Swades

Of Swamijis, cults, crooks and Indian economy

2010-03-02T21:51:00.001-05:00

As cult leader Nithynanda is caught in a sex scandal and his organization torn down in India, it is time to ponder on this spread of cultism and proliferation of “holy men” in India. I asked spiritual oriented elders in my family about this and they believe that such enlightened masters are very few in any society. They come once in a generation. But India has now got millions of such guys who claim to be “enlightened”. How?

Since 1990s, the “holy men” count in India has grown manifold. (If only India had half as many scientists as saints we would invented time machine.) They come in all forms, all kind of hairstyles and all kind of fashion. They all establish a big temple and organization around themselves, throw out some general good statements (like Dont be evil, don’t lie"), quote from Hinduism’s holy scriptures and sooner or later the sheeps in Indian society will declare them as saint and god.

Till late 80s there were only a handful of these groups, but suddenly what happened? Is there some cosmic event that created 1000s of saints out of ordinary mortals? Well, it has probably got less to do with religion and spirituality than about economics.

As India got economically liberated in 1991, people particularly those in IT found new wealth, new dreams and new environments. When wealth comes so sudden, so is fear, anxiety and doubt. People were also more staying more away from families and work pressure & competition. They took on more adventure activities like hiking and river rafting to relieve the pressure, but it was not getting enough. They needed some spiritual adventures. Everybody wanted a slice of this nice thing called “enlightenment”.

In economics supply always meets where there is demand. In come all these ordinary joes in saffron. They claim to have an answers to these spiritual problems. They throw out good feeler words and slowly build a cult. Most of these cults are centered around India’s IT clusters – in Bangalore and elsewhere, because that’s where the main market lie. These fellows also frequently visit the US, where diaspora Indians, hippie Americans and Caucasian females – provide a very lucrative market to them. They collect a lot of money, build huge temples and (sometimes) even some good things like schools and hospitals. They create an aura where everything in the ashram moves around them.

As they say about “markets are the best instrument to separate money from the fools”, the Indian IT folks were pouring money on these cult leaders. There are 3 day, 3 week and 3 month courses on enlightment from these cult leaders that charge outrageous sums of money. What these paying guys were secretly wishing is for a short cut road towards spiritual enlightenment. And everytime they wish for these short cuts they strengthen the crooks and charlatans.

Green hunt and India’s war on ultra left-wing

2010-02-06T05:11:00.001-05:00

After dilly-dallying for a few decades India has stepped up the war on India’s left-wing Maoists who seek to bring an ultra-left communist ideals to India through violent means. Operation Greenhunt seeks to deploy 20000 paramilitary troops in the communist affected regions and smoke the terrorists out. It is probably India’s biggest anti-terror operation outside Kashmir.

India’s “revolutionists” come under the banner Naxalites named after the town Naxalbari in east India from where they originally started the movement. Though Indian government understates the problem, it affects 220 of the 450 odd districts of India apart from the neighboring nation of Nepal.

The issue partly stems from the fact that India’s development doesn’t always reach the interior which is beset by a variety of problems including faltering agriculture, encroachment from unethical corporations and greater competition for the rich mineral resources – all the problems that afflict sub-saharan Africa. There is acute poverty that politicians and bureaucrats have not always addressed.

It is a well known phenomenon worldwide that regions far away from oceans and major waterbodies will have significantly lower development, but various Indian government failed to appreciate this fact and add greater developmental measures to compensate for this handicap. The red-belt (red stands for communism) also doesn’t have a major city apart from the tech center of Hyderabad near it and that has deprived the locals from modernization and urbanization. Most of the villages don’t even have electricity and social ills like hunger, illiteracy and infant mortality is rampant.

While the problems are genuine, there are some evil elements that try to make use of the issue to implement their extemist ideals. The Naxalites are a brutal organization and have conducted many a brutal beheadings in Taliban style. Like Al-Queda they are highly decentralized and very sophisticated. This kind of barbarianism is further disconnects the region from world economy and exacerbates the poverty.

Over the decades, Indian governments have thought this as a law & order issue that must be dealt by the provincial governments. However, the provincial government lacked the resources and determination to put out the menance. So, finally Indian federal government has started this war that now has 5 batallions and 20000 paramilitary soldiers on the ground.

While brutal force must be used against the naxals, extraordinary care must be taken not to victimize those tribals who have no part in this. We don’t want to increase the ranks of the disillusioned. The federal government must also studiously monitor the excesses of the military force that is often an issue in Kashmir and the north-east. But, most importantly the root cause for the socio-economic ills have to be solved. The federal government must start a massive project to bring electricity, roads, markets and other infrastructure to these regions at war-footing. Integrate them with national & world economy at a great speed and bring substantial investments and development to this region. And anything that stands in the way of this development must be thrown out at once.

The federal government must also try to give more autonomy/separate statehood to some of the regions in the affected zone (including the creation of Vidarbha & Telengana) to prioritize the developmental issues that affects the red-belt. By separating the red-belt of Vidarba and Telengana we would free up the prosperous states like Maharashtra & Andra Pradesh to focus on issues different issues – like how to bring their regions to world standards.

Shiv Sena and MNS set new records in hating

2010-02-02T10:43:00.001-05:00

The Sainiks first hated the Muslims and wanted them to get out. Then they hated and rioted against South Indians (particularly Tamils) in the 1970s. Then they hated and asked the north Indians to get out of the state. Then they hated the India’s arch rivals in Cricket – Australia and Pakistan and not play in the state. Due to this hatred and threats, Indian Premier League had to keep the Pakistani players out of the format in which they are champions and worsening Indo-Pak relations.

But, Sena is not contended. They hated Shah Rukh Khan (a resident of Mumbai and the top star of the Bollywood) who acted in patriotic movies including Swades and Chak de India. Then they hated the city born Anil Ambani (who ranks among the worlds top 5 businessmen) and Aamir Khan – the actor of Rang de Basanti & Lagaan. Well, these are all “outsiders” – those who are not native Maratis, so it is ok. But, they still don’t want to stop with that.

Now, they hate Sachin Tendulkar – the god of Indian cricket who is loved by people beyond regional, linguistic and national barriers, and a Maharashtrian himself. Then they hated their political allies – BJP and the ideological masters – RSS. All because they dared to speak the obvious – Mumbai is a part of India and every Indian has a right to it.

As Sena, MNS and its followers keep setting the records on hating, we Indians need to ponder on what allowed these parties to exist and get votes in the first place. How can rational and patriotic Indians support such dangerous elements that threaten the fabric of India? The problem is not just in Maharashtra, but exists in some form or the other throughout India. Regional parties of Karnataka, West Bengal and of course the Dravidian parties of Tamilnadu used fear & hatred of outsiders to gain votes and grab power. They have manipulated their electorate and nurtured a sub nationalism that run counters to the one Bharat idea.

As Indians we need to nip this in the bud. Let’s get rid of parochial regional parties and support politicians with a vision to unite India and solve its real problems. And Maharashtrians and rest of India have a lot important problem of farmer suicides in Vidharba to tackle before discussing the stupid language imposition on taxi drivers. And Sainiks should also ask themselves if Shivaji Maharaj and Bal Gangadharar Tilak approve of their hatred of non-Maratis.

When will India and China overtake US in GDP (nominal terms)?

2010-02-02T09:55:00.001-05:00

Here are some charts from Goldman Sachs research. China is expected to overtake US around 2035 and India is expected to overtake US in 2040 and then it will be the race between the two Asian giants.

World in 2025 according to Goldman Sachs estimates – China closing on US and India closing on Japan, but the world order is not significantly different from today. However, when you go a little further, world order dramatically changes as India and China become the top economies US comes in a close 2 – 3 and there is a vast gap afterwards.

Indian cities under threat from surrounding states

2010-02-01T01:01:00.001-05:00

Today I was appalled to read the statement from a former Lok Sabha speaker (head of Indian legislature) Murali Manohar Joshi that “Mumbai is for only for the people from the state of Maharashtra”. Mumbai is the economic & entertainment capital of India and how can it be closed only to the people from its surrounding state? Mr. Joshi does not limit to just words but through his party has contributed to enough violence against “outsiders” – Indians from other states. Think of what would happen if NYC declares it is only for ethnic Newyorkers and start burning those coming from Pennsylvania or Maryland ?

The problem is limited not only to Mumbai but in other cities too. India’s tech capital of Bangalore experienced riots and violence against Tamils and other “outsiders” in 1990s, and some of its leaders blocked developments to the city like a monorail plan arguing that the Kannadigas (natives of the surrounding state of Karnatka) outside the city are being left out. The other tech city of Hyderabad is caught in a tussle between regions of the state of Andhra Pradesh. It is a shame that 3 of the major tech centers of India are now a victim of such chauvinism and sub-nationalism that both threatens India’s unity and economy.

It is time for Indian government to put its foot down and reinforce the idea - “India is for all Indians” and there cannot be any linguistic/regional/casteist group that can threaten this idea of India. Any Indian is free to move/settle in any part of India and state/local government that thinks otherwise must be threatened with dismissal. Any leader who incites violence in the name of subnationalism should better spend time behind bars.

But, more importantly Indian government should consider separating the major metropolis from their surrounding states and give them politcal autonomy – under Union Territories classification. China has this way and cities like Beijing, Tianjin, Chongqing, Hong Kong and Shanghai are autonomous & don’t belong to other provinces. This allows the cities to pursue their development and handle their problems independent of their adjoining states.

Just like how national capital of Delhi was carved out of the state of Haryana, metropolitan cities including Mumbai, Bangalore, Hyderabad, Chennai, Kolkata have to be carved out of their parent states and be given autonomy as Union Territories. This will prevent different communities fighting to attach the metropolis to their own region similar to what is happening in the state of Andhra Pradesh, and will allow the city to devise its own transportation and urban development infrastructure.

Chandigarh, Pondicherry and New Delhi have had no problems by not being a part of a major province and I would like to see other metros too in this. There could be a unified city development council at the center that can manage and guide these autonomous cities.

And coming to Indian politics, if the national party of BJP doesn’t rein its ally Shiv Sena and get out of such narrow minded interests it will permanently damage its electorate in the rest of India.

Business models and Entrepreneurs

2010-01-19T02:10:00.001-05:00

Wonder 1:

What is the difference between startup entrepreneurs and non-entrepreneurs? Is it that one of them has a great notion about business strategy while the other doesn’t? No. In fact, both of them don’t have a friggin clue about business models. The difference is one of them takes the forward step with a mix of guts, greed, passion and appetite for risk. The other doesn’t.

Wonder 2:

Why do all those strategy and business professors, with apparently lots of business ideas, don’t make a dime making something, while Steve Jobs or Larry Page who don’t write about strategy still make billions? The difference is the profs are waiting for a perfect business idea that satisfies all their models, while an entrepreneur lifts up his finger and just does it. The people who talk about strategy more often than not have little clue of actually building a business. They can talk & analyze post-facto, but cannot predict the success/failure before it actually happens.

Wonder 3:

Why do planned communist economies fail even when the planners are very good, while capitalist economies thrive in apparent randomness. Is not competition wasting a lot of money in advertising and stuff? How can a capitalist economy beat a socialist economy well-designed by famous economists with planning done to perfection?

The fundamental assumption about all these three things is that a business can somehow be planned, predicted and built with perfection. The assumers think some dude thinks up the perfect idea, draws up the perfect business plan, goes on to implement and make big bucks. But, the reality is any but the most trivial of businesses cannot be predicted, and great idea goes through 100s of revisions and iterations, just like how a great musician plays a tune a million times in anonymity before achieving fame. The ones who are flexible to this iteration, can cope up with change and can adapt to randomness becomes the successful entrepreneur.

Microsoft started in 1974 building BASIC compilers with little plans of building Operating Systems and such. They kept on doing good work and waited 7 years before the major idea of DOS hit and then another decade when Windows hit. Apple started in 1976 assembling microcomputers, but were inflexible to change that almost destroyed their company. But, then a change took place a decade ago, and now they make all their money with iPod, iPhone, app store and an OS written from UNIX a decade ago. Did they have an idea about any of these in 70s? Google started in late 90s and their initial business model was like putting banner ads. They had to wait for 5 years before AdSense idea hit that gave them the real revenue and rest is history. Ford started in 1902 making motor vehicles like 100 other companies, but it was after 7 years when they really made Model T they changed the business world. And Nokia – the lumber company – had to wait 120 years before the mobile telephony took the small Scandinavian company to world stage.

As a company evolves, the ideas, assumptions, models and even the sector could change. So much for detailed planning. So, instead of waiting for the perfect idea and business model to knock our door, we have to take the step ahead and learn to work with imperfection. As we keep pounding hard to add value, keep innovating and keep our minds and ears open to new concepts, perfection and new paths will come. A society that gives enough leeway to work with imperfection and nimble to change wins. If we keep bonded to the myth that great entrepreneurs start with the perfect idea, we waste all the opportunities to work with the imperfect ideas that could morph into perfect ones.

Revival of religion in India

2010-01-12T20:42:00.001-05:00

For a few decades since its freedom from British in 1947, Indian policymakers and thinkers tried hard to keep religion out of Indian society and politics. India declared itself as secular socialist and its first prime minister – Pandit Nehru, had his own inhibitions against religion. He wanted Indian’s dams and industries rather than temples to be the places of worship. The liberals sold the common people the idea modernism means keeping Hinduism out and faith & development couldn’t go together. It was as though secularism is a virtue by itself. It was as though one cannot enjoy the marvels of technology and religion at the same time – you have to pick and choose only one. They made it fashionable to become atheistic and educated people were abhorred from displaying their faith. Populist leaders broke Hindu idols in public ceremonies and political leaders tried to keep a completely non-religious aka modern outlook.

There were two ironies here. First, International economists call the Indian economic growth between 1947 to 1991 derisively as “Hindu rate of growth” - for its lean and anemic nature, while during that time Hinduism had its lowest point as policy makers have successfully kept Hinduism out of the society. Second, the Indian liberals equated development with atheism by pointing to the West, where curiously religion had far more status than in India. While Indian populace were made to believe developed nations are completely secular, they were unaware of the fact that American goverment’s official motto is “In God we trust”, Head of British state also heads the Church of England and Shintoism & Buddhism continue to be a central part of Japanese society. Rather Indian liberals were enamored with the Soviet’s failed ideals of anti-religonism.

The liberals also forgot history. Almost every major civilization evolved with a religion at its core. Mesopotamians produced the first recorded religion, Egyptians had their Sun worship, Harappans had their Shiva like god, and Greeks and Romans came with their own pantheon of gods with Zeus and Jupiter as centre. There were no real atheistic civilizations. It was Renaissance in religion in the middle of 16th century in Europe that brought the continent to its central place in world history. In fact religion and cultural development almost always go together. By keeping out religion the liberals attacked the very glue that bonded the society. Faith plays a great role in spread of moral values and can also be a great antidote to urban crime. Without religion’s role in answering deep philosophical questions, societies can quickly unravel. Economic cycles can deeply strain people’s lives, as economies move from expansion to recession to expansion and if people don’t have the faith that there is some good being on top of the things, mayhem can result. A calm, non-violent, philosophical religion is a must for every society.

As the dawn of economic revival started in India in 1991, so did the start of the end of Indian secularism. As people started to get more educated, more of them started to believe in religion. they also came to realize that intellectuals like Einstein, Da Vinci and Gandhi had a faith to back their glorious work. The color of the religion matters less compared to the fact of possessing faith in something.

While Hinduism had taken some bad elements (with the infusion of all those self-professed Swamiji’s or “holy men”) there are many good elements too in its new flavor. The religion has become more inclusive with people at all levels now included in the new revival, not just the high class urbanistas. Various rural faiths are merged with the mainstream Hinduism that has added color and strength to the mainstream. Village deities like Aiyappan of the southern state of Kerala and Mariamman of the state of Tamilnadu, are now successfully merged with Hindu pantheon. Just like European Renaissance, Hinduism sprang back up – much to the chagrin of Indian socialists, and has slowly started to get official patronage too. Over the past 6000 years, Hinduism had survived many a crisis, and now it has survived one more at the hand of Indian socialists.

Role of media in impacting India’s foreign relationships

2010-01-12T10:09:00.001-05:00

These days when I talk to my friends in Pakistan, China, Australia and elsewhere one common theme I see is their complaints on our media. As Internet has brought content around the world to anybody’s home PC, our media is gaining more attention and has become extremely notorious abroad. This attention is increasingly straining our relationships, as the recent Australian incidents have shown. Australians complain about the hysteric reporting of the crimes; Pakistanis, Banglas & Nepalese complain of the “arrogance” when it comes to media description of India’s neighbors; Chinese complain about jingoism and over-extended comparison with their juggernaut economy, and the Americans complain the overstressing the importance of Indian IT players and the ever present talk of the next “superpower”. English are more generous but they too are irked by the neo-Indian attitude.

With my overseas friends, I would often defend that given India’s democracy media is bound to have full freedom in expressing their thoughts. But, I’m myself not satisfied with the reply. USA and UK are also great democracies and I subscribe to UK’s Economist, Financial Times and Guardian and America’s Wall Street Journal, TIME and US News. However I don’t see the journalists there on a sensational spree. They take far less liberties when talking about other nations than when talking about their own. And when they criticize they try to be more sensitive. America’s journalists might slam Federal Reserve, White House or other authorities in strong language, but they talk respectfully about India and other countries. We should extend the similar respect when reporting about other countries.

Sensational reporting of the Australian attacks is the perfect example of what is wrong with our media. Our journalists fail to comprehend that assaults and other crimes are pretty common in the West and not always due to racism. When I lived in Baltimore, US I used to frequently see violent crimes in our city in vastly greater proportion than in major Indian cities. You can get mugged or even killed right in sight of Capitol Hill in DC whether you are white, black, brown or yellow. And Australia’s per-capita assault rate is 20 times that of India (UN crime stats 2007) and people in every demographic become victims.

Parts of Melbourne & Sydney are pretty notorious for crime and given our population size in Australia (250,000) statistically it is expected that some of our guys could be in that victim list. Let us be aware of the statistics and be more sensitive towards the crime there. Nobody wants to be called a racist for no fault of theirs and by continuing to call them as racist would invite more ire & attack on our citizens in the future. Already Indo-Australia relationships are looking at an abyss, thanks to the media.

With respect to Indo-Pakistani affairs, I have often found Dawn to be a fairer observer than Indian newspapers. Our media should be less biased and patriotism should not color its perception of truth. Our journalists should be open to tell Indian people that India was not so innocent in Indo-China war, nor was our wars with Pakistan outright victories. Our soldiers fought bravely with conviction, but so did our opponents. We complain about vicious tactics of our enemies, but when you look impartially so do some our actions.

Part of our problem is that our journalists in top newspapers are significantly younger & inexperienced compared to their counterparts in the US & UK. They are given to more rage than reason. This makes it absolutely important for the media houses to train them on “International sensitivity” and encourage them to temper their language while firmly pushing their viewpoint. Media persons should be more rational than emotional, and facts & statistics should be their fundamental friend and not assumptions and accusations.

Let media be a bridge to build relationships with other societies. Let it not be an impediment to our society’s relationships with others. Let it not damage the hardwork done by our diplomats and non-residents. We fight so hard to build friendships with other nations - please don’t derail all of them with improper reporting.

India: A cop left to die while 2 ministers were showing the height of apathy

2010-01-10T06:45:00.001-05:00

A cop was brutally stabbed by a couple of gangsters in a case of mistaken identity, in southern Tamilnadu in India. A government convoy accompanying 2 ministers happen to come that way. However, for the next 20 minutes they showed height of apathy and inaction as the cop pleaded for life and left to die. They claimed that they were waiting for an ambulance (that never came in the end). In the end the district chief took the injured cop to the hospital but it was too late.

Tamilnadu government must immediately fire the two ministers and suspend the cops who were at the scene. Inaction by public servant is as worse as committing the crime itself.

Warning: the video can contain gruesome scenes.

India – Aus: Crime rate comparison – let’s look at stats

2010-01-10T01:23:00.001-05:00

Here are UN stats for crimes measured per 1000 people.

1. Assault: India – – 0.2/1000 Aus 7/1000. US – 7.5/1000

http://www.nationmaster.com/graph/cri_ass_percap-crime-assaults-per-capita

2. Burglary: India – 0.1/1000 Aus – 21/1000 US – 7/1000

http://www.nationmaster.com/graph/cri_bur_percap-crime-burglaries-per-capita

3. Murder: India – 0.034/1000 US – 0.043/1000 Australia – 0.015/1000

http://www.nationmaster.com/graph/cri_mur_percap-crime-murders-per-capita

4. Rapes: India – 0.014/1000 US – 0.3/1000 India – 0.77/1000

http://www.nationmaster.com/graph/cri_rap_percap-crime-rapes-per-capita

http://www.nationmaster.com/graph/cri_car_the_percap-crime-car-thefts-per-capita

As the India-Australia relationship getting heated up due to a spate of attacks on Indian students, it pays to watch the statistics. Australian authorities and media have stated that crimes do happen in India and so there is nothing to be alarmed. Sure, crimes do happen in India and elsewhere. But, that is not an excuse. The reason for the crimes are more important. In LA more people die of murders every month than the September 11 attacks, but you cannot equate them both. In Mumbai more people die in metro trains every week than Nov. 26 attacks but they are not the same. What India is worried is whether the cause for the crime is racist. I’m sure most Australians are not racist, but you need to pursue the criminals to find if there is a small minority who are. You need to assure us that you are capable of arresting these petty criminals and prove without doubt they are not racially motivated.

But, more importantly, Australia’s crime stats are alarming if you measure per-capita. Except for murders, Australia has a worse crime rate stats than India. While it is fashionable to say that third world countries like India are crime-ridden and unsafe, the stats don’t say that. India has a lot lower crimes per capita than most countries and lower than we guys assume just that multiplying by billion makes it look big. Although I agree some of the crimes are not reported in India, still there is a huge difference. I hope you guys take the stats and use the crimes against Indians as an excuse to start a war on criminals.

India – Australia on an ugly spat. Time for media to cool down

2010-01-09T23:02:00.001-05:00

After the recent burning of an Indian student in Australia (following 2 murders last week), India is really angry with Australia. To make matters worse, Victoria police has not progressed much in these three cases. They entirely deny racist motive. What irks India is that after 100+ attacks on Indian students, Australian authorities have still not tightened up the screws.

While we may find issue with efficiency of Australian police, it is outrageous to term them as racist. Even though the cartoonist of the Delhi paper – who drew Aussie cops as the racist Ku Klux Klan members – says the exaggeration is to provoke them into a positive action, such things can really be offensive in the West. It is like those ill fated Danish cartoons. You don’t want to provoke an entire society just for the action of a few individual criminals.

Hopefully, India-Australia relationships turn to normal soon. Let that not get derailed by a couple of criminals.

Cricket Dream teams

2010-01-01T11:43:00.001-05:00

My favorite teams in Cricket. Methodology – for each position the best player in terms of runs & average, and overall team balance

All time ODI XI

Sachin Tendulkar

Desmond Haynes

Viv Richards

Brian Lara

Gilchrist (wk)

Michael Bevan

Imran Khan ©

Wasim Akram

Allan Donald

Joel Garner

Muralidharan

Shane Warne (12th man)

Jayasurya had to omitted as opener because Haynes & Sachin are better batsman than him, Ponting is not here as Richards & Lara are better middle order batsman, Beavan is the most consistent at 6, Imran & Wasim are the all rounders. On pacy tracks, Garner, Donald, Wasim and Imran can decimate any order. On spinning tracks Warne in place of Donald could be lethal supporting Murali. Batting extends till No. 8.

All time Test best XI

Gavaskar

Sehwag

Don Bradman ©

Sachin Tendulkar

Viv Richards

Richard Hadlee

Gilchrist (wk)

Dennis Lillee

Shane Warne

Malcolm Marshall

Muralidharan

Wasim Akram (12th man)

Since No.3 is where most of best players play - Ponting, Dravid, Sobers, Hammond had to be unfortunately excluded in favor of the Don. Sehwag’s inclusion here will be controversial, but he is the only opener in the history with two triple centuries and overall batted with much better average & strike rate than Hayden & other openers.

Sachin – the greatest (by impacting 4 decades)

Sachin had made a mark in 80s, by being one of the youngest cricketer and playing the Pakistan series with a lot of spirit & courage. He is unarguably the greatest batsman of 90s, and among the top 3 in 2000s, and will probably be a great batsman in 10s & probably retire by 2013. How many sportsmen (cricketer or otherwise) can impact their sport for 4 decades? His records will be hard to beat for a long time to come (unless ridiculously made batting pitches become the norm).

Year of dreams

2009-12-31T13:20:00.002-05:00

This year was not a dream year. But, it surely was a year of small dreams. Not coincidentally, I read "The Alchemist" atthe end of last year and probably that made a difference. I just pursued all the little dreams and happy that I did them. In no particular order:

1. I finised watching almost all movies listed in all of AFI's 100 year series (600 of them)

2. I biked the STP (200 mile Seattle to Portland on bicycle). It was a 3.5 year dream and afer two ligament surgeries, finally completed them this year.

3. I toured all the major national parks & monumnts in the US - Yellowstone, Glacier, Grand Canyon, Rockies, Yosemite, Arches, Wind Caves, Lassen, Mt. Rushmore, Death Valley... (20 of them)

4. I touched the Arcic ocean and drove the entire length of Alaska on a RV - for the first time

5. I rafted a frigid rapids near Glacier NP, slashedup the Class4 rapids at Yellowstone, enjoyed a day long raft in the warm Colordo and rated the Class 5 Husum waterfalls.

6. I flew in a small airplane landing on a Glacier near Mt. Mckinley and flew in a Helicopeter over Glacier NP - both firsts for me.

7. I drove 6000miles on a single trip alone for 2 weeks. I had half dozen other random drives

8. I moved back to India after 5.5 years.

9. I started my own company.

10. I learnt Scuba diving. Though I didnt get the certification, I had enough of experience une water.

11. Hiked Granite mountain and a dozen other peaks.

Now, time to achieve the bigger dreams and as we step into a new decade want to follow the path of the Alchemist and go where the heart takes me. A crucial decade in which I want to redefine my life.

New year resolution: Blog reguarly in Agni and EconJournal. :-)

SPS Rathore: Molestation, abuse of power, abetting suicide - but no justice done

2009-12-24T22:23:00.002-05:00

A 14 year old budding Tennis player was molested by the chief of a Tennis association. Then he started harassing the family when they filed a complaint, leading to 11 fabricated cases against her brother and other cases against the family. Finally the harassed girl committed suicide. In a civilized society this guy should have been sent to the gallows or electric chair. But, not in India. This monster with his political connections became the chief of police and had more ammunition to harass the innocent.

19 years later court finally ruled on the case. The punishment: 6 month imprisonment. You must be kidding, Mr. Justice.

http://economictimes.indiatimes.com/news/politics/nation/Om-Prakash-Chautala-shielded-Rathore-Ruchikas-father/articleshow/5376426.cms

http://www.indianexpress.com/news/19-years-later-ruchika-girhotras-tennis-partner-returns-for-judgment-day/556732/3

A day in Indian life

2009-11-24T22:20:00.002-05:00

On most days these days, I visit the neighborhood temple in the morning, clad in tradional Indian wear. On one of my recent visits to the temple, an elderly gentlemen accosted me:

Stranger: What is you name?
Me: Balaji Viswanathan(huh, who is this guy?)
S: What is your father doing?
Me: Viswanathan.... (What does he want?)
S: Are you married?
Me: No, not yet (!$!$!$ Indians are famous for blunt questions)
S: What is your age?
Me: 26
S: Where do you work?
Me: I worked for Microsoft, and now building my startup (at this point, I wanted to really cut the conversation and continue with my business)
S: I worked as a senior manager @ Air India. I have a 24 year old daughter. She works as a senior software engineer in XXXX company. I'm looking for a well-educated son-in-law.
Me: ? (Well educated? You have come to the wrong place, buddy)... I'm not thinking about marriage now. I need to get my company stabilized before taking additional commitments.
S: That's ok. I have enough wealth. It's ok for you do your business.
Me: ?(If you have enough money be my VC and not my father-in-law :))
S: She is quite a beautiful girl and smart girl, but I have to ask her before finalizing this agreement.
Me: (Wait a minute.. who agreed to what here?) Sir, I said I'm not interested in marriage at present...
S: It's ok. I will talk to your father and convince him. You don't worry.
Me: ($#!$%#)
S: What's ur zodiac sign?
(Indians are pretty strong believers in astrology)
Me: Taurus (will you really allow me to get away)
S: (After making a minute of mind calculation) Oh, I'm sorry. This alliance will nt work, as her zodiac sign will not match with urs.
Me: (With a heavy sigh of relief) That's not a problem. I really need to get going. Nice meeting you.

Started a new blog for my startup

2009-11-09T17:48:00.003-05:00

Just trying to chronicle my startup progress:
http://balaji-startupdiary.blogspot.com

Flunked my Scuba certification

2009-11-01T00:03:00.003-04:00

I practiced for weeks underwater, but when it is time for certification everything seemed to go wrong. It was a nice day with sun coming out, but I got late getting to the site and got too much tension on the way. We started in our wetsuits and got down into the alki beach overlooking the ships entering the Seattle harbor.

I had a wet suit with tight hood and gloves to tackle the cold waters (10 C), masks with snorkel, weights to help me sink easily, BCD (a suit that is connected to air suply) to help me move up and down in the water, boots, fins to swim easily, cylinder with 2 regulators to breathe, gauges to monitor depth, direction, air pressure etc... Scuba is a sport with too many gears all strapped into your body :(.

The first few minutes seemed to go ok and I swam underwater about 100 some feet, when the dirty waters of Alki seemed spooked me. The salt water was bitter, visibility was not good with all those silt and I got extreme claustrophobic. The extra weights (I strapped some 40 pounds into various parts of my body to help me sink well) were awkward and it was tipping me onto one side all the time. I don't know what got into me, but the panic I felt was sudden. And I broke the cardinal rule of scuba diving - never panic. In that panic I lost all the rationility.

The regulator went out of my mouth and water salt started rushing into my mouth. I could not find the BCD regulator that will help me go from the bottom of the sea. Salt water filled my masks and I could harldly see a thing. In that panic, I took the emergency exit and zoomed thorough the top of the water and started gasping. And since I had all those extra weights to help me sink, I could not stay on top of the water and kept sinking repeatedly. The coast was just 100 feet away but water seemed to take away all my courage. Finally the scuba instructor pulled me out of the water.

Relaxing for a few minutes out of water, I wanted to go again., But, the one time panic was still acting on my brain and I could not act rationally underwater. The salt water was still producing all those nasty reactions in my mouth, but this time I calmly swam out of the water.

That confirmed my flunking the underwater diver certification. Maybe scuba is not for me. I donno. I still have this fear of open waters - having seen the brutal powers of water. Having once struck under a whitewaterstream and suffocating in a powerful rapid before entering a waterfall, maybe contributing to that effect.

I was so disappointed with myself and as usual I took up the 2 activities I enjoy. I went to the bookstore and spent some time reading and buying books, and then drove randomly. I went for 5 hours to go to beaches in Oregon, when the tiredness of the day started getting on me. I pulled up in a rest area and started sleeping in my car - usual stuff in my roadtrips. After 2 hours woke up, drove back, returned gear. I'm not ready to give up Scuba yet. But, I will hopefully get over claustrophobic...

Moving to India - part 5

2009-10-26T19:14:00.004-04:00

Life is full of tradeoffs.

Top 10 things I will miss in India.
1. Driving my Mustang - it was my most prized possession and I thoroughly enjoyed driving. I could drive 1000 miles in a day in mountains and not feel tired. In India, I will have to use powerless car in hapless roads with nary a road discipline :(.
2. Splendid Seattle - I-90 is the road to the heavens and 101 is the boardwalk of utopia. I drove these roads dozens of times for 100s of miles with no end in purpose. Sometimes I ended all the way in Montana while planning for a 20 min drive. There is going be nothing like I-90.
3. Hiking - I throughly enjoyed the hikes of Mt. Baker - Snoqualmie forest. The peacefullness of Granite Mountain, crowds of Mt. Si, pleasantness of Rattlesnake mountain, beauty of Oyester dome and dozes of other places. In India I need to travel to the Himalayas (1500 miles away from my place) which I could drive in 20 mins from my place in Seattle.
4. My current home - It is a rental, but I got the home I wanted. Watching the sun rising over the entire breadth of Sammamish Lake, without even getting up from bed is something I will sorely miss. There won't be a lake like Sammamish.
5. Brilliant national parks - swimming in Olympic's crescent lake, biking the Tetons, hiking the Denali, driving through Arctic national refuce, sneaking for wildlife in Yellowstone, flying in Glacier park, riding a mule into the Grand Canyon, gawking at the Arches, rafting the colorado, trekking the Rocky Mountains, crawling into wind caves, camping in the red woods, walking the Yosemite - there is no place like America with accessible natural beauty.
6. Dollar - oh yeah dollar smells sweet even after its fall. One dollar is still worth 45 Indian rupees.
7. Efficient government services.
8. Civic facilities - clean water, cleaned up streets, no stray dogs etc.
9. Pretty energetic work environment
10. Most importantly the friends I made here.

Top 10 things I will gain in India.
1. Staying with my parents and family - there is nothing as sweet as a family.
2. Temples - I might be a rational, objective man. That doesn't preclude the fact that I'm a spiritual person.
3. Festivals - Oh yeah.
4. Food - I might like Thai and chains like Denny's and Subway, but there is no match for Indian food. And then Sugarcane in Jan, Mangoes and Jack fruit in summer and lychee's in winter.
5. Lower cost of living - Dollar buys more there. Even after the scorching inflation, India works to be a lot cheaper than living in the US. Particularly in the startup phase, I need to have as long a runway as possible.
6. No long winters. While winter is great if you are skier, but I stopped skiing after 2 seasons when I tore my ligaments. That means 6 months of year goes short of activities - in dark, damp, cooler Seattle winter. (But to compensate for no winter, Chennai gives you plenty of brutal summer).
7. No more restriction on activities. If you are a visa holder in any country (particularly in US), what you can or cannot do with your career is dictated by your visa. Now, I will be a free man.
8. I reactivate my old networks. For obvious reasons my network is a lot extensive in India and a lot of people in business that I know of.
9. Ability to access large, untapped markets. Indian businesses are sometimes run in stone age principles and there is a lot of room for improvement if I utilize my experience in US to make even smallest of changes.
10. Most importantly, I will be in India. My own little country. It can be poor, shabby, corrupt and diseased. But, it is a part of me and it is my dream to build the country I want, instead of just moving to some country that has already been built.

Moving to India - part 4

2009-10-26T18:54:00.004-04:00

Now that it is clear (to me atleast) why I'm moving to business and why I'm moving to India, next comes what I'm going to do now. I have a few ideas, but I'm going to start from democratizing economics and finance. This crisis was a painful reminder of how little objective information is out there and getting used by common people. News sources offer pretty biased, subjective opinions on the eocnomy and financials, while common people need more of objective facts. The facts (in the form of government statistics and company earnings releases) are all public, but there are very little tools at the reach of common man to make sense out of them.

I'm really passionate about data and the tools to visualize the data. My goal is to have a central place where an objective (wo)man can access any major economic/financial data at the click of a mouse,visualize the major patterns that are occuring, and then make decision on investing, retirment planning and career moves based on it. This should act as a bulwark against the imbecile showmen and clowns in the media, who pretend to delieve advice on finance and investing.

Over the course of my work at Microsoft, I have made a lot of interesting friends and some of them will be a part in build this idea. My little venture is to start by the end of this year in Chennai, India and I will be joined by my partner and other people in the team early next year. It is too early to discuss the business plan and the product design in public, but this blog will publish it first when it is ready to go public.

Moving to India - part 3

2009-10-26T18:29:00.005-04:00

Now that it has been decided that I am moving to business, the obvious question is where. I toyed around with building a business in US, Canada and Singapore, but finally settled for India. While India has always been a part of my dreams, there were two recent catalysts that helped me make the final decision that it is going to be India where I'm going to start my business from.

First is the movie Swades that still keeps troubling me after I first saw it 4 years ago. The Hindi movie is about an Indian-born NASA engineer who visits India to bring back his childhood nanny to US, whom he considers as his only relative. But in the process of convincing her to move from her native village, he undergoes transformation in his perspectives and finally quits being a rocket scientist to move to India.

My classmates and I used to argue whether the movie is practical, but that got me to thinking why it should not be practical. I thought one could be a rational engineer and a capitalist and make use of the wide market of rural India. As an Ayn Randist, I believed that building capitalistic temples - corporations, can do more to world's development than all the charities put together.

Second is when I visited India early this year, I saw this transformation in my village. (See post here) The village that could easily compete with the worst of subsaharan Africa in yesteryears, is not undergoing real transformation with capitalism and technology. The village school didn't have a building 5 years ago - but now classrooms have PCs and DVD players. The teachers talk about world issues, and villagers own pricey motorcycles, mobile phones and TVs (5 years ago there was not even a telephone connection to this place). But, while they had hardware, skilled labor was in short and the school had all their PCs shutoff since they didnt know how to operate it.

I think this is a beautiful platform from which India could be rebuilt. I'm not a social activist or some kind of social worker with elevated thoughts, but an ordinary engineer who thinks there is a symbiotic potential - I can develop India while at the same time developing myself. I know its human development index and economic indicators are among the poorest in the world - but the entrepreneur in me sees the opportunity rather than problems. I came to this position (however meek it might be) crossing through rural India, and it is time I made did something for it. I enjoyed studying America's history and now believe that the conditions in the late 19th century US that brought Ford, Rockefeller, Edison, JP Morgan and my other heroes, are pretty similiar to what India is having now. I dreamt of US for 2 decades, but I'm an Indian and it is time to apply what I have learnt to India.

Moving to India - part 2

2009-10-26T17:52:00.005-04:00

Microsoft is a great place to work and whether I work here or not, I will still love the company. The kind of energy, freedom and passion is unbelievable. I have a lot of disagreements about how the compoany should be run and believe that it has plenty of brutal challenges ahead of it. Like America, Microsoft came down from being the world beater in 80s & 90s to lose to its once beaten out rivals, due to less than par leadership. But, like America the spirit of freedom and passion of individuals are pretty underestaimated by the rivals and will keep it thriving a lot longer than most people expect.

In 3 years I was a here, I was a part of the three main divisions of Microsoft - Windows division, Live Labs (as a part of research) and Windows Mobile (as a part of Entertainment & Devices). I also spent equal amount of time in development (first 18 months) and test (last 18 months), with remaining spent in multi role in Live Labs. This gave me wide perspective of how things work at Microsoft.

I came to Microsoft with the plan to quit in 2 years to build my startup, but in the end it took 1 year longer than I planned. One reason is that bad economy interevened inbetween and I didnt want to get caught up on the storm. My plan was to wait till the tail stage of the recession, when you can still use the weak job market and poorer health of your competitors to establish your business and develop your product in time for the economic boom, when investors and customers return.

But, more importantly I underestimated how much I got used to this newfound "wealth" and the comfort of the paychecks. I focused on achieving my "silly" dreams so that when I quit I won't have the regrets of not fulfilling them. I bought my dream car - Red Mustang convertible of which I first read about in school in a children's magazine (Young World). I took various dream tours - even all the way to the Arctic Ocean and Europe, drove 10s of thousands of miles to dozens of national parks in the US. I became an avid biker, biking 200 miles to Portland this summer, learnt scuba diving, went on kayaking trips, rafted through waterfalls, watched all the great movies series published by American Film Institute (some 600 of them), and read through all the pulp fiction works of Grisham, Crichton and other authors.

As I took on dozens of activities my footprint started getting bigger and bigger and I was spending 6 times more than what I used to a 4 years ago. I lived a plain old American dream - drive a convertible, take long roadtrips, live by the lake, watch great movies and enjoy the outdoor activities. I saved a little, but my nest egg was substantially smaller than my peers.

I was also distracted a bit by B-school admissions. I spent a year vetting the schools, meeting the alumni and preparing my essays. I was waitlisted in my top choice schools, but in the last minute couldn't get admission when a bunch of unemployed wall street bankers competed with a lot more attractive resume than mine. I realized that whatever you do, for a Bschool admission committee your engineer resume of building tools and systems is never going to look more attractive than advising on a billion dollar merger or managing a massive portfolio for a mutual fund.

All these factors considerably delayed my progress onto the next stage, but it also gave me more time to fine tune my business ideas and make the networks necessary to build my future team. In the end my top level goal prevailed and whatever happens, I could not afford not to pursue something that was driving me crazy for 2 decades. I cannot lose here - if the company succeeds then it could propel my life, and if it fails it can give me valuable experience in running a business and the satisfaction of pusuing what I wanted.

Moving to India - Part 1

2009-10-26T17:25:00.005-04:00

I'm quitting Microsoft and America and pure software engineering, to move towards a life I always dreamt about. I'm moving back to India to build my startup focusing on economics & financial technology. It was not an easy decision and I had been sitting on the edge for a long time before jumping headlong into this triple transition. It will take a while for me to get used to without steady paychecks and getting used to the life back in India after 5.5 years.

Building my own business is something I had been ceaselessly dreaming since I was young. My extended family's succcess in business is pretty mixed, with my maternal uncles doing very well in their architecture, printing press and software business, while my paternal grandfather failed in his seafood business and my great grandfather lost his textile mills during Great Depression. But this mixed result wouldn't stop me from dreaming. I lived and studied in poor villages in southern India studying in schools with thatched roofs, but even that would not stop me from thinking the crazy stuff. Dreams were the cheapest form of entertainment.

My father is a banker and he had a number of manuals about running small businesses - to evaluate the businesses he was loaning to. I used to read them and keep playing with those numbers and success stories. Somehow those inspid manuals interested this school kid more than comics, cartoons and movies (probably because we didnt get good TV signals out there and there were no libraries nearby). In my high school, I used to read about S&P's bond ratings and Dow Jones Index in "The Hindu" newspaper's business column, without understanding the least about what they are. Until I came to highschool, science was a distant third to my favorite subjects - Math and Social Sciences (History & Economics). In highschool I developed a deep love for Physics and Computer Science and also by this time realized that while economics and finance can help me implement an idea, that idea has to come from prowess in technology.

I had no problems in choosing computer science as my major and when I joined college during the dotcom burst early this decade, my dreams turned into building a tech startup. I tried my hands at various ideas and at somepoint even got chosen for Far Eastern economic Reviews Young Inventor's awards in Singapore. But then I was not yet ready to build a company of my own. Once I graduated I moved to the US to do my graduate studies and pursue my research dreams. At some point I planned turn that research into a viable business.

I did reasonably well at grad school finishing up with 4.0 GPA. Once I was done with all my courses and my Masters thesis, I thought about getting work experience before going on to PhD. Microsoft gave me a pretty lucrative offer of joining as a developer in Core OS division. I had never worked in a company before and I immediately jumped on the opporunity to be a part of one of the most admired companies.

Field report - Future of India and commodities

2009-03-05T18:44:00.001-05:00

In January, I was visiting a few villages in India partly to understand how global markets are affecting them. After spending a week in Europe and a few weeks Indian cities, the villages marked a refreshing contrast. As I walked in the fields, I saw that the villagers were happy, gave me free juicy sugarcanes and they were more upbeat about economy than anybody else. As we will see, if India were to consume as much oil per-capita as a relatively poorer Eastern European nation like Slovenia, it alone needs 30 million barrels/day (mbpd) more (40% of world consumption) apart from another 35 mbpd from China. If they both want to consume as much as US, India needs about 60 million addition barrels apart from 70 mbpd for China (current world production of the order of 85 mbpd).

These villages might never get to the economic level of an average American or European countryside, their per-capita income might never get closer to that of an average American, but the changes going on in these nameless places will have a profound impact on world’s commodity, tech and consumer markets. And this could change the wage-commodity price relationship substantially.

Changes at the ground level

Kovil Esanai, a small village in southern part of India and about 200 miles from the tech center of Bangalore could have easily qualified for those UN ads on world’s poor with people earning less than $1/day. I spent my formative years and primary schooling in such villages where even the best village school is only slightly better than a glorified cowshed in terms of amenities & hygiene. Till about 2004, this village of Esanai didnt have a telephone, most of the homes were constructed with mud & dried coconut leaves, people couldn’t even afford bicycles, the village school was a little more than concrete benches under big trees, and most of energy usage was in the form of burning dried cow dung & wood.

However this village of 2009 is drastically different. Almost everybody has mobile phones, the village school has a brick building and every classroom has DVD players, projectors and PC, people drive new motorcycles built by Indian collaborations of Suzuki, Yamaha and Honda, more houses made of concrete with the “modern” amenities like refrigerator and gas stoves, and people have far more world awareness. The village is not some model village adopted by a world organization, nor is it near a outsourcing base or some major global factory. The nearest major town is 3 hours away and it takes more than half-day to reach a major city. The village is yet another part of developing world whose carbon footprint has dramatically grown and whose inhabitants have started to get a taste of the modern world. My back-of the envelope estimate shows that their average carbon consumption would have grown more than 5 times in as many years.

Image source: Market Research analyst

Implications for carbon consumption

Now, you are thinking so what? Almost everybody in Us has an automobile, concrete house, phones and good schools, why is this change relevant. Look at the graph below using the data from CIA factbook.

Data Source: CIA factbook

Compare India’s 2005 electricity usage with other countries – it is 30 times lower than US and 60 times lower than Iceland. If India and China were to reach the economic level of Eastern Europe and consume the level of Easter say Slovenia, there will be a run on world oil markets. We would need additional 60 million barrels/day (75% world consumption) for India and China alone, leave alone the growing demand for countries like Brazil and Saudi Arabia.

Wage differentials

While globalization has flattened a few wage rates for a few professions like Software development, Project management, portfolio management, etc, there is still a huge gap for non-globalized professions. For example, till 2004 a typical harvester or sowers in agricultral fields earned $0.5/day (for about 10 hours of work) and this is 150 times less than a comparable wage in the developed world. Even a slightly more sophisticated job in McDonalds has a wage differential of more than 20 as the study below shows.

However, globalization train has left the station and more professions are coming closer to flattening the wage differentials across geography. With more education and labor development, the villagers in the kovil esanai could be turned to produce goods that will substantially contract world prices and counteract the commodity inflation.

Data Source: Cross-country comparison of wage rates

New growth, New markets, New cash requirements

Unlike the west, India and China are still growing by over 5% of GDP and every year. You all must have heard the often hype-combine story of Indian and China, but the reality is their growth have real implications even if some of the hype is not true. The global recession is not going to change a lot of that. In the short term there might be slowdown in growth, but the previous growth has set off a real growth in India supported from domestic market. This would act as a cushion and be the base for the future growth. So, if you look past the next 2-4 years, Indian market looks very attractive and for the world markets as a whole the following markets look the most to be impacted.

Commodities: As villages like Esanai step into modern amenities, their energy consumption will go through the roof. We need a lot more oil and electricity to satisfy the demand. India’s per-capita food grain consumption is one-fifth of US, and if it starts eating better then 2008 food grain shortage might get back. USO and DBA could get big.
Capital: Right now countries like China and India are surplus in capital, because majority of their citizens don’t have access to formal credit markets. As villages grow and people want to expand their economic signature there might be a dramatic need for capital. Assuming that a per-capita capital requirement to expand, educate and establish is about $1000/year, India and China can suck up $3 trillion every year. It might not be far off from the point they could consume all their reserves (for China it is around $1500/per capita) and start requiring capital from world markets. That would be a good thing for millions of retirees looking for high yield savings.
Technology: Indians and Chinese might be skipping the computer revolution and directly going to the mobile revolution. India is estimated to go for 750 million mobile phones in next 2 years and already rank the highest in world mobile minutes usage. As they mature up into more powerful handsets it would be big for tech companies. Goog is already making use of the growth, by various initiatvies like mobile search, google bus, etc.

The Future

I see a future for world economy where the relationship between commodities to human labor, completely reversed. The last few decades we moved in a fashion that made labor wages grow faster than commodity prices. In the developed world, workers with minimum wage ($7.25/your) could buy 8700 gallons of gasoline with the yearly salary and drive 261000 miles in an average rated car. The price of food-grains to household income also reached among the lowest in human history, a couple of years ago. However, these will change and the events in 2008 summer was just a sampler. In the long term, the effect of entry of villages like esanai to the global scene will put downward pressure on services and upward pressure on commodities, and commodity prices to wage rates will grow significantly more than the levels in summer 2008. This will cause a significant realignment in the current global economy where developed world is moving mostly to services and developing world into manufacturing. The pains of adjustment will be hard, but in the long term will help improve the strength of the global fabric.

1. Newsweek - Why India’s economy will keep growing?

2. New york times – India retains optimism and growth

India’s thopukaranam is touted as Super brain yoga

2009-03-04T22:33:00.001-05:00

This is something a lot of south Indians do it as a part of prayer (and part of school punishment). Now, it is funny that this is getting into the fitness and medical community as a big thing.

'Slumdog Millionaire' opens a new passage to all things Indian

2009-03-04T21:02:00.001-05:00

Here is an interesting article in USA today. Is India getting closer to American mainstream like Latino and Chinese culture? Every Indian knows A.R. Rahman is one of the best world musicians, but sadly till now the world didnt know it. There are so many of these untapped talents that might start coming out. Who knows, maybe Amir Khan might be the next Tom Hanks (ok, Tom Hanks is uncomparable, but there is nobody else in Hollywood who can take up his mantle when he retires, so why not somebody from Bollywood?)

http://www.usatoday.com/life/lifestyle/2009-03-03-india-slumdog_N.htm

Hurray for ... Bollywood?

Not exactly, but there's no doubt the success of India-set Slumdog Millionaire — eight Academy Awards and more than $100 million at the box office — has magnified India's profile and accelerated the mingling of American and South Asian cultures.

Who knows? Just as salsa came to rival ketchup as America's top-selling relish with the diffusion of Latino culture, maybe Slumdog is a sign more Americans will be consuming even spicier fare.

So pass the chutney.

"Now you can find Indian food even in mainstream grocery stores," jokes Vin Bhat, the American-born co-founder of Saavn, a New York-based company that, as the largest digital distributor of Bollywood movies, music, videos and ringtones, is benefiting from the success of Slumdog.

Music to more and more ears

"We're seeing a tremendous impact," Bhat says. "We're already seeing record downloads on iTunes and other major carriers; we're seeing a lot of people purchasing tracks and albums by (Slumdog composer/musician) A.R. Rahman."

In fact, the soundtrack is top the album on iTunes and vaulted 26 spots to No. 22 on the Billboard chart in the days after the Oscars.

"People are buying Slumdog— it's an access point for people to explore other movie and musical content from India," which is easier to do nowadays, thanks to the Internet, Bhat says.

Indians in America, long concentrated in the tech industry, say it's about time. (Indians are the largest ethnic group among the South Asian population.)

"Perhaps it took something as spectacular as the Slumdog sweep to confirm our 'arrival' as a cultural, and not just professional, force," says Ragini Tharoor Srinivasan, editor of the American monthly India Currents.

The India-is-cool trend has waxed and waned for decades. "It goes back to The Beatles, Ravi Shankar, the Maharishi — look at how yoga is mainstream now," says frequent visitor Dan Storper, founder and CEO of Putamayo World Music, which expects its first, just-released all-Indian music CD, India, and coffee-table book, India: A Cultural Journey, to be best sellers in part thanks to Slumdog.

"There has been a curiosity about the region for a long time, but it always takes one big thing to take it to another level," Storper says. "The stage is now set."

Hollywood might be more willing to gamble on Indian-themed movies and other East-West collaborations now that Slumdog has established audience interest, says Chitra Banerjee Divakaruni, the Indian-born American novelist and author of The Mistress of Spices and just-published The Palace of Illusions.

"We're kind of on the cusp, and Slumdog might tip us over," she says. "Fiction touches the imagination, and the impact lives on long after the facts of non-fiction have faded."

More and more, Bollywood and Hollywood are hooking up. Aussie singer Kylie Minogue is making her Bollywood debut in Indian superstar Akshay Kumar's upcoming film, Blue, and has already recorded two songs for it, including the title track by Rahman.

Sylvester Stallone is appearing in an Indian film co-starring Kumar, Incredible Love, made in Hollywood and due out this year. Warner Bros. released the Hollywood-made Chandni Chowk to China, a Bollywood-style martial arts movie aimed at the world market, also starring Kumar, last month. Will Smith, Tom Hanks, Julia Roberts, George Clooney, Brad Pitt, Tom Cruise, Bruce Willis — all are said to be working out deals with Indian entertainment companies.

"There's all sorts of people going to work" in India, Slumdog director Danny Boyle told reporters backstage after winning his Oscar. "The world's shrinking a little bit."

But don't expect pure Bollywood down at the local multiplex. The genre is not really most Americans' cup of tea: no sex, not even kissing, and lots of over-the-top song-and-dance numbers. Five years ago, Bride and Prejudice, a Hollywood-Bollywood version of Jane Austen's Pride and Prejudice, flopped at the U.S. box office.

"The people who go to see Paul Blart: Mall Copa ren't going to start watching Bollywood films," says box-office analyst Gitesh Pandya, editor of BoxOfficeGuru.com. "But the exposure opens up more eyes."

Slumdog itself isn't very Bollywoodish: There's only one musical number. It's a British production with a British director, a British-Indian male lead and a Dickensian story of a Mumbai slum-dweller's rags-to-riches romance.

Nor is it the first India-themed movie to sweep the Oscars: Gandhi, a British production with a British cast and crew, took home eight top awards in 1982 but had almost no effect on U.S. culture.

Increased familiarity

By contrast, Slumdog lands in the American consciousness just as South Asian names, faces and accents are being heard more, thanks to immigration and population growth.

Nowadays, many Americans have Indian doctors — in fact, Indian-American Sanjay Gupta, a neurosurgeon and CNN correspondent, is being considered for U.S. surgeon general.

"For years, Indians complained about TV hospital shows that had no Indian doctors — it was completely unrealistic," Pandya says. "Then (British actress) Parminder Nagra was cast in ER, and everyone celebrated. This second generation born and raised in the U.S. wants to be represented" on TV.

And in politics. Louisiana Gov. Bobby Jindal, who delivered the GOP response to President Obama's address last week, is the first Indian-American ever elected to a statewide office — and the first Indian-American politician to address the nation on national television.

South Asian names and faces are becoming more familiar in screen credits (director M. Night Shayamalan, The Sixth Sense); on TV (Kal Penn in House, Naveen Andrews in Lost, Sanjaya Malakar and Anoop Desai on American Idol, Aasif Mandvi on The Daily Show, even Apu on The Simpsons); on the news (Martin Bashir on Nightline, and Ali Velshi and Fareed Zakaria on CNN); and advertising (Indian-American Ajay Mehta stars in Fiber One cereal ads).

In music, Western pop stars such as Snoop Dogg, Jay-Z and Britney Spears, hook up with Indian stars and make hits. Singer M.I.A. is a London-born Sri Lankan; No Doubt bassist Tony Kanal is a London-born Indian.

Golf fans follow Vijay Singh, a Fijian of Indian descent, lifestyle junkies follow Deepak Chopra, and readers snatch up books by the likes of Salman Rushdie, Arundhati Roy and Jhumpa Lahiri.

"We're trying to bridge the gap between East and West, and there's a natural musical and creative synergy between Western music and classic Indian music," especially the rhythmic Bhangra genre that blends well with hip-hop, says Ted Chung, chairman of the Cashmere Agency, a Los Angeles company that brought Snoop Dogg together with Akshay Kumar to make the title track of Singh Is Kinng, a hit in India last year.

"The passion that drives us is to show each other's culture and expose people to new things, so they're not so ignorant or afraid of something they don't know," Chung says.

Funny Math Video

2009-03-04T19:50:00.001-05:00

Who said recessions must be gloomy. Enjoy the fun with the recession math:

Funny video on Optimism

2009-03-02T19:09:00.001-05:00

This video is awesome. How many times we take modern things for granted? The credit crisis is partly led by customers who felt entitled to various things - new homes, biggest Plastma TVs, shiny cars... all on credit.

World's best companies - Fortune list

2009-03-02T19:05:00.001-05:00

This year's list of best companies is released by Fortune.

World's most admired companies:

Best companies to work for:

The curious case of Chander Mohan and the anachronism of the sharia law in India

2009-02-25T12:44:00.001-05:00

Today's Wall Street Journal reports about an Indian politician's escapade.Basically, this guy wanted to have an affair and marry his mistress and made full use of India's archaic legal system. While even many Islamic countries don't have sharia law allowing folks to marry multiple wives, India has them. One cannot believe a secular 21st century democracy, giving equal rights to both sexes still follows some archaic law that is hopelessly out of place with the march of the modern civilization.

When will India come to modern age and repeal such anachronistic laws?

....................

http://online.wsj.com/article/SB123552228845764863.html

"Chander Mohan, deputy chief minister of the northern state of Haryana, made a shocking announcement. Mr. Mohan, whose overwhelmingly Hindu state of 23 million people is among India's most prosperous, declared that he had converted to Islam. The 43-year-old father of two added that he had also just wed a second wife, another Muslim convert....

What's happened since has all the trappings of a Bollywood plot, replete with an alleged kidnapping and mysterious disappearances. The drama's serious subtext shows how crucial religious identity remains in a country that bills itself as the world's largest secular democracy....

...A divorcee, Ms. Bali says that her affair with the politician began after the two met by chance at a juice stall in 2004. She says she yielded to Mr. Mohan's insistent messages and love letters -- some of which, she claims, were written in blood.

...Indian law, however, prohibits bigamy and makes divorce a complicated procedure. It might have been especially complicated in Mr. Mohan's case because his house and numerous other assets are registered in the name of Ms. Bishnoi and their children.

Yet, there was a loophole: India's 150 million Muslims, unlike other Indian citizens, are exempted from the secular legislation in family matters. Instead, they are governed by Islamic personal law, or sharia, which permits Muslim men to have up to four wives. "

--------------------------

What do Indians search?

2009-02-24T18:38:00.001-05:00

I was going through google search trends - http://www.google.com/intl/en/press/zeitgeist2008/world.html#top and it is fascinating to see what Indians search the most J. I have not seen so many actors in the zeitgeist for any other country. And interestingly there is no male actor in the list. So, I think search in India is highly dominated by boys and I guess any search company trying for Indian market should note the demographic trend and configure the product accordingly. The overall theme fits with the fourth column.

Top searches on Mobile

1. orkut

2. yahoo

3. waptrick

4. gmail

5. games

6. katrina kaif

7. rediffmail

8. yahoomail

9. namitha

10. google

Fastest Rising

1. youtube

2. orkut

3. katrina kaif

4. cricket

5. irctc

6. facebook

7. genelia d'souza

8. beijing 2008 olympic games

9. sixth pay commission

10. ipl

Most Popular

1. orkut

2. gmail

3. yahoo

4. google

5. youtube

6. yahoomail

7. indian railways

8. rediff

9. cricket

10. katrina kaif

Top 'how to' searches

1. how to reduce weight

2. how to kiss

3. how to earn money

4. how to get pregnant

5. how to learn english

6. how to gain weight

7. how to play guitar

8. how to create a website

9. how to impress a girl

10. how to tie a tie

Contribution of Computers and Internet to Economic growth

2009-02-18T22:37:00.001-05:00

Also appears in: http://econjournal.com/2009/02/11/contribution-of-computers-and-internet-to-economic-growth/

How come we see the computer revolution everywhere except in the [aggregate] productivity statistics?

- Robert M. Solow, Winner, 1987 Nobel Prize for Economics (Sveriges Riksbank Prize)

Computers, Internet and mobile phones have fundamentally changed our life the last 2 decades. We could do more efficient shopping, connect to a lot more people and be more productive at work. As an engineer who have been a part in developing an Operating system, a search engine and a social networking tool - the three main products of this revolution, I feel they are great things to both build and to use. They make individuals much more productive looking at the micro level. However, looking from an economic point of view and see the Macro picture I’m bogged down with “Show me the money”. Economists of the 1980s and 90s have debated a lot about this and suggested that they may not have caused a lot of economic growth. As this review shows, the economists of late 80s successfully argued that this paradox is due to “mismeasurement, lags, redistribution and mismanagement”.

However, over a long period of time you should see the effect in economic growth, as the indirect effect of the productivity increases reflect in the macro economy. And things have changed since the original “productivity paradox” came, as PCs came into the living room and internet connected the ordinary people to do their mundane stuff in networks originally designed to survive nuclear attacks.So in this decade, have the powerful PCs, Smartphones, Search engines, Facebook led an explosive economic growth? In reopening the debate and looking at the recent data, there still seems to be dismal evidence for the productivity growth from the modern revolution. It is possible that the economy might have reached a saturation as a $10 trillion economy cannot continue to be sprinting like a $1 trillion economy, but still 1.7% annual growth in per-capita income since WWW came seems less. There might be other small causes too. The article concludes with what might be a possible cause for this.

GDP growth in the last decade

Here is the annual GDP growth since the War. We see some big spikes in the 1950s, 60s and the 70s, but the growth since the 1990s has been pretty muted, inspite of all the hype of the late 1990s.

Let me take two sample years 1995-2007 to compute the range. 1995 is year of the Windows 95 (that brought PCs to common people), Yahoo (the first search engine), Java (the language that will become the foundation of the web for the next few years) and of Netscape that brought the world of Internet to a lot of people. The next year Hotmail came in and brought email access to everybody. So, 1995 is the pretty much the start of the revolution. And, 1995 was in the start of a massive boom and 2007 was at the peak of another boom – so we should be seeing some real super growth in the period.

According to BEA statistics the GDP (chained 2000 dollars) has grown from $8.03b to about $11.6b a 45% growth in 12 years from 1995. Well that might sound great till we see the Census stats that says the population has grown from 261 million to about 303 million now. So, the GDP per-capita has effectively grown only 24% in this time - growth rate about 1.7%/year. Not bad, but definitely not close to an explosion.

Contribution to GDP:

Now, how much of the growth is really caused from the real productivity growth. There were four other parallel forces that contributed to the growth.

1. Globalization – with the rise of China, India and other countries, US had access to cheap capital, labor and goods. They consumed a lot of American goods and services and gave in return a lot of cheap goods that US retailers used to sell the customers and generate jobs. Thus, there was a lot of growth from personal consumption.

2. Financial “Innovation” – Wall street created a phantom growth over the last decade as it played with ever more greater financial tools. This produced rich profits for the financial companies, cheaper credit for corporations and individuals, and increased the leverage. All these directly fed into the GDP. Well, this doesn’t last long but still contributed to the growth over that period. OECD research shows that this growth contribution could be more than 1%/year.

3. Government expenditure – US government had embarked on a substantial spending program since the start of this decade (duh) with the war in Afghanistan and Pakistan, leading to a spurt in the government component of GDP growth. The spending on homeland security has given a lot of work to defense manufacturers, and the tax cuts introduced by Bush had contributed to economic growth. All these came at the back of heavy national debt notwithstanding, for the temporary period we saw some growth.

And last but not the least:

4. Housing markets – Well, Americans spent a lot on housing between 1995-2007 will be the world’s biggest understatement. Because that is a kind of spending that has put the world in this peril. They built ever greater McMansions [Massive homes that become kind of commodity at the hands of common people], decorated it with expensive toys and spent on all the related stuff, giving jobs to millions of people. People also used their homes like ATM machines and drew money to buy all sorts of stuff. BEA statistics show that over 1% of growth per year in this period could be attributed to increasing housing spending.

Now, out of a 1.7% annual growth in the economy, we have financial sector, globalization, increased government spending and housing growth all could have contributed to growth upwards of 1% each per year, that must be subtracted from the overall growth. So where do we see the explosive growth from Computer and the Internet? As the snippet below shows, the effect of computers and information systems might have even contributed a small negative growth to the economy since 1995.

That sounds incredible to me, but that is what I see from the facts, and fits in the picture given the growth contributors above. Thus, I have to conclude that the computers, internet and social revolution might cause a long term productivity growth, but we have not seen that yet.

Where did all the time go?

Well, computers really save us the time and that cannot be denied. So, if it doesn’t go to economic growth, where does it really go? One possible explanation is people are spending more leisure time. In fact, according to this research from the Federal Reserve of Boston Americans spend 6-8 hours more than they did in the 1960s and according to this research from TNS Market Research more than a third of it is spent online.

Charts courtesy of: Measuring Trends in Leisure, written by Mark Aguiar and Erik Hurst

Chart from the “The Productivity of Information Technology”

Related works:

Header image courtesy: http://www.flickr.com/photos/61444548@N00/110855053/

Where do US Universities spend their money?

2009-02-18T22:36:00.001-05:00

Also appears in EconJournal

Have you ever wondered where do the money from your tuition go? How do the universities spend their money? Why does the cost of tuition grow 2X more than the inflation rate? Why are the US universities extremely inefficient and uneconomical? I didn’t find any other study and workable stats on university spending in the net, so I just made a small exploratory study on how universities spend money.

Organization of this essay:

Part 1 concerns endowments, Part 2 contains analysis on a private University (Harvard) and Part 3 contains analysis on a public university (UW) and Part 4 is the initial conclusion. If there is enough audience interest, I will go deeper into this problem in further posts.

I started from this chart from my earlier post and started digging where the universities spend their money in.

1. Endowments in US Universities

A lot of universities have billions in endowments that they really don’t need to go for any tuition (I think Yale is doing this partly for its undergrads). 78 universities have $1 billion+ in their reserves and 1b is a lot of money [that is 10% more than the entire money spent by Indian government in higher education per year, for instance] and Harvard alone has more money than the GDP of 100 nations. The endowment pool of top 10 universities (after the current downturn) is more than $150b combined. And by law they have to spend 5% of it every year. But, it amazes me that they collect the tuition and other than the endowment interest part they are not able to run the universities in an economical way and have to constantly jack up the tuition. Look at Harvard’s endowment growth in second chart, for instance.

http://www.nacubo.org/documents/research/NES2008PublicTable-AllInstitutionsByFY08MarketValue.pdf

2. Spending at Harvard

Let’s look at Harvard. Audited statement: http://vpf-web.harvard.edu/annualfinancial/pdfs/2007fullreport.pdf

· It spent 3.2b per year, of which 1.2b is from its investments.

· Tacked in its footnote of its financial statement is a $680m expenditure [wow… most nations in the world cannot spend 680m on their entire nation’s education program and Harvard puts that amount in footnote].

· They incur a deficit of 2m even after the endowment money.

Where did your money go?

3. How University of Washington spends its money

http://www.washington.edu/admin/finmgmt/annrpt08/2008report/AR08_tagged.pdf

Tuition contributes less than a sixth of its sources and instruction forms a fourth of its expenditures.

In facts and figures.

The instruction part of the expenses has grown a whopping 14% in last 2 years, while general inflation was less than 4% in that period.

It has a pretty good endowment growth, with the current fund worth $2.2b.

4. Comments

I think US education system should go in for a major overhaul. It is extremely good at graduate level with unbeatable teaching and lab quality. It has huge requirements (Assistant professors, Doctors etc spend 10+ years in school) and strict quality control. But, I think such great quality has a huge cost penalty particularly when you go for lower levels. A lot of times you just need a nail and hammer, and having a $10000 driller doesn’t satisfy any more efficiently. They should shift most of their courses online, let students really think, reason and question, and use the university’s facilities when they need to. They should cut their substantial overhead (more than 2/3 of their expense) and achieve very high throughput. Universities (like automakers) spend a huge amount on benefits (500m for a mid-sized university like UW).

Header Image of Harvard – courtesy of http://www.flickr.com/photos/bunkosquad/29703357/

My 2020 Wishlist

2009-02-17T22:50:00.000-05:00

1. Economical solar power (less than $0.05/kWh)

2. Economical water desalination (less than $0.001/gallon)

3. 100% global literacy

4. Democracy and Law & Order returning to Sub-saharan Africa

5. Poorest countries of developing world getting within a factor of ½ or more of developed world’s per-capita income (around $40K/yr)

6. Significant protection of coral reserves & tropical forests and help rebuild the damage to nature

7. Reversal of global warming using the cheap energy from #1

8. Eradication of most preventable, communicable diseases (including Polio, Malaria, Cholera, Tuberculosis and Typhoid)

9. Programmable homes, enabled by Nanomechanics, to enable changing in color, structure and other physical properties on demand, and making homes extremely cheap, mass producible and still satisfy consumer choices

10. Foldable, collapsible cars that can completely compact on demand (you can park the car in the closet) and give options to hold from 1 to 10 passengers, with adjustable sizes, and passing all the crash tests.

Header Image from: http://www.flickr.com/photos/66164549@N00/2455160742/

H1b and Innovation

2009-02-10T18:50:00.001-05:00

Here is an interesting paper on H1b and the contribution to innovation.

http://www.hbs.edu/research/pdf/09-005.pdf

It’s a pretty long paper and some parts of it are too technical. So, I have reorganized into two main themes and summarized the contents below.

Size of H1b	Innovation from H1b
immigrants represented 24% and 47% of the US SE workforce with bachelors and doctorate educations in the 2000 Census, respectively. This contribution was significantly higher than the 12% share of immigrants in the US working population.	Indian and Chinese inventors account for about 15% of Canada's patents during the 1995-2006 period, only slightly more than in the US
Approximately 40% and 10% of H-1B recipients over 2000-2005 came from India and China, respectively.	Higher H-1B admissions are associated with stronger increases in Indian invention in highly dependent computer-oriented firms (e.g., Microsoft, Oracle)
2.5% SE unemployment rate in 2006, the lowest unemployment rate measured for SE [Software Engineer] since the early 1990s	Bill Gates reported that Microsoft hires on average four additional employees to support each H-1B worker hired
The net increase in immigrant SEs during these twelve years [1994-2006] was 319k workers — 67% of the total. Looking even further, the number of non-citizen SE immigrants increased by 144k, or 30% of the total SE increase	Indian and Chinese patenting are consistently shown to be dependent upon the H-1B program, English invention is typically weakly correlated, and the results for other ethnicities fall in between. The majority of our estimates suggest that native invention is either not affected by the H-1B program in the aggregate or that a weak crowding-in effect exists.
SE and computer-related occupations account for approximately 60% of H-1B admissions	downturn in the Indian share of computer-related invention after 2000, which includes software patents. This shift from the strong growth in the 1990s is striking and may reflect more restrictive US immigration policies. Many factors contribute, however, such as the high-tech recession and the increasing attractiveness of foreign opportunities like Bangalore.
The share of H-1B visas granted to healthcare and therapy occupations declined dramatically from 54% in 1995 to 14% in 1998. SE and computer specialist occupations grew from 25% to 57% during this same period, and the SE sector has been dominant since this inversion.	H-1B admissions substantially increased rates of Indian and Chinese invention in dependent cities relative to their peers. In the base specifications, a 10% growth in the H-1B population increased Indian and Chinese invention by 6%-12% in the most dependent quintile of cities relative to the bottom two quintiles

London Trip, 2008: Part III - local trips

2008-12-22T11:28:00.001-05:00

The first day I spent mostly in getting to know the underground network. By the time i reached the hostel from airport, it was already 2pm and have only 1 more hour of sunlight left. So, after relaxing for 5 min and taking a relaxed shower, I visited St. Pancras - a kind of Central station with a great architecture and then after hanging out a bit, I directly went on to Royal Opera near Covent Garden. I had already booked a premiere show for "Thief of Baghdad" - a dance theatre. I got a good seat in the front for just 16 pounds and that is lucky. This is the first dance theatre I'm visiting, and there were no songs and not much emphasis on music. It was focused more on choreography and aerobics. I will explain more on the art elements, in another dedicated post. The theatre ran between 7:30 to 9:30, and then hunted for restaurants. Couple of restaurants turned me away as it was a crowded time and finally found an Italian pizza place.

The second day, I started my day with London School of Economics near Holbourn station. I reached the school by around 10:30 and walked around the campus. The campus was not too impressive given the fact that it is the world's central place for humanities education, but it was right at the center of London. I went around the facilities a bit, talked for a few minutes with an admission consultant. At around 12:15 I left there and headed off to the railway station to go to Oxford. I went to the wrong station - St. Pancras, and then had to detour to Paddington that connects to other places in Southern England.The train to Oxford was late and after waiting for an hour (for 1 hour long trip), I finally boarded the express train at 2pm and reached Oxford at 3. I was immediately welcomed by a cold rain (around -5C) with strong gusts of wind and a setting sun, and it was pretty uncomfortable. And to add insult to injury, I couldn't find a way to reach the university. As usual I went under-prepared with no address and was walking randomly. Finally, one guy pointed me to the Said Business school and reached there at 3:30. The admissions officer took me around the school and I was very impressed with the facilities. Of all the MBA schools that I have visited - Yale, Columbia, LSE and Oxford, Oxford impressed me the most.

I boarded the train from Oxford at 4:30 and it was a slooooow train. I reached London at 6:30 and headed to British national opera, for the Ballet - "Sleeping beauty". This is the first ballet I visited and it was incredible. It was so brilliantly choreographed with a dozens of hot chicks in varied movement playing the traditional story of sleeping beauty. It was a very long show at 3 hours with 2 interval breaks, but they conveyed the entire fairly tale with no song or dialogue or voice of any kind. After the show, I quickly finished a Pizza and headed home.

The third day started with rain and cold winds and pretty much usual London weather. But, I still braved for a walking tour around London guided by New Europe tours. This is a free tour conducted in many parts of Europe and next time I visit a European city, I will make it a point to find them. We started near the Hyde Park Corner at 11am with the memorial for Lord Wellington, an Army general who faced Napolean and started walking to Buckingham palace, then stopped outside Prince Charles' house, proceeded to St. James' place - an old palace for royal family where visiting ambassadors take their briefs, and walked through Pall Mall - a famous residential area. We then saw Florence Nightingale's memorial, the famous Trafalar square (where Londoners gather for any celebration), Victoria memorial and then the Big ben, Parliament house and WestMinister Abbey (where the royals are crowned and buried for last 1000 years and also housing the graves of Darwin, Newton, etc). We went all the walking (in total more than 2.5 miles) and the guide was giving us history lessons about royals and wars and all the way.

The tour ended at 2 and I was frozen by then. I went to a souvenir shop to buy trinkets to folks back home, and then went to war interiors of National Art Gallery near trafalgar square. I went around the exhibits to see Van Gogh, Monet, Renoir and few other great Painter's famous works. After about 1.5 hours, I took the train to British Museum. I wanted to see Peacock throne, Kohinoor diamond and other precious Indian treasures stolen from India. Unfortunately their Indian gallery was closed the week I visited for renovation :(. So, I walked around Egyptian mummies, some European artifacts, and pieces of historical work from Nicobar, Central America and elsewhere. I had just 1.5 hours to visite the museum and was tired from whole day of walking. So, I didn't see enough stuff. From the museum, I directly proceeded on to Queen's theatre near Piccadilly circus station for the famous musical - "Les Miserables". On the way, I had my portrait drawn by a painter.

Les Miserables was the most incredible theatre performances I have ever seen. It was set with the background as French revolution with emphasis on class differences and sufferings suffered by common people, including young children. I will do a detailed post on this.

The last day of the tour, I spent on a walking tour in old London. I walked around River Thames, spending time near London Tower Bridge, London Bridge, Tate Modern art museum, St. Paul's cathedral. At the end, I visited Trafalgar square and Big ben to take pictures (the previous day I could not, because of the rain).. I planned to go for a Jack the Ripper tour to see the poor part of London, but didnt do as I wanted to conserve energy for the next day's journey to India.

London Trip, 2008: Part II - Astor Hyde Park Hostel

2008-12-22T11:23:00.003-05:00

I came to London on the 11th of December 2008 with the BA48 flight from Seattle. The flight landed at around noon, and within another 30 min I was out of the airport with the baggage and the immigration cleared. It was such a breeze. I was carrying a big backpack and small carry-on, all laden with souvenir, chocolates and perfumes, I was taking to my folks in India. I booked a bed at Astor Hyde Park hostel at the heart of the city. It was near Hyde Park with famous A-list addresses, and next to Natural History museum, a string of embassies and Imperial college of London, and just 400m from Gloucester road underground station that connects with Heathrow and other parts of the city.

Unlike a hotel, here you share the room with 5 other people - both boys and girls. The first three days I had roomies as a Singapore couple, an European girl and guys from US and Hong Kong. The last day, my roomies were guys from Italy, Mexico and Germany. If you think 6 is too much for a room with a bathroom, wait till I tell you about my Netherlands experience, rooming with 18 other people and a bathroom shared between 2 such rooms! The hostels are mainly made for backpackers under 35, but more preferably students in their undergrad, and typically bursts with life (and of course there are a lot of hot chicks out there).

Among the hostels I researched, this hostel received the highest ratings and deservingly so. The room and bathrooms were relatively clean, the food was good, it was well accessible to public transportation and the place secure, and that is what you pretty much need.

For those of you who have not stayed in such youth hostels, here is some info:

Similarities to a hotel:

You get Wi-Fi Internet access, a sumptuous breakfast (with a lot more variety), a reception like central place to control access inside (unlike a motel), a laundry service, a public refrigerator and access to iron box.

Differences:

+ Hostels come with a kitchen and you can cook food, and save money on eating out. Though this time I didnt make use of this, the previous time when I visited Netherlands in 2005, I cooked during most of my stay for 8 days. I carried rice, yogurt, pickles, rotis, etc and that was more than enough to cook decent food to supplement the morning breakfast there.

+ It is very cheap. A good hotel in central London costs minimum of 60-80 pounds and near the Hyde park it is typically more than 150/day. I paid 65 pounds for the entire trip (4 days)

+ It has incredible diversity. Almost everybody who comes to such hostlers are either moving on to other places or coming after touring other places, so you get to meet people who travel a lot. This allows you to see a wider portion of the world through them.

+ Youth hostels are readily accessible to public transportation, since it is for people who won't afford cars.

- You get to share the room, and in many cases members of opposite sex. It is not for all people. You won't have too much privacy, sleep might get disturbed as people keep coming in and out of the room and have to put up with a limited space and need to be careful of your belongings.

London trip 2008: Part I

2008-12-22T11:23:00.001-05:00

My first impression of London was of a confusing place, with a lack of basic facilities drinking water fountains and trash bins, aggressive/horrible drivers who knows not to yield to pedestrians and wet, cold, windy, cloudy weather. But, once I learnt to saw beyond these, a brilliant city emerges - one that is truly an international city with immense diversity, a people with more respect for each other, a city that is super-connected by a network of underground trains and most importantly a city with incredible historical heritage. You have such a continued history that you can keep walking around and say what happened to the place you are standing in, in say 1600 or for that matter 1200. And given the propensity of the Londoners to maintain their traditions, more likely the system is not too different from those of the yesteryears. Even when the great fire of 1600's burnt down the city and a brilliant architect gave a modern city plan with grids and nice layouts, King Charles II preferred to rebuild the city just as it was.

The London Bridge (not the more iconic London Tower Bridge) was burnt down 'n' number of times ("London bridge is falling down, falling down"), and various parts of the city destroyed by wars for the past 2000 years, from the Romans, from the people of Normandy (in Northern France), the Vikings, the French with whom Brits have fought wars for so long including the famous 7 year war and the Napoleonic wars, and of course the brutal world wars with Germany and rest of Europe. Fires have raged and burnt down the city multiple times, plague has ravaged the city and financial crisis like those that followed the World Wars, the 1929 Great Depression and the current depression have stung the heart of the city. But, after all this London is still thriving, still energetic and still hopeful. This incredible resolve of the Londoners is what keeping them alive and is what going to take them through the current depression.

I came to London to see if I could move to this city, in case I get admitted to a school here, and so far I'm extremely pleased. I always fall in love with history, and this is a place with such a quality and will also give me access to Continental Europe with equally long history. I will cover the details in the next part.

Brutal carnage in Mumbai: Whom to assign Blame?

2008-11-28T14:41:00.001-05:00

I was surprised not to see any blame going to state and local level politics in India, who control the law and order machinery. Federal government could do only so much, and it is the state governments with all the police power that must ensure blocking low level crimes that feed into the high level terrorists. Mumbai has long been under the control of Mafias, and with their low level networks and access to money, it would be hard to stop the terrorists unless we stop these mafias. But, many of them have connections with all level of local politicians. So, we need a powerful police force that can stand independent of the corrupted local politicians. As KPS Gill showed in Punjab, an effective police force can neutralize even the most brutal of terrorist forces.

Unlike in the case of September 11th New York and July 7th London, Mumbai or for that matter any major Indian city, is not new to massive attacks. New York and London and Madrid were genuinely surprised by the scale and nature of attacks and made a massive ramp up in Law & Order to thwart any further attacks. India doesn't seem to have done too much as continued instances show. Taj is the center place for all powerful people visiting India, including Presidents and CEOs and how come dozens of terrorists entered there with weapons and with intimate awareness of the hotel? What were the intelligence and security forces doing, leaving such a high profile place loosely guarded?

What is the nature of the past investigations with the prior Indian terror attacks? There are no verdicts on any of the cases in the recent terror attacks. What are the courts, CBI and rest of the machinery doing?

We have been witnessing disaster situations of every kind. From nature created Tsunamis, earthquakes, floods to man-made terrorism, stampedes, fires and carnage of all flavors. Why is there no national policy on an effective answer to disaster, like the one Israel has. We need a national level preparatory education that would teach the common public on ways to deal with a crisis situation - and we need to integrate NCC and other grassroot level forces to make a combined national preparation against emergencies. We might have to make a mandatory short military training programs at the college level, so that we can better supplement the government forces. With its relatively smaller army (compared to population) and an ineffective police force, India is right now uncontrollable and unprepared.

The terrorism answer must focus on starting from preventing the lowest level crimes and flouting of the rules. As the book "The Tipping Point" and the "Broken window theroy" show, once the bad sections of the society realizes that they can go scot-free on most of the smaller crimes, they will tend to increase in scale and things will start to snow ball.

What should the world do post-Mumbai?

2008-11-28T00:44:00.000-05:00

The carnage in Mumbai is still going, 48 hours after the crisis started on a Black Wednesday. Terrorists have been mostly neutralized except for the Taj Mahal hotel, where one suspected terrorist seems to be holing out still. In size and daringness this is comparable to only September 11 - when a group of hijackers synchronized their attack to destabilize the commercial capital of the US. 9 different locations where attacked killing Jews, Europeans and scores of Indians. Once, the crisis ends we have big questions ahead of us.

The world community needs to come together against terrorism, in full force. A lot of columnists have claimed it is a home-grown Indian issue, and Indian officials have predictably used their stock quote "It is from Pakistan". Foreign investments would hurriedly get out of India and there might be bleeding in the Mumbai stock exchange next week, when Indian traders return after the disaster and American traders return after Thanksgiving break. Such, knee-jerk reactions is what terrorists want. World must stay together and realize that no part of world is safe - in the past few years they have hit the heart of London, New york, Madrid, Karachi, Bali, Mumbai, Delhi.... and we must not give into the terrorist ransoms and make them force our investment decisions.

1. World should pay more than lip-service against terrorism. We must unequivocally condemn global terrorism in all forms and for all causes. Whether it is the Chechens fighting against Russian, Uigurs against Chinese, Tamils against SriLankans, muslims against Israel, Talibans fighting Americans or the host of terrorist groups striking India, world must unilaterally act against them and work shoulder to shoulder. No end would justify the means, and even if we sympathize with the cause of people causing the terror in some instances (like the Tibetans who went in rampage against Chinese this summer) we must unconditionally act against it. Just as Pakistan is finding out with its home grown terrorists, and America found with the Afghan terrorists they trained in1980s and Indians found with the Sri Lankan terrorists, terrorism is like a Frankenstein monster that will eventually prey on its creator.

2. India would need to stop pin-pointing Pakistan for all the troubles and also recognize troubles in its own locality. How did dozens of armed men, with the most powerful weapons synchronize attacks against so many locations in a city already under terror alert, and still security forces had no clue? What were the intelligence agencies doing when terrorists were getting into hotels that are frequented by foreign leaders and other critical visitors to India? India must answer a lot of tough questions and should tell the world what happened with all the investigations it launched in the previous terror attacks. Indian law and order machinery is in shambles and controlled by a fracticious political system at the state levels. While India's federal institutions and leader command relatively, high-respect, India has a horrible set of intuitions at the state level. 6 years ago, in the Indian state of Gujarat, the state law and order system actively assisted militants to commit a carnage with the common people sitting in rooftops to enjoy the spectacle. India needs to rescue its horrible state of law and order, and take the state governments to task. Without that it is so vulnerable to terrorist attack and no kind of protection could be kept, as terrorists could easily slip through the cracks.

Pakistan could indeed be the cause of the troubles, given its notorious legacy, but it might mostly be from the anarchy that is spreading out there. India must work with the Pakistani government to collaboratively put together the terrorists, and not invite a macho match in the borders, in a volatile region.

3. Investors must proactively help the countries that are a victim of the terrorist troubles. Terrorists want to take countries out of international markets, and we must thwart such attempts. World should give a collective answer, and give our unity and solidarity and that will be the worst answer a terrorist would be expecting. If his aim is to destabilize economies, split communities and cause panic, what will be his reaction when we stand together to unite communities and strengthen economies.

Let the world stand together fight this global menace.

Major terror attack in Mumbai

2008-11-26T14:44:00.000-05:00

Image source: Guardian

Terrorists have yet again struck Mumbai, the financial center of India. The attack around 10:30 pm Indian standard Time, was one of the most daring things in the recent times.

India has been plagued by insurgents for the last couple of decades and is related to the global terror attacks emanating from Islamic insurgency in Afghanistan and Pakistan. The attacks seems to have been highly coordinated and aims to scare away away the tourists and other foreign visitors from the Indian financial capital. The information available currently is pretty sketchy and a detailed report will be made in this blog soon. One only hopes that International community will collaborate stronger with India in rooting out this global terror mania.

Attack locations:

Map source: Wall Street Journal

http://www.guardian.co.uk/world/2008/nov/26/india-attacks-mumbai

State of US housing

2008-05-19T21:47:00.001-04:00

Home construction turned up unexpectedly in April. It seems multi family dwelling is growing up. Here is the data from census.gov: http://www.census.gov/briefrm/esbr/www/esbr020.html (I have circled the point the where it started climbing up). Even with the current, it is hardly a great news, given that the number of units started is at the lowest point in this decade. You can see pretty detailed data here: http://www.census.gov/const/newresconst.pdf

WSJ gives some commentary on it here: http://online.wsj.com/article/SB121094058802498537.html?mod=hps_us_whats_news though it exaggerates the stuff a bit.

Interestingly, the home ownership rate decreased in the last one year (maybe due to foreclosures?)

http://www.census.gov/hhes/www/housing/hvs/hvsgraph.html

Paul Erdman's - The Panic of 89

2008-05-19T21:45:00.001-04:00

Last week I was reading through Paul Erdman’s “The panic of 89” a novel about a fictional systemic financial crash in 1988. Though the book is more than 20 years old, it is amazingly close to the current situation. The setting is an America with a Republican president who in his 8 years rule has loaded the country with a lot of debt and the international community has lost faith and dollar is having massive depreciation, while the economy is flirting with recession. The economy is slowly clawing into a recession while a Democrat President is to take control in a few weeks. In the meanwhile the commodity markets are menacing, house prices are falling, people are walking away from mortgages, Mortgage Backed Securities markets and Swap markets are crashing (he talks about colossally the derivatives market has grown in 80s) and a rogue leader from Venezuala is trying to screw US by grouping Latin America. The Fed chairman is as confused as Mr. Bernake and is trying to lower interest rates. All this is causing Bank of America to go the brink of a solvency crisis, and the plot involves a former IMF chief and the Fed Chairman in bringing back America to Normalcy. And then there are terrorists, murders and other stuff. The characters are not like the normal ones you see in other popular novels, but if you like Erdman’s novels you would appreciate the depth of characters. It is not just an interesting action packed novel, but this author who is a former Swiss Bank chief packs with loads of finance stuff that look as good as new. The author has always been ahead of his time and generally respected in Wall Street for foreseeing things – his novel “A Billion Dollar sure thing” that came in early 70s was talking about Oil and Gold crisis and another one of his old novels was talking about the trouble with Hedge Funds and stuff.

If you like action packed novels and want a different perspective of the current financial crisis and understand the behind the scenes politics in Fed, then I would recommend this book. Here is an old review of it in NY times.

http://query.nytimes.com/gst/fullpage.html?res=9B0DE0DC1039F932A25752C0A961948260

Writing fiction frees an author to use imagination, though the higher standard for non-fiction doesn’t seem to be there anymore. This author who was a Chief of Swiss Bank in a previous life was jailed for fraud and spent some time in Basel jail. There he got an acquaintance of a professional bank robber from whom he learnt a lot of tricks. He wanted to originally write a non-fiction about global finance, but the Swiss jail didn’t have a good library and so he converted his ideas and personal experiences into a novel and that became a runaway hit. Unlike his other novels this particular novel is often criticized by his fans for not being too fiction-like and too much of real life finance. Many of the characters are real – Reagan, Kissinger, Carlos, Volker whose names are used directly instead of building characters based on them, as done by other novelists. And a lot of the ideas were outrageous at that time – he speaks a lot about Derivatives, Credit Default Swaps, Mortgage Backed Securities and stuff at a time when hardly more than a couple knew mortgages could be securitized. I was reading through the reviews in Washington Post of the 80s and they were wondering how these could collapse the world financial system. But, looking from 2008, we know how. Though, this novel fell out of favor from his other books with more fiction contents, I consider this to be among his best.

He died last year and you can find more about him here: http://www.timesonline.co.uk/tol/comment/obituaries/article1722875.ece

State of IT in the first quarter of 2008

2008-05-19T21:43:00.001-04:00

San Francisco Fed recently published some hi-tech related stats and I find some of the data interesting.

Full data is here: http://www.frbsf.org/publications/economics/et/index.pdf

I don’t know why many of the major news sources didn’t comment on the data.

Summary: Computer Hardware and Software shipments is slowing down, job market growth in IT sector in this Western region is slightly positive in Services and slightly negative in IT Manufacturing, and Industrial production of IT industries in the last quarter seems to have dropped sharply, though I suspect this drop is seasonal.

Nice tool to analyze Subprime data

2008-05-15T17:02:00.001-04:00

I just found out that the FED released a tool 2 months ago to analyze subprime and Alt-A mortgages at county, state and zipcode level. It looked cool. So, for those who plan to purchase a house or for those who are curious to know how different regions of the country are faring in Subprime, this would be interesting.

http://www.newyorkfed.org/mortgagemaps/

Why are CA and FL hit mainly by mortgage crisis? Striking difference between Jumbo and non-jumbo mortgages

2008-05-15T17:01:00.001-04:00

I was going through ofheo’s data (Office of Federal Housing Enterprise) and one thing that mainly struck me was the dramatic difference between the Jumbo and Non-jumbo mortgages. In the first chart, the left bar is the Jumbo and the right bar is the non-jumbo. See how traditional was the non-jumbo market with mostly FRMs (Fixed Rate Mortgages). But, we see all sort of exotic things in Jumbo mortgages. We know from anecdotal evidence that this must be true because jumbo loans are unaffordable for a lot of people and GSE’s cannot take and so people try all sort of funny stuff, but now with hard data it is so clear why the mortgage crisis happened. And the second chart on the right, show the all the usual suspects on the top – with CA alone accounting for one-half of all jumbo loans issued in the country.

The scale of exotic stuff in the first chart (about 75% of total jumbo) really surprised me. And in the third chart at the bottom we can see how conforming loan limits have dramatically increased even faster than home appreciation rates in the last 20 years, even without the current government proposal.

Source:

http://www.ofheo.gov/media/research/MMNOTE11108.pdf

Source: http://www.ofheo.gov/media/mmnotes/MMNOTE072.pdf

OPEC's gimmicks

2008-05-15T16:59:00.001-04:00

We all know oil prices have been going up to extraordinary levels. Let us see some patterns in it. Look at what OPEC did to oil. When prices was skyrocketing they cut production sharply and when it started falling, they increased it substantially. So, the thing for oil investors to watchout is not just China and India’s demand increase, but what goes in the minds of the OPEC.

Dollar at INR 42.6 ...................................... Going up, up, up

2008-05-15T16:56:00.001-04:00

There are conflicting reports emerging from various investment banks on Indian rupee (that already went to 42+) but it looks like most are forecasting a weaker rupee. Given that a lot of analysts would say “dark clouds are gathering” for a rain that has started J, I take analyst reports with a pinch of salt, but still the underlying fundamentals mean that rupee will weaken this year. Slowest industrial growth in over 7 years, historic oil prices and an American recession seems to have already taken a toll on India. Goldman Sachs and UBS have already given a lower forecast for rupee, while Lehman Brothers feel that Indian government might strengthen it to reduce inflation. The only way to do it is increasing interest rates, and I don’t think the government could do it in the face of weaker growth. On the other hand, just like when rupee went stronger, it is not just the rupee but it was the dollar that was going down. Now, it is reverse. The last 10 days dollar is getting a lot of strength.

http://in.reuters.com/article/domesticNews/idINBOM4212620080507

http://www.bloomberg.com/apps/news?pid=20601091&sid=a.dHO1ACVGtQ&refer=india

http://www.bloomberg.com/apps/news?pid=20601091&sid=a6C7NuEzjwO8&refer=india

For those who want to send money to India, this is good (not for me L).

Will oil prices go down or up?

2008-05-15T16:52:00.001-04:00

One of my colleagues gave the following 10 reasons of why oil price would go down soon..

1. Everybody thinks it will go higher

2. Speculation has caused the price to climb and will make it crash once it starts to go down.

3. Higher gas prices will start to make an impact on petrol consumption

4. The dollar will plateau or slightly recover

5. Avg mpg of cars worldwide continues to go up

6. We had a wet winter with a lot of snow in the west which will mean more hydro power is available; especially compared to the last few dry years.

7. US oil reserves are full

8. China will consume less oil during the month of august to control air pollution

9. Airline consolidation is causing fewer flights (and they are also flying slower to save 1-2% of kerosene)

10. People will see the end of the war in Iraq coming and the corresponding in reduction in consumption of military oil

Here are 7 reasons why it might not go down according to me:

US defense while being one of the biggest consumers of oil in the world, still accounts for less than 400,000bbl/day while US total consumption is well over 50 times that. So, even if you think the Iraq war will be over (I don’t think that Iraq war is anywhere near to the end) and even if the entire US military establishment is closed from tomorrow, US consumption would go down barely by 2% and it would hardly be blip in the world consumption of about 82million bbl/day.

Airline consolidation is a long drawn out thing and the government will not be folding its hands to see all the airlines cutting all the smaller cities. Even if all airlines consolidate and the entire government establishment is happy with, the increase in driving necessary to substitute the air travel could more than substitute the reduction in consumption.

China might more likely increase the consumption rather than decrease consumption of oil to curtail pollution. This is because they use the problem is in their dirty coal, and to reduce pollution they might be hard pressed to substitute some of the coal sources with less polluting oil sources.

US strategic reserve is a bit big (worth of slightly more than a month’s supply of oil – at 700 million bbl) but US has never drawn from it in 3 decades, except for some 17 m bbl in 1991 Gulf war and a similar amount during Katrina. Unless there is a major disaster next year there is very little chance that US will draw from strategic reserve. That said, if it is full, in a way it would help to slightly reduce the oil prices because the US government would stop further purchases of oil to fill it. This effect is only be marginal.

Higher oil prices will impact on consumption or cars becoming fuel efficient is only in the long term. It would be unrealistic for a Humvee or a Ford Pickup driver to immediately switch to Smart or Civic or Prius or any such ilk. In fact, the price at the pump is well past $3 since 2006, and the consumption has barely slowed down at 0.3 % ending this April. This slowdown was more than made up by increase in consumption in Saudi Arabia and elsewhere.

Dollar recovery will only be marginal. The credit crunch is far from over. The problems that have surfaced since last August have not gone away and if anything house prices are only heading south every month.

So, in the end there are some minor cases for oil consumption to go down, but $50 or $80 is a bit of a stretch.

Is India in the ring of fire?

2008-05-15T16:48:00.001-04:00

I was just plotting the biggest natural disasters of this decade in the order of number of deaths and a big pattern starts to emerge – it looks like India is in the center of everything. And 3 of these events (Tsunami, Myanmar Cyclone and Kashmir Earthquake) would go into the world’s all-time records in death – An ugly record. And it is not the traditional floods and famines of earlier centuries that took the big lives. The new events - Tsunami, Earthquakes and a lot of factors seem to be pretty new to the subcontinent. I didn’t plot many other relatively smaller events like the historic rainfalls in Mumbai and Bangalore and Chennai that occurred in the middle of this decade and if we started plotting them soon we will fill up the entire space. Maybe all these events are just a coincidence – but as a nation how prepared are we to tackle such big challenges particularly in the wake of what climatic changes and geological plate movements can bring to us.

Gujarat 2001 is in my plot and 1993 is recent in the geological terms J. Deccan plateau historically is one of the stablest regions and I learnt somewhere that it was one of the safest region in terms of Earthquakes (I don’t have any links to backup this hypothesis). So, in our ancient history we didn’t have that much mention of earthquakes. But, the plate below the Deccan (whose pushing into Asian plate gave rise to the Himalayas and also altered the course of three pre-Himalayan rivers from Manasarovar region - Indus, Brahmaputra and Sutlej) is currently unstable as Himalayas have reached the certain level and it cannot tolerate the Deccan pushing it any more J. So, this plate movement is leading to a lot of things along the fault lines and the Indian ocean Tsunami, Kashmir Earthquake and the quakes in the boundary of Deccan (Bhuj and Lattur). So, we are in for far more disastrous earthquakes. And the climatic changes (due to Global warming or otherwise) could screw up the monsoons big deal. It might be interesting to point out the Sahara desert was not a desert a few thousand years ago, before the monsoon that was bringing it rain changed course. So, if our monsoon changes course there might be different cyclonic patterns and things like Burmese Cyclone or historic rainfalls in rest of India have to be prepared for.

You can start looking from here:

http://en.wikipedia.org/wiki/India_Plate

http://www.scotese.com/indianim.htm

Interesting stats on how Oil consumption patterns changed

2008-05-15T16:45:00.001-04:00

I was collecting some data from International energy agency and here are some interesting results of how the world energy usage has changed since the first oil shock.

You can see the original data for this report at: http://www.iea.org/Textbase/nppdf/free/2007/key_stats_2007.pdf

How energy consumption changed – energy consumption by region... OECD's consumption as a percentage of world enegy has come down significantly

Since 1973 shock, Oil’s share in energy use has substantially come down from over 46% to just 35% now. Every other energy source increased.

Oil production stats – Middle east’s share of world oil has reduced significantly since 1973 from 37% to 31%.

How coal markets changed – China became leader while OECD and Soviet receded

Source of electricity - Oil is no longer used to generate electricity

Oil usage by sector - Transportation is gobbling up a lot of energy

Life was like a box of chocolates. You never know what you're gonna get

2008-05-05T20:42:00.006-04:00

I turned 25 (by Tamil Calendar) past weekend and will be turning 25 day after tomorrow according to the English Calender. It has been a great 25 years, though looking back I have mixed feelings towards it. The one thing that comes to everybody at this stage is "I have done something, but is it enough? Am I on the right track? Am I doing well in comparison to my peers?" and it comes to me also. And I dont know the answers for it. 25 is a big milestone that I had for a lot of dreams but hardly anything matured :( - either I was too unrealistic in my dreams or was too lazy and gutless to pursue them. I'm particularly a tinge disappointed with the last 5 years, as I think I have lost the momentum that I was building towards the end of my teens. But, looking another way it is a comparatively calmer portion of my career where I spent good portion building the basics. I drive my dream car, work in a reasonably good company, live in a place i like a lot, have some money and got a few good friends. So, not too bad.

I feel like I have left the whole career dream of becoming a Professor/Researcher, as the life is taking me to a different path. But, I'm also moving more towards what I was dreaming all along in my childhood - Economics and Humanities. Till my 10th grade I was not that passionate about Science as I was with Humanities, and now after exactly 10 years and I'm yet again at the crossroads - which path to choose?

It will be too hard to put everything i have done in the last 25 years... but I want to recount for myself the last 5 years. There are no significant achievements, no resume grabbing stuff... 3 of the autumns were spent in applying for higher studies - one each for MS, PhD and MBA and only the former succeeded and the later two ending in wasted seasons. All the GRE, GMAT, Subject GRE, TOEFL and stuff took a bunch of my energy :(. Maybe this year will also be spent in a similiar pursuit. Apart from this two of the years were spent researching - one each for my undergrad and grad thesis. And a short while was also spent in getting a job in undergrad and the position here at Microsoft, but these didnt take a lot of energy.

But, there was some achievements in the order of priority :).

1. I finished all of Asterix series and most of Tintin :). I was a pretty slow reader till 5 years ago and spend most time with non-fiction. i was reading everthing from Vivekananda to Gandhi and I used to pull others leg that they were reading childish stuff. I guess I was wrong. So, i took a u-turn, put down all those spiritual and other stuff and read dozens of amazing fiction. Finished all of Ayn Rand, most of Crichton, Orwell, Sheldon, Archer.... I felt fiction greatly expands the mind and allows you to think better. In the next couple of years, i have a 100 book list to finish and will be done with most of them from Ulysses to Passage to india.

2. I finished most of Academy award winners since 1928. Movies is yet another thing where my opinions were wrong. I felt they were waste of time and had only entertainment value. Looks like I was watching the wrong stuff. Once I got into Citizen Kane, To Kill a Mockingbird and the likes, I felt a totally new world. Particularly in the last 2 years I made it a point to watch every great movie ever taken. I have still 150 more in my main queue, but atleast i got around to finish 300so far. I cultivated a taste to like the award winners, silent movies and black&white picture and I'm so happy that I have seen a lot of these stuff. Within the next 3 years, I will be done with my main list of 1000 movies. I will come up shortly with a big post on all the great movies I have seen so far.

3. Driving. I was a big bike lover and still I am. But, the last 2 years I feel a new passion towards driving. One reason is my Mustang convertible. For a very long time, I was dreaming of a Red Mustang Convertible and here I have it. Though, my eventual dream is to drive a Enzo Ferrari, I'm pretty happy with my car. I learnt driving myself 2 years ago, directly taking the car alone to the freeway after my friend gave me bit of intro to the mechanism. Ever since I have driven 10's of thousands of miles and it is one happy thing. Last May, I drove 5K miles in 3 weeks with my parents as a single driver and I long for such long trips. Now that it is summer, i will be using my affectionate bike (in the same color of car) more often... but still my car would retain the status of the lover...

4. Traveling. I was always traveling. But in this 5 years was a whole lot more. Had great trips around US and Canada, couple of good trips to Singapore and Malaysia and a trip to Europe. Lots of good memories. In the next 5 years, I plan to travel a whole lot more, particularly if I'm married by then.

5. Learning economics and finance. This is one thing that is pretty different from previous 5 years. I read a bunch of economics and finance stuff in the last 5 years and hopefully will be applying them in the next 5 years.

6. Academics. This was one thing that i didnt pay as much attention in college as I want to be. I had 75% attendance and was not a topper in the class. In Masters, I wanted to change this and got a 100% attendance for 2 years (first ever for me) and a 4.0/4.0 GPA. Though not as important as finishing Asterix series, still this brought some happiness to me.

In a lot of ways, this last 5 years is a bunch of building blocks that i feel will be part of my final construction. The construction is in a big mess, with a lot of heterogeneous stuff thrown in, and everybody close to me have decided that I'm a confused lot trying out too much. Hopefully I will disprove them and then show that even the unfinished projects (almost every project I started) will be a big part in my final goal. Only time will show who is correct. The investment in the last 5 years will be added with those in the next 3 years and hopefully, I will have my day using and applying whatever I learnt.

Let bygones be bygones. What is most important is the years to come. One should always remember the video of Randy Pausch:

Hopefully, i will be able to satisfy some of my childhood dreams like Randy. Maybe someday I will be able to set out to the place I'm dreamin for.

A blog post on Indian economy dated 2011

2008-03-13T22:07:00.013-04:00

Recently I found out how to go in a time machine and going ahed 3 years, I got the following blogpost from http://www.theagni.com/ and I though I will publish it after coming back from the machine.

How to ruin a nation in few simple steps

New recipe from Mr. Chidambaram................................................. Dated March 13, 2011

There used to be a time (maybe >5 years ago) when I used to long for India getting mentioned in international media. And the day came, and India became a rock star of world economy. Everybody who was telling India-Pakistan, were just uttering India-China in the same breath. People were as excited as hell, and optimism run sky high. Even this author was so excited. So, far so good. But, when it gets to the head of rulers, optimism becomes arrogance and arrogance leads to misgoverning and misgoverning leads to downfall. As India started to progress, its rulers started to plot its own downfall. They prematurely curtailed the reforms process that gave a ray of hope to a dying Third world nation. They waivered trillions of rupees of loans made to unworthy borrowers (including some farmers) and destroyed the backbone of banking system at a time when the world financial system was hemorrhaging. It is no coincidence that the only two times that India went bankrupt in his history was following two loan waivers of the last 20 years. The first one in 1990-91's National Front's budget led India to bankruptsy in 1991 and second one in 2008-09's Congress' budget Indian went insolvent in 2010. Interestingly, Mr. Manmohan singh rebuilt from the ruins in the former disaster, while he led to the ruins in the latter disaster.

It also didnt help that they postponed a crucial opening up of banking sector to globalization and they maintained a highly fragmented Indian banking system saddled with big unions and highly inefficient process. Slowly the banking system started to collapse and by 2010 the banks didnt have any cash to lend, pushing everybody (including farmers) into the mouths of money sharks. Mr. Rahul Gandhi, who knew not a word to speak in the Parliament, suddenly woke up in his sleep on March 13 to deliver a 11 minute speech to a bunch of supplicants that increased the loan waiver by many times.

The opening up of retail (a sector that was once worth $300billion) was stopped in its rails by the "Big Mother" a symbol of a ultraPower (written in NewSpeak) who in the period from 2004-2010 cast a complete shadow on India and broke the nation to pieces before moving back to the Latin lands. A sector that once held hope to pull millions of poverty from an Indian quagmire called agriculture by streamlining and simplifying the process of good transfer was killed in cold blood, at the instance of few middle men (called kiranaKiller in Orwellian NewSpeak).

And as the government kept dancing in approving foreign investment and made business process even really harder by keeping the failing bureaucracy, the foreign corporations said "enough is enough" and put an end to their patience and packed home. Stock Markets that was once hovering around 20K (yes, it really was) before it went on a historic slide to the current levels of 200. 25 of the Sensex 30 companies have filed bankruptcy. No more foreign investors to fill in the gas balloon. :-(. India's oil subsidies due shot to $500billion before ONGC, Oil India and BP filed their bankruptcy. Now, people fill their automobiles, by scavenging stuff, inspired from the 2007 movie "Iam Legend". Same is the case of fertilizer and every other stuff that Indian people thought were free stuff to be misused. Water, Kerosene and every possible stuff was horribly subsided to the "poor" at the insistence of "Commies", some of whom returned back to their lunatic asylums (to the detriment of its rest of inmates) and some also made pilgrimage to Moscow, Cuba and Venezuela and singing songs daily. The once hopeful US-India nuclear deal was flushed in the toilet and the US President refused to reopen the deal summarily. So, there is no more electricity in India, now.

Manufacturing that was already dying to a woeful neglect of infrastructure and even present bullies in government bureaucrats died completely in 2009. The remaining performing members of the nation As the failing nation couldn't survive the outflow of money and without anything to import (save a few call center calls, and some software) the nation went once again begging to international agencies. But, this time Mr. Narashima Rao was no more there, and Mr.Singh has been taken along with the Pet dog, a parrot and a couple of cats grown by "Big Mother", back to the Latin lands (how can the Big Mother stay when India has problems). Her son went back to his date in UK and her daughter is happily enjoying hot sands of Mauritius. Mr. Chidambaram (who took "Deception 101", "Misleading 203" and "Misgoverning 404" courses in Harvard Business school with George W. Bush in 1975) has presented India's last budget in 2008 (later budgets were cancelled as there were no revenues to budget) and joined with Mr. Singh and rest of the pets and puppets of Big Mother. Its happy, happy time for all of them, running and picking up balls, and playing with water fountains. In the meantime, millions of Indian farmers are committing suicide (the number was in hundreds in 2oo8 when there were healthy banks) and there is widespread hunger and famine. there is no more employment, no more value for rupee and nothing anymore. Hey, but who cares. You didn't think about that when you voted, and didn't voice when government was misgoverning, so why now.

Some news articles that preceded the downfall:
http://afp.google.com/article/ALeqM5im8omrGzSBx4aeR8TQhDVmnKaz0g
http://www.forbes.com/fdc/welcome_mjx.shtml
http://www.economist.com/opinion/displaystory.cfm?story_id=10808493

Indian budget

2008-03-10T22:13:00.003-04:00

One of the biggest financial events in India is its annual budget. What is supposed to be a dull event of displaying numbers and fact, has been colored by successive Indian governments who use it as a pulpit to throw out doles to the hungry public. So, it is an event that is well televised and watched by Indian public with as much intensity as they would watch if India were playing finals of a Cricket WorldCup.
Mr. Chidambaram, Indian financial minister, who has delivered some progressive budgets in the past has come with a horrible political budget this year that will increase the debt burden and slowdown the economy in the future. The idea is clear - the government doesnt want to repeat its previous government's mistake of not taking the fruits of development to the poor and thereby loosing the election. So, what Mr. Chidambaram tries to do is play a bunch of tricks and hoodwink the people into thinking that the development reaches poor. So, instead of using reforms, investment and development to reduce poverty, the finance looks to remove poverty by throwing out rupee notes from the air. It looks as though Indian government is counting that this past 2 years magic will continue forever and fail to realize that what works at the peak of a cycle doesn't work at the end of the cycle. Instead of leading into progress, this budget can lead it into darkness. Indian government seems to hace reneged its promise of cutting down fiscal deficit (gap between governmental borrowings and earnings) and will add further debt to an already indebted nation (public debt at 60% of GDP, compared to 18% in China) The government seems to gone back to its socialist era that has brought so much pain and agony and made India a third world nation that had horribly lagged behind its Asian peers.

One of the biggest features of the budget is a Rs.600 billion write off of debts to small farmers. Ostensibly this is to reduce the number of suicides that has increased to very high levels in the last decade. Why the writeoff is bad:
-- It mainly targets farmers with very small land holdings (around 1 hectare). However, suicides mainly happen among cotton farmers who have fairly bigger holdings (around 10 hectare).
-- There are hardly any cases of a farmer committing suicide due to the inability to pay a government bank. Most of the suicides come from taking loans from loan sharks, and they are not going to write off the loans. Given the shallow penetration of Indian banking system, writing off bank loans and freeing up process for them to take more loans might not change ground conditions of the farmers much.
-- Any kind of a write off is morally wrong. Those hard working honest people who repaid the loans will be punished at the cost of the dishonest faulters. In the future, even the honest people will be forced to postpone or not repay the bank loans, and deliquencies will raise. Already, most rural people see bank loan more as a charity than something to be repaid.
-- Principally this makes India more socialistic and that itself is wrong. Given how much India suffered due to socialism under Indira Gandhi and Nehru, government should have known better.
-- 600 billion rupees is a huge amount that could be better used by government for bettering Indian agriculture. It could improve irrigation, research newer seeds and usher in a second green revolution and permanently change the agonies of farmers.
-- This would weaken the banking system as they will take most of the burden of loan writeoffs. In an international climate of banks in bloodbath, this is the least opportune time for such a plan. Indian banks will suffer and their chance of going big and global will be nipped in bud. No modern nation has grown by screwing its banks and financial system. Banks are the fundamental nucleus of an economy and if u treat it badly, u r in for big trouble.
-- Lastly, by rewarding small farmers this would prolong the agony of Indian agriculture. It is time that Indian agriculture start consolidating and land sizes grow. India uses 600 million people in agriculture and this is a horribly big amount. No sane economist can work out a condition where India would reatain so many agricultural laborers and still become developed. Thre is absolutely no future for so many people. The government's focus should be to move the small farmers away from agriculture by creating more jobs in industry and service sector. Also, India should dramatically increase land productivity and move more lands away from Rice and Wheat and bring in more rewarding crops. That is how rural India can see more money from Indian growth. But, by rewarding the small farmers and prolonging their stay in agriculture the government is horribly skewing India's long term development.

The only way India can revitalize its rural economy is by bringing the long awaited industrial revolution. We have had an agricultural green revolution and a service revolution is already well in its way. But, only industrial revolution can absorb so many uneducated laborers and make India's economic bone. It could wipe out the trade deficit and dramatically reduce unemployment. Thus, the fundamental focus on Indian government should be bring a rapid Industrial revolution at the scale of China's and we need every possible resource to do that. Lots of money, open policies and a strong banking is needed for this revolution. Indian rural people need a chance and deserve a bright future. But, this budget will be a very very big backward step and the Indian media is deluded in praising this step.

Further Reading:
http://www.atimes.com/atimes/South_Asia/JC11Df01.html
http://www.economist.com/opinion/displaystory.cfm?story_id=10808493
http://www.economist.com/world/asia/displaystory.cfm?story_id=10809412

India's Aussie win: A fitting revenge to the goliaths of the game

2008-03-04T16:34:00.006-05:00

If I say it was one of the sweetest of India's victories it would be an understatement. For, the yesterday's win by India in Australia was probably the best victory for Indian cricket in 23 years and the kind of celebration ensuing will be one of the greatest in history. When a billion people are in great celebration there are very few events in world history that could beat that in size and pomp.

I stayed awake till 4am for the match even though I had a doctor appointment and a bit of heavy work today, but I was nicely rewarded with some good entertainment. Missing entire night's sleep hurts a bit, but its ok :). This looks to be one of the best Indian sides in the last 15 years with a cool headed captain, a pace quartet, couple of discriplined spinners, fine fielding and deep batting. Sachin was in usual song and there need be no better sight in cricket that watching his game. Australians were comprehensively defeated in all quarters and it is a nice end to one of the most controversial series in recent cricket history.

The Davids of Cricket finally slayed the Goliaths of Cricket and it was a fitting revenge for a controversial series. There used to be a time, when Aussies mixed substance with arrogance. But, the former is totally gone, leaving them only with the latter. Australian cricket had a lot of nice gentlemen - Warne, Mark Waugh, Gilchrist and now all of them are gone, leaving them with only a bunch of bullies in Hayden, Symonds, Ponting and such. And the Australian spectators were trying to outdo their players, and the repeated allegations against the Indian player Harbajan Singh was disgusting. It looked like they all had a single minded pursuit of destroying India's most experienced bowler. It was really fitting that their spectators arrogance ended with a shaming defeat. Australians for too long gotten away being the Atilas and Genghiz khans of the game, and now they need to look forward to become normal players.

Bracing up for Recession

2008-02-10T17:26:00.000-05:00

Looks like this is gonna be recession year in the US. Recession means a drop in economic activity and associated with drop in investments, company profits and employment rates. How this going to affect various people?

First, interest rates will significantly drop as a reaction to recessionary pressures, and couple with high unemployment rates and inflation, this looks to be bad for saving money :-(. However, this seems to be right time to take a look on basic things. Based on my readings I find the following to be the reasonable advice for people like me.

1. Dont leave secure jobs, as job market will go south this year.
2. This is not the best time to go to school for doing MBA and such, as markets might tighten up in the next year. But, a lot of experienced folks who can untangle the mortgage mess and stuff will find great jobs.
3. Maintain 6 month emergency fund that should take care of ourself even if we dont have job for a long period. This fund must be maintained separately in money market or savings accounts.
4. Reconsider the portfolio. While stocks do better in the long term, it is time to reduce the risk by taking bit more of bonds and other secure avenues. I moved mostly to secured investments last October, and could wither some of the drop in my retirement plan.
5. Rethink investments. As big ticket investments like starting companies or building houses will be hit during this recession, it is time to reconsider those things for now.

If we are able to maintain jobs and have savings cushion, recession could also be a great time. A lot of great investment opportunites will be available at the later part of recession when everybody else will run out of cash. Houses and companies could be got for dirt-cheap prices and the recession will also help the economy overall by cutting down wasteful expenditures and over consumption while moderating the prices (of oil, houses etc that had runaway inflation during the current boom).

In terms of countries, the expectation seems to be that China and India will cool down affording them to rethink their policies and priorites. China will be hit by drop in exports, while India will be hit by drop in investments. So, its time for China to put renewed focus on domestic consumption (including by appreciating Yuan) and India to start second wave of reforms. When India badly needs money it can no longer afford to keep sectors like Banking, Aviation, Retail stores under tight leash and might be forced to open these to foreign investments. Dollar looks to get weakened more as there is a substantial interest rate gap between India and US, and IT companies will be hit both by strong rupee and a drop in US economic activity. Its time to rein in the India's runaway salary growth and diversify beyond IT.

India can gain a lot. First, if IT weakens a bit and salaries start cooling down, other Indian sectors like Auto and manufacturing can pick up as they can get quality engineers at affordable salaries. It makes no sense for the nation to train a mechanical engineer only to lose to Infosys to do some payroll processing. Also, this recession could get the hell out of Ford and GM who would be forced to do a lot of offshoring and India seems to be the best choice. Already Tata Motors and Hyundai and have begun huge expansionary cycles. And healthy Indian companies can get great bargains with a weak western economy. I wont be even surprized if a group of Indian companies together buy up Ford in the next decade. Also, its time to realize our strengths in Finance and Banking. Its illustrative to note that almost all of the Citi's current top management are Indians and we have similiar loads of talent hidden in our moribund banking sector. Its time to get to Basel-II banking standards and open them to International capital and competition. Maybe, someday we could see a ICICI or a privately owned SBI could take on Citi or Bank of America in head on competition in international turf.

Second, Indian economy can also gain by cooling down of real-estate markets at home. Just like Americans, Indians seem to harbor the thought that house prices can never go down. Americans have learnt the lesson and Indians have still not. Just like any investment, house prices can as much go up as down. A lot of houses are priced at 100 times the annual per-capita income of Indians and the development looks unsustainable as a lot of them were made with unreasonable expectations of salary growth. Now, house prices can go down significantly in a lot of over-priced markets and this will improve affordability for common man.

Third, the market crash will make people rethink consumption. While too much dropping of consumption is bad, too much of consumption is even more bad. Indians are consuming rather too much for their salary levels and savings are not as great as Asian levels. This can hurt a lot of people in the forthcoming real-estate and stock crash, and if managed correctly this could lead to a long term balance between savings and consumption.

Third Wave of Cricket

2008-02-10T16:18:00.000-05:00

I used to be a big fan of cricket and the last couple of years, I had not been watching much, not the least because of lack of access to Cricket Channels sitting at Seattle. And Indian team had a few debacles and Australia has become predictable. Now I started watching Cricket again starting with the current India-Aussie series and boy the game changed so much.

The 1990s look nostalgic to me, when every team had an equal probability to win. Back then, Australia was not so strong and West Indies was not so pathetic. South Africa and Sri Lanka were at their peaks, while India and Pakistan had extremely good players. New Zealand and England were getting as they always were, disciplined but not too threatening. In terms of fun - 1993 Hero Cup,1994 Wills Trophy, 1996 Wills World cup, 1996 Titan Cup and 1998 Sharjhah cup were so unforgettable and times seems to have change a lot. The atmosphere and celebration no longer seems to be there. Even the world cups like those in England (1999), South Africa(2003) and West Indies (2007) looked a lot sedate in comparison. Looking a bit deep, I see a pattern. I always wondered how cricketers world over seem to reach to the top in unison and get out in unison. At one point in 1996 almost the entire Indian team was 23-24 years old, all of them trying to cement their position. And like high school graduation, there seems to be a batch of people who come in at the same time and graduate at the same time.

The first wave took in the 1970s with the coming of Kapil Dev, Gavaskar, Viv Richards, and so on. The first wave of cricket ended after the 1992 when a ton a great players left the game. Viv Richards, Desmond Haynes, Krish Srikanth, Kapil Dev, Ravi Shastri, Javed Miandad, Imran Khan, David boon... all who made the first wave of ODI cricket were gone. Their age of ODI cricket was just a shortened version of the Test match. Bowlers were still at the top, batsmen tried to be cautious and concentrated more on techniques. At one point Desmond Haynes, 17 centuries and 7000 odd runs were insurmountable. But a new wave of cricket took place just before the 1996 world cup. With 15 over field restrictions and the retirement of many great bowlers, a new age of young cricketers took to challenge every possible batting record. Sachin, Jayasurya, Kirsten, Anwar, Ganguly and later Hayden and Gilchrist, totally changed the role of openers. Big hundreds were no longer the issue and once improbably 300+ scores on a 50 over game became the norm. Explosive people like Afridi made cricket look like baseball with a do-or-die hits for every ball. And the once improbable Hayne's record was beaten by almost every credible batsman of the era. In fact, Tendulkar has now 41 centuries and 16000 odd runs, something unimaginable 10 years ago.

Now all these greats of second wave seem to be going off at the same time, just like the first wavers did a 15 years ago. Kirsten, Wasim Akram, Lara, Walsh, Warne, McGrath, Srinath... have all gone. Soon, there wont be Dravid, Ganguly, Tendulkar, Gilchrist, Ponting, McGrath, Inzamam Ul Haq, Jayasurya and world cricket will look a lot different. As this third wave begins cricket seems to get more equalized. Australia dominated entirely during the late second wave with the peaking of all their greats - Warne, McGrath, Ponting, Gilchrist, Hayden, Symonds... Now, already with teh first two gone the bowling looks weak and with Gilchrist gone the top order and wicket-keeping will take a hit. And there is no credible alternative to the top three batsman. Clark, Hussey, Haddin look nowhere near the greats and with a weak bowling Australia looks to be beatable once again as India has shown. India seems to be positive with the third wave with the historic failures of Indian team like running between the wickets, pace bowling and fielding have changed the lot, while there must definitely be worries on historic Indian spin department. It looks the weakest in India's cricket history.

Time will tell how man of the current batch will replace the records set by the second wave guys like those of Tendulkar and Muralidharan. At school, we used to spend hours speaking of the great comparisons like batting of Mark Waugh-Sachin-Lara, spinning of Kumble-Muralidaran-Mustaq-Warne, fast bowling of Akram-Srinath-McGrath-Walsh. A lot of these people including Tendulkar, Kumble, Walsh and Akram were splendid ambassadors of the game with their exemplarily on-field behavior. Compared with those, the current behavior on the field looks uncouth and barbaric. When people Tendulkar, Kumble and Warne celebrated their victories there was a touch of grace. It was fun and even the appealing to the umpire was amazing. But, with the unrefined third wave, the appeals and celebration had to be restrained by ICC so much that the match looks sedate.

Are petrol prices in India cheap??

2008-01-10T00:08:00.000-05:00

($1 = Rs.39, approximately)

Recently, I had been going through a number of articles in Indian media, claiming that oil companies are losing Rs.9/liter of petrol due to global oil price rise. The reports seem to convey the message that Indian motorists are somehow paying very low than what they should. Reality is otherwise, as I noted in one of the earlier articles here.

Indian motorists pay around Rs.52/liter ($1.3/liter or around $4.93/gallon). Do you think this is subsidized and cheap?? See what India's peers in far more wealtheir nations with greater purchasing power pay in CNN.com. I think the petrol subsidy debate is misguided, because of the absence of discussion of taxes. Are Indians paying less for Petrol than we living in the US? I fill my tank at $3.2/gallon (before getting 5% cashback with my credicard) because my state of washington has one of the highest sales taxes, but it is still equivalent approximately Rs.30/liter which is half what an Indian motorist pays in India. Does it mean 76, Chevron and other places where I fill gasoline from are making losses?? Looking at their stock prices doesn't make me think so. US oil companies are having windfall profits.

And Indian purchase basket of crude is about 8 dollars cheaper per barrel than international price and Indian refineries are more efficient. So, shouldn't Indian motorist deserve a much lower gas/petrol price than us in the US? So ideally the petrol prices could be in Rs.20s per liter and still the companies coulde make profits and government to earn taxes, if US prices are a guide.

Basically, Indian governments at various levels tax petrol and gain over Rs.35/liter and at the end they claim they are losing Rs.9/liter due to subsidies. With proper math, it would come to Indian government gaining Rs.25+/liter on petrol, after taking up a loss of Rs.9 loss per liter given to oil companies in bonds and other forms of subsidies. Simple. So, nobody is doing charity in India with petrol. Its just that government has odd tax policies that end up taxing much more than required and in the end share a part of spoils with oil companies by taking their losses.

For Diesel and LPG, if you factor out the taxes the government breaks even and only on Kerosene the government, loses overall. But, eventually the hope is that more of rural people would be moved to LPG. And since Diesel is more efficient and used mainly for public transportation there is a better rationale for selling it cheap. For LPG and Kerosene the rationale is that India should have its priority of moving people from highly polluting wood, cowdung and other materials that are burnt in rural places for cooking. So, having it cheap makes sense, though eventually I would prefer Kerosene to go around Rs.25/liter that would break even for the government at the current $100/bbl global prices.

I would prefer a more transparent mechansism in which government strips all its taxes - from excise duty to sales taxes on petrol and diesel, along with subsidies for marketing companies, align the prices to vary daily with global prices and then over it add some minor taxes that can vary based on international prices. This will be pretty transparent and allow people to see how much of the price rise is due to interntional prices and how much is due to their government, and unless the oil prices goes to extremes the government should not meddle with the prices. So, a gas filler can see his Rs.52 payment for a liter is due to Rs.25 for Saudi Arabia/OPEC, Rs.5 for refining and transportation cost, and Rs. 20 for government taxes, and the rest for the profit of the oil marketing company. Same with all other petroleum products and it will remove politics from pricing, and only simple economics will rule.

Here is one chart of global and Indian petrol prices in 2006: http://www.kshitij.com/research/petrol.shtml

HEre is another slightly older (2005) prices of gasoline around the world:
http://bigpicture.typepad.com/comments/2005/05/gas_prices_from.html

Again India was just below the European countries and much ahead of rest of the world in its prices.

India's retail revolution

2007-12-27T17:11:00.000-05:00

This is regarding the retail article in IEB. Two of the things that are often missed in the road towards modern retail is the expansion of organized labor and the addition tax base. The fragmentation of current retail system makes it easier to evade taxes at various levels and almost all the labor belong to the unorganized sector with no mentionable rights. One of the goals for India is to move its massive unorganized labor into organized sector where they could get more rights and the same time there will be better accountability. Also, with bar-coding and automatic billing the modern retail aids in tax collection - sales, corporate taxes and employee income taxes.

In the end it would benefit everybody - farmers, investors, infrastructure developers, laborers and also the government would have more tax revenue at its coffers to spend on the people. The jobs of few middlemen are not worth to stop such a massive potential to change the contours of Indian economy. If the middlemen are enterprizing enough they could adapt to the new India that will enable the creation thousands of new opportunities for entrepreneurship - supply chain management, cold storage, back end data processing.

Crouching Dragon and the Hidden Tiger

2007-12-19T01:44:00.000-05:00

Browse any newspaper or magazine discussing on Politics or Economics and China is spoken atleast 10 times as much as India. In fact, India has started to get mention only in the last couple of years and mentioned only in a few selected instances and in most contexts taken as a passenger in the sentence about China. But, Indians are far more aggressive and everywhere you see an Indian comparing China to India. This is a dramatic turnaround from our past, when India had an indifferent attitude towards the world. When Chinese, Arabian and European sailors came observed and wrote scholarly works, Indians were living in their own world. And we know the history, dont we? We paid the price of not knowing about our neighborhood. Now, we have made a 180 degree turn. We speak about other nations more than any other culture in the world. An average illiterate in a tea shop in rural India could talk about the politics of dozen nations and a cheap regional magazine could carry as much foreign news as some of the top newspapers in the US. We are in a constant state of comparison and China has taken most of our debate space. After all, it was a poor buddy of ours 2 decades back and now sits with rich nations. Thus, nothing moves Indian society or polity than a talk about China. Without China, it is doubtful whether we even could have got so many economic reforms in India.

Given that Indians have the highest sense of self-pride and over-confidence, most of the comparison between India and China specifies only three things - English language proficiency, Democracy and Demographic dividends. And all of them are tricky and India might not be strong in any of the three, compared to all hype. English can we well spoken and written by probably 10 million people - less than 1% of population, and the kind of politcal system in major states like Bihar and Uttar Pradesh can be anything but democracy. And the demographic dividends can do far more harm given the dozens of separatist organizations in India, unless it is handled with high care. But, with all that in future India can still grow substantially, not because of these 3 factors but that we are so low in every indicator that is there is no room to go further down.

So lets take other things into comparison with China and as usual for an Indian we will beat China down (!).

Looking at the overall numbers, China's GDP measure both in current exchange and PPP is only between 2 to 3 times as big as India. And given that it has 30% more population, 3 times more area, 13 year headstart in reforms and a history of never ever been ruled long by aliens, it is not that impressive. It is ok. In fact if India had slightly started early by around 80 and increased the growth rate by 2% in that decade, the GDP numbers wont be too different.

And Indian numbers were achieved with just 65% literacy and a miniscule share of world trade and investment. Given such a low baseline, there is an enormous headroom for India. Even If we manage to increase literacy by 10% every 5 years, we could still have 10% growth rate irrespective of what happens in global economy. And this is not such an impossible task given the technology and resources we have. One good example to see is the rise of telecom. 6 years back we had probably 1 to 2 % teledensity and now we are adding that many every month. So, we can attack our social problems like illiteracy with tools that no other advanced nation had the benefit of. And miniscule upper middle class could multiple many times over the next decade leading to an exponential growth in many other sectors.

And if the last 2 years is any indication, the share of India in world trade and investment has only one direction to move. And India has a lot more cards kept close to its chest. Most of the bigger sectors are still unopened and only the soup has come out so far. The meal is still in the kitchen. Retail, transporation, banking, agriculture education and dozens of major sectors are still locked and as they keep getting out of state control, growth could accelerate and may more than compensate for any loss in US slowdown or even if IT sector dies.

And more importantly India is still under the radar and treated as innocent observer. China with a percapita income 3 times less than a poor European country - Romania, is under attack from around the world, accused with tampering the world economy. No one has taken note of the threat India could possess. All the extremities - Iran & Israel, US & Russia, China & Japan have started enormous startegic partnerships with India and none of the major nations nowadays even criticize India openly.

In comparison, China has already started to face resistance in too many quarters and could threaten its future growth. It has done the simple things well - made its people literate and provide basic health care, but how about future challenges as a first world country. Given its current growth pattern, if China has to grow even to the economic level of Turkey, it has to completely take over world trade and investment and to keep yuan week it has buy the entire debt of whole world, that looks a tough task (!). So, it has to find new ways to grow and the old ways of low cost production, high foreign investment and bulging exports but may not scale to China's ambitions.

So, China is charting an untravelled territory and faces with questions on how sustainable its growth will be, given it has maxed out on most items. How many more toys can it produce or how much more foreign direct investment will get? How long will Yuan remain weak and withstand world pressure?

China is definitely ahead of India in most aspects, but can keep it that way?

Lead India

2007-12-14T23:32:00.000-05:00

If nation's tastes and interests were determining its destiny then India is on the right track. The extremely popular Lead India Campaign by Times of India (the tabloid finally woke up to do finally something worthful) is really ennervating. The image is really powerful. And this is not at all impossible. If at all, it just reminds of Mahatma's struggle. The struggle of the rich and educated elite became a national freedom struggle by one man's lead. And as he lead, entire India followed like in the video below. And among them we found the finest of leaders who were previously trapped in their everyday trappings.

Will we shake up ourselves in this video's style? Chances are slim. But, it is still possible.

For a long time we have been cribbing on our environment. But as Sharukh and Amitabh say, we have no right to complain about the Traffic Jam. We are that Jam.
See Sharukh's and Amitabh's Videos below:

And here is an older nice video with the "Ye Jo Desh Hai Tera" song in Swades. So Nostalgic.

Do Indian sports deserve better treatment?

2007-09-26T22:10:00.001-04:00

We had a big argument at work on whether India recognizes other sport equally compared to cricket. Agreed, Cricket is major sport in India, but are we not recognizing other sports even if they do good? Do you think Ranji and Duleep Tropies get crowds, even in Cricket mad cities? If you look closely, Cricket is not popular in India - it is patriotism that is popular. Did you see what national recognition a single Bronze medalist Malleshwari got after Sydney Olympics? Even the 11 Gold Medalist Phelps didn’t get that much even in his native Baltimore. Or how about Sania Mirza and Leander Paes? How many nations keep track and celebrate the 50th and 100th ranked Tennis players? Or how about legendary PT Usha and Milka Singh? How many nations make a national heroine out of an athlete who has not won an Olympic gold? And a lot of great players in other fields like Vishwanathan Anand and Narain Karthikeyan are very well recognized.

So, its untrue that we are not recognizing other sports, and we have some special affection towards cricket. Honestly we given other sports enough chance and most nations don’t recognize the bronze winners and 100th ranked players like we do. We are plain pathetic in most sports and people don’t want to keep seeing a losing home nation. Would Cricket be so much of fun if we have 75 to 100 nations play competitively? Would an Indian still watch the sport after being routinely drabbed by 50 other sides consistently? This hockey victory is good, but the performance over the last 50 years is not enough for something that is recognized as a National sport.

Look at India – most Indians don’t care about the game or its funky rules, they just want India to win. Whether you score a cover drive with a straight bat or an edge beaten clear by an outswing it doesn’t matter. For Indians, Cricket is kind of a pain releaser where they want to see their fragile nation win in something. If India were winning so much in Ice-hockey, maybe they would watch that . It doesn’t require great marketing (Indian athletics didn’t do much marketing before PT Usha’s Athletic prowess in the Asiad) - it just require quality stuff. Without quality stuff, in the long run, product wont sell and that’s what most sports are finding now.

Seriously, India is pretty pathetic in most sports and probably recognition is a bit to blame. But, looking at whole of South Asia, it is peculiar region in the world where all countries are poor in most sports (that’s why we have SAARC games as Morale events). Africa, North America, Europe, South America, East Asia, Middle east are all good in atleast a couple of sports and are fiery in it – Olympic medals and Soccer World Cups are a good indicator. May be some researcher should start exploring the genetic makeup to see, why a poor South American or an African with probably as bad facilities are able to play well, while South Asians are not .

And to add further proof (or flame) immigrant Indians who have settled in Europe and North America have excelled in almost all fields – from winning Oscars to becoming a deans at institutions like CMU and Kellogg to becoming powerful board-members of most Corporations. But, even among immigrant Indians and overseas born Indians (who are grown in the same environment as other ethnics) we don’t have top soccer players or F1 champions or Olympic winners.

So are we sure recognition is the most to blame? I’m not saying that something is written in our gene that is setting the Boolean value for Sports to FALSE. But, we must sincerely start looking in and find out what our real problems and how we can solve them. Probably there are unique issues in our social culture that are not valuing sports and economical conditions are forcing people out of sports. Still looking at our big North neighbor winning so much medals (the only field India is not competing with China) with similar social values and economical constraints, I’m pretty frustrated.

The extraordinary lectures of Hans Rosling

2007-09-04T12:28:00.000-04:00

Hans Rosling has given an amazing presentation that debunks some of the myths about Third World. It is presented so beautifully that even total strangers to economics and public policy can understand every part of it. It should be a bible for all powerpoint presenters and those want to present analysis on the data. Watch the presentation and enjoy.

See this followup presentation on poverty:

A third video about the beauty of statistics

Will US go into recession? Part 2

2007-09-02T18:53:00.000-04:00

Now, the last few weeks of hearing all bad news all around financial markets, made me think is the world is going to be destroyed pretty soon. Is this the Apocalypse? I mean, why is there so much of panic when a casual glance at the current situation doesn’t seem to be bad, at all. Notwithstanding the subprime case that we saw in the part 1 of this series, the tide might not be big enough to rock the boat. Here's why:

1. In most subprime hit localities, American households earn average of 75K/year and buy house at an average rate of $300K that is just 4 times the annual income, and in many rich neighborhoods that earn in 6 digits this ratio could be even less. So, is the house price sky-high? Is the ratio change too much in America’s history? Are other countries better? Brits and Europeans whose average house price is like 10 times the annual house-hold salary seem to worry much less even at the back of a 3x price growth in 10 years. In Asian countries like India, this ratio could get even higher. I don’t know about Africa and South America, but think that they wont be any better in owning houses than America.
2. Current America has a very healthy corporate cycle and unemployment rates are almost historically low. The last housing bust was at the back of big unemployment.
3. The subprime mortgages are still a small portion of total value of American housing assets and not all of them are defaulting and not all the defaulted properties have a value of 0.
4. By the very nature of the American economy, the risks are well spread out and markets are pretty deep and matured compared to almost any other country. Agreed that there is a lot of unnecessary froth at the top, but derivatives in essence builds a very strong foundation and links the stakeholders.
5. The world economy never looked so better and not all of it is based on cheap mortgage. There are quite a bit of fallbacks, unlike the previous times. Even taking the factors that are dependent on US consumption, the consumption of many Asian countries have increased sharply and Russia is back on its knees.
6. Most importantly, unlike in most other times of American history, there are a quite of bit of non-market entities that are extremely powerful and they would like to maintain status quo and have the means to do it. The foreign reserves of Japan, China, India and Korea alone are in the range of $3 trillion and each of them is much bigger than any institutional or individual player in the market and they understand the stakes. If US goes into recession or if there is a reduction in interest rates, there could be losses of hundreds of billions here alone. So, would it be stretch to assume that a couple of hundred billion dollars could get diverted by these power central banks into US mortgage and bonds to save American economy from collapsing, while making strategic buys with high yielding interests. For these central banks few billion dollars are pocket change and they have quite a bit of powers in their arms. They are silently watching and if there is a definite case of collapse, there could be a lot of invisible hands at work to clean the mess.

US is so crucial to the world economy that not many of the powerful hands will allow it to drop. And the fundamentals seem to be good – its not like inflation is going into double digits or corporate are throwing out people in mass numbers. Few hedge fund owners and a few greedy subprime buyers are fried, but I don’t understand why the market value should drop by few trillion dollars.

I agree that the Mortgage lenders have tightened up and its hard to get loans now. But, this can’t go on forever. The fundamental money generation engines have not gone away. Asian and European countries are still generating billions of surplus cash that eventually finds its way to US economy. And those sitting on fences now with hoards of treasuries cannot afford to sit there forever. At somepoint those money will get back into bonds and asset backed securities. The lending standards won’t be as lax as last year, but still I don’t think that the complete opposite that is happening now can be there forever. In fact this crisis could become a like a vaccine that has inserts weak pathogens and arouses the immune systems. A lot of countries are happy that the flood of investment has slowed down and began to take a hard look at the economy fundamentals. For example, Indian central bank was so concerned that it gets so much of portfolio investment that has started hurting the export competency by strengthening the currency and China was constantly expressing fears of a stock market bubble. Now they breath relief. A lot of corporations were very concerned by the overarching powers of Private Equity players and now don’t need to spend as much energy in warding of the PE eagles or making synthetic modifications. And prospective home buyers in US who were getting pushed out of the market are now considering a serious comeback. And banks and financial institutions that have been over enthusiastic will be concentrating on their core businesses realistically. If it is going to be just a blip will it make much sense to close up all the investment positions that have been painstakingly made, just to watch from the sidelines that the markets get back to their bull runs?

And slightly OT here… does the periodicity of business cycles and recession cycles for US still valid? I mean, many of those researches were made before 1990 when significant changes occurred in world economy that multiplied market sizes by many times. In just year 1989 Berlin Wall collapsed, USSR pulled out of Afghanistan leading an eventual collapse of the soviet, China had Tianenmen Square massacre that forced it to join market forces, Indian elected a moribund coalition eventually leading to a bankruptcy and opening of economy…. And thus from start of 1990 the recession cycles are way off and even the Asian crisis of 1997 or dot com crash didn’t dent economy too much and house prices didn’t dent.

Will US go into a recession? - Part 1

2007-08-25T15:45:00.000-04:00

The last few weeks of credit crunch has made people to start thinking about a recession. If you go by the historical periodicity of economic cycles, a recession is a long overdue in the US. The last one in 2001-02 was not a big one, and a lot of believers have come to predict that next year might be a recession year. The biggest factor this time seems to be the mortgage crisis, in particular, the subprime mortgage crisis where lenders were very lax in providing loans to people with spotty credit history. So, this part would focus on that.

A background on Subprime crisis:
In US, home loans, like those in most other countries, used to be a direct relation between a lender and the borrower. The borrower puts up some money and approaches a bank and if he has good financial track record and has the means to pay the loan, the bank gives a loan for the rest; and this is given from the deposits made by its customers. The borrower puts atleast 20% of the amount and has about 30 years to repay the remaining 80%. Usually, home prices doesn't go down more than 20% in normal circumstances and hence the bank always have the option of pulling the loan from the borrower and selling it in the market, if the borrower ever defaults. Since, the borrower puts 20% and takes a risk of losing the entire investment in case of crisis, looks carefully before buying and make sure he could pay the loan for atleast 2-3 years down the road. And normally, the rental cost is not too much more than the interest paid on the loan and so there is always an option of renting the home and pay the lender from the rental returns. So far, so good.

Now, the lenders wanted to expand their businesses and bring more liquidity. After all, if they just lend with the savings deposits they get from retail investors, they would still be a small business. And its risky too. What if all the customers want the deposits immediately (savings deposits are for shorter term) while the bank cannot get loans in a split second from the borrowers who have a period of 30 years to pay. This situation is called the "run-on-the-bank" and during the 1929-33 depression, a lot of banks failed because the depositors wanted money too quickly sensing a panic. So, to reduce the risk and save their asses, banks wanted to marriage the borrowers with those who could invest for pretty long and who might not want the money immediately in case of a crisis. Enter bond markets and institutional investors.

Now, the bank makes ten loans for say $1 million and then packages them into a bond. This bond would yield at a rate slightly less than the rate charged by the bank to the borrower and the bond is secured by the ten homes for which the loan was given. This bond would be bough by big brokerae firms and other big institutions who might slice them into say 1000 pieces of $1000 each and so on. At some point retail investors who plan for retirement or want to invest for their kids education would buy these bonds and they look long term. In the long term, houses always appreciate usually with the rate of inflation. So, even if the borrower's default, the house could be sold and the bond repaid. And the chances of borrower default is very low given that it is given to only good people and the borrower has significant equity that he doesn't want to lose on foreclosure. Given that less than 5% of borrowers would ever foreclose and the individual piece you buy is so spread-out (your $1000 bond piece might contain $1 pieces of 1000 loans) that the risk is not too much. The lender is now just a conduit who needs to lend to good borrowers and package the loans to long-term investors and so has very little no-risk. For the borrower, the loan interest rate goes lower as he could choose from the huge pool of liquid options. So, its a win-win for everybody.

But, human greed sometimes can blind objectivity and when the risk is not directly visible the greed directly takes over sanity. This win-win equation seems to suit everybody and it looks like irrespective of who the loan goes to, the final investor gets his return. To make matters worse, at each level, the reputation of previous level adds up thereby reducing the risk (apparently). So, John Doe goes for $1 million loan. This is a bit risky, so the lender charges slightly higher. The lender, a small and reputable bank can get a much better rate for its Mortgage backed security and sells it to say, Fidelity*. Now, when the final investor buys from Fidelity he thinks of all the great corporations involved in the chain and agrees for a much lesser interest rate for his bond, than what he would give it to John Doe directly. Since, he agrees for much lesser interest rate, Fidelity can give the next loans to the local lender at a much lower rate and the lender hence gives the borrower a lower rate. This chain of lowering interests come to point where the interest rate between what you get in super-safe Government bonds and treasuries and what you give it to a spotty borrower like John Doe is infinitesimally small. And the investor keeps full faith on housing market that always seems to go up and thus the spottiness of John Does doesn't matter. You can always get the house from him and sell it in the market.

Now, the lender doesnt need to ask for any income proof or repay ability from the borrower. The average investor Jane Smith doesn't plan to ask that and if the final investor is not asking, why bother. The lender and broker could happily loan to any shabby, shady little person with just a couple of document signatures and pass the securities to final investor. How better you business could get? Every body is happy in this land of paradize. To make it worse, the Fed (American central bank) reduced interest rates so low that now its barely above zero. So, anybody could be given a loan with almost no interst rates and since house prices *always* go up (short or long term doesn't matter), every Tom, Dick and Harry jumped into the game. They didnt have to put 20% from their pockets, didnt have to worry about planning for payments 2 years down the line or even worry abount Rental incomes. HOUSE PRICES ALWAYS GO UP YOU MORON. And the lower interest rates are taken for granted and people went for Adjustable rate mortgages where interest rates go with the market rates, rather than one fixed rate for entire duration of the loan.

So, what if the housing markets start going down, interest rates start going up and the poor investors like Jane Smith start using their brain? You will get the current crisis. Those who got million dollar loans with no income, start suddenly thinking that they cannot repay. So, they go to the market and sell the home and pocket gains after repaying the lender. It turns out that every other moron tries to do the same, and just as in the "Emperor without any clothes" fable, suddenly people start realizing they are all naked. The house prices start falling down. Now the big brokerage houses start waking up (aroused by Jane Smiths) and they start asking the lender to give back teh bond amount or foreclose those houses that are not paying interest. When they try to foreclose they realize that the house is worth just 75% of what the loan is and everybody start scrambling. The investors threaten the brokerages and big banks and they inturn put their hands in the lender's throats. Result: Lenders start closing down, and brokerages are hit big and have to take some of the losses and pass the rest to its investors, starting a chain. Now, many people who thought they were loaning Fidelity* or Bank of America*, realize they were in fact loaning the shady loan applications of Joe Does who wont repay. Thus, this whole mess.

This subprime market is more than $2 trillion and no one is sure how many of their famed institutions are involved in what amounts. As uncertainity is the mother of bears, we are feeling this great pinch and the dormat investors are now suddenly running helter-skelter to get their investments back.

Next: Would it really cause a recession?

* This is taken just as an example. It is not to be taken literally to mean that Fidelity has very high mortgage exposure.

http://en.wikipedia.org/wiki/Subprime_lending
http://onlinejournal.com/artman/publish/article_2341.shtml

A Brief history of Current Crisis

2007-08-18T11:12:00.000-04:00

The last couple of weeks the world markets are choppy. Stocks are crashing, finance companies and hedge funds are on their knees, emerging currencies are heading lower and there is a virtual panic in the capital markets. Even commodities and real-estate were not spared. Even having a not too aggressive portfolio, I lost more than 1300 dollars in just 7 days. But, things are far from being over. The Monday opening could be a very crucial factor that could affect the world economy for a long time to come. If things stabilize, then its business as usual (we have successfully postponed the crisis), but if the waves get higher and panic goes in a vicious circle then whole world could go into a recession, dwarfing the Asian crisis of 1997. This article would briefly explore the history of current crisis.

The historians would always disagree when the core events for the current crisis started, but I would say 1989 as the year from which world economy started getting very different and is a crucial year for the current crisis. It was the year when USSR pulled out of Afghanistan accelerating the collapse of the Union of Silly and Stupid Republics two years later. It was the year when Berlin wall collapsed, crashing serially all the imaginary walls built by the socialistic societies of the 20th century and forming a formidable economy of Europe - Germany. It was the year when Chinese government massacred a large group of innocent students in the watershed event at Tienanmen Square of Beijing, leading to unprecedented international pressure that caused China to abandon communism and join world economy. It was the year, when a loose and directionless coalition of political parties took power in India, making it finally bankrupt in 1991 and forced to abandon socialism join World economy. Free elections were held and Brazil became a democracy leading it to overcome an economic crisis and become a big world player. And in Eastern Europe nations got decoupled from Soviet Russia and its Warsaw Pact, with nations like Hungary declaring independence. And in South Africa, apartheid was coming to an end leading to the end of years of economic isolation.

Too much for a single year? In economics and politics, things linger for a long time and when they start coming down they come down like a pack of cards. Whatever it be, it was a watershed year for international capitalism. In one stroke - the biggest countries of the world joined the world economy that earlier just had just Uncle Sam and kids (Japan, UK and Western Europe) that were far more homogeneous. They had similar per-capita incomes, similar political systems and far more open markets and financial systems. But, these new countries - Brazil, Russia, India, China, South Africa (BRICS) had vastly different economies and political systems. They are some of the biggest countries in the world, with vast histories and totally different per-capita income levels. Even today, India's per-capita income is one-thirtieth of those in Western Europe. The new entrants of world economy were greatly welcomed and in 2000's they all had sputtering growth - India became a service superpower and China built the greatest industrial establishment of history. Russia and Brazil became major commodity superpowers much later. There was an humongous gain in productivity in China and East Asia.

Fast forward to 1997. The vast increase in investment opportunities in these emerging markets were a great blessing for international capital markets who took them with too much of enthusiasm. While, China and India were pretty closed, rest of Asia welcomed these capital with four hands. Thailand and Malaysia were particularly too kind to these. But, things started getting bad. Investors and economists started to realize that productivity gains were not too much and most of the growth was just an illusion caused by speculation and capital flows. These emerging markets are not an elixir for all the woes for international investors, and as the realization started to sink in, a crisis was looming and before anybody could realize the summer of 1997 was a bloodbath in East Asia. Indonesia, Malaysia and Thailand were devastated and even after 10 years, their real economic level has not come to their pre-1997 levels. And the echo started falling all over Asia and due to few other factors (like Hedge fund manipulation) Russia became bankrupt in 1998. The sum total of all these factors led to a massive inflow of capital back into United States, leading to a collapse of all these currencies, as panic-ridden investors always look for safe havens in times of crisis.

Forward to 2000. Capital never stays calm. It is a fluid and it has to find a lot of new resting place. Where did they go? They went to a new found fad in California, called the dot-com boom. Any tom, dick and harry who knew to put like ... Bunch of trash ... started a company, went on an IPO and sucked millions of dollars. The process could not be slowed by statements of caution of wise men (Alan Greenspan said a prophetic 'Irrational Exuberance') and this farce continued till some one had to say "the emperor had no clothes". And everything came down with a thud in March 2000 and continuing all the way upto 2001.

Now, the US fed got into thinking. It had to pull out of recession caused by the crash and find alternative means of growth. In a series of breathtaking sessions, it brought the interest rates down to ridiculously low figures and by 2003, it was just around 1%. In the meantime, lending standards were relaxed and any jane and mary with just an existence to show, could borrow millions to buy dozen of housing properties. This had three big effects. One is that all that money found into places like Real estate and commodities that were long ignored. The oil prices went up by 5 times in a space of as many years and there was boom in all those metals - steel, copper, gold, etc and house prices doubled and trebled in many places. Second, the bad experience in US markets and the low interest rates pushed money out of US and they directly entered emerging markets. Parallely, India and China established themselves as great players in their game and opened their economies much further. This combo effect had billions of capital inflows in the form of FII and FDI. Brazil and Russia also were back on their feet with commodities soaring. These currencies suddenly started appreciating further and hurt their domestic industries a bit. Third, the cheap capital caused the Hedge funds and Private Equity to take control of world economy. Corporations like Chrysler and Hilton found their way into the kitties of companies that had nothing to do with automobiles or hotels.

The current crisis is thus a series of flip-flops where investors swing like monkeys from one investing to tree to another. Commodities were not so kool in 1990s and they were the hottest plays of 2000s. Emerging markets were too risky in late 90s and they were the toast of the day in mid 2000's. Housing markets were not so interesting in 90s and in 2004 they all believed "house prices will always go up and no one can lose in real estate". Dollar is a loser in early 90s, safe haven in late 90's, loser again in middle 2000's and now again a safe haven. Most of investing is now just momentum and bringing new fad of the day, than an appreciation for grey cells. The most important of all is that world still has not come to terms with globalisation.

60 Great years of freedom

2007-08-15T17:05:00.001-04:00

What a great time for India to have its 60th birthday. Normally in India, 60th birthday would mark the passing of the retirement era where the old gives way to new. The day is celebrated pretty grand as a mark of recognition for the 60 great years of living. But, surprise for India it is more like a celebration of the first birthday. The nation is so young and so much of energy left in it, that the following years are going to be the most crucial and significant ones. Our basic problems like - rural decay, over dependency on Agriculture, adult illiteracy, poverty, gender inequality, inadequate buffer to face routine forces of nature like flood, cyclone and earthquake... have not changed much in the 60 years. We are still as divided as we started out with and the religious tensions have not smoldered. Thus, it will be the future that will be more significant for India than the immediate past. Most of the instrumentation to solve these colossal issues are getting available only right now.

In some aspects, we have not done bad and in fact done much more than expected. Who in the 1940's would have expected India to lead the world in Technology, software, satellite communication, etc? We are among the top 10 nations in economic size, stock market volumes, satellite capabillity, software production, super computing, nuclear generation... We would soon replace US as the country with the second most telephone connections after China and we are just couple of years behind the cutting edge technology in communication. This is a far cry from the days (just 7 to 10 years ago), when India had a place among world nations with the poorest teledensity and telephonic infrastructure. Our Television and Radio reach is complete and we have among the highest world viewers of Cable Television. We have produced some of the world's most respected educational institutions in Technology, Medicine and Management and Indian graduates go for a premium in international job markets. Tell that to someone who was sleeping for the last 20 years and he wont believe. Our film industry has matured enormously and is second only to the Hollywood in size and viewership.

There are cries of inequality and "rich-getting-richer". But, look around. How many rich people did you see in 1947 and how many do you see now? There are now atleast a 100 to 150 million credible middle class population dozens of times more than a couple of decades ago, and this class is rapidly bulging. While Indian companies were small dots in global picture, as late as 2003, now they are audacious enough to take on the world giants. Tata has gobbled our former colonial master's biggest steel maker and vying for Landrover and Jaguar, a car that transports English aristocracy. Reliance is hunting for GE's plastics division, the Pharma players are looking for big ticket acquisitions and companies like Bharat Forge and Moser Baer have reached the top in their fields. We had a handful of big corporations a decade ago. Now, you have Bharti, Infosys, Reliance, Ranbaxy, Tata Steel, Tata Motors, Wipro in every spectrum of production. Well done, India. We produce much more entrepreneurs than most other countries and our boys are there in the boardroom of every major company now. A few Giants like Vodafone and Pepsi have Indians at their very top. And this is not including Mittal who has built a world steel and energy empire almost single-handedly.

In 1940's our only rich people were the Maharajas and Zamindars who had squandered other's wealth and coasted on theis ancestors wealth generation. Now, the richest billionaire Indians - Lakshmi Mittal (Arcelor-Mittal), Ambani brothers (Reliance), Sunil Mittal (Bharti), Kushal Pal Singh (Real esate giant DLF), Azim Premji (Wipro) were almost nobodys 2 decades back, and almost built fortune with their own efforts (for Ambani brothers, a big start was provided their illustrious father). And there are thousands in the wings - just take a rough glance of the world's top B-schools and most of them have huge Indian contingent. Each huge company have a positive rippling effect on hundreds of thousands of people, and with so many huge companies thundering Indian economy never looked rosier.

Looking at the negatives, we have huge volumes of them. Take any social problem in the world, and India would rank top 10. Poverty, illiteracy, sectarian troubles, gender divides, class/caste issues, Communalism, Tuberculosis-Malaria-HIV-Polio, Corruption... our health care and primary education facilities are in great decay and rural India is almost sinking. In fact, we have come to the point where none of the major problems look very surprising. We are so used to glancing our morning newspapers where the headlines would have a major rail accident killing hundred people, terrorist gunning dozens in Assam or Kashmir, a major politician indicted in a big ticket scam and smilingly coming out of prison, floods drowning hundreds of villages or religious violence burning an entire city - these are just news points in a fast mesh of problems we face. We are now so insulated from our problems.

Thus, looking at our future, I would like to see these core problems solved before we rest on our laurels and enter the world's elite clubs. There is no use in just praising ourselves that we have IIT, IIM or AIIMS, when half of Indian kids dont go to school. There is no use in becoming a medical superpower when majority of citizens dont have access to proper health care. But, the solution to these are not more of commie stupidity or Arundati Royism, but lies in carefully planned policies that involves all the constituents - the government guiding and overseeing, corporations implementing, and the local communities working to even out the benefit spread. We would like to see the Mittals and Ambanis of Schooling, Agriculture and Medical Care and this is where India's future lie.

Future of Rupee - Part I

2007-08-04T00:22:00.000-04:00

Now that the inflation in India is tamed, the central bank in India (RBI) started back to its good old ways - buying humongous loads of dollars and increasing money supply bringing down call rates and also simultaneously increase Cash Reserve Ratio, affecting the profit margins of banks.

In the last couple of months, after I wrote the article series - "Is RBI handling inflation correctly", I had been in touch with a few financial columnists in India, working for Bloomberg, Hindu Business line and Business Standard and a few of them were very apprehensive of the rupee's effect on exports and cite their good old model - China on how to manage the inflows. However, good China had been in energizing the economy, I dont think that it is an good example for everthing. It has its price.

To put it short, if you have to manage heavy inflows - you have to screw one or more among the four crucial variables
a) Inflation
b) Export competitiveness
c) Financial health of banks
d) Interest rates and capital availability

So, if you have allow all those dollars to flow into India, unhindered, you will immediately cause rupee to appreciate (by simple demand-supply) and India's export competitiveness will be eroded as exports will be costs compared to imports. So, if the central bank buys up the dollars and prints rupee to prevent appreciation, it will cause inflation by making more money available in the system and weakening the currency. Now, to keep money supply constant and prevent inflation, the central bank has to increase interest rates and cash reserve rates (the amount banks have to keep idle and not use for loans from their deposits) affecting the availability of domestic capital and affective investment in crucial sectors. Now the Chinese model - sanitise all those dollars and not cause inflation by arm twisting the market by fixing constant prices and wages. And use banking sector to fun unproductive enterprises and load them with debt. This way the banks will take all those blow associated with maintaining the dollar low.

Each of these paths have a price. Inflation is the worst and no elaboration is needed here. If managed wrong and allowed to go on a vicious cycle, can cause the worst nightmares as seen in the hyper-inflation in Greece, Germany in the early 20th century and in Latin America in 1980's and 90's. Interest rates are among the next worst as it affects needy companies from raising adequate capital and affects crucial investment opportunities. Corporations would be unable to raise debt at favourble prices and affect economic expansion. And financial institutions are very crucial for a good market economy and making them a scape goat for increasing exports will debiliate the economy in the long run. Its like smashing the leg to give more blood to the hair. The last comes exports - whose importance varies from economy to economy.

For economies like Japan, Korea, Singapore and even Germany, the domestic population is so small and spend allergic that there is no way that they can ensure good jobs by relying on producing for local markets. They are forced to export and to export they have to have good currency support and so artificially affect exchange rate even at significant costs to economy. But, this doesn't hold good for China or India. They have 1 billion+ customers each and a good economic history that they dont theoratically need any external markets for their goods. If they can stand on their own legs by developing good local markets, the enterprises have so much of room to grow that they can forget about currency manipulation. And given their rate of expected growth and scale of operation, they cannot afford to depress currencies forever. Elephants cannot afford to jump trees and hide in burroughs and the managers of these trillion+ dollar economies better know this.

(Next part: The reasons why should the RBI allow freer flows and there is a solution, where we could avoid screwing up any of these 4 variables, to a great extent)

Back to Blogging after a long hiatus

2007-08-03T18:17:00.000-04:00

I'm back to blogging atlast, after a 3 month sojourn. There were two many things that were happening that I hardly got time to sit down and write something. I got to write a couple of drafts, but later discarded them. I wish I could write a few elaborate articles, but the time required to put long good article in place (including the background reading) was demanding and I couldn't do enough allocation.

Last 3 months in Brief:
>> My parents and grandfather came to visit me and it was great time May - July. They were with me for my graduation ceremony, my dad's birthday, my birthday, my parent's wedding day and its great to be with the family. It was the longest vacation ever for my father and its the longest time, I spent with them since my school days.

>> I had the longest and best drives in the month of May. I drove for 2300 miles during my trip to Calgary, Canada visiting Banff and Jasper parks on the way. The one week trip through some of the world's most beautiful glaciers that are source for the biggest chunk of world's freshwater (most of water flowing through Missouri, Missippi, Niagara and other great rivers & lakes of North America draw its source near here). On the second leg, I flew to New York and had another 2500 miles drive around Toronto, Niagara, Pittsburgh, NYC, Baltimore, Washington DC...showing some of the iconic American tourism destinations to my folks. The 5000 mile+ drives on solo in 3 weeks had taken most of my energy for that period. I'll write on these trips, after a while.

>> My Ski accident in March had screwed the ligaments on both of my knees and on May 1, I realized that I had to get surgeries on both legs to repair back. I had one of the surgeries on June 11 that fixed 2 of my ligaments and I might have one more later this month to get everything completely fixed. But, the recovery for the ligament repair is long and so it will be a year, before I could take much of strenous physical activity (like Skiing or Skating :)). This was my first major surgery and the experience with General Anesthesia was overall very disturbing. I couldn't remember anything of that 2 hours and to think back of that overall blank state, I could think of death as the only closest thing. And the first week after the surgery was horrible. It was paining, itching and totally disturbing :( to have a knee locked out. And walking with braces and crutches was pretty discomforting to say the least.

>>I got a traffic ticket in May that put my overall driving under great stress. I just spiked to 90+ on a 70mph zone, as I was overall very tired after a week of driving and there stood a cop. Normally, I learnt to watch for a cop so that I could drop from 120mph to 70+ in no time, but this time tiredness and darkness took over. I was given a speeding ticket, but since I was perfectly alert and stopped immediately after the lights were put on, I was given no other citation (normally 23+ the limit can cause multiple tickets). After the ticket, I got so careful that I dont drive above the speed limits and life is a hell now. I couldn;t chase any powerful cars and I had to constantly move to right lanes to gave more faster cars a room in left lanes. Even stupid, sluggish and humongous trucks, tail-gate me. The moral: If you are a Lion you have the luxury to sit over your prey, but if you are as innocent as the lamb you are a sitting duck for others to prey on you.

Luckily, my ticket is dismissed by having an expert lawyer on my side, but its doubtful I would ever go to the 120-130mph range, that i occassionaly try on deserted highways with my V-8 machine. And with high gas prices and low fuel efficiency at high speeds due to wind resistance, I'm now happy at 70-75 mph range.

Overall, life has never been so tough and 3 of the passions that I had so far - Movies, Skiing and Driving all took a backseat. I also stopped communicating with people - no phone calls, emails, orkut scraps, blogging... Now, I'm very close to come back with my normal life. Let's see how the next few months unfold.

In the meantime, I'm getting back to touch with the economics literature and I'll be back to serious blogging there.

Is RBI handling inflation correctly? Part 3

2007-04-25T17:07:00.000-04:00

In Part 1, we saw why RBI had to resort to hard measures like interest rate hikes and free exchange rate controls. 6% inflation is just a small indicator of the overall overheating that could be witnessed in the asset prices that show more than a triple digit appreciation, leading to a monetary policy change. In Part 2, we saw about the main tools for a Central bank - interest rates and exchange rates and how they could be used. No how all these changes impacts on us? The "us" involves exporters, importers, India economy, Indian consumers, Indian banks, Indian enterprises and Indian/overseas investors. In this part we will mainly see the impact on major export industries and in the next part we will see the impact on others.

In general, an interest rate hike dampens growth rate by squeezing liquidity (more money is absorbed by bank deposits, bonds and other fixed instruments) and make credit unaffordable (businesses have to pay more money on the loan). An exchange rate hike rate will discomfort exporters and help importers leading to a more bigger trade imbalance, and might again dampen economic growth. But, when we have to choose the lesser of two evils, the choices are not so clear. A point to be taken is between 1970s to 1990s when Rupee tumbled so much, did our exporters become very strong?

Exporters: In general exports go down as Rupee rises against the dollar. Why? For example, you make a car for Rs.2 million in India, at an exchange rate of Rs.50 to a dollar you can export and sell it to US or other countries at $5,000 (Rs.2.5 million) and still make a Rs.500,000 in profit. But, what if the exchange rate changes to Rs.40 to a dollar? Now, you cannot sell it at $5000 and might have to increase the price to $6250 to make the same margin but face a tougher competition against other country exporters who might sell for $6000 or something, or sell it under $6000 to gain the markets but lose the profit margin. In both the cases, the exporters are to lose, if you assume that the car will be made at the same Rs.2 million independent of the exchange rates.

But, this is where nominal and real exchange rates come into place. To put it simply, if the exchange rate changes there will be some impact on the price of production of the car. The movement from Rs.50/$ to Rs.40/$ will reduce inflation and can reduce the wage rises and domestic production costs. More importantly, you could import the components like engines, tires and steel bodies far more cheaply and the production of the car might fall much below Rs. 2million if other things are equal. The converse is also true, a runaway inflation and high import costs can offset whatever gains exporters get from a depreciating rupee as seen in the previous 20 years. Thus, if the central bank manages appropriately, the rupee appreciation can help a lot of sectors to get stronger, though in the short term they will be squeezed. In effect it is sector specific - the dependency of a particular sector on imports and domestic wages.

India's main exports include - Petroleum, Gems and Jewellery, IT services & Software, Textiles and emerging sectors like Auto, Pharma and Electronics.

Petroleum and Chemicals: India is oil poor, but still Petroleum is one of its top exports. Weird is it not? Iran imports good amount of its gasoline from India. Its primarily because of the Administered Pricing Mechanism for oil, where oil distribution companies have to sell things at a loss while private refiners are under no such compulsion. Result: private refining companies like Reliance and Cairn sell or plan to sell most of production abroad earning their actual value, while public sector companies like IOC and BPCL stand like losers. Politics apart, this indirectly helps India to have a very good refining capacity and become a good power in petro chemicals. But, this industry is not going to be much affected by exchange rate hikes as most of the export component is imported thus, profit dents will be marginal at best.

Gems and Jewllery: India is a market leader in Diamond cutting and polishing and one of the top makers of Gold jewellery that is mostly consumed at home. Since, gold and diamond are mostly imported like petroleum, this sector is not much affected. Even more, the industry being labor centric is also sensitive to wages (of skilled artisans) that could be affected by inflation. Thus, if inflation is dampened by exchange rates, thereby reducing wage rises the net effect on this will be very close to ZERO. And the domestic consumption is very high for these gold and diamond sectors to cushion any significant drop in overseas markets.

IT Services and Software: This is my favorite industry :) and if this industry is impacted who cares. There is much more cushion and slack in this industry than any other India's export industry and whatever perceived competition of China, Vietnam etc, they are not gonna be too soon to take advantage of this currency appreciation. This industry has its own problems like runaway wage appreciation and talent shortage, and compared to them exchange rate is still a minor thing. $1 still equals Rs.41+ and in India even now Rs.10000/month ($250) can earn a reasonable middle class living for a family of 4. So, most people demand more wages just because the companies could afford to give it. Surely, the current condition of an IIT professor or the Prime Minister receiving lesser wages than some startup junkie moving one file from this computer to another is not a perpetually sustainable one. And the sector is fat enough from a lot of tax holidays. Time for milking this holy cow.

Since, this exchange rate uniformly applies to all Indian IT companies they can uniformly cap wage hikes and with a very good margin they can still thrive in the competition. Thus, this sector does not deserve much merit in including for exchange policy settings and surely if Indian IT companies die out in competition, exchange rate will be the last thing in the post-mortem list.

Textiles and Leather: By far this is the export sector that is gonna be receiving the biggest blow. Not much of the components are imported, though some part of the sector is labor centric thereby benefiting if a lower inflation comes out of stronger rupee. But, for now the 500 pound gorilla (Chinese exports) is held back till next year due to export caps and China itself is facing currency appreciation, wage rises, reduction of tax benefits for exporters etc. So, the competition will also be slightly scaled back (relatively). But, being labor centric and producing $25billion+ this industry merits serious attention from the Indian government and sector specific sops and tax holidays apart from investments in new design could be promoted by the government.

Emerging Industries: These include Auto, Electronics and Pharma where India is not a major power yet but have a good future. We export a good amount of design and we still dont have much competition as we operate in a niche. For example, Indian pharma companies have established themselves as leaders in Generic drugs, in Electronics we operate on chip design etc and Auto we are into designing reliable components. In my opinion, we still have more margins to be worried about immediate exchange rate crisis. If the government sets up a proper environment and enables progressive policies, this sector can go far beyond the current level and the government must step up huge investment in these sectors that in the future could become cash cow for us. Personally, I would like the government to shift tax holidays and sops to these industries from the IT services and software, as the latter has matured enough.

Tourism and Services: Finally tourism. Again, the asset prices affects hotel rates so much that it is far more cheaper to stay at Manhattan than a rundown Bangalore, even in dollar terms. So, the asset prices have to be cooled to make India a good player in tourism and exchange rate appreciation will reduce the cost of buying planes and fuel for airlines, making India travel cheaper and competitive. And we have far more potential to be achieved in sectors like Medical tourism and cultural tourism, apart from NRI tourism, so this sector has only one way to go (up).

Is RBI handling inflation correctly? Part 2

2007-04-18T20:43:00.000-04:00

In part 1, we saw the overheating phenomenon in India and why RBI is pushed into action. In short, consumer inflation is just part of the story, most important danger lies in the asset price appreciation that pushed RBI to take hard steps. So, what is inflation? In this part we will see how the central bank controls the two main entities - interest rates and exchange rates that affect inflation. This part will be more about inflation theory about the two main tools of a central bank.

Inflation is the classic condition of more money chasing few goods, and it means that the value for the currency you hold is having less value than what it used to be. There are four main components - domestic production, exchange rates, interest rates and consumption rate. Here interest rates (atleast short term) are more of an independent variable controlled by the central banks, domestic production depends on this and entrepreneurial skills + healthy conditions, exchange rate is semi independent in some countries controlled by government while it has to be really proportional to domestic production and consumption rate is dependent on people's psychology and all other variables. Together the effects end up at the consumer when he sees the high price and calls that inflation. Actually, it is just an end product of a whole deal of complex dependent and independent variables. Let us briefly look at each of them.

Interest Rate:

Interest rate is fairly direct. I giveup today's thing to you in anticipation that you will give me something better tomorrow. So, I pay you $10 today and expect you give me $11 back after a year. Here I have $10 available readily, and the other guy has expectation of making atleast $1 in the year's time. The $10 ready availability is called liquidity and the $1+ that he could make with this is called productivity. Now, if the system is perfectly elastic, and I now have $20 still I can loan it to him fully and get $2 back and so on, indefinitely. But, real systems are seldom elastic. At somepoint, the other guy cannot take all my money and still make enough money to give me the interest. At the that point the interest rate starts climbing down. Thus, in global bond markets (that is essentially a market for trading loans) as liquidity increases interest decreases. Conversely, if there is a credit crunch where I dont have $10 even and none of the people have it then the interest rates increase. But, there is a limit here, at some point the producer cannot give enough interest to you without raising prices so much or go out of business.

In the first case, when there is excess liquidy, the money fetches lesser interest rates in the long term, and this makes somepeople to not giveup today's comforts or they go for other sources of making money. Henc, they buy up junk instead of loaning the money and this causes inflation and asset boom. In the second case, the increase in interest rates causes the end products to be costlier and drives up the interest. Thus, inflation can be a resultant of both over liquidity and under liquidity - Damned if you do. Damned if you dont! This is where the central banks enter the system. They first establish some mechanism in which the markets are dependent on them and keep this as an handle. For example, they always give banks the short-term loans (they can print money at will and destroy it when they get back) and mandate the banks to keep some of their long term loans with them and this is the great way in which hold control. And even more, since they are the most trustable business system (they print currencies) they can setup some rate for taking medium term loans from other people (these are called treasury notes or bonds or T-bills) and many people keep atleast some portion of assets in these instruments as they are the safest.

So, now they have a full handle on the system. On one end they can get money from people at pretty low interest rate and on the other end they can loan short term money to banks at any rate they choose, as they print money. So, if the liquidity goes beyond a certain limit, they start issueing more higher rate treasury notes and increase short term interest rates so that people will put more money into governments and take less money from them. Thus, contrary to what we expect, liquidity forces T-bill interest rates to go up, while the rest of the interest in other long-term instruments that offer at more interest rates might fall if they dont find enough takers. This is what currently happening in the US. Long term bond rates have fallen and short-term T-bills have increased for a while now. At some point, the yield curve will be inverted, short-term loans fetching more interest rates than long-term loans.

Now, what if there are enough takers for the loans. Then, both T-bills and long-term rates go up, and this is essentially not an over liquidity situation but actually a liquidity cruch (more demand than supply of money). This is what happening in India. Whether RBI had increased rates or not, the banks would have increased the rates, as there were more demand for loans than more supply of deposits. This is actually a healthy condition IF the loans were absorbed by the producers implying we are having rising productivity. But, most of the loans were absorbed by stupid consumers who bought houses and depreciating assets out of them, thereby not causing any increase in productivity. With the natural increase in rates these people will be priced out, but in a dramatic change of fate we will have higher inflation as the interest rates will cause producers to mark their prices up or else lose margins. The first will cause inflation, second will cause market crash. In some sectors (steel, oil and cement) Indian government deliberately muscled in to cause the second.

In short, interest rate is a function of liquidity and productivity, and we are actually having a liquidity crunch in many sectors causing interest rates to spike which will also puke up the sectors that have been gorging money, like housing and auto loans. While, this could increase prices in the long term, it will reduce demand in the short and medium terms and cause asset depreciation thereby cooling the system.

Exchange rates:

Exchange rate control how much one good should be exchanged for to get another good, in a open market. For example, in a closed system if a farmer produces 10 kgs of rice and a gatherer produce 5 kgs of firewood, they both can exchange stuff on some fixed mechanism, say 1kg rice = 0.5 kg of firewood, so that both benefit from other's stuff. Now, if the farmer could produce 20kgs of rice, can he get 10 kgs of firewood from the market in this closed system? The answer is no. So, now the exchange rate would be adjusted such a way that 1kg rice = 0.25 kg of firewood. Thus, the price of firewood is said to be inflated, whereas it is actually the production of rice that is inflated 10 to 20kg and as a result its dependent exchange mechanism got changed. This is ECON 101.When you produce something more than the exchangeable limit, its value keeps going down and this is the natural process by which economies readjust and make things that are more valuable and productive. In the closed system case, the farmer could focus more energy on gathering some firewood too instead of overproducing rice.

This is all in open market (in 2 person system it ought to be), but are they true in complex real world markets? Not necessarily. The farmer can keep producing his 20 kgs of rice and then give it to the gatherer at the same exchange rate and each time he will get 5 kgs of firewood and 5kgs of firewood in I Owe You notice, which means he writes a paper in which he says he has to give the farmer 5kgs of firewood later (and in this closed case, it is impossible unless he finds a way to dramatically improve the yielf of firewood). This is the farce that is currently going on in the pegged exchage rate system done by Japan, China, Europe and others including India. Instead of allowing the exchange rate of Yen/Renmimbi/Rupee to Dollar (rice to firewood) to flow by natural process they just keep getting the stupid IOUs that the gatherer (USA) has no intention of paying back. But, it doesnt matter: by the time the crisis occurs the old men in the central banks would have died leaving us all in the jeopardy.

Now, what we like many other central banks have been doing is to keep getting IOUs from US (called dollars and T-bills) and right now we have more than $200b worth of them. This whole money has not dont much good to the country and it has just made the exporters like IT sector filthy rich. The appreciation of rupee could have reduced the cost of imports and increase rupee's value threby reducing inflation. But, instead of allowing rupee to appreciate when we got billions of dollars from investments and exports, what RBI did was to print trillions of rupees of money and got the dollars from the exporters and FIIs. Thus, our money supply went up by many trillions (2 to 3) in the last few months just because of this. In effect, indirectly we were subsidizing FIIs and exporters by putting domestic people to strain. And this has currently been stopped for a while, thereby appreciating the currency.

In essense, RBI is currently doing the right thing of allowing the rupee to float freely and the markets determine the exchange mechanism instead of just gorging on the dollars, that might not have any use if US falls.

So, how this twin effect of interest rate hike and exchange rate appreciation going to impact us? That's in part 3.

Is RBI handling inflation correctly?: Part 1

2007-04-11T01:51:00.000-04:00

Nowhere in the recent economic history of India, has an issue that is so well debated and polarized as the inflation/ overheating debate going on India circles. Now, the question has changed slightly from "is India overheating" to whether Indian central bank (RBI) is correctly handling the overheating. Inflation has spiked from around 4% to over 6% now and RBI has recently gone through a round of interest rate hikes that pushed the interest rates from around 7% last year to over 13% now. Simultaneously, it has hiked the reserve rates (that will prevent banks from giving more loans) and allowed the rupee to appreciate against the dollar. As the stakes in Indian economy are growing bigger and bigger, different parties are taking sides on what are the implications of the policy. The market has voted with its foot by crashing the Sensex (it has recovered partly though as i write this) and analysts have smashed the policies. I myself have written a couple of articles arguing against the RBI's policy. Here, I'm giving the other side of the picture. So, what is happening and what will be the implications on various parties concerned - Indian poor, middle class, corporates, exporters, government, foreign investors?

Great Indian Growth:
First, what is happening? India is on a big boom cycle since 2003 and a lot of people have come to begun that the time has come for India to get to the center stage and rightly so. The growth rates have gone up over 9% from a dormant 6% rates 3 years ago, and the efforts of reforms during the previous regime is finally paying off. The fundamentals look good - a nation with atleast 250 million people with reasonable spending power, a vast network of well bred universities (atleast 25 of the institutions are now in the elite category, including the IITs, IIMs, AIIMS & IISc), a great history, center of major trading routes in Asia, and a vast network of expatriates providing free diplomacy and act as conduits for knowledge and economic exchange. India is simply in the best possible position for development, so far, and here is the link for India's scorching growth prediction.

Oh no... not so soon. However, too many things happened and the growth was simply too fast for the system to handle and the overheating signs have been showing its ugly teeth now. 6% core inflation shows nothing and honestly, I believe the RBI doesnt care as much about that. What is dangerous is a precarious position in asset markets. Indian infrastructure and housing development, along with even good corporate stocks, couldnt withstand a sudden barrage of this huge money flood. House prices in Indian major cities have gone up by over 300% in 3 years, stock index appreciated over 300% in the mean time, real-estate and commercial property have gone up by over 5 times in a few places, and all these dwarf the 6% core inflation rate that is mainly showing global inflation in commodity prices. And all these were fed with cheap credit, and loan growth is at a dangerously high 30%/year. The condition is really risky now.

Indications of overheating:
Housing: Rocketing house prices where people are willing to pay $200,000 for some second-grade apartments in not-so-good localities when the country's per-capita income is just around $1000/year is definitely a scary sign. To put things in perspective, in Seattle (the home of Boeing, Starbucks, Amazon and Microsoft) good apartments in nice localities can be got for $400,000 when the median household income is over $100,000, and people fear overheating here! So, the hard-earning middle class is priced out, while a lot of people have dangerously accumulated huge amount of loans to buy white elephants. In the last 1-2 years RBI has issued a lot warning regarding this situation, and asked banks to cool down housing loans, but banks have not turned their ear to it.

Real Estate: Its not just the houses that are too expensive. Commercial property is an unexpected peak where shady locations in Bombay and Delhi seek prices that would shame even Manhattan. This has affected expansion plans for many hotels (nation of India has less hotel rooms than the city of New York), many companies are holding their plans to open offices in Mumbai and Bangalore, and even retailers are affected by this skyrocketing prices. At some point the cost of doing business will cross a tipping point, and India will no longer be a favourite service/production outsourcing even with low wages, if we dont address this real-estate quandary.

Stocks: And the stock markets have been affected by this irrational exuberance. While the fundamentals are definitely good, the prices (in terms of P/E ratios) are really high for an emerging country, enough to price out many serious investors. And a lot of investment is in the hot-money section (foreign institutional investors and domestic buyers trading on margin) that could vaporize at a degree above room temperature. While, a good stock appreciation encourages the corporations to expand more, over-appreciation and over-hype could cloud us on crucial things like efficiency and cost-management, and over-paying on unworthy assets like what the Japanese did in 1980s. It is time for some correction to more moderate levels (probably around the 10-11K region in the Sensex).

Savings: For an Asian country, India's saving rate is not impressive. While, the Europeans and Americans have social security and good nets (comparatively) and the Asians have good domestic savings, Indians have neither. India is on a complete blow-out cycle, learning to spend from the Americans, before even they have learnt to earn from them. Personal credit growth is rocketing, and unlike their previous generation, people are not afraid to go on big loans for flat-screen TVs and unaffordable houses. Automobiles are overcrowding before the roads are even built and Indian researchers are worrying more about obesity and cholestrol than hunger and poverty! Indian domestic consumption as visible from rocketing non-oil imports have also caused the current account deficits to zoom (imports much greater than exports) inspite of a healthy growth in export industries like IT, Auto, Pharma and Chemicals. Indians are currently just over-consuming and a developing country cannot afford to have deficits for long.

Thus, the current overheating, if left unchecked, could rock the Indian boat and the Japan's painful experience from over-exuberance in 80's and America's experience in 90's should not be forgotten. Brimming prices of Housing, stocks, commercial properties and runaway loan growth has already given enough indications that the supply-side pressures from agricultural commodities, oil and metals are just an excuse for the inflationary pressure. RBI has got nothing to do with these latter things, and the solutions are pretty simple and are with the government: Liberalize sectors like power, mining and agriculture and you would see the same benefits. But, we are not arguing about these core principles for now, and RBI with its monetary stick is tackling the runaway overheating than core-inflation with interest rate hikes. Commodity inflation is just a pretext for RBI to pull the government to take action (governments are the biggest beneficiaries of inflation and low interest rates, as they are usually the biggest borrowers). If RBI is even half as intelligent as I would assume them to be, they would know that monetary policies cannot control commodity inflation (no one is going to stop eating food because you increase interest rate by 0.5%) and so it should not be a secret that the recent measures are more against over-heating fears than CPI per se, what many analysts assume it to be.

In the next part let us see, how the current measure are enacted and in the third part how it will individually affect the various players in the game (including us).

(This article has been included as an Op-Ed in Asian Development Bank's E-Newsline)

Mr. Smith goes to Washington

2007-04-01T16:46:00.000-04:00

Whenever I think a movie was the movie I've ever seen, there is something sooner or later, something even better comes and surprises me with ingenious film-making. Life is Beautiful, Schindler's List, Saving Private Ryan, Shwashank Redemption, It's a Wonderful Life... the list keeps growing. Now, here comes a movie that I believe one of the best ever I've seen. I know a lot of people might not share the same passion as me for this, as it is about democracy and America, still not as much appreciated by many people. But, Frank Capra and James Stewart will not make anything less than an extraordinary movie. And Jean Arthur caps it like a cream of the cake. And, Harry Carey who acts as the President of the Senate brings a highly respected and esteemed impression for his character, though he is not properly credited for this.

The film is about how a young, simple minded Midwesterner from Jackson city, Mississippi is selected for the American senate to be a honorable stooge of a corrupted businessman to replace a recently passed-away senator and how he fights the very own corrupt machinery that had engulfed the principles and ideals of America. The young man (our great James Stewart of "It's a Wonderful Life") loves and believes every patriotic ideal and adores his fellow senior senator and all gungho for this great job of law-making for this world's greatest democracy. When he first sets foot on Washington he loses his mind just watching the Capitol dome and loses time in the great memorials of Washington and Lincoln. His innocent mannerisms and plain patriotism is initially ridicule and mocked at by all those whos-who of Washington and even his secretary Clarrisa (the lovely Jean Arthur) is initially annoyed at baby-sitting this "cocky" new Senator.

The senator has visions of building a great boy's camp in his own state to teach and grow up boys with American ideals, but little does he understand that his bill to create this national camp is on the same land where the corrupt Mr. Taylor works up the nation to build a dam for his own interests. When the interests collide, Taylor tries to break up our man with allegations and when our hero has almost lost, he rises up extraordinarily using the Senate provisions (that allow for filibustering) and makes up his case. You have got to watch this, as I don't do justice for this great act, by explaining all this in a sentence.

We have all seen such stories where a lone man fights for a lost cause among the villains backed by politicians, their stooges and businessman with deep-pocketed connections in the press and other public media. But, this movie is extraordinary and puts America both in a positive light and also points out to its deficiencies. It points out to the concern of how the different estates of public sphere - lawmaking, business enterprises, media and the executive machinery have to be independent and impartial. It reminds people of their responsibilities of this democracy in selecting their representatives and keeping track of the various estates of the society. If people are not going to pay much attention to politics then the corrupt elements will, and instead of representing the will and ideas of the people, the government shall represent the vested interests of the few. Then politics and Presidentship will not be decided in the fields, factories and offices of the common man but at the expensive cocktails, conventions and conferences in New York, Chicago and Los Angels. What is said in 1939 is even more true today, when America is more and more becoming plutocracy far away from the dreams of its creation in 1776.

And it reminds the people of the great dream of its forefathers - the visions of Jefferson and Franklin in the declaration of independence, the Philadelphia bell and Statue of liberty standing to represent the freedom and liberty to all men and women, the words of Lincoln that urges us in protecting the sovereignty and maintaining democracy and the Washington memorials that stands tall to represent the ingenious ideas of this young nation. The singing of star spangled banner (the national anthem of US) during the senator's election and dramatic portrayal of various symbols of American entity is simply wonderful in this movie.

I hold a lot of personal emotions for this movie in that it points to what we have lost in politics. I always get emotional when I visit the great memorials of the Washington, the great Washington's pillar, the majestic statue of Lincoln, the great World war memorial and most importantly the capital dome viewed from the Union station just out of Amtrak, from the air taking off from Reagan airport, and from every road leading to it. It is the place where laws are made that governs the working or atleast affect it for most parts of the world. Seldom do people understand how important an institution it is, how much they really care to affect it.

We, the common people, have shrugged from our responsibility towards politics and treat it like a nasty art little realising that it is the thing that moves and works us. What is true for America holds true for most other democracies including Britain and India. Back home in India, we have left politics to rot. The great halls of Rashtrapati Bhavan where doyens like Sarvappalli Radhakrishnan and Abdul Kalam have grazed their presence, is just a ceremonial entity that overlooks a chaotic Sansad Bhavan where goons and criminals represent us and enact laws for us. More than the Americans, we have shrugged our responsibilities to elect responsible representatives for the nation and then just bitch about the poor state of the nation.

I wish movies like these come in India and other democratic nations, and more people get into the working of the beautiful web of democracy.

Hour of National Shame

2007-03-24T16:06:00.000-04:00

As the day started on Friday, there was a flurry of activity in our entire campus and sitting at Building 1 of Microsoft's headquarters I didnt have to guess too hard for the reason. It is the India's world cup decider. The desis were moving all around, made all the cafeterias and building lobbies to beam the cricket matches and few conference rooms were totally dedicated for the telecast, people were paying $200 at home for a dish subscription for the series, all the 100+ cricket teams in the campus were busy trying to "learn" from the "masters"... all this to much bewilderment to the non-desis most didnt know what this game is about and people like me were taking great joy in explaining this mediocre game to his Ukrainian office mate. By, afternoon the "campaign" was history and everybody returned back to work in great disgust, agony and shame and our internal mailing lists were flooded with patriotic Indian slamming their lousy team.

In all this, I wonder should we still place much importance to this game, where a water-boy of a third rate team of a game played by less than dozen scattered countries part of a long-dead colonial empire make millions at the cost of his poor fellowmen from the shanty villages and congested cities.

Make no doubt, I am (atleast was) a huge fan of this game and there used to be a time where I used to watch every game from the English County season to Duleep and Ranji Trophies, leave alone things as great as ODIs and Tests. We used to play in the street (and get scolding from homes where we hit the balls into) after every match and used to passionately discuss our hero’s techniques. In the train commute and school, we used to play book cricket, sponge cricket and a dozen other innovations including word games and used to remember every possible statistic about those "heroes" much before internet or cricinfo came. We used to call Vaas with his full name - "Warnakula Pettabente Ushanta Joseph Chaminda Vaas" and celebrate Apr 24 with great pomp.

If I say cricket was a passion, it would be an understatement. It was much more than a religion for us and for years in our secondary school, we couldnt think of an hour we lost track of our gods. We watch matches with passion, then follow the highlights and analysis with even more passion and then wait for next morning newspaper to read every word about what each and everyone think about the game. It was a way of life for us. We used to get up at 2am for the New Zealand based matches and go to sleep at 4am for those West Indies based matches.

And for most Indians - from those poor villagers to army men to auto rickshaws to every common man in the street, cricket is not as big a concern for them as a sport much as much as the patriotism for their nation; they dont care whether Aussies win their Ashes or the South Africans gave their big chase or how classic Lara hits against England. For them India is the dream and Indian matches are their carnival. They dont care whether the batsman keeps the bat straight and hits the drives in the "V"s or whether the pace bowler gets outswing at good length outside the off-stump. They only care whether the batsman and bowler wins for them.

I cant forget the spectacles when I was traveling Calcutta when "dada" was tormenting the lankans at Tauton in WC1999 looked liked as though hanuman was burning the streets of Lanka. And when Tendulkar hit the 143 against the Assies in the pre-Birthday game in 1998, people were wondering whether the storm was from the desert or from the Tendy's bat. And we had nice laughs when Sidhu was in full form saying "Drown a lucky man in water and he will come back with a fish in his mouth" during the legendary Natwest finals with Yuvraj and Kaif. How many can forget the Tendulakar's golden arm in Hero cup match against South Africa, the legendary finals in 1983 that I would have watched a dozen times, the Titan cup splendor when two great nations - SA & Aussie were subdued with great pomp following the winning of a dirty trophy named Gawaskar-Border Test trophy against Aussies. Or how about Ganguly's legendary opening series in England, Assaruddins innings in Eden Gardens and Green park, Tendulkar-Ganguly partnerships, Javagal Srinath's genuine pace bowling... I could keep adding a million more pages if ever I have to recollect what l remember of Indian cricket.

All these golden experiences are blotted by what happened later. The first disaster happened in 2000, when Cronje accepted to match fixing in the Ind-SA series when India took the ODI series and SA took Test series. I wrote a couple of articles to letters to editor in 1998 about match fixing, but never though things would be as ugly and never thought Jadeja and Azar would be a part of it. It was a deep pain for me - as I watched through all the matches even during my crucial board exams and this was a treason to me. Cricket never looked the same like before to me, and even though I watched a lot of matches including the Sachin's power pack against Pak in last world cup, things were never the same.

Even then, as a shameless Indian I was limping to take a look at our TV in the lobby. My ligament was torn during skiing last week and with all bandages I strained through the stairs just to take a glimpse at what was going on. And what I saw was unforgivable. Its not a loss that matters. When Sachin hit that 143 against Aussie in the desert storm, no body in the world mourned for India's loss, and even Aussie's were thinking that they lost much after the match ended their way. It is the way of they play. To see a "star studded" team representing 1.1 billion poor people who pour millions into their pockets and keep in them in the same league as Diego Maradonna and Michael Schumi... making their worst ever performance in the World cups since 1975 (winning just one match against a non-test playing team) and also making Rs.163 crore loss for their sponsors... I think let-down was too small a word. It was treason.

Dear Indians, forget about this shameless team of a mediocre sport and grow up.

Should people be restricted in online media?

2007-03-21T17:16:00.000-04:00

Fire in the stove cooks while fire in the roof kills

Should there be regulations to maintain a proper interaction in the web or should the statusquo be maintained? How many of us realize that they could be prosecuted if they write illegal content on a blog or even on an Orkut community or even an "anonymous" Wikipedia entry? If you are a girl and someone puts slanderous content with nude/objectionable pics in an online media, and totally screws up your life should the person doing intentionally or as a prank be let scot-free? If you are a lawmaker and you are seeing terrorists use online forums to recruit and commit crimes against your innocent people what should you do? As terrorists and gullible teenagers utilize the Internet for a lot of criminal activities how should the conventional society respond? Finally, has Internet made the world a better place?

This is one of the question that I was asking myself for a while and I had couple of posts in draft that were later discarded. Let me put more thoughts into this. Our conventional society has done a lot of adhoc things to stop this Internet menace but things are not enough. they either restrict too many things or lets too many things.

Consider the conventional society:
There is a minimum age for driving & drinking, there are processes for obtaining licence and only those who are qualified can drive, for getting a gun you need to be qualified, you can drive only in left/right depending on the country you are driving in, if you insult someone publicly in writing or speech you could be prosecuted for libel or slander, if you kill someone you are jailed or put to death....

When we don't have problems with conventional society having so many rules and regulations that help us mostly though gives some minor nuisance, and is a must for orderliness in the society. How much of those controls exist in the highly powerful online mediums? This is particularly important as young kids write blogs, go to social networking sites and do all sort of activities without even realising the rules of conventional society and a lot of people get burnt. They don't realize that if you create a malicious profile in social networking sites like Orkut intentionally slenderizing people, you could be prosecuted in various jurisdictions including India, China, Brazil and US. This is like giving fully loaded Machine guns to kids and punishing them when they accidentally hit the trigger. The fault lies in the society that had allowed the kids to have accessed the tool in the first place.

Internet like any powerful tool of nature has to be put in place and accessed properly to get real benefits out of it. Fire in the stove cooks while fire in the roof kills. But, I'm appalled to the lack of much regulations and education regarding preventing its misuse. No doubt, the revolution occurred too quickly for lawmakers to take decisive action. A similar process occurred in the world a hundred years ago, when automobile was invented and every tom-dick-and-harry started driving. The result was disastrous and nations quickly responded by issuing driving licences. We need similar things for the online media, lest it gets totally out of control.

Reputed service providers like Google, Yahoo and Microsoft have to take first steps and steer the direction for the community and the public should maintain a list of sites that voluntarily implements the steps and block the access to the rest from the corporate domain, parental control list etc. I use the term Internet account to mean the combo package offered by Google, Yahoo, etc that lets a range of services including email, chat, photo sharing, blogging, social networking, etc.

Some of the essential standards are:
1. Provide options for special Internet accounts with proper identification: Currently anybody (including Osama Bin Laden) could open email/blog/social networking account. This has to be slowly moved to a situation where only real persons with provable records and identification should be able to open accounts. In other words, if you need to obtain a Google account (for Blogger, Orkut...) or equivalent Yahoo and Passport accounts, you should be able to produce atleast one identification from the conventional society: Drivers licence, Credit card number, Passport number etc. This is one of the first steps in controlling spam and malicious mails, apart from reducing a lot of different spoofing and other crimes on the net. Though, it is not a cure-all medicine, it will make a lot of people think twice before they could do all those stupid blunders under the guise of anonymity.

2. Ensure licensing in accounts: Schools must start an internet education program and only those have passed them should be allowed to create internet entities including email & blogging. There must be such education and test programs across the society and the individuals wanting to access the specific tools must be able to pass a small exam that makes them liable to their crime. So, if you are kid sending a death threat by email to the President, or insult a person in a blog or create a malicious Orkut account or vandalize a Wikipedia entry you know its consequences. It might even be as bad as killing someone with a jigsaw. If we can suitable have drivers licence program for hundreds of millions of drivers across the world, I don't think why it will be more hard to create education and testing program for hundreds of millions of Internet users in the world.

There are few other steps that could be done for a better internet world, but these alone could make a good start and enable to contain the current anarchy. Initially enforcing them would be hard, but schools & governments should work with internet tool providers like Google and Yahoo to create such standards and punish those companies that don't follow the standards. A lot of governments are very concerned with Internet security and thus, most of the world will agree to those standards and only companies adhering to those standards will be permitted in a lot of school & office campuses. Eventually other companies will start implementing the standards and once most of the major providers of email, news, social networking & blogging join the common standards platform, ISPs could be pressurized to blockade everyone else, and eventually from our ISPs we will get only those websites & content that have proper legal standings. And things like Verisign standards can be extended for many other websites too. And after a while, such international conventions can be agreed upon and all these Internet content will come under the purview of the international law, instead of the current fragmented jurisdictions. And those countries and networks that don't agree can be permanently blockaded from the Internet.

The goal is to bring every Internet user, website or an Internet entity under laws and procedures of the conventional society. Like, how the world agreed upon that killing without a cause is a crime internationally, internet laws should be international standards and it will end the anarchy in the Internet world and pave the world for a better future.

Unbelievable - Where are the hits coming from?

2007-03-21T15:34:00.000-04:00

Seeing a spurt in the daily visits (more than tripled to almost 100/day nowadays) for the first time, I browsed through the logs of hits that this site gets, and I was so surprized of the outcome. Most of incoming links are from people searching Web in Google, and only one from Google's blog search, one from another site, and no Technorati or other blog engine hits. This was both worrying and surprizing.... surprizing because Google's web search indexes my blog well and "worrying" because no blog search or web search tool is directing to my site for any query (God burn all search engines other than google).

The kind of google searches that was bringing my blog to the top of Google search was mind boggling:

1. the foreign banks which are entering India in 2009
2. about tamil language in tamil
3.CHANCES IIT GRADUATES IIM gd/pi
4.how much gift dollars indian parents children in usa

and the best:
5.rigveda molten lead would be poured into their ears

I dont have an idea of how these hits come to my site and I guess many of the visitors themselves dont know it. Seeing the logs, I found a few good readers spening some time (alteast 5 mins) reading while most had immediately closed or gone to another site. Most of the incoming hits were from XP systems with 1024*768 monitors. The statistics has so much interesting information about who (I mean which IP location) is currently reading what and when it gets wings after a couple of years, I can even cater to those people who read the article to considerable time. Right now I got a work cut out - Make a lot of articles, lot more interesting and relevant as many readers had closed the browser before reading fully :(.

Three Billion New Capitalists

2007-03-20T13:56:00.000-04:00

I was reading through Clyde Prestowitz's "Three Billion New Capitalists - the Great shift of wealth and power to the east" that came in 2005. Like many of the books of the same era including the "World is Flat" it describes opportunities and challenges that is unfolding for America given the revolutionary changes that is occurring in India, China, Brazil & the East Europe-Russia. All these countries were warped in some kind of socio-communism till the late 1980's and (almost) everything came down with a thud with the fall of Berlin Wall. East Europe followed Germany into capitalism and USSR collapsed in 1991, India became almost bankrupt in 1991 and turned into a market economy partially due to the fact that its main export destination went down pinching foreign earning, China was forced to become a capitalist with a host of events including the Tiananmen square massacre in 1989 and Brazil became democratic with a new constitution in 1988. By now the concept of BRIC (Brazil, Russia, India, China) has become a cliché for international economists.

The globalization process started since the 15th century when Turks captured Constantinople in 1453 closing an important trade route for the West with India. So, starting with Portugal, European countries were sending their great expeditions towards India and unimaginable wealth was found in Asia, Africa & Americas accidentally. This process was accelerated with the industrial revolution and Renaissance and by early 20th century the strains of protectionism-mercantilism that came as a reaction for globalization almost destroyed the world with two great World Wars, along with producing diseases of socialism, fascism, Nazism, communism, Maoism & Fabian (India).

This time the challenges are much more than the earlier rounds of capitalism-globalization that occurred till 1980s. The players were relatively small Japan, West Europe along with the big boss - America together accounting for a population of half billion+. But, the challenges that are posed with the rise of three billion new capitalists (from India, China, Russia, Brazil, East Europe) poses totally different challenges. Of fundamental worry is the Export imbalances caused by curency manipulation by Asian countries that causing dollar to be artificially strong and posing threat to everyone in the system.

The book covers a lot of these aspects and the author puts his vast experience in government commissions and private executive boards to explain how each of these challenges unfold and how US can cope up with them. Some of the interesting observations made by the author are:

1. Linkages between various sectors of economy: A lot of macroeconomists believe economies to be working linearly and free market principles can stabilize systems in almost no-time. For example, you lose an industry to abroad due to productivity difference and this will help you to have cheaper product and eventually you currency will depreciate and cost of labor will go down and you will eventually get equal or better industry. But, a lot of cases such things don’t happen. The author gives an example of how US companies like Ampex lost VCR business to Japan, thereby US lost all the additional things like disk storage & recording etc. and Japan built its CCD industry with VCR revolution and this led to Digital Cameras. Thus, by losing one industry US lost a dozen industries.

2. Economies are ecosystems: While dealing with biological & physical systems we are sometimes so amazed and shocked how important certain minor linkages are. Destruction of certain animals/plants or loss of certain soil & water streams can break an entire system just like how faulty screws could potential bring down great machinery. While biologists and ecologists are starting to appreciate such crucial links, economists are late in the game. The author gives an example of Silicon Valley. It is not just a place of producing h/w & s/w. It is a region watered by the great brains of Stanford & Berkeley, powered by thousands of venture capitalists, lawyers, Research labs and corporations and each are important to other. The corporations need universities for talent and Universities need corps for funding, and both require capital from the VCs & investment bankers. You break one linkage and you collapse the whole system. Thus, US should be careful of what it moves offshore and should make a few industries national priorities just like how biologists designate few animals to be endangered.

3. Currency manipulation & Monetary policy: The world system has gotten to a point, where one part of the world (read: America) is mad consuming while a lot of rest of the world is mad saving. Both cannot continue forever. Over saving is as bad as over consumption like what the great depressions showed. Like fat accumulation in the body, a lot of regions including Japan & China have accumulated a massive reserve of dollars (running in trillions) and they have no sound plans for consuming them. The system is thus very precarious and small moves can bring the entire system to a thud. So, major savers should diversify their savings and move a lot of it for domestic consumption. Major economies like China should move their focus from export-centric to serving their huge domestic markets. Interesting suggestions he gave include bringing Japan into dollar zone (effectively ending currency manipulation) and work with Europe & IMF to bring alterative international currencies to reduce the burden on dollar.

4. Energy security: US is spoilt with a couple of decades of cheap oil that brought new beasts like SUVs into the market. This has put it an unsustainable situation of consumer of more than a quarter of world oil. By a combination of activities including support of energy efficient vehicles, tougher standards for SUVs and support for alternate energy sources like oil from shale, tar and ethanol should be pursued to totally eliminate the dependence on Middle east oil as world oil reserves are going to be extremely pressured with the rise of the three billion people.

5. Focus on Education: Due to the policies that centered on baby boomer generation, US education is in a state of deep shit. There was a time when people could land in life long good employment with a mediocre high school graduation and such laxity has removed focus on a rigorous schooling curriculum. Teachers are underpaid and hence of poor quality, and due to legal action discipline is not properly enforced. Thus US lags the rest of the world in student quality and this must be redressed.

6. End US hegemony: Many of policies of US including the Iraq war are not adding any more friends to the US and now it has been totally isolated. So, it should focus on strengthening international institutions like UN & EU to share its burden and consult with the rest of the world in greater actions. As US is slowly losing its economic superiority comparable changes in defense policy must be made, and defense allocations pruned.

However, I disagree with the some of the observations of the author including his undue fear of wage equalization. Eventually, there will be a wage equalization where US and the rest of the world will come closer. This is because US gotten to where it was, because the great countries of the world were sleeping then. India & China contributed to 75% of world GDP till 17th century and then due to external intervention were totally broke & poor. In the meantime wars weakened Europe, and US got a golden chance to rebuild the world and in the process built a legendary economy. There were more kids and very little old men and so everybody got great safety nets and high school students landed in great jobs. US consumed half of world's major resources with one-twentieth of the population. So, what it reached in early 1980's & 90's were peaks that, in my opinion, can never be reached ever. As other nations start waking up there will be a need for equitable distribution of resources and balancing act will continue. Eventually, US will become like rest of the world consuming what it deserves and that is the best that could be hoped for a nation with scarce history & no ancient culture though they can partially equalized by great entrepreneurial spirit of the 19th & 20th centuries.

But, the challenges that involve the spreading of resources among the old and new owners will be anything but painless and great powers must ensure a smooth transition to ensure the continuity of the world.

Inflation! Why should India care?

2007-03-02T22:02:00.000-05:00

There are two people - one a 70 year old man seen the best of his life and in a hospital bed and another is a 18 year old healthy boy playing an aggressive soccer game. Now, a rise/drop of blood pressure for the former by even a few percentage requires immediate attention and intervention by the doctors. But, what about the latter? Should same yardsticks be applied? Should the doctors barge in the middle of the game, and medically intervene if the heart rate marginally increased above 70?

This is the game that is currently going on in India. The pundits at Reserve Bank of India (RBI), worry day-in day-out anxiously watching the inflation jumping around 6%. They have reasons to worry. They follow a lot of practices of the US Federal Reserve, Bank of Japan & European ECB that have set their main mandates as controlling inflation, and growth is a footnote for them. But, at some point those worriers at RBI should ask themselves - are the comparisons valid? Inflation control makes sense for Europe, Japan & US that have had their best times, whose people lead a comfortable life currently, whose growth rates are barely a few notches above ZERO, and small changes in this stable economic equilibrium can wreck people's life-long savings and bring financial disasters. In many sense, they are like the 70 year old man - survivability and maintaining status quo is the key.

But, what about India that has just started to grow. Majority of its people are poor, not many have too much of life-long bank savings to worry about losing a percentage due to inflation, and a lot of development is just waiting to happen. Simply, status quo and economic equilibrium is not an option. If it a'int grows, it dies. As simple as that. In this condition, with growth rates clocking in excess of 9% and bank interest rates above 8%, why does a 6% inflation bother anybody? And a lot of this 6% is due to global factors including global rise in prices of wheat, corn & dairy, along with sky-rocketing oil prices, commodities including metals and increase in transportation costs.

Secondly, this higher inflation coming after two years of unusually low inflation rates. Before that period, even double digit inflation was not unusual. Thus, another part of the game is a lower base to start out with.

Third, apart from global forces, a lot of inflation is due supply side forces - less availability of developed urban areas, rusty food production and full capacity utilization in industries. A healthy inflation rate can and will encourage more entrepreneurs to add capacity and build more production. Farmers will be eager to increase food production and property developers can wipe out scarcity in good urban development. An artificial intervention, puts water in all these positive developments and precludes natural development that should have happened.

Fourth, increase in interest rates have put enormous strain on government finances and non-plan expenditures have skyrocketed leaving little for capital & infrastructure expenditures and this will cause further damage to this fragile nation badly in need of development.

So, its too early for RBI to nose in and spoil the exciting game. Simply, its interventions are unwarranted and unnecessary - the 18 year old boy can take a bit more increase in heart rate and can enjoy the game. RBI is dealing with a healthily growing country, not some ageing nation.

Last but not the least, RBI is a tiny factor in the world game with gazillions of liquid money. When US Fed, ECB & BoJ are finding it extremely hard to rein in this flood, its preposturous for RBI to think of putting brakes on it. If you are pressing too hard on a wet soap, you know the consequences. So, RBI should know its limitations, and carefully guide the game externally instead of its fiats to banks.

Rollback the interst rates close to international levels and work with the government on producing proper development and consider sector-wise tightening of capital through well-guided regulations.

Tamil Language Sources

2007-02-23T18:29:00.001-05:00

Tamil General:
Thamizh Thai Vazhthu - An anthem for Tamils
Tamil language & culture reference books

Language:
Introduction to Tamil Language
Tamil Learning Tools
Tamil Dictionary
Grantha Script

Culture:
Tamil proverbs
Tamil festivals
Tamil Marriage Songs
Simple Kolams
64 Traditional arts

Religion and Devotional:
12 holy books for tamils
Tiruvasagam
Thirupavai
Thiruvempavai
Devaram - Part 1
Devaram - Part 2

Arts:
Tamil Music - Part I
Carnatic Music and Bharatha Natyam

History:
Great Tamil saints
Great Tamil rulers

Tamil Literature:
Tamil ebook collection
List of Tamil publishers
Tamil magazines and newspapers
Chronology of Tamil literature - Part 1
Chronology of Tamil Literature - Part 2
Aathichuvai & Kondrai Vendan
Early 20th century novels

English Translations:
Sivagamiyin Sabadhan - English
Periyapuranam English condensation

Movies:
Old Tamil Movies
Links to a collection of Movie related resources

Bank of Japan (BoJ) rises rates: What are the impacts?

2007-02-21T16:03:00.000-05:00

While, writing this I find BoJ has increased the rates to 0.5% and this surprize jolt has hurt a lot of speculators.

The speculators and short term traders will get hurt by any upward moment of the currency (strangely the currecy moved downward yesterday, as the rate increase was below expectation of few organizations) and/or increse in rates.

However, long term is a different story. I dont believe Japan/Germany can ever attain the state they were once in the early 80's. The world economy then looked totally different with tiny nations like Japan, UK, Germany, Italy along with their big boss US controlled the world economy. Now, those days of tiny tots are gone, and big wigs - BRICs are entering the show and if terrorism could be controlled even Middle east will join the show.

What this means is that not only there is enormous potential for greater depths for world markets, but also that these nations are no longer in US control to take things like Plaza Accord or Bretton-Woods agreements.

These nations by their size and population have enormous appetite for capital and can easily suck in trillions of dollars in the next decade for their development to come in par with the west. Atleast India, with its huge infrastructural requirement could suck few hundred billions in the next couple of years.

So, Japanese currency's appreciation potential will get diminished as they face import pressures due to rising oil prices and export pressures, where even countries like India would join as competitors for electronics, Auto and Steel. And with current deflation there is very little room for upward movement of currecy and the ageing society doesnt want to spend as much as their younger counterparts.

So, my guess is that these new countries could suck the entire investment fountains dry and would coast on the wealth that Japan and Germany built up for decades.

It is great time for countries like India that has great entrepreneurship scope but limited access to capital (till very recently) and can use this great "Akshaya Pathra" for supercharging growth.

Should government subsidize Oil?

2007-02-15T14:41:00.000-05:00

This question has been puzzling me and the answer to the question "Should Indian govt. control the petrol/diesel prices" produces an answer even baffling to me. I'm a free market supporter and in general against government intervention, but I feel Indian govt is not too wrong in controling the oil prices at the moment. At the same time, I also feel we in the US are enjoying a much cheaper petrol and the government here must raise the prices by increased taxes. I'll explain my contradictory position in this article.

Background:
In India, oil prices are not directly determined by the world prices, but controlled by the government in a process called APM (Administered Price Mechanism). What this means is that periodically, based on the international prices, government would set a prices for Petrol (Gasoline), Diesel (used by trucks), Kerosene (used by poor for cooking & lighting) and LPG (used for cooking by middle class) and all the oil market companies have to fix to that price. The price is set in a way that oil companies make profits on Gasoline, break even on Diesel and losses on Kerosene & LPG, and in return get compensated by government bonds.

In an effort to curtail inflation (and score political points ahead of forthcoming elections), the government has reduced the oil prices though the oil companies are still making losses out of subsidies on Kerosen & Diesel. A lot of columnists have blasted the government, and for once I'm not going to attack the government.

In India, currently after the reduction the price for petrol (gasoline) is around Rs.50/liter ($4.18/gallon) compared to US prices of around $2.3/gallon, while Diesel costs around Rs.32/liter ($2.55/gallon) almost the same price as in the US. And India has better refineries and slightly hence lesser cost of fuel production and distribution. Thus, its not correct to say that Indian government subsidizes oil. In effect, what Indian govt does is to tax the fuel heavily and then make profits at all levels mostly going to state & provincial governments.

So, gasoline in India is not cheaper than most countries and this makes sense as India should curtail the use of more cars till the necessary infrastructure comes up, and even then it is better not to go the American way of automobilzation. High gasoline price makes sense, but very high prices can affect sectors like tourism etc. and so I believe that current prices for petrol are neither too high nor too low. And the pricing of Diesel at lower rate makes sense, because Diesel is much more efficient (40% more power compared to Petrol) and it emits just 69% as much greenhouse gases as petrol for every kilometer of ride. Thus, by encouraging the Diesel usage government is pushing more people out of the more inefficient and nasty petrol towards a shade better Diesel. Moreover, Diesel is used by trucks transporting essential items and public transportation (Trains & Buses), apart from small captive power plants. Thus, Diesel subsidization encourages a more healthier practice of relying on public transportation rather than Automobilzation a trap that America got into. Now, US is considering more sops for Diesel based cars. And, since diesel is used in core sectors, a lower price will curtail inflation in a lot of sectors.

Now, coming to the sacred cow of Kerosene & LPG the main cooking and lighting source for the poor and middle class respectively. India has a ultra low price for Kerosene almost half the cost of production and this alone leads to a loss of over $2b/year and a similiar amount in LPG. I believe that LPG prices have to be gradually increased so that it breaks even, while some efforts must be made to modify Kerosene distribution. $2b is not a big deal for trillion dollar economy and the Indian government can effectively carry on protecting the poor for a longer time from the vissicitudes of global economy. The poor spend considerable portion of their earnings on energy, food & transportation and all these are directly affected by the fuel costs, and the resulting unrest can put the economy down by tens of billions of dollars, and hence Kerosene subsidies make sense. But, distribution mechanisms must be modified so that it reaches the appropriate persons and to protect the blackmarket sale and adulteration into petrol and other fuels. This paper has proposed good methods for this problem.

http://www.iimahd.ernet.in/publications/data/2006-07-06smorris.pdf

Global oil prices are erratic and you cannot have mechanisms that directly reflect the global prices in a developing economy. Oil prices swing from $10 to $80 in 5 years before coming to $50 in a few months, and this could totally collapse a fledgling economy like India, if the government doesn't interefere and smoothen things out. If you calculate all the taxes that various governing bodies in India make out of oil, it could easily compensate for the various subsidies - notably in Kerosene & LPG. And, even if you have to spend a couple of billion dollars more, its worth it to keep running an economy that adds $100billion to GDP every year. And to compensate the oil majors for the loss, the government has to provide sops, though in the long run I would prefer a more simple system, where the government reduces taxes on these oil products and also take away some of the sops from the companies. The non-m0netary sops including governmental intervention and support for acquiring global oil assets and exploration of alternative fuels and efficient systems should be pursued more.

In the end, I believe that India's currently policy of keeping a higher price for gasoline and a moderate price for diesel makes sense and should be continued. While the oil companies face losses due to this, they could easily be compensated with the government bonds, which inturn can be paid from the taxes the government earns on these fuels. And LPG prices in the long run should get in par with the global market, while Kerosene subsidies should continue but mechanisms must be reformed to ensure appropriate distribution.

Regarding the situation in US, I recommend higher prices and here is a slightly older post, but still relevant to the current issue.

Rate Hikes in India - Part 2: Effect on Corporations

2007-02-14T16:35:00.001-05:00

The previous post had given an introduction to the sectors that could face trouble due to the rate hikes. We will go further on analyzing the ramifications.

First, the rate hike would pressurize a fledgling banking system in India. Indian banks are tiny compared to world standards, inspite of India having one of the deepest and oldest financial markets and some of the best talent in this arena. One of the main reason for this is the over meddling of Indian government in its affairs. Now, things are going for worse. The Prime Lending rate in India has climbed above 12% for many banks, while you could borrow at 5% in Libor (London) or around 1% in Yen nominated loans from Japan. And, given that Indian rupee has bullish prospects both in short & long term, the overseas loans would have an effective rate of less than 3% in rupee terms. To add to this, recently Standard & Poor has upgraded India's ratings and thus, Indian corporations could get better rates due to lesser perceived risk. Thus, any corporation that could borrow from overseas will skip Indian banks and get it at the concessional rates. So, when you read about Tata or Birla's mega acquisitions and dont read any Indian bank acting as the banker for the deal, dont be too surprized. By being burdened with enormous rates, Indian banks lose out the best customers and have to be put up with the lousy ones.

Second, RBI would slowly lose control of Indian market. By forcing more companies to look outward for loans, RBI has little leverage over the market and over the course of time market would act independent of RBI's whims & wishes and long term rates would be less under control. This is somewhat similiar to the situation with US Fed that has control over short term rates but has little control over the long term rates. While, it is debatable whether RBI should have greater control over the economy or not, but an economy totally running out of governmental controls might get reckless if the markets are not mature and deep.

Third, small & medium scale enterprizes would lose out of competition. Large concerns like Tata, Reliance, Birlas, Essar, etc. could borrow at international rates, while their smaller rivals back home cannot do that and have to put up with twice the cost in interest rates. In many businesses that run on lower margins, a small change in the rates could topple the competition totally towards other side and kill a lot of fledgling enterprises that is essentially not good for the country.

In Part 3, we would see what other steps India could take to counter the current inflation crisis