Archive for May, 2015

Foreign investors ask for too much (and we oblige most of the times)..

May 29, 2015

Prof. Ashima Goyal of IGIDR has a timely piece on FII-MAT issue:


Let’s face it — most so called reforms do not mean anything to mango man

May 29, 2015

This BS op-ed sums up the dilemma for the govt. Even if there have been some reforms which have please the D-street, people are not sure.

The moot question most people on the Indian streets (not dalal or mint street) want to ask is what does all this one year tamasha mean to me? Both the government and experts tell me that one year has delivered big changes and more to come. But has it led to any changes in my life? It is not sure.

So even the govt is not sure.  Its recent ad of one year skips, the attention shifts to the rural poor:

Narendra Modi set out with characteristic energy to showcase his government’s first year in office. Much of what he has said in public rallies and interviews is on expected lines: corruptionhas been contained, sentiment has improved, this government is working unremittingly for India’s poor, there is hope instead of despair and so on. Much of this has been dismissed as atmospherics; and others, including his predecessor as prime minister, have claimed that many of the schemes for which he has taken credit – from rural employment to inclusive banking, provident fund reform andneem-coated fertiliser – are legacies of the United Progressive Alliance that Mr Modi’s government has accelerated or modified.

But Mr Modi’s chosen variations on the achche din theme are, in fact, easy to explain. It seems many of the real gains of his first year are issues he does not want tom-tommed at mass rallies. The fear is that they are “anti-poor” as defined by the conventional paradigms that inform the Indian political discourse, and so he will leave himself vulnerable to opposition evisceration (“suit-boot ki sarkar” being just one example). Many have remarked that his speech in Mathura on the anniversary of his assumption of power, while delivered in Mr Modi’s characteristic spellbinding style, had content that seemed to be a complete reversal of the growth-promising speeches on the campaign trail. In it, the prime minister was at pains to stress his “pro-poor” credentials – although, taken together, several of his government’s actions reflect political courage that has been notably absent in the past. For example, diesel and petrol decontrol have been allowed to take hold, allowing prices to rise so far with global oil prices. The government was also quick to take advantage of low prices to bolster its revenues by raising fuel duties. His oil minister has talked openly even about deregulating prices of kerosene. The Centre also sharply cracked down on the bonuses on the support prices offered by state governments, some of them ruled by the Bharatiya Janata Party, another important step towards curbing subsidies. The fact that an adverse decision by the Bombay High Court in a transfer-pricing case against Vodafone was not appealed is a baby step in the direction of improving confidence in the government’s conduct of legal tax disputes. Yet many of these steps have been subsumed by the sloganeering of the early months – “Swachh Bharat”, “Make in India”, “Smart Cities” et al.

This, however, raises a deeply problematic question. It seems that even Mr Modi – a salesman par excellence and one of the few Indian politicians who is able to present economic decisions in a way that gets votes – is not willing to discuss even the limited amounts of economic reform he has carried out. So will India ever graduate from the “reform by stealth” paradigm to a more open and honest political economy?

I mean the edit should instead ask -do any of these reforms mean anything to people? Most reform list is only to please D-street and foreign investors. Very little attention is there on things that matter to people. As none of these people based reforms are so called big bang or newsworthy, they are hardly news and hype worthy.

This is the paradox faced by most Indian govts and none know it better than UPA and even NDA-I. NDA-I highlighted these reforms but lost elections in 2004. UPA despite having Dr MM Singh as PM and enjoying 9% plus growth in its first phase was more eager to do something for the rural poor. This strategy was fine in 2004-09 but backfired in its second phase.

So it is not as if it is reforms by stealth. It is just that when PM or MPs talk to the people, they know none of this really matters to them. In a country where basics are not there in most places what would talking about deregulating oil, selling PSUs etc mean? Especially from a PM who has made really tall claims of his pro-poor credentials.

Infact for people, BJP’s initials of Bijlee, Jal and Pyaaz matter more than anything else. It was used smartly by Congress to vote out BJP in 1990s (Bijlee Nahin, Jal Nahin and Pyaaz nahin). Now the challenge for this govt is we have enough of all these three and prices are low as well..


How two Indian banks are using technology to transform themselves..

May 29, 2015

One in public sector -SBI and second in private sector- HDFC Bank.

Needless to say, SBI’s transition is much much harder..

Changing the rules of game for US economy..

May 28, 2015

What should be Hillary Clinton’s economic agenda? Should she be on right of the centre (like her husband) or lean towards the left (as developed world is increasingly moving to)?

This report by Prof Stiglitz et al suggests rules for American economy have to be rewritten. Over the last few decades, post policymakers have followed market ideology but that has only led to wealth piling at the top. All that talk of market being the best mechanism to distribute resources has not worked. Markets may be more efficient than govt but poor at equity allocation.

This article by Dylan Matthews sums up the report:


Another country which has successfully Dollarised – Ecuador..

May 28, 2015

Yesterday Prof Hanke wrote about Panama dollarising, today he writes about Ecuador doing the same.

He starts with continued woes of Venezuela, and then gets to Ecuador:

Facing this inflationary theft, Venezuelan’s have voted with their wallets. Indeed, they have unofficially begun to dollarize the economy. But, the only way to establish the rule of law in the monetary sphere is to officially dollarize the economy by officially dumping the hapless bolivar and replacing it with the U.S. dollar.

Ecuador, where I served as the chief advisor to the Minister of Finance, when that country dollarized, offers some lessons that merit Caracas’ attention.

Ecuador represented a prime example of a country that was incapable of imposing the rule of law and safeguarding the value of its currency, the sucre. The Banco Central del Ecuador was established in 1927, with a sucre-U.S. dollar exchange rate of 5. Until the 1980s, the central bank periodically devalued the sucre against the dollar, violating the rule of law. In 1982, the central bank began to exercise its devaluation option with abandon. From 1982 until 2000, the sucre was devalued against the dollar each year. The sucre traded at 6,825 per dollar at the end of 1998, and by the end of 1999 the sucre-dollar rate was 20,243. During the first week of January 2000, the sucre rate soared to 28,000 per dollar.

In the case of Ecuador, the inability of the government to abide by the rule of law was, in part, a consequence of traditions and moral beliefs. Ecuadorian politics have traditionally been dominated by elites (interest groups) that are uninhibited in their predatory and parochial demands on the State. With the lack of virtually any moral inhibitions, special interest legislation was the order of the day. For example, during the rout of the sucre in 1999, laws were passed that allowed bankers to make loans to themselves. In addition, state guarantees for bank deposits were introduced. These proved to be a deadly cocktail, one that allowed for massive looting of the banking system’s deposit base. This, as well as the collapsing sucre, enraged most Ecuadorians.

With the rule of law (and the sucre) in shambles, President Mahuad announced on January 9, 2000 that Ecuador would abandon the sucre and officially dollarize the economy. The positive confidence shock was immediate. On January 11—even before a dollarization law had been enacted—the central bank lowered the rediscount rate from 200% a year to 20%. But, this newfound ray of hope was threatening to some, and during a 24-hour period (January 21–22), a coup d’état ensued. While the Mahuad government was toppled, the coup was a bungled affair and the former Vice President Gustavo Noboa assumed the Presidency. He honored Mahuad’s dollarization pledge. On February 29, the Congress passed the so-called Ley Trolebus, which contained dollarization provisions. It became law on March 13, and after a transition period in which the dollar replaced the sucre, Ecuador became the world’s most populous dollarized country on September 13.

With much the same enthusiasm as Ecuador’s coup plotters and the rigidity of a dogmatic cleric, the critics of dollarization condemned it as something akin to voodoo economics. Well, the critics have been predictably proven wrong.

The misery index is an objective measure of just how well dollarization has worked. The index is equal to the sum of the inflation rate (end of year), bank’s lending interest rates and unemployment rate, minus the actual percentage change in GDP per capita. Simply put, a high index means higher misery.

In Ecuador, prior to the implementation of dollarization in 2000, the country sustained a misery index of over 120. The public suffered greatly from inflation, but after dollarization was implemented, high inflation was stifled and misery drastically fell. The accompanying chart shows the direct link between dollarization and the immediate and sustained decrease in misery. From 2003 through 2014, the misery index in Ecuador has been remarkably constant at around 20 — one of the lowest in Latin America.

Interesting cases on monetary systems around the world..

From MDGs to Post 2015 SDGs..

May 28, 2015

Trust all these UN type organisations to keep coming out with one buzzword after the other. I mean buzzwords are fine if some work actually gets done. But this is usually not the case.

Anyways as tenure of MDGs is going to be over in 2015, UN is coming out with a new development buzz – Post 2015 Sustainable Development Goals (SDGs). The question is what should these goals be?

Bjorn Ljomborg of Copenhagen Business School, who has been associated with such projects writes on SDGs.

Over the next 15 years, the international community will spend $2.5 trillion on development, with national budgets contributing countless trillions more. In September, the world’s 193 governments will meet at the United Nations in New York to agree on a set of global targets that will direct these resources. With so much at stake, it is vital that we make the smartest choices.

Because it is only natural for politicians to promise to do everything, the UN is currently poised to consider an impossibly inclusive 169 targets. The proposed targets range from the ambitious (“end the epidemics of AIDS, tuberculosis, and malaria”) to the peripheral (“promote sustainable tourism”) to the impossible (“by 2030 achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities”).

But promising everything to everyone provides no direction. In truth, having 169 priorities is like having none at all.

That is why my think tank, the Copenhagen Consensus, asked 82 of the world’s top economists, 44 sector experts, and UN organizations and NGOs to evaluate which targets would do the most good for every dollar, euro, or peso spent. A team of eminent economists, including several Nobel laureates, then prioritized these targets in value-for-money terms.

It turns out that not all targets are equal. Some generate amazing economic, social, and environmental benefits per dollar spent. Many others generate only slightly more than a dollar per dollar spent. Some even generate a net loss, doing less than a dollar of good per dollar spent.

If the world were to spend money equally across all 169 UN targets, it would do about $7 of social good for each dollar spent. That is respectable, but we could do much better.

The panel of eminent economists has produced a much shorter list of just 19 targets that will do the most good for the world. Every dollar spent on these targets will likely produce $32 of social good – more than four times more effective than spending on all 169. Being smart about development spending could be better than quadrupling the global aid budget. The short list covers a lot of ground; what connects the targets is the amount of good they will do for people, the planet, and prosperity.


 This list of smart targets will not solve all of the world’s problems; no realistic list, however ambitious, can. But the 19 targets identified by the Copenhagen Consensus can help the world’s governments to concentrate on key priorities. These targets will do more than four times as much good per dollar spent as spending across all 169 targets would do. Governments should stop promising everything to everyone and start focusing on delivering the most possible.

MDG had 8 goals with 21 targets. And now we have 19 targets. I don’t think this is a really short target list. Just that these 19 targets are under three Ps – People, Planet and Prosperity. Who said only Business Schools believed in Ps, Ss and so on?

Eric Hanushek and Ludger Woessmann suggest just one taregt – basic human skills:

Paradise in Peril – Case of Maldives

May 28, 2015

Knew there was trouble in the islands, but did not know it had gone this far.

With Amal Clooney, the human-rights lawyer who recently married the actor George Clooney, acting as your advocate, you would think that your case would grab headlines. And yet Mohamed Nasheed – the Maldives’ first democratically elected president, who was just sentenced to 13 years imprisonment for unnamed “terrorist offenses” by the military-backed government that overthrew him in 2012 – seems to have fallen off the world’s radar.
This is bad news for the Maldives, where the fate of a fledgling democratic regime is inextricably tied to that of Nasheed. And, with radical Islam gaining traction on the archipelago, it does not bode well for the rest of the world, either.

Nasheed’s predecessor, Maumoon Gayoom, who won the presidency in a 1978 parliamentary vote, adopted an authoritarian style, and subjected the country to three decades of misrule. While Gayoom oversaw the archipelago’s transformation into a popular holiday destination, it was he and his associates – not ordinary citizens – who benefited from the tourist industry’s success.

Nasheed’s victory in a free and fair popular vote in 2008 offered the promise of a brighter future for the conservative Muslim country. The new president – intelligent, eloquent, and enthusiastic about what his Maldivian Democratic Party (MDP) could deliver for the Maldives – introduced a more secular tone to political rhetoric, while working to impress upon the world the threat to his low-lying island country posed by global warming.

Toward the end of his first term, Nasheed initiated a comprehensive reform of the judicial system – an effort that did not go down well with the judiciary, which was dominated by Gayoom’s appointees. The arrest in January 2012 of the chief judge of the supreme court, Abdulla Mohamed, on charges of corruption and malpractice was the straw that broke the camel’s back. Military and police forces supported opposition-led street protests, and Nasheed was forced to resign the following month, succeeded by his then-deputy, Mohammed Hassan.

When new elections were held in 2013, politically motivated charges were brought against Nasheed to prevent his participation. Ultimately, Nasheed did contest the election, which was marred by irregularities, including the annulment of the original first round, in which he won the most votes – 20% more than his nearest rival. And yet Nasheed accepted the result: a victory for Gayoom’s half-brother, Abdulla Yameen.

Having refused to leave the country or retire from politics, Nasheed is now besieged by his rivals, who are seeking to deny him any chance to mount a political challenge. A new law banning prisoners from membership in political parties, coupled with his imprisonment, has cost Nasheed his position as President of the MDP.

Another example of celebrating political successes a bit too early. One has to wait till the political cycle gets over.

Canadian student’s declining Math scores..

May 28, 2015

Came across this interesting report from CD Howe Institute based in Canada.

The authors raise concerns on the declining math scores in Canada. They suggest the way out is to change teaching habits that promote cramming instead of understanding. Just so similar to India:

Canadian educators should abandon curricula and instruction premised upon the assumptions of discovery-based learning, according to a new C.D. Howe Institute report, which examines mounting evidence that this approach seriously hampers math learning by students. In “What to Do about Canada’s Declining Math Scores,” author Anna Stokke urges provinces to act quickly to improve the way mathematics is taught.

 Between 2003 and 2012, on exams administered to 65 jurisdictions by the Organisation for Economic Co-operation and Development, all but two Canadian provinces showed statistically significant declines in math scores. Another international assessment, the Trends in International Mathematics and Science Study, also shows some troubling trends in Alberta, Quebec and Ontario.

 The author recommends encouraging teachers to follow an 80/20 rule favouring direct instructional techniques over discovery-based instructional techniques as studies consistently show that direct instruction is more effective.

 “Unfortunately the popularity of discovery-based instruction, which encourages inquiry learning typically through minimal teacher guidance and instruction through open-ended problems and projects, is squeezing out direct instruction methods, where students are directly taught concepts and given explicit explanations, followed by plenty of student practice,” states Stokke. “Proponents of either type of instruction generally agree that there are merits to using a balance of both approaches, but the specific balance is in dispute.”

 Stokke also recommends that math curricula be rewritten to stress important topics – like fraction arithmetic – at earlier grades and that future K-8 math teachers be required to complete a minimum of two math content courses while in university, and to pass a math licensure exam before they can obtain certification to teach mathematics.

 Stokke concludes: “The importance of mathematics in a knowledge- and technology-based economy, and the decline in Canadian students’ mathematics scores on international tests in recent years suggest that provincial governments should make the improvement of math curricula and instruction a priority.”

Why our learning has moved to such a cramming world?

Tale of 2 one rupee coins…

May 27, 2015

Came across this interesting joke. It pointed to these two one rupee coins. The first one is of earlier times (it existed even in the 1970s):

The recent one is (came out in late 2000s):

The joke is: Earlier one rupee coin showed grains as one could buy something valuable with one rupee. Now you only get a thenga (nothing) hence the thumbs up sign…:-)


Monetary Policy and the Onset of the Great Depression: The Myth of Benjamin Strong as Decisive Leader

May 27, 2015

This is the title of a recent book by Mark Toma and is reviewed here.

I mean Great Depression research still remains so relevant. More importantly, scholars are undoing whatever we have learnt about the depression. One such common lesson is role that Ben Strong of NY Fed could have played in resolving the depression if he was alive. After all it was Milton Friedman who made this idea popular.

Not anymore as it has been discussed in this book. AS the reviewer points out:

Mark Toma’s short, but dense Monetary Policy and the Onset of the Great Depression: The Myth of Benjamin Strong as a Decisive Leader provides a revisionist history of the Benjamin Strong leadership years at the Fed leading up the Great Depression. Despite the title, the book focuses entirely on this period and doesn’t delve into the actual causes of the Great Depression. Rather than provide a casual explanation of the Great Depression per se, Toma’s project is to convince monetarist and Austrian economists that both of their accepted histories of the Great Depression are empirically unfounded. Thus, Toma argues that mismanaged monetary policy — tightening per the monetarist narrative or loosening per the Austrian narrative — can be ruled out as a causal factor of the Great Depression.

In questioning the Strong decisive leader theory — the theory that Benjamin Strong played a decisive role in the monetary policies of the 1920’s as the President of the influential New York Federal Reserve Bank and that his untimely death ultimately led to the wrong-headed policies that brought on the Great Depression — Toma does not stand alone. Temin (1989, 35), Wheelock (1992), and Brunner and Meltzer (1968) all question the strong leader hypothesis. However, Toma discredits each of their theories and forges a completely new explanation for why Strong’s leadership was not a decisive factor. Toma makes the case that the Fed operated as a self-regulating, decentralized system. According to Toma, this system operated effectively as intended, so the credit for Friedman and Schwartz’s (1963, Ch. 6) description of the 1921-1929 Fed era as the “high tide” of the Fed system should go to the founders of the Fed, not Benjamin Strong.

Overall, the book would have benefitted from a more thorough engagement with the modern literature. Instead of addressing modern developments and more nuanced and refined arguments in the monetarist and Austrian tradition, Toma sets up the book against the narratives of Rothbard (1975) and Friedman and Schwartz (1963).

Hmmm.. Have not read the book so no comments.

All I can say is we have this tendency to glorify certain individual and try and make him/her accountable for all goods/bads especially in an institutional setting. Reality is a lot different and one has to see a broader political picture.  What matters more is how political systems have designed certain institutions and the structure therein. This is a much more important story and plays out for a longer period of time. Person based stories last only till the luck lasts..

It is also important to note how certain narratives remain despite them being proven wrong/right by subsequent scholars..

Most central banks do one thing well: they produce monetary mischief..

May 27, 2015

Says Prof Steve Hanke in this post. More so in case of emerging economies.

So what is the solution? Well, give the mon pol function  to a more responsible country. One option is dollarise. Panama is a good example:


Indra Dev and monsoon forecasting: What is the dummy variable?

May 27, 2015

A super fun filled column by Manasi Phadke (of the crazy blog – Manasiecon.

Its starts with this scene where Lord Indra is being reported on rains in India:


War over mathiness in economics..

May 27, 2015

It is not always you see likes of Prof. Paul Romer criticise economists and that too likes of Lucas and Prescott. The criticism is for their over the top mathisation of economics.

Noah Smith, Justin Fox and Mark Buchanan chip in.

Buchanan says:

Once upon a time economists made their arguments in long, discursive, often contradictory books about pin factories andnewspaper beauty contests. Verbally oriented people like me tend to extol those days, but to most modern economists they were the dark ages.

In the 1940s Paul Samuelson of the Massachusetts Institute of Technology brought enlightenment, in the form of elegant mathematical treatments of the major concepts in economics. Most of these ideas were inherently mathematical anyway, he argued in the introduction to his “Foundations of Economic Analysis,” first published in 1947, which meant that trying to express them in narrative form involved “mental gymnastics of a peculiarly depraved type.”

Samuelson’s approach gave the discipline a, well, discipline that it had previously lacked, and enabled economics to make great leaps in coherence and rigor. It also made the field incomprehensible to laypeople, but that turned out to be more a feature than a bug. Economists were seen as possessing unique scientific knowledge, and came to play increasingly prominent roles in public life in the U.S. and elsewhere. Samuelson’s economics-professor nephew even became Treasury secretary.

There are some obvious limits to this approach. In his entertaining and enlightening new book, “Misbehaving,” University of Chicago behavioral economist Richard Thaler documents case after case of “theory-induced blindness” in which economists ignored interesting and important real-world phenomena because they didn’t accord with the dominant mathematical models. Since the financial crisis, the conviction that macroeconomics in particular has reached a sort of theoretical dead-end has gained ground even among mainstream economists.

That’s not what Paul Romer is arguing, though. In a provocative paper presented in January at the annual meeting of the American Economic Association and just published in the American Economic Review, plus a series of combative blog posts, the New York University professor and famed economic theorist complains that some of his fellow economists have been resorting to what he calls “mathiness.” This is a variant of comedian Stephen Colbert’s “truthiness,” and means that they are using mathematical models not to elucidate or investigate but basically just to assert. Samuelson and others of his generation believed that mathematical reasoning would clarify economists’ arguments.

Well, nothing is new except for the fact that it is Romer who in an elegant AER paper (has a bit of math) questions the math methods adopted by stalwarts to showcase their supremacy over others. What is worse is that Romer actually points to mistakes in one of their papers which ends up being published in an top econ journal.

The problem is not limited to extensive and intensive use of math. It is just ensuring other areas like history and politics do not matter anymore. Most economics courses around the world are designed as suggested by these priests and are taught unchallenged by their several direct and indirect students across the world. So it is the same neoclassical school which is not even relevant in developed world is taught in schools across Asia and Africa.

I mean how preposterous can things get in economics teaching. We in other countries are part of the blame as we have just accepted whatever is being taught in these schools and taken it to be Bible.

Anyways, this is how things shall remain in economics . When the entire purpose of humankind has shifted from basic humanity to pursuing wealth at all costs nothing much can be done. This is then added to the strong belief that it is economics and economists which can help the society in that pursuit, things only become crazier and are expected to remain..

Ten Takeaways from the ‘Rethinking Macro Policy. Progress or Confusion?’

May 26, 2015

Oliver Blanchard sums up the progress which is mostly confusion:

On 15-16 April 2015, the IMF organised the third conference on ‘Rethinking Macro Policy’. In this column, IMF’s Chief Economist Olivier Blanchard presents his personal takeaways from the conference. Though progress in macro policy is undeniable, confusion is unavoidable given the complex issues that remain to be settled.


What is amazing to note is that people whose theories broadly failed during the crisis continue to reform the thinking post-crisis as well.  The so called neo-liberal thinkers continue to dominate whatever there is to economic thinking. Which other field allows this kind of progress?

Book review- 2014: The elections that changed India

May 26, 2015

The future historians (oxymoronish term) are keenly awaiting to write tomes and tomes on this 2014 election. We still do not know how things will pan out as it is just one year old.

Some accounts have already started and this one by Rajdeep Sardeasai is an intriguing read. The eminent journalist has lost quite a clout from his Mount Everest days especially after the fight in NY. But nevertheless one cannot take away years of his journalism experience and election tracking which he tries to pour into the book.

The author upfront says that this is not a scholarly account but a journalistic one. So don’t expect some neat theories and empirical data to validate them. The book is just like a journalist’s life – breezy and anecdotal.

The focus of the book is 2014 elections. In each chapter Mr Sardesai tries to pick up some party, some individual and eventually tries to bring them to the common theme – what were they doing before the 2014 verdict and how they were campaigning.  In this pursuit of 2014 verdict, Sardesai comes with some interesting anecdotes and stories around the 2014 election. We have seen most of the events so there is nothing new. But then this is the purpose of the book as well – to bring all these events in one book. Given he is a journalist and has vast experience, there are bound to be biases. But overall he tries to put things in perspective and does not spare anyone really.

The book tells you how well managed and focused the campaign was for BJP and listless for Congress and others. The way various resources were tapped into is interesting. One has to especially mention technology which played a decisive role in these elections. It was ironical to see a swadesi party like BJP taking on technology so well and Congress with so many erudite leaders were just no match.

One would have hoped that along with the main theme, Rajdeep also explain some basics of news reporting. But this is missing from the book. It would have brought some interesting insights from the industry which otherwise tells you about how other things work. The author does get into darker insights of breaking news and exit poll phenomenon which has made quality news coverage a thing of the past. This obviously has deeper ramifications as we are reduced to a soundbyte society. This aspect also was captured really well by BJP which tried to capture all possible soundbytes through a slick electoral campaign.

Overall, a nice breezy read with little expectations. I am sure more such journo accounts will follow as such was the impact of this election. And then eventually it will be over to historians and polity scholars to get into details..

Why maintenance of roads is as important a target as developing new roads..

May 25, 2015

Came across this yet another article on NDA vs UPA comparison. The earlier ones were between UPA I and II vs NDA I and the recent ones are between NDA-II (in first year) vs UPA. The article is on road development target in the two regimes:


Indian Govt’s flip flop over FDI in retail: Governance involves responsibility and continuity

May 25, 2015

So said India’s Finance Minister in his latest attempt to justify why govt is continuing with the policy of 51% FDI in multibrand retail. It is highly ironic as the same govt opposed this policy tooth in nail while in opposition.


Surging demand of ‘Badli bais’ and economics lessons..

May 25, 2015

Interesting article in ToI. Badla is a infamous word in Indian finance but finds great acceptance in household (economics) in Mumbai.

Badli Bais (as the name suggests), is a maid who acts as a replacement for the main helper. This is especially the case in Summers when main helpers go on a leave to native villages.

How do you cook for a month with just 200 grams of oil? “You just boil vegetables mostly,” says home cook Pulkit Mukhia, who would not have known the answer a month ago. The 28-year-old learnt this rationing trick last month while working for a health conscious couple in Khar, who had called him to replace their cook temporarily. This month long stint was one of around 20 wild card assignments Mukhia landed this summer while many of his counterparts were away on their annual leave. “It is better to stay put in the city in April and May,” says Mukhia, who received close to 40 desperate calls in these hot months and fetched a cool surplus of almost Rs 50,000. “You earn in two months what you would in five.”

Mumbai’s workforce of ‘substitutes’ doesn’t just make hay, it makes a killing when the sun shines. Between March and June, the city’s vertebra—domestic help, home cooks and drivers—goes missing in spurts. Weddings and festivals back home beckon. Many housemaids travel to their native place in rural Maharashtra while drivers and home cooks—who chiefly hail from Uttar Pradesh and Bihar—go home for anywhere between 15 days and a month, creating a temporary scarcity.

Long ago, this scenario gave birth to the ‘badli’ bai—the domestic help who will replace your housemaid for a few extra bucks. Today, an industry thrives on this paucity.

It surely makes economic sense to stay during summer and make money off the shortages in labor markets.

The concept has moved from household help to taxis and other services as well:

Besides substitute cooks and drivers, a host of businesses such as maid agencies, driver-on-hire and tiffin services prepare for the customary deluge of calls.  “It doubles,” says Rehan Shaikh, owner of Work Hard Drivers at BKC, about the demand for drivers in summer. Instead of the usual 25 to 30 leads per day, Shaikh is now getting around 60.

Since many of the drivers on his team too are on leave at the moment, “I am not able to provide a driver on the same day. I need a day’s notice at least,” says Shaikh. At Rs 600 for an eight hour shift, these freelance drivers could earn up to Rs 28,000 per month, which is twice as much as their salaried counterparts. Of course, clients try to bargain. “We quote Rs 650 for eight hours, they say Rs 500,” says Shaikh.

Though am always intrigued to figure this. Despite huge perceived supply of unskilled labor, there is always labor shortage in India. Ideally, one would imagine given the surplus labor supply in India, it should not  be too much of an issue filling these spots. Infact it should be the other way as those with jobs might never go on a leave fearing easy replacement and loss of job.

Infact this is nothing new really but has become quite prevalent. The cost of all these services has risen exponentially in recent years and there is a huge shortage of labor related to household maintenance, electricity, plumbing and so on. One is actually seeing emergence of a firm like structure for these services in large cities, just as in the west. Now if, this labor was getting employed elsewhere in so called productive formal services (frankly there is far more money to be made in the unskilled variety as of now), it was fine. But this is also not emerging as most reports  point to low employment transition. So not sure what is going on..

Anyways, knowing about this badli industry was fascinating..


RIP Prof Nash

May 25, 2015

Prof John Nash passed away in a tragic accident along with his wife.

No amount of words can do justice to his contribution to field of economics (above all game theory). Rest in Peace Prof.

A political party in Barcelona pledges to print local currency for the region..

May 22, 2015

Interesting article on money something Austrian school might be happy seeing.

In local Barcelona elections, one of the party has said it will print local currency on winning:


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