Archive for August, 2011

Growing role of electronics in cars

August 23, 2011

A fascinating write up from Thomas H. Klier and James M. Rubenstein on the topic.  There was a conference on Annual Automotive Outlook and this article just sums up the broad discussions.

Today an average new automobile includes more than 40 electronic controllers, five miles of wiring, and more than 10 million lines of software code. Are cars becoming more like computers on wheels? What factors are behind the increasing use of electronics in automobiles?  And what should we expect in the  future? For example, will motor vehicles drive themselves one day? A panel of auto industry experts at this year’s AOS explored these and related questions. This Chicago Fed Letter  summarizes the presentations and discussion of the panelists.

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Comparing ECB to a highly agile coast-guard vessel

August 22, 2011

PIMCO’s Mohamed A. El-Erian provides a nice analogy to understand ECB’s woes.

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How private citizens saved New York’s public spaces?

August 22, 2011

City Journal is becoming one of the favorite websites for its continuous stream of good articles on urban eco and other public policy issues.

Laura Vanderkam in this article discusses how public parks were saved in NY by private citizens. How both Central and Bryant Park, once home to panhandlers, pushers, and punks, are now an urban oasis is a story worth telling. It was thanks to few individuals who took up the cause.

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Why aren’t all countries rich?

August 22, 2011

Jessie Romero of Richmomd Fed asks this question in this nice write-up on growth and development economics. Going to any developed economy does bring this question to your mind that why your country is not as prosperous. I am not sure whether people from developed who come to not-so developed feel the same.

Romero says the search for factors that lead to growth continue:

Why do some countries thrive while others fail? Economists have pondered that question since Adam Smith published An Inquiry into the Causes of the Wealth of Nations  in 1776, but there is still considerable debate about what poor 
countries should do to become rich and what rich countries should do to assist them. It is clear that sound legal, political,and economic institutions are essential to economic growth, but it is less clear how countries can acquire them — and how to feed and educate their citizens in the meantime.

The author goes on to discuss the resources curse and how instis can help escape the curse:

Institutions can help countries escape the resource curse. For instance, diamonds have made Botswana one of the richest countries in Africa. Its strong democratic government developed a productive relationship with the diamond company  De Beers, in contrast to the exploitative relationships that often exist when governments are weak or corrupt.

It then discusses institutions and geography and how instis rule. However, much of instis are determined by past and history. How can those countries grow now which has acquired poor instis?

The debate then moves to markets vs govt.push and how tide swung in 1980s from govt to markets. And gain it has swung towards government after the 2007 crisis:

Some economists and international organizations now advocate ideas that hearken back to those of the 1950s and 1960s. Citing the recent global financial crisis and subsequent  downturn, for example, the United Nations’ 2010 Least Developed Countries Report  advises against dependence on the market system and calls for a development strategy based on “country ownership, structural changes, capital accumulation, and the developmental State.”

There is some nice comparison of MDGs to central planning in 1950s:

What the MDGs have in common with central planning in the 1950s and 1960s and structural adjustment in the 1980s is the attempt to find a universal solution to an important problem. But development experts increasingly emphasize the importance of tailoring efforts to the needs and culture of individual countries, rather than aiming for “accelerated modernization via transplanted best practices,” as Pritchett, Andrews, and Woolcock call it. Nearly all economists would agree, for example, that property rights are essential to economic growth. But attempts to impose Western-style land titling programs in Africa and Cambodia have not been successful. That’s because institutions are idiosyncratic to the country where they develop, explains William Savedoff, a senior fellow at the Center for Global Development, a think tank in Washington, D.C. “Even  procurement  systems in Sweden and Norway are different.  They developed to respond to the particularities of their behavioral, linguistic, and political systems,” he says.

The focus is shifting to more micro action than just macro talks:

Accordingly, many are turning to projects at the micro rather than the macro level such as distributing water purification tablets or paying individual families to send their children to school. Healthier, better-educated people, it is hoped, will be able to participate in their own development.

Finally, the solutions to poverty are going to be more heterodox and country specific:

The solutions to poverty will be as heterogeneous as the causes; countries need both vaccines and property rights, and the complex links between people, communities, governments, and nations make it difficult to tease out cause and effect. But economists and policymakers on all sides of the debates continue to search for answers, motivated by the same thing: making life better for 2.6 billion people.

A superbly written essay covering many thoughts on development economics.

Was India ever a No.1 Test team?

August 21, 2011

India may have become a No.1 test team but it just seems to be a statistical error. The current performance against England has been so so bad that one does not know where to look for answers.

The current India-England cricket series has produced far worse outcomes even for the most pessimistic Indian team critics. It may not be a black swan event but was a clearly a tail event with very low probability.  To imagine how Indian cricket team has been so thoroughly outplayed in all departments for four consecutive tests is something I have never seen. Each test has produced a defeat bigger than previous test. As I am writing this post, India is at 150/6 with England piling 590 odd runs in the first innings. Barring rain, the outcome is certain. A follow on and an innings defeat. The first two tests India lost by runs, third test by an innings and fourth follow-on innings defeat.

India has always been an domestic tigers and awful travelers losing tests easily travelling abroad. This changed in 2000s after England tour in 2001 (ironically) where we managed to draw the series followed by an amazing series of runs with wins in Pakistan (in 2003), draw against Australia in 2003-04 series, wins against England in 2007, New Zealand in 2009, draws against Sri Lanka and South Africa in 2010 and so on. We did not win in Australia, South Africa etc but atleast held our heads high with some stellar performances and winning atleast one match.

But this series in 2011 has been too much to handle and figure. We never really bowled so badly abroad as our gentle pacers managed some movement which was absent in Indian conditions. There have always been one-two memorable spells from someone which turned one match around in previous away series. But this time it looks like any college/club attack. There has been no memorable spell with each inning of bowling worse than previous inning.  If we did not accidentally discover Praveen Kumar (who could not turn around matches) England might have put 1000 runs as well..

Batters were always a pride but have failed so miserably (not one score of 300!) collectively that one does not know which way to look. First test match of the series was always bad, but to bat so badly in each test has never been seen before. Barring Dravid, it has only been shame.

Fielding has always been a case of embarrassment which was hidden in batting and some bowling performance. So, nothing to write on it. The so called youngsters are no better. Dravid himself  has spilled so many catches which shows the minds are elsewhere.

The ongoing series reminds me of two such series. SA in 1996-97 and Australia in 1999. We were just shocked by the pace and movement. Both bowlers and batters could not handle swing in 1996 and first test got over in 3 days (scores of 100 and 66). In second we saw a mighty fightback by Sachin and Azhar and managed to save the follow on. But SA was too good and we just could not fight in 2nd innings. However, in third there was a beiger fightback and India could have won the test if it was not for Cullinan and rains. Dravid batted superbly and we showed it was not lack of skill but for lack of preparation.

In 1999, we ran against one of the best test sides ever and barring some spark from T’kar and Laxman in last innings of the 3rd test, it was a complete whitewash. Laxman was awesome in that inning and went onto dominate Australia which no one else could.

However, in 2011 we had far bigger reputations. We were nowhere there in 1996 and 1999 but were no. 1  in 2011. To imagine performance like this between No 1 and No 3 (Eng was no. 3 before the series with SA at No. 2), was unthinkable. Barring the first two days of second test, India looked like the last ranked team. Even currently last ranked team like B’Desh, Zimbabwe etc would have put better performances in atleast one test.

I am not sure what is going on? People have come up with following answers:

  • Too much of cricket- Yes there is too much of cricket but that applies to all. Not an excuse really. People are free to choose whether to play or not. It all boils down to your preferences.
  • IPL and money – I don’t like to say this but this has been a real factor. It is connected to the first. Right after a week of WC victory, players moved on to IPL. It was sad to see some Indian players having double standards of first preferring IPL and then saying too much cricket is being played. Many nursed injury but still played IPL for pleasing their teamowners and BCCI anf ofcourse their bank balances. They say it is nobody’s right to question their playing as it is a personal choice. But we surely can question them for such shoddy performance playing for the country. It Is sad to see such tall players carrying injuries and not notifying things in advance. Well perhaps they also knew there is no replacement so wait and see if injury heals in time.IPL has opened a Pandora box like seen in football. Some players play really well at club level but fail to deliver for their country. Forlan/Suarez of Uruguay are not really known in club football but are different players when donning Uruguay colors. Whereas Messi can never perform for Argentina. Similar would happen and is happening for IPL as well. We need to choose players carefully. IPL success may not lead to similar success playing for country.
  • BCCI – Well, like Indian government is one of the biggest hindrances in India’s growth same is the case with BCCI. It is just interested in making money without any major initiatives to make money. We are being told that Indian batters cannot play swing/seam as no pitches. In India.  First such pitches are never really made or promoted in India. Second, what prevents the board from sending players a month early to get familiar with the pitches. This obviously will not happen as it has to make money from as many tours as possible with as limited time for another tour. It is amazing how little cricket teams play on coming to another country. Earlier 2-3 matches before the test match was a must. Now to get even one is a luxury. Even this is not an excuse as our middle order and openers have played so much outside. They know what to expect.

So it is all a mixed bag. A problem which was being seen by a few but ignored by others. Ian Chappel has long said India does not have the bowlers to help it remain at No. 1. It is so amazing to see how useless we are without Zaheer. How can we be no. 1 with just one bowler? Even in batting it was really a case of Sehwag firing in a couple of matches which allowed middle order to settle and pile runs later in the day. Now both openers out of form, we are usually one down by the first over itself.

How badly Indian cricket has been is indicated by spin department. We just have nothing there. We never had good pacers (barring Kapil Dev and now Zaheer) but spin was always a force. After Kumble went, we have just struggled. Harbhajan has declined sharply after Kumble departure and to not have any other spinner is baffling.

The tour also saw same glaring errors. We already saw what happens when you field a player in England without match practice. Sehwag became the third opener in history to score a golden duck (out first ball) in both test innings. And we again did the same with RP Singh who was never really a substitute and was asked to come to England and start bowling the new ball right away! The first over from RP turned out to be one of the worst first over bowling.

Having said all this, it is equally amazing how England has played. They would have been surprised by both how well they played and how poorly India played. This bunch of English players looks really solid and up for a fight. They have been building slowly since Ashes drubbing of 5-0 in 2007 by Aussies. They bounced back winning both Ashes continuously and last one in Aus was a true thrashing. India should have woken up then but was busy sleeping.

All Eng batters and bowlers look in ominous form where all players from India (barring Dravid and Pravin Kumar) look awful. We have not managed to bowl their side out barring one inning and have managed 600+ scores in most innings. People say that when India bowls, ball does nothing and when Eng bowls it starts moving around like crazy. Well, this is nothing but true. We are just clueless about bowling at the moment.

The coach Fletcher was appointed primarily for his knowhow of English conditions but says he has never seen the bowl swing that much in England. Really Sir! Do you think if the swing was lesser our batters would have handled it? He also says where does one practice swing batting/bowling in India as there are no pitches? Well what stopped him of telling the board this in plain English? If he did tell the board and it did not hear (which is a huge possibility) he should have chucked the job. We need some independence here otherwise what is the point.

Overall, the difference between the former no. 1 and current No. 1 was just too large. I don’t think even in form Zaheer and Sehwag could have avoided the rout. We just became No. 1 somehow and it is sad the way the ranking has been given away without any fight or even intent to fight.  Thanks to Anna Hazare as no one is really focused on cricket. People are also trying to ignore cricket preferring Anna.

The loss exposes many ills related to Indian cricket which has become too obsessed with making money without really doing anything much to improve the overall game. The skills of few select players bailed out the team earlier but they all were meant to fail one time which has happened in this series. It is not the losses but the way Indian team has lost the matches. This is easily the worst performance I have ever seen (and most would have seen). Even close losses to Pakistan in 1980s and 1990s were not as bad as it was a decent fight. Pakistan had something towards the end which gave the match to them. This one has been so bad that it should hurt us for a long time. Then only we will not try and repeat them. One also feels bad for guys like Dravid, Tendulkar. Laxman etc. They have to face such humiliation at fag end of their career. It will make their retirement (whenever it happens) even bitter.  But this is what happens when you delay it so long. You should retire at the top and not forced to.

The worst bit is one does not know where to seek improvement. Who do you fire and who do you keep? Where is the bench strength? One Eng players said “It is not very cold and to see Indian players putting hands in pockets while fielding, shows their disrespect for the game. If not interested please go home”. I wish Dhoni and the Indian cricket team fan had that option.

Update:

The forecast of India loosing after following on was bang on the target. I wish my economic forecasts were as good. There was some hope when Tendulkar and Mishra were batting but after Mishra, we lost 7 wickets for 21 runs! It is as if Mishra was the main batsman of the team. It made things even worse as it tells you how hollow the whole team is…

Anything that could go wrong has gone wrong in this series. If it was not for Dravid, we might have struggled to even post 100 runs in an inning with matches getting over in 2.5 days. I wish he was out of form as well.

He has been such a gentleman. The selectors keep picking him when they feel and drop him at will. So when you have seaming conditions in SA and England, they say hey Dravid come in the team and then drop him. It is a shame that a board which as so much money has still not been able to nurture youngsters who can face this kind of bowling. Dravid hined his talent in Indian conditions and others can do it as well. Dravid was very kind to agree to play ODIs in England on his selection. He should have refused and retired from ODIs on his announcement of selection. Someone needs to teach the board a lesson and should be run by professional cricketers who know what cricket is all about. But then that is how things are in India. Most sport administration bodies are run by people who have never played the sport.

We just had one sport to look forward to, now even that looks in such bad condition. Someone commented that B’desh might take offence that Indian test team being compared to them. Even their performance in England have not been as abysmal as India’s with just one inning of 300 score in 4 test matches…

RBI’s strange TAC minutes…

August 18, 2011

RBI released the minutes of its Teachincal Advisory Committe of the monetary policy held on 26-Jul-11.

RBI raised policy rates by 50 bps and shocked markets. The strange bit is that no member mentioned 50 bps hike in TAC. The meeting happened on 20 Jul 11 (a week before the policy). So, it seems some views changed during that week. Or it was just purely Governor’s call:

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Case Study: protecting against movie piracy in India

August 18, 2011

Lakshmi Iyer of HBS has cowritten a case study with Namrata Arora on this topic:  Hollywood in India: Protecting Intellectual Property.

This article explains the findings. The basic study is based on success of Fox Studios distribution of My Name is Khan. It limited piracy and as a result was a huge success.

What formed the basis for the case?

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Thumbs up for ECB’s environment policy

August 18, 2011

ECB is getting criticised for its role in the crisis both ways. Some say it is not doing anything, others say it is doing too much.

However, its environment policy gets a big thumbs up. I had pointed earlier about ECB’s superb initiatives to minimise carbon imprint and lower wastages.  

It has issued an update on the intiatives:

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Don’t bet your money on India, bet on its states

August 17, 2011

Gopal Vittal, (executive director for home and personal care at Hindustan Unilever) writes this nice article.

He says instead of thinking about India as a whole for investment, we should be thinking about investing in states that deliver:

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Economics of KBC choices…

August 17, 2011

The fifth edition of KBC series (Kaun Banega Crorepati (KBC) is a popular TV show modelled on Who wants to be a millionaire) has just started on 15 Aug 2011. needless to say the host Amitabh Bachchan continues to be excellent with his diction and ability to charm the audiences.

I was particularly interested in the choices KBC gives to the hot seat participants (one slected to take the quiz). Basically you have four choices for each question. In the earlier KBC editions (before 2010) you had four lifelines which you could use if stck in a question:

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If unethical experiments could be true…what amazing advances could economics make?

August 17, 2011

David McKenzie writes a superb post pointing to an article which explores 7 science unethical experiments. However, if these are allowed it could lead to huge jump in science:.

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Vietnam’s new airport vs Mumbai’s new airport

August 16, 2011

I just came across this news item:

The southern province of Dong Nai plans to open Southeast Asia’s new main transit airport in 2020, local authorities announced Friday. According to the plan, work on Long Thanh International Airport will start in 2015 with an initial investment of over US$6.75 billion.

The first phrase is scheduled for completion in 2020 and the airport will be able to admit A380-300 airplanes or those of a similar size, investor Vietnam Airlines Corporation said.  It then will be able to serve 25 million passengers together with 1.2 million tons of goods per year, the company said.

However, its capacity will be improved to 100 million passengers and five million tons of goods per year when all the three phrases are completed in 2030, according to the plan. Minister of Transport Dinh La Thang said many railways and roads will connect to the airport, some 40 kilometers from Ho Chi Minh City’s center. New roads and rails will also be built to accommodate the new hub, he said.

 

And what to we do at a new airport to be built in Navi Mumbai. A capacity of 10 million by 2014 (unlikely to be completed by then), 25 mn by 2020, 45 million by 2025  and 60 million by 2030. And we call it an international airport.

This demand projection from CIDCO (the governing body of airport in Navi Mumbai) itself:

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The fight that led to revamp of New York City

August 16, 2011

Anthony Flint, a journalist wrote this book called Wrestling with Moses: How Jane Jacobs Took On New York’s Master Builder and Transformed the American City.

Who better than Ed Glaesar to do the review. The review makes the book a tempting one to read for urban planners and economists.

Basically the book is about a battle between two NY people each who had a different idea about desighn of the city. Moses wanted all those tall buildings at the cost of forcing people to relocate. Jane Jacobs cared about people and instead preferred to save neighbourhoods and imposing land use restrictions. Moses designed the city earlier and was very well-known and powerful. How Jacobs took over him and defeated his ideas is what the book is all about. It is a battle of david vs goliath in urban development space.

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Vocal Israel vs Silent India

August 16, 2011

I was reading this article on how Israelis have taken to streets protesting for rising housing prices in Israel. A friend in Israel did tell me that housing prices were a concern in Israel but did not know something like this happened:

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India’s 64 years of independence….where are we headed?

August 15, 2011

This post is mainly a loosely structured  and a random thought one…

Just heard the same old speech of our PM Manmohan Singh — we will do something against inflation, corruption and there is no magic wand etc. Once again, he missed inspiring confidence in a country which is so critically placed at this juncture.

There are many articles written on India’s independence on how bad things are as of now. Some call it glass half full and others half empty. Others call it fully empty.

As it was  long weekend, you also  end up talking to many friends and relatives. It is amazing to see how much discontent there is in general public. No one really believes India is growing and those who think it is question, how are we gaining?

The best quote I got is “Ok most newspapers/policymakers  say India is growing…When will Indians feel India is growing?” Roads, hospitals, education everything is in such a bad shape and in some cases has gone even worse. Plus there is the monster of inflation which just refuses to go away.

Indian government said  every Indian should get three things – Roti (Bread), Kapda (cloth) and Makaan (Housing). I think education was added later. Housing prices are already beyond most people, college/school education has been rising like a taxi meter. Food inflation has been so high that now government is saying it is rising as people are consuming more food. So what should we be doing…stop eating food?  So we may have the best brands in the world to choose and pick from, but basic things are still far far away for most.

I must also say Indian government should also work urgently to introduce some kind of a happiness index to measure the true well-being of its people. It is right now assuming that all we need to do is spread the message that we are growing at 8-9%. People are clearly not happy and believe nothing is happening. The different stories on infrastructure and sewage facilities in other cities is appalling including Delhi. The new flyovers and bridges are so badly planned that they create more problems than solve them. So it is Mumbai all over the place.

So, it is not really the analysts and economists which have become bearish of prospects, it is the general public as well (though my sample is very small and limited). These are not good signs at all…

Subbarao extension and continued surge of inflation expectations

August 12, 2011

I somehow keep forgetting to write on this so thought of connecting two stories.

RBI Governor, Dr. Subbarao’s tenure was recently extended by 2 years by Govt. of India.

Commenting upon his re-appointment, Dr. Subbarao said, “I am happy that the Government has reposed its confidence in me at this difficult juncture in the world economy. I look forward to working with a great team in the Reserve Bank to meet the many challenges ahead.”

Markets took it positively saying in times of uncertainty. Some said in absence of reforms, this was a good move showing continuity and not keeping markets guessing. As we know, mon pol decisions in RBI are taken by Governor (though advised by TAC), so it was important to keep things going rather than have a new man at help.

Few comments/articles:

My view is a single thumbs up for the numerous initiatives he has taken to improve transparency at the central bank. Yes, some measures like having four more mon pol meetings makes things complicated but that is always the case with transparency. Now we have mon pol live on TV as well. RBI is a very different central bank with press releases for small events and clarity. Even research has improved under him with working papers (though this could be due to Dep Gov Gokarn as well).

His major problem has been ugly inflation which just gets uglier. He holds a dubious record of having worst inflation figures under his tenure. Despite all that improvement in transparency etc, any central bank governor wants a great (if not the greatest) inflation record.

So in a way this extension will help him get that record straight. His two shockers in May-11 and Jul-11 policy should help control inflation after being accused of being behind the curve. He suddenly looks to be leaping now (though some say still behind the curve).

Now to the second part of the post.

However, inflation is unlikely to leave him soon. Headline inflation numbers are already at the level RBI expected in May-11 policy despite not much rise in oil prices, limited deregulation of oil sector etc.

And then inflation expectations measures by HH survey just keeps going up. Latest survey for Apr-Jun 11 shows people still expect inflation to rise.

The current round of the survey shows that the threemonth ahead inflation expectations of households have tended to be slightly lower at 11.8 per cent from 11.9 per cent in the last round of survey but one-year ahead inflation expectations have moved slightly higher at 12.9 per cent from 12.7 per cent. The survey findings indicate that households expect inflation to rise further by 60 and 170 basis points during next three-month and next one-year  period  respectively, from the perceived current rate of 11.2 per cent.

The percentage of respondents expecting price rise have gone up for all product groups (viz., food, non-food, household durables, housing and services). However, expectations on general price rise were mainly influenced by movements in food prices. On category-wise inflation expectations, daily-wage workers and housewives expected higher inflation rates compared to other categories. Across the cities, Bangalore expected the highest inflation while expectations were the lowest for Hyderabad. 25 per cent of the respondents felt that RBI is taking necessary action to control inflation, of which, 51 per cent felt that RBI’s action has an impact on controlling inflation. 

Moreover, people expect inflation to be higher an year ahead from current levels. So they don’t think any of the current measures are helping. As it is a household survey not many are aware of RBI actions (the survey shows only 25% believe RBI is taking any action), but they must be believing nothing much is being done to monitor inflation by anyone. So it will continue to rise.

As they keep saying, don’t let inflation get entrenched in expectations. Unfortunately, this is what has happened for India.

Lately policymakers are saying inflation is due to global reasons. One can only laugh at that. Thanks to EME growth rates of which India is a major part, prices are rising due to limited world supplies. So global inflation is rising dues to India as well.

And hang on. it just doesn’t end there. They also say India will not be impacted due to global recession as we are more insulated from global forces and it is a domestic economy. Well, you cannot have both the cases in your favor…And we hear these statements from respected economists and names which makes it even worse and funny…

 

 

India is exporting to which planet?

August 12, 2011

Barring IIP data incredibility, the export import data has also been on similar lines.

So much so, my friend and colleague (Alok Baadkar) ended up saying what has become a superb title of this post -India is exporting to which planet?

The recent figures show exports grew by 82% in Jul-11. BS puts all the nos in a nice tab form.

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The incredibility of IIP data!!

August 12, 2011

It is amazing how frequent economic data gets leaked in India. I am not sure how the mechanism works, but it does. Some people seem to get some privilege over certain data and I would guess take positions in financial markets based on this and make a lot of money in process (atleast more than others). It is often the case that just before any major data/policy release, there is some unusual moment in financial markets (sudden dip or rise) and people figure data has been leaked.

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Does blogging improve reputation?

August 11, 2011

The next series of post on usefulness of econ blogs by  David McKenzie and Berk Özler looks at this question.

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Indian Education System – Issues and Challenges

August 11, 2011

RBI Dep Gov KC Chakrabarty gives a nice speech on the same.

He begins nicely with a quote:

‘Plants are shaped by cultivation and humans by education’

Summary:

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