Archive for June, 2017

The Bank of England risks forgetting its history (parallels with RBI?)

June 23, 2017

In the recent MPC meeting, Bank of England voted 5-3 to maintain status quo policy. The 3 dissenters suggested a rate hike citing inflation concerns:


Kala Ghoda-Fort and the making of a high-street retail hub

June 23, 2017

Interesting article in Mint:

With its aesthetic pull and old-world charm, the Kala Ghoda-Fort precinct that is aspiring to be the equivalent of London’s fashion centre has become a draw for the best-known fashion labels and designers

 Lots of history here..

The investment advice given by bank salespersons is like standup comedy

June 23, 2017

Dhirendra Kumar of Valueresearch does not mince words here:


Bengalureans oppose Hindi imposition on Namma Metro…

June 23, 2017

Last Sunday, Bangalore Metro (proudly called as Namma or Our Metro) opened an important line which should help commuters immensely after all these years of wait.

However, there is another controversy which is brewing up in the city, This is over imposition of Hindi on the Metro stations:

A day after social media buzzed with protests alleging hegemony of the Hindi language in Namma Metroannouncements, signage, display boards at stations etc, the Kannada Development Authority (KDA) issued a show cause notice to Bangalore Metro Rail Corporation (BMRC) MD Pradeep Singh Kharola.

The Authority says that BMRCL is a state-owned company and has violated various notifications in using Kannada and promoting the local language, and that the use of Hindi is “not necessary” in its premises. However, BMRCL is not a state-owned company, but a joint venture between the Centre and state.

The notification further says: “It is a contempt of court order in which the government says usage of three languages is okay only if it is a central government agency. Since BMRCL is under the state’s jurisdiction, it is not necessary to use or impose Hindi. It is sidelining Kannada. BMRCL must send an explanation in a week.”

KDA focuses on implementation of Kannada in the administration of various state government agencies and allied institutions.

On Twitter, the language debacle started on Wednesday evening when a set of pro-Kannada groups slammed BMRCL for using Hindi signage and announcements in its premises, saying a third language (Hindi) is not mandatory. They even compared Namma Metro with Delhi Metro which uses only two languages — English and Hindi. Using the hashtag NammaMetroHindiBeda, the campaign quickly kicked up a storm and became one of the most trending topics. 


SG Siddharamaiah, chairperson of KDA said, “In Bengaluru, after Kannada, there are a maximum number of Telugu, Tamil and Malayalam speakers, then Gujarati, but the Hindi speaking population is only about 2%. So BMRCL should include Telugu, Tamil and Malayalam also. Basically, the three-language policy is valid for central agencies like the Railways, post offices and PSUs. It is anti-constitution to impose Hindi and not give priority to Kannada. Tomorrow, even the BMTC might use Hindi and say they’ve got directions from the Centre.”

Here are views of two experts on the topic.

The history of language policy in India continues to remain a bitter one…

Shaping Coimbatore as a smart city…

June 22, 2017

Interesting discussion:

Coimbatore is one of the “lighthouse cities” in the smart cities mission and its smart city proposal was ranked 13th among the 100 cities chosen under the mission. The city and its proposals focussed on the ecological restoration of its lakes that are its raison d’etre. The other feature of the smart city proposal was its resounding citizen participation programme. Coimbatore is expected to receive technical support from the German government for designing smart infrastructure projects.

The case of Coimbatore was discussed in a workshop on smart cities organised on 6 and 7 June 2017 under the umbrella of the German House for Research and Innovation (DWIH) by the Heidelberg Centre South Asia (HCSA) and Observer Research Foundation (ORF). Other partners included Friedrich Naumann Foundation, the School of Planning and Architecture (SPA), the Indian Institute of Architects (IIA Coimbatore Chapter) and the Bavarian-Indian Centre (BayIND). This workshop, second in the series, was held in collaboration with local institutions PSG College of Technology and Kumaraguru College of Technology (KCT-BS). The first one was organised in Shimla on 19 and 20 May 2017.

Lots of history behind Coimbatore. It has been a so called smart city for a while as this remark suggests:

The significance of participation exercise in inclusive planning was highlighted by Mr. C.R. Swaminathan, President, Residents Awareness Association of Coimbatore, during his keynote address. It was mentioned that Coimbatore is a very progressive city and open to ideas for city development.


SBI Exchange Traded Fund becomes country’s largest mutual fund scheme..

June 22, 2017

This is a fascinating development and comes sooner than expected. In a recent post, one argued that time for passive/exchange traded funds is about to come.

Now, one sees SBI ETF Nifty 50 overtake HDFC Equity to  become the largest equity fund. The fund though has not grown due to retail money but due to changes in EPFO rules which allows larger equity exposure.


How did Japan enter the world markets during the first age of globalisation..

June 22, 2017

Interesting research by Profs. Christopher Meissner, John Tang

Economists have long been interested in the dynamics of comparative advantage, but have only recently begun to use detailed product-level data in their analysis. This column examines the Japanese experience after the liberalisation of the 1850s. It suggests that trade costs, destination market demand conditions, and product specific factors played key roles in Japanese exports growth. Roughly 30% of growth in exports between 1880 and 1910 came from shipping new goods to new countries, selling new goods to extant trade partners, and introducing existing products to new countries.

Even during early 20th century, Japan was thinking of entering international markets via new products, new markets and so on. Fascinating..

What is it with Turkish Lira demonetised notes that interests currency exchangers in India?

June 22, 2017

Turkey demonetised a series of notes in 2010. The demonetised notes cannot be used for transactions but can be exchanged at central bank offices. The government has given a 10 year window (10 years!) to exchange the notes which is quite something.

This morning there was a news in Bangalore papers about busting of a gang which offered exchange for the Turkish demonetised notes:

It was a hoard of demonetised currency with a difference: not Indian rupees for clandestine exchange, but Turkish lira with a face value of ₹71 crore.

A group of four in Bengaluru, including a 40-year-old constable, tried to sell the demonetised lira to a businessman, police said. All four were arrested on Tuesday and 78 notes of 500,000 denomination recovered. The exchange rate is ₹18.27 to the lira. “Though the currency has been demonetised in Turkey, it is redeemable and legal tender. It can be exchanged till December 2019,” said City Police Commissioner Praveen Sood. The gang was busted while negotiating the sale for ₹27 lakh at a multiplex in Marathahalli.

While doing google search, I came across three more cases of similar operations being busted, all in Hyderabad. On May 16, 2016, Nov 16, 2016 and March 22, 2017  .

I have always been fascinated by these cash operations. There should be some linkages and reasons to see demonetised Turkish Lira first finding its way in India and then being exchanged…

Argentina manages to sell a 100 year bond!

June 21, 2017

Despite all the noise about Argentine economy, the investors continue to buy their bonds. And that too 1oo year ones:

Hyman Minsky must be rolling in his grave at the sight of a country with as checkered a long-run economic history as Argentina successfully placing a 100-year bond in the market. It would have been for him yet another indication of how little markets seem to learn from past experience. It would also likely have been for him a red flag as to how complacent global financial markets have become about risk and how all too likely it is that those markets are now setting up the very conditions for another major global financial market meltdown.

Against the backdrop of the extraordinarily easy monetary policies that have been pursued by the world’s major central banks over the past several years, global investors have been forced to stretch for yield by moving up the risk curve. Taking advantage of these favorable market conditions for issuers, the Argentine government has now successfully placed a 100-year bond in the amount of US $2.75 billion at a rate of 7.9%. A further indication as to how desperate global financial markets have become for yield is the fact that Argentina received bids in the amount of US $9.75 billion for those bonds.

In rushing to buy these very long-dated bonds, global investors are choosing to ignore how poorly managed the Argentine economy has been over the past century. They are also choosing to overlook how divided the country remains today and the questions that all too many years of past mismanagement must raise as to the country’s ability to honor its very long-dated debt obligations.

So much so for economy fundamentals and all that..

Thinking about financial independence of central banks…

June 21, 2017

Central bank independence is perhaps one of the most discussed economics topics. Econs have  divided central bank indep into two parts: goal independence and instrument independence. Goal means what a central bank should so and instrument is a way to achieve goals. In an optimum case, governments set goals and let central banks set instruments to achieve those goals. However, one sees central banks getting into setting goals and governments interfering in instruments leading to all kinds of frictions.

There is another dimension of independence which is missed- financial independence. Do central banks have enough resources of their own to sustain their operations? Or are they reliant on regular support from Government to run the show.

This note from ECB discusses financial independence of Sweden’s Riksbank:


ECB trying to caution Euroarea Governments over war on cash…

June 21, 2017

Interesting developments in Euroarea.

Both Portuguese and Belgian Governments are trying to be aggressive over their war on cash. They recently took more measures and asked ECB to share its opinion on their meaures.

ECB shared its opinion (Portuguese here and Belgian here.) In both, ECB has a common thing to say:


Comprehensive Guide to understand statistics presented in RBI’s Monthly Bulletin

June 21, 2017

This is a useful publication from RBI:

The Reserve Bank of India today, released a Comprehensive Guide for Current Statistics of the RBI Monthly Bulletin. The Current Statistics portion of the RBI Monthly Bulletin contains summary forms of statistics and information which reflects the changing pattern of economic activity in the country. The contents of the Current Statistics are reviewed and reoriented from time to time to capture the development in the Indian economy.

The Monthly Bulletin currently contains 46 tables which cover balance sheet of the Reserve Bank, money and banking, prices and production, government accounts and treasury bills, financial markets, external sector and payment and settlement systems. Apart from the print version, time series versions of all the Bulletin tables are available through the Database of Indian Economy (DBIE) (URL

This guide explains various data items and linkage among different tables which will be helpful in enhancing the understanding of the data.


The farmer protests reflects India’s money illusion problem…

June 21, 2017

Interesting piece by Niranjan. He says the recent farmer protests due to fall in prices of agri goods despite a record agri production reflects nothing but money illusion. It is the old problem where people attribute rise in prices to rise in well-being.

The recent farmer protests in some parts of the country throw fresh light on an old economic problem. People think in nominal rather than real terms. Price changes matter. The paradox of farmer protests when farm output is at record levels is less puzzling once we take falling food prices into account. It is the nominal rather than the real trend that is hurting farmers. It is useful to remember that two of the biggest movements launched by M.K. Gandhi were timed with the deflation in farm prices after World War I and the Great Depression across the world.


The recent drop in Indian inflation provides an excellent opportunity to think more clearly on the old problem of nominal versus real variables in an economy. It can also offer some clues about why this does not “feel” to be an economy growing at around 7%. This has been a common complaint

The answer could be that human psychology—or feeling of confidence or pessimism—is deeply affected by the trend in prices rather than in output alone. Indian workers, companies, investors, savers are so used to high inflation that lower nominal numbers because of the drop in inflation is a fact that they have psychologically not adjusted to. The Indian economy is not yet out of the woods but the money illusion is making the situation seem worse than it is. Think about it.


Common Economics proofs techniques: Unlearning Economics edition…

June 20, 2017

Unlearning Economics lists several proof (or proofing ) techniques by economists. Another ouch moment for economics students:


Have international financial centres lost their mojo?

June 20, 2017

Not one it. They have only become stronger as this post from IMF suggests. Infact, earlier these centres were home to financial corporations.Now even real sector firms are crowding in:


Leontief on the dismal state of economics

June 20, 2017

How economists including eminent ones have argued about dismal state of economics for a while now but have been ignored.

RWER blog points to this interesting lecture from Wassily Leontief .It is part of his Presidential address delivered at the eighty-third meeting of The American Economic Association in 1970 (full lecture here):

Much of current academic teaching and research has been criticized for its lack of relevance, that is, of immediate practical impact … I submit that the consistently indifferent performance in practical applications is in fact a symptom of a fundamental imbalance in the present state of our discipline. The weak and all too slowly growing empirical foundation clearly cannot support the proliferating superstructure of pure, or should I say, speculative economic theory …

Uncritical enthusiasm for mathematical formulation tends often to conceal the ephemeral substantive content of the argument behind the formidable front of algebraic signs … In the presentation of a new model, attention nowadays is usually centered on a step-by-step derivation of its formal properties. But if the author — or at least the referee who recommended the manuscript for publication — is technically competent, such mathematical manipulations, however long and intricate, can even without further checking be accepted as correct. Nevertheless, they are usually spelled out at great length. By the time it comes to interpretation of the substantive conclusions, the assumptions on which the model has been based are easily forgotten. But it is precisely the empirical validity of these assumptions on which the usefulness of the entire exercise depends.

What is really needed, in most cases, is a very difficult and seldom very neat assessment and verification of these assumptions in terms of observed facts. Here mathematics cannot help and because of this, the interest and enthusiasm of the model builder suddenly begins to flag: “If you do not like my set of assumptions, give me another and I will gladly make you another model; have your pick.” …

But shouldn’t this harsh judgment be suspended in the face of the impressive volume of econometric work? The answer is decidedly no. This work can be in general characterized as an attempt to compensate for the glaring weakness of the data base available to us by the widest possible use of more and more sophisticated statistical techniques. Alongside the mounting pile of elaborate theoretical models we see a fast-growing stock of equally intricate statistical tools. These are intended to stretch to the limit the meager supply of facts … Like the economic models they are supposed to implement, the validity of these statistical tools depends itself on the acceptance of certain convenient assumptions pertaining to stochastic properties of the phenomena which the particular models are intended to explain; assumptions that can be seldom verified.

Criticism still remains valid and will remain ignored as well..

What right does Finance Minister have to deny loan waivers to farmers?

June 20, 2017

Interview of Prabhakar Kelkar, Vice-President of Bharatiya Kisan Sangh.

He says the country is sitting on a volcano with farmer unrest everywhere.


Pune Municipal Corporation Bond Issue Oversubscribed

June 20, 2017

Interesting update from Ira Dugal. Pune Municipal Corporation issued a bond worth Rs 200 cr and got oversubscribed by 6 times. Will this see revival of municipal bonds in India?


How reading Annual reports of companies can reveal the secrets a company wants to hide…

June 20, 2017

Nice piece by Narendra Nathan of ET Bureau.

Tells you what all key things to look into while reading annual reports of companies..

Politics and Economics of Mathura’s temples…(similarities with Central Bank Governance??)

June 19, 2017

Fascinating piece on politics/governance and economics of Mathura’s temples.

Apparently, the government wants to regulate these temples to ensure tourists are not looted . In a way similar to Goa’s taxi case, but here we cannot really have competition. Thus, the government wants the pandits to be regulated under a Board to manage affairs. Obviously, the pandits/priests are not amused:


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