Shape of Economy – Interview with CFO Magazine

 

V Kumaraswamy, CFO, JK Paper Ltd says the new indirect tax law will bring rural economy into the formal fold and, thus, help create an inclusive economy

Is it Time to rework our Monetary Policy Framework?

http://www.financialexpress.com/opinion/what-should-rbi-give-weightage-to-decide-policy-rates-all-you-want-to-know/941225/

My article with the title above (different in title between the Print version and e-paper version) appears in Financial Express today.

 

The government seems to be in a bit of bind over both employment and growth, not for all its as own making. One of the chief contributory to this morass is the inappropriate way the objectives of our monetary policy have been fixed or evolved over the last 6-7 years. The Chart shows clearly the increasing misalignment between the inflation, external value of Rupee (as reflected by REER) and the interest rates caused by the recent shifts in our monetary policy. The Chart uses the WPI instead of the new found CPI which is 57% out of control of RBI’s policies as the report itself admits.

Two main components as it operates in our Monetary Policy Framework are (i) to target a consumer price inflation of 4% with a tolerance of 2%. Both the variable and its levels are recent developments, and (ii) to aim at orderly conduct of the forex markets without seeking to target any particular rates.

Fundamental flaws

Firstly, in both these, the targets are fixed without reference to any end goals in mind. As if these are desirable self-actualising end-goals in themselves. In economics everything is interconnected – inflation, interest rates, growth, employment, productivity, cost competitiveness, etc. To seek a deterministic nominal goal in a web of influences looks naïve at best.

Secondly, the objective that the economy desires to achieve may vary depending upon the stage of growth. It can vary for the same economy from time to time. For EU it is kick-starting growth now, for China is to stabilise it at a high rate, for Japan it is to grow – any growth – even if very low by international standards. For US it was achieving any growth after the meltdown but now slowly crossing over to stabilising inflation. A nominal fixed target does not address these contextual concerns.

Thirdly, economics is mostly about balance and trade-offs between what in general are opposing interests – buyers and sellers, producers and consumers, workers and producers, savers and investors, inflation and growth and so on. One isn’t sure how a nominal deterministic inflation number can work towards an optimal or at least desired equilibrium between savers and investors, between domestic investments and imports at all times even in the medium term.

Lastly, as is explained below, there is excessive and suicidal reliance on the nominal rather than real variables, which is what may be causing the current problem.

No basis

There seems no theoretical basis for the inflation targeting or its levels – not from IMF, not from Basle norms which aims at financial stability or RBI. While nothing can be exact about economics and hence a band is necessary for targets, a 2% tolerance on 4%, is like permitting Usain Bolt to run on his track or the adjacent tracks on either side and the penalties for trespass being imposed 2 Olympics away.

Just orderly movement of forex rates is no policy. When it is clear that it has a significant impact on domestic capacity utilisation, jobs and growth to just aim to only curb the volatility but not be concerned with the values is naïve shirking, much like driving without violating any traffic guidelines or speed limits but towards a wrong destination. By keeping the currency over valued for far too long (over a decade now), we are re-creating conditions of 1991 crisis.

Way forward

Keynes had brought out the true nature of the real and the nominal economy, the rigidities exhibited by the real and how to tweak it by using the nominal to achieve real goals. The current constant 4% inflation (nominal) target can in no way balance the interests between savers and investors, forever. The government should move to a 2% +/- 0.25% real interest rate regime. Whether the inflation is 4% or 9%, such a real interest spread of 2% will be a fair compensation to savers. It will also not curb investment urges if what investors have to pay out is in line what they recover from the market through inflation in prices. This is a sort of inflation proofing both savers and investors.

Such a floating nominal interest (but largely fixed real interest rates) regime will largely ensure that fresh investments and savings do not grind to a halt.

But the existing outstanding stock of savings are in fixed nominal interest regime, which poses problems. It is therefore necessary to move to a floating nominal rate regime and increase its proportion. In the last few years, Bank loans have largely become floating rate with optional repayment and a significant progress has been achieved. It is necessary to increase the proportion of floating rate bank deposits from the savers side as well.

The second thing that is capable of derailing growth and employment in an open economy is the forex rates. An overvalued currency makes imports cheaper, exports far less remunerative which affects domestic employment and growth. A 20-22% overvalued currency as on date is a killer. Government should mandate RBI to walk it along in an orderly manner along the real values. RBI and Government should agree to maintain exchange rates within a band of 97 -103 REER. This REER should be calculated on a base year that is sound when most economic parameters (CAD, fiscal deficit, inflation, growth, etc.) are as close to our desired objective. As it stands now, 2004-05 is one such year. The government should also tailor its inward investment policies accordingly and the degree of capital account convertibility tuned appropriately.

Currently policy rates it appears are decided mostly or solely on inflationary expectations. This can result in fear mongering. In deciding the policy rates, perhaps the actual for the past 2 quarters should be given equal weightage.

By moving to the real from the nominal on both interest and forex accounts, we may have learnt the right lessons from Keynes. Excessive reliance on the nominal on both accounts have made India underperform its potential in the last 4-5 years.

 

 

Poverty. Or Lifestyle by Choice. And the Genius of Julius Nyerere.

Poverty. Or Lifestyle of Choice

Poverty alleviation to my mind is a patronising imposition on the unsuspecting impoverished as the rich see the poor. I have seen extreme ‘poverty’ at first hand in many parts of Eastern rim of Africa, East Asia and India in what are some of the poorest regions. Its not that the poor are exactly sending out distress signals for rescue.

Their smiles are broader, worry lines on their faces far lesser, leisure activities and small talks of humour reveal more enjoyable times, families better knit, better at peace with the rest of creation like Animals, rivers, environment, trees, etc. Their care for the rest – elders or younger- seems better and worries about what next and what will overcome their existence near non existent. Yes I am talking of the extremely poor. Of course I am talking of those in regions that would truly be called the poorest by any economic patronizers.

The rest of the paras is about a tribal village that we visited recently in Tanzania located between Gorongoro and Serengeti both world famous abodes of Wildlife – first a conservation area, which means both animals and native people are allowed to live together and the latter a National Park which means no human habitation is allowed.

There is nothing spectacular to further my arguments / conclusion in my description, so be prepared for some disappointment except some heat at the end.

Our Visit and What we were told

When one gets down from Gorongoro’s crater rim one could see from time to time people sleeping on hard rocks in baking Sun with just a crate of water. Or young children – alone or 3-4 at odd places with nothing else in visible distance. You wonder where they live and what they are upto – completely bewildering.

In the middle of nowhere is the tribal village (Bora by name) amongst the vast stretch from horizon on one side to the craters rim and small volcanic mountains on the other side. There is a small stream a KM or so away and a few trees near the stream.  There is a vast area of pebbles, sand grains, mixed with goats droppings, a few blades of grass visible here and there and a disproportionate number of sheep grazing or trying to graze them.

The Village has 122 people all belonging to the same person. He and his 20-odd wives, their children and grand children. They spoke a dialect of KiSwahili. They belong to the Masai tribe which stretches from south west Kenya to west and north west of Tanzania.

The driver called out and a man of the tribe who spoke fluent english (and of 24 yrs of age as i later enquired, Seiko by name) came out to negotiate with us. He had studied Secondary in nearby town in a boarding school and was in line to pursue graduate studies after a year or so – there seemed no reservation for them – perhaps for noone in Tanzania).

We were told that the fees for our visit per person was $ 20 and we negotiated a consolidated $ 100 which Seiko agreed only after checking with his head tribesman.

they performed a dance for us in which they invited us to participate. We never understood the lines but it was all about jumping about with a staff and a kind of oversized wooden hammer shaped like a scoop – spoon. (see pictures). But when we finished some of them asked us ‘Barabar?’ in Hindi with an approval seeking smile on their face.

The Village: The village boundaries are marked with some twigs and Acacia branches, more for warning animals than human intruders. We understand that the whole village takes about 3 years to build but a single hutment about 2-3 months – all entirely made of twigs, acacia branches to lend strength and cow dung and some ash for binding. There must have been 40-50 houses in 2 concentric circles, with a central open space where they were displaying handicrafts for sale.

Their houses have a master bed may be 6’X4’ and an adjoining 4’ X 5’ and a fire pit hardly a foot away from them. The drawing cum dining cum kitchen cum store must have been another 5’X6’ – fire seemed eternally burning. In one corner was some firewood, water for cooking and some vessels in place. It is the duty of women to build and maintain them. They let out the entire village in case they have to shift out somewhere and some other tribe is willing to take it, though i was not sure what that contingency might be.

Each lady of this polygamist society had a separate house for herself and children.

2           Divisions of duties: The society we were told is divided into Children (boys and girls), Women, Warriors and Elders. Children play and sometime help out (of late some attend primary school) in grazing cattle. Its the duty of women to construct houses and maintain them, upkeep of village pathways, raise children, housework and cooking. Warriors are males who are trained to ward off dangers primarily from Animals during migration. They train in using some acacia staves and some wooden hammer (they weigh quite heavy and just one blow might throw the lion or leopard out of its wits and leave the tribe to itself). They don’t hunt for there is nothing that they can or are allowed to. The Elders are the judges, rule makers, administrators, liaison people with external communities or government, deciders of any changes to their customs, etc.

3           They follow a religion called Engarai (not sure if I got that right), which worships the volcanic (long extinct) mountain and fire.   There was a lonely Christian (which the tribe had allowed) who had a neck chain with the cross. Apparently, he had attended some higher school or college in Kenya and had attended some Churches and developed some affinity to the religion. There were also a few others who had been to Iskcon temple but had not converted to the faith.

What to do with the dead seems to be in a state of flux of late. The long standing custom was to sacrifice it back to the God i.e the mountains. In between they thought it should be offered to water. But seas are a thousand kilometres away. So they thought that if they buried the dead they would be carried by the earth to the seas. They tried out cremations but are back to burying in the mountains now. Somehow they seemed undecided as of now, waiting for the next big thing.

4          Marriage custom. They are all polygamists each taking 3-4 wives. and there is no incest. so the women have to come from other villages. Once they come over, their contact with their parent community is near totally lost. The man has to propose and the female accepts or rejects. After the girls accepts, her parents have to approve and then they have to inform the village head which is usually the grand or great grand father. and then the Boys side, although none of them stand on their basic decision. (I could not get any answer as to how such a skewed ratio can be sustained unless the ratio of women to men is also similarly skewed). When the village headman dies his next eldest brother takes over and the line of succession is very clearly laid out.

 

5           Social upbringing. The children are born into the society, we were told – not just to the parents who biologically bore them. Its the duty of everyone to look after and bring up the children and the children in turn have to do whatever duty is assigned to them by the village elders – no saying no if not coming from your parents etc.  Male children take cattle out for graze and females house building, maintenance, cooking etc. So both ways there is nothing individualistic or home centric – everything is village centric – belonging, upbringing, duties and responsibilities.

The skin tone was great, no cragginess or folds despite the harsh Sun they have to face thru the year. No worry lines – not at least as much as you see in similar aged people in cities. Smile but no giggle or ridicule, quite disposition no cynicism is how I would describe.

No exaggerated exuberance or garrulousness that is typical of most Africans. It was more a guileless dignified ‘easy to make friends’ kind of welcoming ness.

6     The Culinary. Basically the entire food chain revolves around the cows and the sheep. For a group they claimed to have 3000 cows and an equal number of sheep. Cows give them milk and blood and meat and sheep mainly for meat. They drink the blood of cow every morning for breakfast along with milk. The extract the blood by puncturing some blood vessel and letting it ooze, without killing the cow. There is meat at Lunch and a soup of herbs and plant roots along with meat in the evening. There is no fruits or vegetables for them – ever.

We did not see any cows during our visit. We were told because of lack of grass and water, cows had been taken to a nearby place – 2 days walk, for grazing.

The entire medicine is made up of herbs and plant extracts and only in very rare occasions people are sent to outside towns for surgery etc.  Sanitation is primitive with near total open defecation out in the fields.

7           Economy : The entire economy revolves around Cows and sheep. When we entered they collected our fees in USD. They sell some handicrafts made by the women. The proceeds are used to buy their clothes – which looked neat and clean and i had no clue as to how they kept it that way, all in deep blue and red colour combination. The water in the stream  is hard and incapable of being used for cooking or drinking. They buy their water in tankers (stored them in syntex tanks) and a tanker of 22,500 litres last for about 3 weeks- some economy indeed.

8     The School visit: (see the photo with a man walking towards a small hut. Thats the school). The school is primary and sets them all together for 2 sessions each day one on the morning and one in the afternoon. We saw a glimpse of the 2nd session. The students stood up and sang a song in Swahili – led by one and repeated by others – welcome to Bora, our holy land, Welcome to Gorongoro, welcome to Serengeti, and welcome to Tanzania. The teachers are sourced from within their colony and teach them english and how their native tongue is constructed (that too thru english alphabet) and basic arithmetic.  Beyond that students go to boarding for secondary education and beyond that to distant cities in Tanzania or Kenya for even higher education. But those going outside are limited in number and is a recent phenomenon. The primary school itself was started in 2003/4 only. It will be interesting to see what influence the education has on their culture. There were 4-5 of outside graduates we could see and our guide was one. They spoke good english and one of them had become a Christian by choice and others had exposure to Hare Rama Iskcon movement.

The Warriors are trained in the use of their weapons and have the duty to protect their cattle and cows from animal intruders and from animal during migration. They smear some ash on their face – may be different patterns for different ranks. They don’t eat with others – they prepare and eat their meals outside the village near the stream – wonder what is the reason.

9     The Genius of Julius Nyerere – We also heard of another community of one Boni Louise who had 27 wives, 70 children and rest to make a community of 147 living somewhere in the stretch. The govt had offered to take them on board, provide for education and give them skills and jobs. But the Village headman had refused and the government had no problems with that. The Government made a standing offer for providing teachers for free should the village chose. After long years BL accepted it to forma school for his grandchildren and there ended the govt’s role. Basically Julius Nyerere has done a more commendable job of 2 types of integration after Tanzania’s independence – religious and cultural. Tanzania has 45% Muslims and 45% Christians and the rest making 10%. The population is one and no visible signs of tensions anywhere during the last 50 years. They are Tanzanians first and whatever religion they are, next.

Again he did not force development or education on any of the 120-odd tribes. They were given the option of integrating with the national mainstream but just an option. And where they just wanted to access only education they were allowed without precondition.

The net result after 50-60 years is that we have several societies or village communities who have their own rules and regulations, cultures, law etc. over which the nation has no say. But they also have a strong respect and love for the nation. Finest form of Democracy with no force or pressure tactics used anywhere, anytime – everything by choice. And no militancy or naxalism anywhere – all nationalists by choice. That explains the students’ song. In that respect Nyerere seemed to have done a far better job than his mentor Gandhi or even Mandela.

My Take on the people

The students in the school looked at peace with themselves like any of their city counterparts, seemed competent at what they were doing but not over eager to please us. The men looked healthy, again not too eager to prove themselves or ingratiate themselves as some of the country cousins tend to be when they come in contact with what they think are superiors. They dealt with us as equals I thought.

At a point in time when we asked them questions which appeared invasive, a silent pause to make us understand that we are off limits is exactly how you expect someone who is sure footed to handle a difficult situation. The ‘foreign returns’ and the outside educated did not betray any signs of dis-ease with their native surroundings nor any snootiness over the rest. They seemed well integrated and at peace with their community and no visible or subtle signs of dissatisfaction or Freudian slips anywhere that their true leanings were elsewhere or their desire to be in the cities or towns.

Their politeness, sensitivity, courtesy levels were laced by a sense of unhurried ease secure in the belief that the other person will not run away with what’s yours and hardly betrayed any rabid competitiveness. The village was neat and clean with no litter – even of food remains – to be seen.

On a Philosophical Note

My take is that they have lived exactly same lives the last millennium or perhaps the last million years. Other than perhaps the recent changes in clothing and education. It would be interesting to see how education affects them, whether it leads to any conflict between the educated and those without, whether it leads to younger ones challenging the Elders and all the civilizational conflicts. The younger ones seem to have come back out of choice and happy embracing the village life. As of now it appears that they wont move from their equilibrium. Happy as they are, with what they are, where they are, who they are…with their surroundings.

Their today is an exact carbon copy of yday, day before, last week, last year, probably the last 1000 years. The children would be doing exactly what their grandfather and head of the tribe would have done when he was similar age. The tribes head would be seeing his sons and daughters in law doing the exact thing he had observed his parents do. In a sense everyone had the script with him and his role was frozen in it.  Nothing to strive for or compete for that the society would tolerate. Seniors juniors  and young ones -they all have the same houses. There is no greed in such a situation, there is no competitiveness or need for savings or safety at individual level. Even concepts and words like regret, failure, lack of success, (all about the past) and fear, confidence, optimism, savings  (all about the future) may be largely irrelevant or lot less diluted.

They are the perfect example of sustainability in my opinion. They have already proved it in my opinion. Lets come back after a thousand years or a million years. The tribes will and can subsist exactly as they are – their lifestyle wont destroy the river nearby (unless it dies by itself), they wont destroy the trees, they wont dig the hills or mountains for minerals or metals, they don’t eat the wildlife, they wont mishandle the cattle since any quick reduction of cattle will threaten their own existence. All the current notions in the developed world seems an apology or euphemism at best, in comparison.

Makes me believe its an ideal most Oriental spiritual heads or religious heads crave for. They live in time zero. Somehow happiness is inextricably fused it appears with time. You move away backwards and you long for or regret yesterdays and with it the unhappiness. You move forward you develop fear, greed, despondence, confidence or lack of it or successive waves of it, and you find people in the most affluent societies walk to their office with heavy worry lines as if they will face the yellow slip on arrival or go back to their residence as if when they reached there their spouse would have deserted them for a better choice.

Choice may not necessarily mean Welfare. Just get rid of the words Greed and Individuality …life can have a completely different meaning altogether. Like particles behave completely unpredictably under zero gravity, greed and individualism seems to make humanity to go berserk – no amount of savings is enough, no measure of success enough to satisfy – we are in a permanent pursuit to prove ourselves to others and earn their certificate, no end to competitiveness to prove others are not as good as you, destroy nature and its various creations in the name of development and give euphemistic proselytization to others.

They may be called poor. But there is no poverty in my opinion. Its their lifestyle. By choice … choice not to move away from what they have seen work. And no good Samaritans have a right in whatever name be it religion, democracy, freedom, women’s liberation, human rights, etc.  have a right to interfere in their choice. For happiness you seem to need equilibrium not necessarily fly around in A380s or zip around in fast cars. And they seem to have that in plenty. They have inherited it from their forefathers and will bequeath it to their successors nth  generation. And in doing so they would not use up an iota of nature, But most certainly we, the development champions,  would have exhausted our Gas.

Way to kick start economy – Currency Devaluation or Fiscal Stimulus?

An edited version has appeared in Financial Express on 13 Oct 2017

Currency Correction or Fiscal Stimulus?

V Kumaraswamy

The feeling of sluggishness is palpable everywhere. There are talks of stimulating the economy by fiscal incentives etc. This can be a very innocuous medicine for reasons of (i) dosage, (ii) potency, and (iii) long lead time.

First the dosage. The government may throw Rs 50-60K crores as fiscal stimulus. This is about 0.4% of our GDP. Given the current moribund state of economy with 25-30% underutilised capacities it is too tiny to have any impact. The current closure of capacities or lack of investments have not become so for 1-2% poorer realisations or profitability. While the figures vary for different industries, it is substantial – more in the range of 10-20%. We need a correction of this magnitude. The gaps in our competitiveness with countries exporting to us like China, ASEAN and Korea is 10-15%; not a 1-2% pittance.

Next the potency and wastage. Any incentive will reach both Units operating at full capacity and units with low utilisation and poor profitability. Units which are closed or NPA currently could hardly be revived with a small ‘spread thin’ incentive. The incentives reaching units operating at full capacity will neither create incremental growth nor new employment. There will be a lot of wasted (applying where not needed) efforts.

Finally, the lead time. If stimulus is by way of Income Tax rebates, it will be a year or many quarters before the recipient feels it and reckons it in his decisions. If it is by way of Indirect tax cuts, the recipient knows that it is for a limited period and will not motivate him for taking a long term investment decision. We need some immediate actions and most fiscal measures take a long lead time to get results. It may be well beyond 2019 that one would see perceptible results.

The current problem

The economy is stuck at a low and unresponsive equilibrium.  The current economic impasse is born out of 3 main factors (i) high internal value of currency (low inflation targets resulting in high real interest rates), (ii) may be partially from it, high external value of Rupee and high real interest rates attracting too much forex flows which are beyond the capacity of economy to absorb and (iii) free trade with ASEAN which kicked in from Jan 2014 in full.

ASEAN FTA did increase supplies and kept prices under check. It made import parity as the main basis of price determination for many manufactured goods. But it also eroded domestic industry’s profitability since manufacturing prices have hardly risen to cover inflation of inputs in wages and inputs from agriculture. It delivered customer stable or reduced prices but took away their jobs. India’s growth is creating Jobs but in other countries!

Somehow inflation control has become the focal point of our monetary management in recent years just like fiscal deficit is for our Union Budgets. While the fiscal deficit control is understandable, in an open globalised economy when product of every description could be freely imported, supply shortfall induced inflation is out of question. From Pulses and rice, to apparels, to electronics and Ganesha and Navrathra idols everything can be imported these days. So supply constraint induced inflation is the least that RBI or the Government needs to worry about.

Ways to correct imbalances

The main contributory reason for our lack of competitiveness with other regional players is the high external value of our currency. The sooner it is corrected the better, either by devaluation or dis-incentivising inflows.   But devaluation can cause inflation. As is reasoned out below inflation can be phantom enemy if things are calibrated well.

The first thing is to reduce debt limits available to overseas investors and strictly adhere to such limits. There is nopoint accumulating reserves to earn 1-2% returns by paying 4-5% overseas as interest in $ terms.

Secondly, there could be a temporary tax on overseas investments into India. This can be even for ECBs, investments into government debt and all inflows which are not required for physical imports. Taxing interest on GOI bonds will lower their yields and contain inward flows. There could be a surcharge on inflows till the related imports also take place. These could be used for re-capitalising our banks.

As a corollary, Government can mandate that fresh foreign investments can only be in new government bonds issued, on which the GOI can offer much less interest rate. Such an exercise will help the GOI as well. Such issuances can be allowed for secondary trades may be a separate bond segment with lower interest will develop as a result.

Containing Resultant Inflation 

The Government should bite the bullet like it did with GST and correct the near 22% over valuation in one substantial go. It can reset $=Re at Rs 71-72, which is 11% correction.

Monsoon is good throughout the country and agricultural inflation may not be a risk. If in fact there is excess production, a good forex rate might help evacuate some surplus so that domestic prices don’t crash due to oversupply.

In the long term, a 11% devaluation is about $ 40 billion in added inflation. This on a GDP of approx. $ 2400 is about 1.6% – may not be unbearable. But it’s the short temr effect on imported products and their immediate derivatives and next level products.

Oil is the largest at 25% of import bill.  Government (state and Central) should put a price cap. Their duties (customs, Excise and VAT together) account for a third of final price. There can be a freeze for 12-18 months in Re-terms on these. Oil marketing companies which have expanded their margins in the last few months can be told to absorb a third and the rest can be passed on. An additional 3.7% inflation on oil will amount to about a 1% on final inflation. Gold and Diamonds are next. We should not bother with Gold (the costlier it is, the better) and Diamond is largely for processing and hence related exports will make up for the input inflation.

That will confine inflation largely to manufactured goods. Most prices today in manufacturing sector are determined by import parity prices. A 10-11% correction would most likely translate into a similar uptick in their prices, which could help several factories (most especially textiles) to start chugging again. In any case, buyers of manufactured goods have had it too good for the last 5-6 years without much inflation.

Protecting the pensioners and interest earners needs to be balanced with the interest of freshers in the job market. The total interest paid on all bank deposits and Small savings and MFs is less than 5.5% of GDP. If we remove the government pensioners and those who have not yet retired from this, it would not be more than 1-2%. The number of those entering the job market and finding themselves without jobs will far outnumber those surviving solely on interest.

Currency correction will also solve a lot of NPA issue. A 10-12% increase in industrial realisations will turn many industrial units from potential NPAs to preforming ones.

Superiority over fiscal stimulus

Currency correction will hit the problem where it is. The dosage at 11% on the total value of trade (both imports and exports) is huge. It will alter the domestic profitability substantially and have an immediate impact – from the following day morning.

Sure forex borrowers will suffer. But those who have covered their exposure need not worry. For those who have not covered or partially covered, they have made good gains for the last 12 years on the trot. Why should not they not be made a pay some back now?

An equilibrium cannot be corrected by fiscal stimulus which will be better for rectifying confidence issues.

(The writer is the author of Making Growth Happen in India, Sage Publications).

Team Work – Lessons from animal Kingdom

Lessons from Animal Kingdom – Serengeti
We seven of us from college took a Safari trip to Serengeti – which shall never die – and Grongoro crater. A few interesting lessons.
1 (See picture of Gnus which looks like a long line of Ants). We saw a long march of Gnus in G’ro. All of them one behind the other no jostling, wresting, trying to out-champion the other, no overtaking, almost equidistant from each other. May be 1-2 mile long. They were grazing on one side and crossing over to some other distant place for water of  fresh pasture. They would be grazing one minute and as if there token number had been called, abandon it swiftly and scamper and join the queue and continue their walk along the st line.

Gnus have been made fun of – as a creation when God had a few spare parts left but not the brain after creating all animals. It has the tail of a horse, torso of a cow, face of a bull, mane of a half adolescent lion, and the gait of a Hyena. Quite ugly looking.

But the Military discipline they demonstrated … well i would like them to come and teach Delhi vehicle owners the grace, functionality and benefits of discipline and perhaps anywhere in India the fruits of proper queuing. Cant figure out who is there leader and how he enforces such order.
Ironically we have the gall to call them Wild(e)beasts!!!

2 (Look at the Picture of Zebras- left extreme – some looking one way and others walking in the opposite direction). This was on the morning in Serengeti. We first sighted several Zebras and soon realised as we kept driving it was a whole colony or perhaps County of zebras – may be 20,000-30,000 of them… as much as the eyes could see and where the horizon threatened to meet the plains.
Soon realised they were queuing. There was a small pond on the other side of the road to where the Zebras are pictured standing. The pond must have been a part of a subterranean stream which has surfaced into a small pond in an irregular shaped rectangle of may be 15-20 feet (see picture) which could be accessed only from one side the other side bund being a little high.
One after the other the Zebras were trouping towards the pond to take their may be 30-40 seconds to drink water and return to the grazing side. The pool could max accommodate 15-20 heads at a time … so one after the other as if in a Tripathy Drashan they took their turn. There was a maximum of 15-20 drinking from the pond at a time, may be an equal number behind them and not many risking being on the road…
Again no jostle, no quarrels and no queue jumping, no nudges, no necking (do u see any in the picture?) … I don’t even remember them bleating ..
Such a large colony could not have been from single or a few groups, they must have been several groups but nevertheless the discipline and lack of friction was astounding! If you don’t believe me please verify it yourself next time your are there and observe them in the morning, during dry season (wet weather would make more streams available and hence you may not be able to see this).
Just the assurance that the water from the stream will not dry up seems to have assured them that they can patently await their turn.
Hats off to the Zebras!.

3 Early afternoon we saw two lions on a rock or rather the heads of two. We slowly moved around and found that it was a pride of 19 (as correct as we could be)  – equally split between grown ups and cubs. We soon saw a couple of lionesses approaching them. Don’t know what was the message … but the pride lying down and relaxing … all of them started moving in their direction. We moved keeping track over them and at a distance, may be of a Km or less, we could see that a Zebra had been killed by the two (or more) lionesses and they had perhaps come to invite the rest for the feast. (see picture of lions walking towards the kill).

We understood from the guide’s commentary that the lionesses after killing do not drink or eat their kill without the rest of the pack. They have it together. After the kill the two hunters had gone to fetch the others before starting the feast.
From the Guide we could understand that a Zebra would be full meal for may be 6-7 lions. But that shortage (they were 19-20 lions) did not seem to make the two who toiled to kill their prey greedy and desperate and have it first before inviting the rest.
An hour or so later after we had moved on, we heard from the wireless set that the same pride had killed yet another prey.

4 A little after Noon, we chanced upon another colony of various kinds of Deer, antelopes, Impalas, Gerenuk (a kind of deer that never drinks Water), etc. Again countless … may be 10-15,000 and this time along with some zebras, Buffalos, Gnus, etc. We saw a lioness with a blood oozing fresh kill of a deer in its mouth with another lioness walking behind. We must have watched them walk about 200-300 yards purposefully in one direction. With some difficulty dropping the fresh kill every now and them resting a few seconds before picking up and walk another 25-30 yards. And so on. The guide said that they must be walking towards the rest of the pride to share the feast.
Again no attempt by the two which had killed to have their fill first before calling in the others to join, as we understood. May be the pride had their kids also and the mothers felt it their duty to feed them first and hence the long walk and wait … one would not know.

There may be more than a Lion and 4-5 lionesses in a pride and more than 1-2 may be lactating at a time. We were told that the lionesses feed milk to any of the cubs unmindful of whether they the cub is hers or other’s

5 One would not know the origins of this nasty practice with Lion family. In most animal species, the line of succession is clearly specified … the oldest female (elephants), oldest Stallion (Deer), the strongest, etc. But with Lions they settle it with Wars. Detached young adult lions who are themselves driven out of their pack fight it out with older lions with a pride and if the intruders win, they take the pride. At that time they kill the older lions or drive them out. But they kill off all the young cubs less than one year old, we were told.

Lions also lose a lot of their cubs otherwise. When they go for their hunt they try to hide their cubs but the cubs are killed by Hyenas and Leopards. Hence ironically, the survival rate of the Lions is one of the lowest – 3 in 10. What fate the King!!!

6 Young elephants are accompanied by their mother or sometimes male elephants. But then they get tired fast and have to rest or sometimes even sleep off mid way. In such cases the accompanying big one patiently waits over the young one till it wakes up again to walk – be it mid way, mid road, or pathway or marsh. What baby care!

7 All in one frame. (see picture with Lion in front). This is a picture (in G’ro) with a lion and lioness (and there were three more behind anther bush), hippos (looking like rocks), birds, Buffalo may be at 25 yards distance from lions, zebras may be at a distance of 40-50 yards and deer some more distance. In another place we could see a similar frame with some jackals, hyenas and two large tuskers thrown in, all within a max 100 yards square. What peace with each other and harmony. Secure in each others company. Carelessly grazing unmindful about the threat to their life (or may be secure that once the lions have had their days fill, they are harmless creatures). Only Man treats everyone else incl other men of the same ilk (politicians), sometimes spouses, of other religion, sometimes Boss and reportee with total suspicion, mistrust, etc. And lives in permanent fear of the rest.

8 Finally the Hyenas, the much despised creatures. Scavengers we call them. Everday so many animals must be dying in these parks. You can imagine the stench …but you have to only imagine. All the left overs are cleaned up by the Hyenas and jackals leaving no matter leftovers. They can even crush an elephants heads between their Jaws, we ere told. So as soon as any of their jungle cousins finish with left overs they eat of all that is left and digest it within a short time so that there is no stench whatsoever.

Incidentally on the last day we saw 2 Hyenas near some bush may be 200-300 yards away from us. They went inside the bush and after about 2-3 minutes one of them came out of the bush running helter-skelter, desperate, helpless like someone running to escape from a killer/mugger on hot pursuit running in our direction and taking its first breadth after may be quarter mile distance, sad desolate he looked. I asked the guide ‘what happened to the other one?’. ‘Probably there is a lion inside the bush who must have killed him’.
Even the heartless Hyena seems to have a heart for its mate/sibling/friend… whosoever!
Animals should feel entitled to offer us an MBA in team work, I guess. Or perhaps basics of spirituality.
Remove just 2 words – Greed and Individuality – from the English dictionary, and we will have a entirely different harmonious world I guess!

How high Real Interest Rates can trip Modi in 2019

this artcile of mine has appeared in Financial express today (29/sept, 2017). Link below.

http://www.financialexpress.com/opinion/here-is-what-can-trip-narendra-modi-in-general-elections-2019/875051/

Unedited Version:

RBI’s Interest Rates can trip Modi in 2019

V Kumaraswamy 

Ask any shop keeper, or the lonely looking private security guards, unemployed youth in urban slums or interior towns, or the taxi drivers as to what their main issue today is and pat comes the reply: be rozgari

Not many expected Vajpayee to lose 2004 with the groundswell of national passion over Kargil, Golden Quadrilateral, relative peace and quiet in domestic scenario, great government finances and the political networking he cultivated.  Yet he lost.

The voter at the booth is not going to be thankful for how much wholesale corruption has come down (retail is still alive and throbbing), degree of digitisation India has achieved, how benign inflation is, etc. These are at best hygiene factors which can easily be washed away if joblessness persists. Without a job, a stable one at that, he can’t proposer.

High Manufacturing Real Interest Rates (RIRs).

If more people have to be converted from being losers during the on-going reforms to gainers, we need rapid job creation. Services sector (IT, BPOs, Call Centres, and Telecom) created jobs by the buckets till about 2011-12 but have reached stagnation now and have even started becoming uncompetitive now threatening imminent job losses.  Agri sector is just incapable of creating further jobs; rather it would release lots that need to be absorbed.

Employment should come from only manufacturing and here is where the real interest rates facing Indian industry is proving an insurmountable barrier not just a hurdle. The accompanying chart compares the Real Interest Rates (RIRs) between China and RIRs facing Indian manufacturing.  Manufacturing RIRs are  derived by deducting manufacturing inflation from the nominal interests facing manufacturing sector. For the last over a decade Indian Mfg RIR is about 7.21% versus China’s 2.92% – (i.e 4.29% over China’s) a huge hole for anyone to be interested in investing in Indian manufacturing.

It is a mistake to compare the general RIR which is just 2.04% over China, the country with which we have maximum non-oil trade deficit. The General inflation is contaminated by Fuel oil, Food which have no bearing whatsoever for studying manufacturing investment competitiveness.

Why has it become important now?

Just but for one year, Indian Manufacturing RIRs have been higher than China since 1991. So why has it started affecting investment sentiments now. Starting Jan 2014, duties for imports from ASEAN has become Zero virtually (S Korea is not far behind) making India’s trade borders completely open. China (even with import duties) has cost structures lower than ASEAN for several commodities.

India’s capital account has also been steadily opening up and for practical purposes it is completely open. Even the per annum limits on debt are periodically reviewed and enhanced without even waiting for the year turns.

With open trade and capital flows one has to be more sharply competitive. Added to this is the 25-30% overall surplus capacity in Industry. Who would dare to invest with a huge handicap on interest rates and surplus capacities. It is better to source goods from China or set up facilities there and sell in India, which exports jobs.

Sources of competitiveness

As mentioned earlier, agriculture and services look spent forces as far as employment creation goes.  It rests on manufacturing to create jobs, for which it needs to be competitive, which has to come from any of the 4 factors of production or natural resource endowments (part of Land).

India has tied itself up in knots where land is concerned.  Our socialistic mindset has made a grand backdoor re-entry through LARR and a plethora of court rulings, restriction on land transfer and change in usage, etc. Any acquisition takes 5 years – far beyond the patience time for an entrepreneur to keeping waiting with his ideas.  India has 375 people per sqkm where China has 142 (2015), increasing the pressure on land. So land as a source of competitive strength is ruled out.

Labour can be a source of strength given the wage levels now. But for that to happen we need to repurpose our education. Instead of (or perhaps alongwith)  BE(Mechanical) and B Tech (Chemical) we need 8th Std (textile printing), 10th std (BPO assistant), 12th std (Source coders), etc. i.e. fit for purpose specialisation kicking in at far younger ages. This can perhaps reduce capital invested for turning an unemployed into productive force as well supply the skills that would increase productivity. Such increased productivity can make the labour cheap per output unit.

That leaves Interest rates. Even enterprise is a function of interest rates beyond a point, where it translates entrepreneurism into investments. With excess capacities and high RIRs in Manufacturing, no one will feel tempted to invest in India.

High real interest rates (when the whole of rest of world is underperforming) and an increasingly politically stable India is attracting excess of $s, that cannot be absorbed by a stalling investment economy. Oversupply / unutilised $s in the forex market causes its prices to decrease. With it, it brings down import prices and makes our exports un-remunerative. This causes imports to flare up. Sure we are also gaining in petrol, prices of Chinese goods, goods from ASEAN, etc. But then the jobs in making them is happening overseas. What’s more important now  – employment or lower inflation? People who are gloating at low inflation are looking at just one side of the equation

In the last 6-7 years our Monetary economists have been failing their equilibrium mathematics exams, with their highly out of context imported monetary theories. But the political student to be detained may be Modi’s Government in 2019.

(The writer is the Author of Making Growth Happen in India (Sage Publications))

 

 

 

 

 

 

 

 

Myanmar Post

This is the first tree  (me with the tree) we planted in Myanmar in Jul 2015. The growth seems as good as the best in India – done on soil and with Tribals as virgin as God created them. A few lessons on the way.

1         The steel frame of bureaucracy may not be a British invention after all. The tribal societies seems to have as rigid a pecking order and rules and regulation and protocols within their small local communities of may be 40 or 10 families. Who takes the call at the community level and family level are well established and you bypass them at your own peril. How you initiate any communication and how it percolates are matters for curious study.

2         For those who have never seen much (or any) money in their lives beyond some basic food and shelter, one would have thought they would be keen to get some to secure their future. But they seem hardly to care. They just walk away from you at the slightest of pretexts; if they dont like something they just walk never to be contactable again – not even to collect their back period wages perhaps. Greed and a sense of security i thought were instincts. They seemed to assume that they will continue to survive the way they have. Savings and security does not seem to be established as even a ‘need’ with them.

3         If 1 X 1 X 1 = 1 what is 2X2X2? It is 2 for them. It might take you 3-4 months to convince them but it is more a matter of negotiation. When we had to dig pits and downsized the requirements from 2X2X2 feet to 1X1X1, wages were initially allowed to fall only by ½.

4         Communicating with them is an art and science of patience. Anger does no good. Communication is more than just about language and tongue. Facial expressions, tones, body language, respecting the hierarchy and pecking order and their esteem, patience… a whole range of things come into play, if you want to get anything done. Language and tongue become just delivery boys.

5         Indians might appear to be the most impatient and rude to them. quiet often you find them drifting away for finding us too rude. When an Indian knows something thats the matter of discussion in a meeting he just cant keep it with himself. He has to share/ impose it on the larger group. Sometimes it is a point of order even if contextually irrelevant, and if the Indian is too junior, it will take the form of an innocent question (actually an answer/prescription masquerading as a question).

Toilets

Toilets are a must, although in most cases it is some 50-100 feet away of vegetation from the hutment made of wood, which look solid. With snakes (ubiqutous), occasional porcupines and foxes and elephants … but they dont seem to worry too much.

Foot Volleyball – Buddhist Oneness (?) Vs Individualism

Most of them (as indeed in many parts of East Asia) play foot volleyball with a ball wowen of bamboo strips. Just foot and head used. Its a passion with them. Their skill levels and body fitness is amazing. Banana kicks to send the ball over the net or place them seem superior to World Cup footballers. And they do it even on concrete or metalled roads though usually on soil or grass field. I took the video of people playing near a toll gate on tarred surface and returned to my car.

I started admiring their skill, physical fitness and their courage (or stupidity) – a wrong landing and they might break their bones. But my host at the wheel said in a complianing tone: ‘but this is not the way it was played before. We all used to stand in a circle – young and old and the aim was to keep the ball up for as long as possible – longer than the last time, previous day, ever, etc. We had a lot more fun that way. Even today many of the interior areas or even the inner streets of here, you can see that’. His tone didn’t leave me in doubt that he longed for. ‘May be from about last 10-15 years they put a net in between and the fun element is gone’ May be this was what was cooking in his mind.

(these are my words). By creating this division they created competitive spirit instead of the oneness and team spirit. So one team (losing) had to go back home with a grumpy face and ruminate overnight or till they played next time on what might have been, copius well-spring of self examination and criticism etc. And another set walking home with a smile on their face instead of everyone walking home with a smile on their face. The oneness embodied by Budhism’s symbol replaced by Western individualism making at least one half unhappy.

But i did greatly admire the skill levels promoted by the net in between. I wonder if the very precise kicking over the net and placement would have happened without the net.

East Vs West

I have heard it from several people as gratuitous advice – that the Morning Sun is good for health and that Evening Sun is harmful. I have never appreciated the logic when the Sun is the same. Nobody has demonstrated it to me. There was a coffee plantation nearby where we made a short stop on two gentle slopes one side facing the East and another West and a road between. The plants on the side facing East looked 2-3 times as well grown and looked far more healthier than the ones facing the West. The planter explained that the Morning Sun is more of infra red rays and on balance more beneficial for plant health and the evening Sun has more of Ultra Violet rays which on balance is more harmful and one could see its demonstration right in front.

That’s commitment

Our Local partner (YA) is well known to our embassy staff in Myanmar who uses him to fix appointments with local businessmen, business assn. meetings for visiting dignitaries, arrange for functions in the embassy, etc. He is known to a few of our envoys in the region.

Sometime back our Ambassador in Singapore had called him and said that there was a leading Tamilian film producer (K for short) (whose wife was a leading actress) who is interested in investing $5 – $ 10 million in a Myanmar based story and that he would like YA to help Director K in his proposed visit to Myanmar.

YA: I was puzzled on what exactly was the help needed but Ambassadors request are generally treated as orders and we simply do what is requested.

‘I took K one night to the Night club below Hotel PR (actually a pick up joint) and he wanted to see a decent one. I took him to Fuse a well-known dance Bar where couples can jive to live music. I had known the owner and he had permitted us to be there 2 males.

‘We spotted a lovely looking single young lady about 20 yrs age cute and beautiful. It was clear after sometime she was alone and we struck a conversation with her. I inquired about her and how come single in there. This is what she related.

“I sometimes give company  to some people and do some odd work for the club in reciprocation…. go to tailoring and fashion stitching class during the day and the nights I spend here and some other clubs.

YA/K : But isn’t it too much work. how are u managing the load?

Girl: Oh yeah no … I make some $ 2000 to$ 2500 from per month from these and is very essential for me.

YA: Vow … that’s an awful lot of money – do you really need to work so hard?

Girl: I lost my father and have to spend $ 1000-1200 on my mother’s cancer treatment every month.  … when her cancer was detected I sold my virginity for $ 3000 to finance her operation and first level treatments. But the treatment is on-going and i have to continue with odd nights out and some soft nights in clubs like this to make ends meet.

YA: What do you plan to do with your fashion design lessons?

Girl: Oh that’s my passion and life dream. I will set up a fashion store first and later become a fashion designer myself.

YA: No marriage then?.

Girl: Of course I will marry – once my mother is through with her illness and my younger sister (whose education I am financing) is settled education wise. But before marriage i want to set up the store and stabilise my income at decent levels independently.

YA comments: There was fire in her voice and dreams and clear cut plan and a sense of determination about her responsibilities. We were taken by surprise about these in her given our general perception about people in similar profession, whom we tend to take lightly or even derisively. There was definitely a lesson for me that night. Its too condescending to say ‘wrong ways for a right cause’

If that’s the choice that a democratic laisse faire system has presented to her and she has had the freedom to choose, what can be our problem.

I admire her sense of duty and leadership to her family and the clear cut plan she has laid out for her life. I am sure she would do something great with her life.

I do not know whether this story interested Dir K.

The Smiling Traffic Cop

Delhi has had a dancing Cop and Myanmar has a national icon in the Smiling Cop who has featured in the front pages of New York Times for his adorable ways in his work – always similing, in directing the traffic, in resolving jams, catching people violating rules, educating them while reprimanding them but forever keeping his smile. Lots of foreigners offer him tips and take photos with him and he has been allowed by Government to take it tax free, which i learnt he contributes to charity. He has brought enormous respect for his profession and the often unappreciated tribe called the Traffic Cop.

The Truth about the Trouble in Rohingyas

 

This is about the international reports on Rohingyas problem in Myanmar.

Recent Reports seems to have got it as wrong as it can. Unfortunately reports in St Times or Bangkok posts seem a lot worse than one sided. I can sense that the reporters may not have moved an inch from their desk in filing their reports. The BP reporter wd hv had a tough time filling in the words for the 2nd half of his/her report.

Spoke to a Muslim (he is not one of the displaced or a Rohingya; he has lived 68 yrs since birth in the adjoining district) about the problem. Based on his version and local news versions … this is what seems to have happened.

ARSA is the terrorist group fighting for Rohingyas. Normally their fight is with the army. But this time they killed 4-6 Hindus, an equal number of Buddhists and attacked the local police posts. Hindus have had to keep quiet. Burmese Buddhists have no way of tracing the terrorists and have got into pitched battles with Rohingyas in retaliation. Local Police is bitten and you know where their sympathies would be.  Totally about 20 people may have died according to him.

The police has set up many check posts to curb infiltration all over the adjoining districts/states.  Some 13000 -odd Rohingyas have got displaced. but about 4600 Buddhists families have also been displaced and their monasteries are sheltering them.

The Government y’day arranged a trip for the media, whosoever cared -international and local – to the affected areas so that they can report facts. But you know the media and their opinion – they always run away when asked to prove their manhood. Lets see what comes out.

There is also inter govt conference against Fake news in Japan. Its high time the fake news, motivated news, and one sided news are put paid to. Its also time that they stop excessive interference with democratically elected govt beyond a point – they want to set the agenda without responsibility, report without verification.

There may be truth in outside media reports – but why are they afraid to present truth from both sides.