done; for we cannot, and should not,  wish away political realities. Government action should be for sustained long term economic development - not short term fixes. Improving "sentiments" , like trying to bolster the stock market, is a waste of time and should not be anywhere in government's priorities. Issues like FDI in retail, fiddling with tax laws, which are getting a disproportionate amount of airtime, are all side shows - they won't make or break India. This blogger is no expert on anything. He is just a concerned citizen. So here's one citizen'...

You couldn't have missed the public fury over the Facebook IPO, over the last week, even if you not economically inclined !  Facebook was a darling before the IPO - great company, stratospheric valuations, etc etc, which this blogger has been heartily against. But now after the IPO , Facebook is a pariah, it botched up the IPO, lawsuits threatened, etc etc. This time this blogger is completely on the side of Facebook and totally flummoxed by the public reaction. What is the main charge ?  Facebook's price did not shoot up 10 times after the IPO. Instead it has declined by some 16% or so, over the IPO price, in the first week. The company has committed sacrilege. Really ?? Who are the moaners and bleaters. The punters who bought in the IPO wanting to sell on the first day after listing and make a 5000% profit. Please tell me why the company has any obligations to these greedy leeches ? What economic activity have these speculators done (never mind that in this lot might be Oreg...

The Hon'ble Supreme Court of India is a very esteemed body and is concerned with matters of grave constitutional importance, on which hinges the future of this nation of 1.2 billion people.  Therefore when this august body makes a ruling, we should take it very seriously and comply. It also goes without saying that the Supreme Court only rules on extremely weighty matters and does not lend itself to trivialisation. It is therefore very clear that the removal of sun films from car windows is one of the most important and pressing of issues that confronts India today. The Supreme Court has ruled, after intense deliberation, and careful consideration of legal issues that pasting a sun film on your car window is illegal . That it has devoted its valuable time to this, while it is suffering from a massive backlog of cases is enough evidence that this is an extremely grave matter. A very concerned citizen of India, Mr  Avishek Goenka (it is completely untrue,  that the aforesai...

Statutory Warning - This post has language which may be offensive to some. Reader discretion is advised ! Why is the  Finance Minister  an angry old man  - approximate translation of the title of this post for non Indians. He is one of the most mature and level headed politicians in India. And yet, these days, he is behaving like an "old f&*% with that perpetual scowl on his face" - you can see zillions of this category in any apartment owners' association in India. Either he has gone a bit batty or has let Ramamritham loose - both of which are awful developments for India I am referring to their collective antics relating to the tax laws in India. The Vodafone story is now well known and is the subject of an earlier post of mine. Pranabda is simply being extremely churlish and petty in pursuing this. I continue to be amazed that they are going after Vodafone (which was the buyer in this transaction and made no capital gain) rather than the seller, Hutchison Telecom,...

Should we worry about India's economy ? Yes says Sriram , a friend and a most prolific and versatile blogger. He makes two or three posts a day  and has wide and original views on a number of issues.  On India's economy, he says "Less than a fortnight into the hundred days in India, the more I observed, the more I wondered whether India's economic "success" story was more hype than real.  That line of thinking morphed into to this column in which I wrote that "the economic health of India is not looking good." Every day, evidence seemed to pile on to further reinforce the impression that India could run into some serious economic troubles really soon.  I was particularly concerned that the country was not paying enough attention to the long-term requirements of resources, energy, and infrastructure ." You can read his full post here . Yes there's much to worry and despair about. We have made some progress, but make disproportionate n...

Ramamritham must be sacked - plain and simple. He is usually just a nuisance and a pain in the posterior, but otherwise a good man. But recently he has crossed the barrier and is now a genuine danger. He must be read the riot act and told to go. I am referring to his contortions and nonsensical behaviour in the Vodafone case. For those not familiar with this saga - here's a short summary. Some years ago Vodafone bought a 67% stake in Hutchison Essar. Vodafone's Dutch company bought the shares from Hutchison Telecom which is a Hong Kong company. Neither the buyer, nor the seller was an  Indian company although the shares they bought were of a company whose operations are in India. Under ordinary tax laws in most countries in the world, including India, the place where the selling company is and the buying company is dictates where tax would be paid on the gains from the sale of shares (in this case neither was in India). This should have been a straightforward matter. But Ramamr...