Archive for July, 2016

Controversy over installation of Thiruvalluvar’s statue in Hardwar…

July 22, 2016

Thiruvalluvar, a Tamil poet was often referred in budget speeches of former Finance Minister P Chidambaram’s budget speeches.

The poet’s statue is finding it difficult in getting installed in Hardwar. On 18 July, Hindu reported:



Moving Indian banking beyond BBB to an ‘A PLUS’ …

July 22, 2016

Prof. Gurbachan Singh of Indian Statistical Institute says the more we try and change things with Public sector banks the more they remain the same. Appointing a BBB is a positive step but will not change things much. We need to move from BBB to A plus banking.

What is A plus? It is an acronym :-):


How industrial cluster policy leads to inter-firm transaction networks

July 22, 2016

Three Japanese researchers (Toshihiro Okubo, Tetsuji Okazaki and Eiichi Tomiura) point to this interesting research.


Is Greed Ruining Private Equity Firms?

July 21, 2016

It always looked like but no one cared. Gordon Gekko argued along ago greed is good and has remained a dictum for the financial sector.

Now a new research by Profs Victoria Ivashina and Josh Lerner of HBS shows greed rules Private Equity firms. Here is a discussion of the same:

In a first-ever look at the internal economics driving private equity partnerships, Harvard Business School researchers have found that many of these funds can be torn apart by greed among founding partners who take home a much bigger share of profits than other senior partners, even when their performance doesn’t merit higher rewards.

This creates a ripple effect, where other senior partners become resentful, disenchanted, and leave their jobs, causing instability that spooks potential investors and could lead to a firm’s collapse. This pattern of unequal pay was much more extensive than anticipated among the 717 private equity partnerships studied by HBS finance professor Victoria Ivashina and Josh Lerner, the Jacob H. Schiff Professor of Investment Banking.

These rifts, far from being uncommon, are the average experience in PE partnerships, Ivashina says.

In their working paper released in March, Pay Now or Pay Later? The Economics within the Private Equity Partnership, she and Lerner found that a partner’s pay was often tied more to the person’s status than to performance. Previous success as an investor seemed to have little bearing on how much the partner earned. Founders in particular gobbled up a much bigger piece of the pie.

Senior partners who believe they aren’t compensated fairly are significantly more likely to leave a firm. These departures can give limited partners the impression that a private equity firm is unstable. That perception creates a wariness to invest, which means a PE firm often struggles in its attempts to raise the next fund.

So in essence, founding partners are damaging their own firms, in some cases beyond repair, by being greedy.

One still needs research to prove the obvious..

How national cuisines depict economic strength…

July 21, 2016

Gulzar has a wonderful post on the topic. He points to this article which tries to understand how certain cuisines are perceived in US?

Atlantic has an interesting article that charts the “hierarchy of tastes” or social acceptance trajectories of different national cuisines in the United States. In particular, why does the French and Japanese cuisine get admitted to high-ed, white-tablecloth establishments while the Chinese and Indian recipes are relegated to lower-status eateries as “ethnic” food?
Consider the cases of steak frites and carne asada. They both involve cooking a fairly high-quality cut of meat over high heat, and they’re both dishes whose origins are foreign to America. But they’re often listed on American menus at vastly different prices. Why? “The shortest answer would be cultural prestige, some notion of an evaluation of another culture’s reputation,” says Krishnendu Ray, an associate professor of food studies at New York University. In a book published earlier this year, The Ethnic Restaurateur, Ray expands on this idea, sketching the tiers of what he calls a “global hierarchy of taste.” This hierarchy, which privileges paninis over tortas, is almost completely shaped by a simple rule: The more capital or military power a nation wields and the richer its emigrants are, the more likely its cuisine will command high menu prices.


India is pretty much bottom of the list and falling in the hierarchy of taste since 1986.. Further from the article:

In 1985, the earliest year for which Zagat data is available, Japanese food had the sixth-highest average check price in New York. Last year, it ranked first. During that time, Greek and Korean have also seen their lots improve, while Chinese has remained at the lower end of the check-price spectrum, along with Thai, Indian, and Mexican.

The theory Ray outlines in The Ethnic Restaurateur is more complicated than just loosely extrapolating from a country’s financial and military might. Some more-granular data does support that approach—many cuisines’ Zagat check averages correlate closely with the per-capita income of the corresponding cultural group—but Ray believes that other variables must matter a lot too, considering that nearly all the cuisines with the highest check prices are ones generally associated with whiteness.


Similarly, it is who the American mainstream considers foreign—and when—that can go a long way in explaining why the prestige of a cuisine surges or plunges over time; perhaps the most important variable in determining “foreign-ness” is how large an immigrant group is, and their socioeconomic status upon arrival. “Most of the Japanese we are familiar with are business folks, are executives,” Ray recently told the podcast The Sporkful. “But right now, most Americans associate Chinese food with relatively impoverished Chinese immigrants.” (A cuisine need not even be foreign to experience such bad luck: Poverty probably plays a role in why Native American food, which has all the trappings of a trendy cuisine, has failed to accrue cultural capital.)

The cuisines of France and Italy, Ray argues, have had very different histories in the U.S. precisely because those two countries have sent different volumes of people, of varying levels of wealth, to American shores. The fact that large numbers of poor French immigrants never settled in large portions of the U.S., along with the country’s reputation for sophistication (and fussiness), helped propel French food to becoming the standard against which other cuisines were measured.

The history of Italian food in America, meanwhile, offers a wonderful case study of how a cuisine’s status is dictated by immigration patterns. As Ray details in The Ethnic Restaurateur, Italian food was first popularized in the U.S. in the 19th century. Thomas Jefferson had a high opinion of macaroni (and pasta in general), which at the time was not associated with cardboard boxes and bright orange powder, but rather with more refined cuisines, such as France’s.

“Italian food would be dislodged,” Ray writes in his book, “by the entry of new southern Italian immigrants between 1880 and 1924 who were numerous and mostly poor, hence derided by the taste-making elite.” Italians were scorned as “garlic eaters,” and by 1955, the status of their country’s cuisine had fallen so far that the legendary cookbook author and food columnist James Beard wrote, “My opinion of Italian cookery was not too high.” Technically speaking, Beard did, like those in Jefferson’s time, compare it to French food, but unlike 19th-century gourmands, he compared it (unfavorably, no less) to the food the French servedon trains.

It was only after the descendants of these relatively poor Italian immigrants began rising in American society that the nation’s cuisine started accumulating prestige. “When American Italians climbed out of the ghetto and into sports arenas, corporate offices, governor’s mansions, city halls, and movie studios, Italian food was re-assessed in the American imagination,” Ray writes.

Superb reading.. Never thought on those lines.

One should do a similar experiment in India as well which has so many within India cuisines as well.

What after all is meant by One Belt, One Road? Will it reshape global trade?

July 21, 2016

A good discussion at McKinsey over the One Belt One road or OBOR plan by China.

The first q is what exactly is One Belt, One Road?


25 years of 1991: Is India now just a proud outpost of global finance?

July 21, 2016

Aseem Shrivastava, a Delhi based economist who earlier wrote a critical review of India growth story, writes on the 25 years of 1991. This is an alternative view (most would call it leftist) which goes against the usually accepted positive spin of the 1991 agenda.

The crux of the argument is despite stellar growth records, jobs have barely grown:


India’s capital market regulator plans to crawl social media on a 24/7 basis..

July 21, 2016

As most of stock investment advisory business shifts on the virtual world, the regulator has no choice but to move there as well.

This BS article informs that SEBI is planning to move aggressively into the space. It has invited companies specialised in Web Crawling, Data extraction and Information Management Services for helping in its cause:

As the regulator of Indian securities market, SEBI proposes to improve monitoring of the news or messages that are appearing ‘about SEBI’ in the social media, so that SEBI is well aware about the general perception of the market on the various issues pertaining to SEBI and can act on those thenceforth. Accordingly, it has been decided to engage an outside agency who can track public information on SEBI and securities market, published and publically accessible in the World Wide Web as well as the information in electronic and print media, and provide it to SEBI, in a manner that is relevant to the various departments of SEBI. Additionally, the agency is also required to carry out social media management activities on behalf of SEBI. 

This is interesting stuff. SEBI should set up a research department as well to report on the emerging trends, ideas and so on as well. No point just having a crawler who does things secretively.

Why money multiplier remains low in US – the micrcoeconomics of banking..

July 20, 2016

Julien Noizet of Spontaneous Finance has a piece on he topic.

The money multiplier has been really low in US for sometime now. Most imagined that with the Fed pumping so much money multiplier will jump significantly and we would have hyperinflation etc. But none of this happened. Why? In most such monetary thinking, we just ignore the functioning of the banking sector. Just like all sectors, banking too has its microeconomics and rigidities:


Using twitter to get monsoon updates…

July 20, 2016

Anand Mahindra is using his social network to get monsoon updates:


Was the 1991 agenda home grown or west imposed? (also the role of mysterious M document)

July 20, 2016

The recent EPW edition ( Vol. 51, Issue No. 29, 16 Jul, 2016) has a series of articles on the 25 year anniversary of 1991.

This one by Montek S Ahluwalia is a great read. It narrates this historical thought process behind 1991. He says it was hardly a case of imposition by western agencies like IMF and World Bank. Infact the thinking started much before 1991 as well. One can always argue whether the process was domestic driven or external driven but the historical process is something worth knowing:


The Return of Ireland’s Housing Bubble

July 19, 2016

Oh no not again. Stefan Gerlach, Chief Economist at BSI Bank in Zurich says the bubble is back:

The country lacks a efficient housing rental market and these bubbles just keep coming back:


Liberalizing India’s urban thinking…

July 19, 2016

Sanjeev Sanyal has a superb piece on how 1991 has not changed India’s thinking on urban development. It remains socialist and centralised:

A quarter of a century ago, India threw off the shackles of Nehruvian socialism and embarked on economic liberalization. Since 1991, socialist-era thinking has been steadily discarded in a growing number of areas such as foreign policy, but it remains firmly embedded in how Indian cities are planned. This is the ultimate source of dissonance between the cities we build and the cities that 21st century India aspires to.

It may come as a surprise to many readers that ideology plays an important role in how cities develop. The fact is that every city is a living embodiment of some philosophy. What is now called Old Delhi, for instance, was a reflection of the hierarchical feudal order prevailing in the 17th century when Emperor Shah Jahan built it. It was a city of grand palaces and miserable slums. French traveller François Bernier, who visited the city just a few years after it was built, tells us, “A man must be of the highest rank or live miserably”. At the top of the urban hierarchy was the Red Fort where the royal family lived.

When the British decided to build New Delhi a century ago, they conceived of it as a city of grand imperial parades and a racially coded hierarchy. The city’s early plans marked the most spacious bungalows as “fat white” and lesser dwellings as “thin white” and “thin black”. As no senior Indians officials were envisaged, the plans do not mark “fat black”. At the pinnacle of this city was a palace for the Viceroy, now Rashtrapati Bhavan.

After independence, Delhi became a city of civil servants brought in to run the socialist economy. Thus Delhi evolved into a bureaucratic ladder made up of housing rungs called C-I, C-II, D-I, D-II and so on. The ideal city was seen as a giant machine designed by “wise” urban planners. They imposed rigid master-plans that neatly zoned different urban activities and strictly controlled urban evolution. The similarity with P.C. Mahalanobis’s economic planning is not a coincidence. They are both outcomes of the same Nehruvian thinking.

The highlighted statement is really important. We seldom notice these things. All architects and urban designers have a philosophy.

He takes on Le Corbusier:

French architect Le Corbusier was the urban planning equivalent to Mahalanobis. Just as Mahalanobis saw the economy as a mechanical input-output model, Le Corbusier saw buildings as “machines for living”. The “wise” planner created a detailed master-plan and success was all about meticulously implementing it. Innovation was allowed only if planners approved it, otherwise it was looked on with suspicion. It was not about managing an evolving ecosystem.

A large number of cities and urban extensions were built using Le Corbusier’s thinking, but not one succeeded. After two generations of trying, Durgapur, Dispur and Navi Mumbai can hardly be called successes. Even Chandigarh, Le Corbusier’s poster child, is really a subsidized housing colony for serving and retired civil servants. Despite the deployment of enormous resources by two state governments and the national government, Chandigarh has not produced anything of economic or cultural value. Whatever buzz it produces comes from the suburb of Mohali that is outside Corbusier’s plan. Even Nek Chand’s famous rock garden was built illegally.

Despite his obvious failures, Le Corbusier is still held in high esteem in India and his ideas are deeply embedded in urban codes. Any attempt to tamper with Chandigarh’s plan is met with howls of protest. This is ironical because, in the rest of the world, his ideas were discredited long ago by the likes of Lewis Mumford and Jane Jacobs. With post-independence planning stuck in a quagmire, 21st century India continues to rely on colonial-era urban cores. New cities such as Gurgaon develop by ignoring official master-plans.

What is the way out? Think cities as evolutionary:

So what should be done? The first step is to stop thinking of the city as a machine and start thinking of it as an evolving ecosystem. Thus, success is about flexibility and managing change rather than implementing brilliant master-plans.

Indians often mistake Singapore’s success as that of outstanding planning but the reality is that the city-state is really a great example of flexibility and constant tinkering. Since it became independent in 1965, Singapore has gone from British naval base to shipping and manufacturing cluster, then to financial centre and more recently to education and entertainment hub. Each step needed radical urban surgery. During the same period, Indians have faithfully preserved Chandigarh’s original master-plan.

Every 15 years or so, Singapore completely re-evaluates its overall economic and urban strategy. The last time this happened was in 2002-03 in the aftermath of the Asian Crisis. The rethink led to new university campuses, entertainment hubs, Formula One racing and so on. The government has just initiated a new round. It’s all about new ideas, tinkering, feedback loops and managing transitions. Having personally participated in the process, it is eye-opening how fundamentally different this approach is from urban discussions in India.

A quarter century ago, India’s economic thinking broke away from socialist planning. Now India’s urban thinking needs liberalization. Even if we did our very best on Chandigarh, the best we can hope for is Canberra or Brasilia. On the other hand, if we managed Gurgaon better, we could get Singapore or Hong Kong.


This design philosophy idea is really important. How to move from a centralised to a more collaborative process is crucial and difficult to change mindset…

A Bloomberg reporter documents her efforts to secure food supplies in Venezuela…

July 19, 2016

As inflation in Venezuela expected to touch 1600% next year, this diary of sorts by a Bloomberg reporter surviving in the country just nails it.

She struggles to ensure a decent meal:


Kerala Assembly passes resolution against SBT-SBI merger

July 19, 2016

This blog had pointed to how Kerala govt did not like the State Bank of Travancore merger with SBI (some customers of other state banks too voiced their concerns). This trouble brewed when the govt had just announced such a proposal. Then the govt cleared it and one thought all noise is over. (BTW, here is history of these state banks as well).

But Kerala govt unlikely to let it go without a fight. Now the Kerala Assembly has passed a resolution opposing the merger:


Make regional airlines a viable business case instead of giving them just cheaper loans…

July 18, 2016

The easiest solution to start or address woes of an industry is to make loans/debt cheaper.

So, it is hardly a news that in order to kickstart regional airline scheme, govt is thinking of providing cheaper loans:


Privatize the Police?

July 18, 2016

A piece from Murray Rothbard’s book – For a New Liberty: The Libertarian Manifesto – written in 1973.

I am not saying we should privatise the police. There mere thought is shocking for someone who has been brought up with the idea that it is govt’s role t provide us with security and it appoints police to d the job.

But why not discuss and think through the issues? Why should one be discovering all these supposed libertarian and market  supporting works outside of economic teaching? These are the kind of debates which widen the scope of economic thinking:


Case of estimating impact of doing business ranking on GDP/capita – which regression to use?

July 18, 2016

Dhananjay Ghei and Nikita Singh on Ajay Shah’s Blog show the predicament for any researcher. Which estimation model should one use which represents the analysis in best way?

They look at the recent debate between two economists on impact of doing business rankings:


Turkey’s Baffling Coup and why India never had a military dictatorship..

July 18, 2016

Last week saw yet another attempt to dethrone democracy in Turkey (it was more a case of demagoguery than democracy). There have been a quite a few already in its recent history. TYe government even tried to make Turkey coup-proof in 2006 which obviously did not work! But this recent one was baffling and amateurish at its best.

Dani Rodrik explains his bafflement:

Military coups – successful or otherwise – follow a predictable pattern in Turkey. Political groups – typically Islamists – deemed by soldiers to be antagonistic to Kemal Atatürk’s vision of a secular Turkey gain increasing power. Tensions rise, often accompanied by violence on the streets. Then the military steps in, exercising what the soldiers claim is their constitutional power to restore order and secular principles.

This time, it was very different. Thanks to a series of sham trials targeting secularist officers, President Recep Tayyip Erdoğan had managed to reconfigure the military hierarchy and place his own people at the top. While the country has been rocked by a series of terrorist attacks and faces a souring economy, there was no inkling of unrest in the military or opposition to Erdoğan. On the contrary, Erdoğan’s recent reconciliation with Russia and Israel, together with his apparent desire to pull back from an active role in the Syrian civil war, must have been a relief to Turkey’s top brass.

No less baffling was the almost amateurish behavior of the putschists, who managed to capture the chief of the general staff but apparently made no meaningful attempt to detain Erdoğan or any senior politicians. Major television channels were allowed to continue to operate for hours, and when soldiers showed up in the studios, their incompetence was almost comical.

Planes strafed civilians and attacked the parliament – very uncharacteristic behavior for the Turkish military outside areas of Kurdish insurgency. Social media were full of pictures of hapless (and apparently clueless) soldiers being pulled out of tanks and disarmed (and sometimes much worse) by civilian crowds – scenes I never thought I would see in a country that has come to hate military coups but still loves its soldiers.

🙂 Events were like those seen in comedy movies..

Thus obviously bring to minds why Pakistan has had coups and India none. Here is an article looking at reasons based on Steven Wilkinson’s work:

The question why the Indian army never attempted to seize power has sometimes been attributed to the fact that it is a disciplined, highly professional army, steeped in proud 250-year old traditions inherited from the British. But this theory doesn’t work, because the Pakistani army was born out of the same traditions and that didn’t seem to stop it from assuming power.

Indeed, one could argue that it was precisely because the Pakistan army was such a highly professional force that there came a time when it felt it could no longer stand by and watch the country slide into chaos, and felt it was its duty to step in. So clearly this is a question one needs to look at more closely. Which is what political scientist Steven Wilkinson has done with his excellent new book, Army and Nation.

In order to understand what didn’t happen in India, it is perhaps useful to first look at what did happen in Pakistan. The military dictatorship in Pakistan has had an interesting pre-history. It begins in undivided India, where the largest single component of the army was drawn from the undivided Punjab. Hence at the time of Partition, of all the institutions that Pakistan inherited, the most substantive was its army.

Moreover, while in India the Congress Party was a highly evolved, durable organisation, in Pakistan the Muslim League was not much more than “Jinnah and his Private Secretary”. Hence, there was a dangerous structural imbalance in Pakistan, especially after Jinnah’s death in 1948.

Unlike Turkey, India did make progress on coup proofing the economy:

The Indian Army was born out of the same tradition as Pakistan’s. In British India, the army enjoyed a prominent position in Indian life, and even played a role in policy matters. The Commander-in-Chief, was also the de facto Defence Minister, and was the second most powerful person in the hierarchy after the Viceroy himself. But after Independence things began to change.

Prime Minister Nehru believed that the new India needed to re-think the role of the army, and initiated a policy that would firmly subordinate it to the civilian authority. One of the first things that happened after Independence, for example, was that Teen Murti House, traditionally the grand residence of the army chief, was assigned instead to the Prime Minister: a small matter by itself, perhaps, but a clear indicator of the way the wind was blowing.

Next came a series of budget cuts (resulting, among other things, in hefty cuts in army officers’ generous Raj-era salaries). And when India’s first army chief, Field Marshal Cariappa, publicly criticised the government’s economic performance, he was immediately rapped on the knuckles, and told not to meddle in matters that did not concern him.

Over the years a systematic programme was pursued to ring-fence the armed forces, and their influence in Indian society – a program that was given fresh urgency in 1958 by the military coup in next-door Pakistan (an occurrence that was worryingly praised by Field Marshal Cariappa, who had recently retired as Army chief). A highlight – or, rather, lowlight – of that ring-fencing programme was the appointment of Krishna Menon, a powerful, abrasive, leftist intellectual, as Defence Minister. It was an attempt to put the armed forces unambiguously in their place. Unfortunately, it also had the unintended side effect of leading to the stinging defeat of 1962, but that is a different story.

By the 1970s, the Indian armed forces had finally been rendered ‘coup-proof’ by a comprehensive system of checks and balances that had been put in place. And that might be considered to be one of the major achievements of the Nehru era: ensuring the durability of Indian democracy. It’s an achievement that is not sufficiently recognized; an achievement underscored by the fact that all our South Asian neighbours – Pakistan, Bangladesh, Burma and Sri Lanka– have experienced military coups, actual or attempted.

Wilkinson explains how this ‘coup proofing’ was implemented, through a package of carefully thought-out measures, ranging from diversifying the ethnic composition of the armed forces to setting up rugged command and control structures, re-casting the order of precedence between civil and military authorities, paying close attention to promotions, disallowing army officers from making public statements, creating a counter-balancing para-military force, and topping off this entire effort with little touches like ensuring that retired chiefs of staff are usually sent off as ambassadors to faraway countries.

At some level it is all about politics and political institutions. Whether they see the role of the army in a democracy as a threat or as a welcome, goes onto shape things for foreseeable future.

Gold standard in Daesh (Islamic State of Iraq and the Levant)

July 18, 2016

This news came somewhere in early July but forgot to blog about it:

Daesh have began recently the use of a gold dinar as their currency standard for commercial trade, denouncing the usage of paper currency printed by US’ ‘crusader Federal Reserve institution’.
According to Al-Masdar News, oil merchants in Deir Ez-Zor, Syria, were instructed to use the gold dinar if they were to conduct oil purchases from Daesh-held oil plants. The Daesh gold dinar is proclaimed to have a value that equals 190 US dollars.
Hmm… No other details are there on the mechanics of the currency regime. What is Daesh? It is Arabic name of dreaded organisation ISIS.
This blogpost argues how the idea shaped earlier in 2015:
From an historical perspective, the picture that Daesh paints about the gold standard is rosy and oversimplified. I must give them credit, however, for presenting a much better description of the prevailing balance of US dollars outside of US borders acting as the global reserve currency, and how these things are tied to rates of American borrowing that are unsustainable. Daesh is certainly not the only group making this argument- their hatred for the US Federal Reserve is most notably shared by libertarians in the USA, an interesting overlap the video never explicitly addresses. Daesh then offers its own solution- a return to real gold and silver coinage and not fiat notes- which it claims will bring down the American financial empire. Let’s look at the  history to understand the problems of gold coinage and see what Daesh offers, if anything, as solutions.
Interesting bit..

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