Formation of twenty one new districts in the State of Telangana – Assignment of Lead Bank Responsibility

February 17, 2017

Though formation of 21 districts in Telangana State is a widely political event, it has implications for Indian banking system.

The Lead Bank scheme has to be reorganised. RBI releases the list which also tells you how the new districts have been carved from existing ones.

Nice bit of information..

How personal computers were advertised in the 1990s

February 17, 2017

Superb series of pictures by Ilya Pestov showing advertisement for computers. Today’s generation would barely believe these ads:

oday, hard drives are boring. You can buy a terabyte hard drive for $50. But back in the day, people would get excited when they saw ads announcing even 10 megabyte hard drives.

To prove it, I’ve unearthed some retro computer ads that give you a first-hand look into how computers were advertised before the modern age of smartphones, ultrabooks, and smart watches.

You’ll never be able to look at your gadgets the same way again.



Want to understand the economy? Don’t study economics!

February 17, 2017

Peter Radford has a hard hitting piece and one has little choice but to agree on most points.

One of the most nervous moments one faces as an economist is when one is crowded by families/friends asking you for suggestions to improve their well-being. After all, this is an impression economists have created over the years that “they are the ones”. The bombard of media has also strengthened the impression when so many economists come before the box to tell us about state of economy/investments and so on. We are seen as these magicians. So it is but natural for people to ask you to improve their well-being.

However, here is irony of it all.  It is one thing to talk on TV about things and completely another when family/friends ask for suggestions. One realises how inadequate economics training has been all these years. If one has any suggestion, it either comes out from work experience (say in financial markets) or plain observing/reading about  things outside of economics (following newspaper for local news). The disconnect between modern economics training and reality is so wide (and continues to widen) that it is perhaps one of the biggest Houdini acts that public continues to believe in power of economics.  The crisis has dented the image for sure but given lack of alternatives economists continue to dominate.

Radford sums this dilemma. Don’t study economics to understand economy:

Read the rest of this entry »

Is the banking industry undergoing a change or a transformation?

February 17, 2017

A nice speech by Mr Frank Elderson, Executive Director of the Netherlands Bank.

He nicely mixes the consulting/strategy talk with that of central banking:

Now, the banking industry is facing several challenges. Fintech is rising, consumer trust is damaged and Basel 3.5 is on the horizon. Then there is doubt about the future of Europe, growing criticism of globalisation and uncertainty about the geopolitical landscape. Meanwhile, the world is trying to achieve the Sustainable Development Goals and implement the Paris Agreement.  

Banks will have to adapt – perhaps contribute – to this and the question is how. What is an appropriate business model or strategy? And what is the best form for the key functions that banks perform, such as safeguarding money, providing loans, and determining risk and return? Or is there a future in which non-banking entities perform banking functions?

In discussing these questions, perhaps it’s worthwhile to distinguish between change and transformation. To me, change implies an increase or decrease over time of something while its nature remains constant. Money was first metal, then paper and now digital, but it’s still money. And today’s stock exchanges are in essence quite similar to those established centuries ago.

Transformation is different. It implies something essential changes and a new order emerges. A caterpillar transforming into a butterfly. A child transforming into an adult. Philips, as Hans de Jong so eloquently described it, transformed from a consumer tech company into a health tech one. Transformation takes time, vision and the courage to take tough decisions. And it is anything but easy to genuinely transform an organisation’s culture.

Having said that I wonder: is the banking industry changing or transforming? Perhaps both? I am sure this is something we can debate at our tables later on. For now, I would like to stress that transformation is not just an inspiring concept, but also a practical and operational process. People and organisations have a capacity to transform that can be nurtured. In today’s turbulent environment, banks would do well to evaluate this capacity. It could mean the difference between relevance and irrelevance.

Sums up the issue quite neatly indeed.

He then points to some lessons from the central bank on their work on pension funds:

DNB has conducted research into the capacity of pension funds to transform and we found several things I am sure apply to other industries.

For example, we found that leadership is key. Specifically, individual leaders with the capacity to identify changes in the landscape, develop best-case and worst-case scenarios and create a compelling vision. Also leaders who are able to develop a strategy around this vision and then execute it. The leadership team is of importance, too.

There needs to be openness, trust and diversity in terms of personalities and competences. We also found that pension funds need to be appropriately equipped.

They need to be agile, have an up-to-date IT infrastructure, have sufficient budget and task the right people with the transformation process. And pension funds need to have their house in order. For unless everything runs smoothly, the organisation will focus its attention on managing the present rather than designing the future.

Finally, we found that pension funds need to be proactive. If they wait until the environment forces them to change, they are at risk. Instead, they should proactively adapt. Some pension funds began to transition from a defined benefit to a defined contribution system years ago and they are now in a good shape. Those who haven’t, are struggling to adjust to changing realities. So transformation is a process that can be managed. But the process needs to lead to something. Transformation is a means, not an end. So what is or should be the end result of a bank or the whole banking industry transforming?

He says organisations should have a well-defined purpose (vision/mission?) and work towards their purpose. Netherlands central bank purpose is financial stability (as monetary function in hands of ECB):

De Nederlandsche Bank believes in the value of having a purpose and we cherish ours. We are in this world to contribute to the sustainable welfare of the Netherlands by promoting financial stability. Through this, we also contribute to the realisation of the Sustainable Development Goals. This inspires us and guides us in relating to our stakeholders. And it seems we are not alone in this. Last December, the Dutch Banking Association published a report in which it explored how banks can contribute to the Sustainable Development Goals. I wholeheartedly encourage such explorations.

Many issues simplified..

Battles in history and history-writing…

February 17, 2017

An important cautious piece in Mint. As the current government looks to rewrite Indian history it should be careful. It is fine to think about rescuing Indian history from the Marxian paradigm but one should not fall into another trap:

Winston Churchill once famously quipped that “history will be kind to me, for I intend to write it”. Implicit in his statement was the certitude that those with the privilege of writing history have the first shot at distorting it. And it is often said that the privilege of writing history ends up with the victors. So, who won the 1576 battle of Haldighati between Pratap Singh (better known as Maharana Pratap), ruler of a rump kingdom of Mewar, and the forces of Akbar, the Mughal emperor? The question has gained relevance since three ministers in the Bharatiya Janata Party (BJP) government of Rajasthan have backed a proposal to rewrite the history books for university courses. The ministers contend that the textbooks must be changed to reflect that Singh defeated Akbar and not the other way round, as is more widely understood. Not to be left behind, Haryana’s education minister too is keen on making the same changes in his state.


Clearly, some rewriting is required. Equally clearly—for history is a core component of identity for communities and nations alike—rewriting will be a contentious project. BJP leaders replacing the wrongs of Marxist historians with their own would be exactly the wrong way to go about it. Attempts like the one in Rajasthan will discredit the project beyond rescue.


Vijaywada: A city that remembers and honours its bureaucrats…

February 16, 2017

This is an interesting pointer from Anantha Nageshwaran.

Vijaywada in Andhra Pradesh is a unique place which names its landmarks in bureaucrats which tried to develop the city:

Read the rest of this entry »

In a time of great powers and empires, just Europe experienced extraordinary economic growth. How and Why?

February 16, 2017

Prof Joel Mokyr of Northwestern University sums up years of his scholarship in this article.

One of the holy grails of economic history is how and why did Europe experience economic growth in 18th century. Prof Mokyr says there is no one answer:

How and why did the modern world and its unprecedented prosperity begin? Learned tomes by historians, economists, political scientists and other scholars fill many bookshelves with explanations of how and why the process of modern economic growth or ‘the Great Enrichment’ exploded in western Europe in the 18th century. One of the oldest and most persuasive explanations is the long political fragmentation of Europe. For centuries, no ruler had ever been able to unite Europe the way the Mongols and the Mings had united China.

It should be emphasised that Europe’s success was not the result of any inherent superiority of European (much less Christian) culture. It was rather what is known as a classical emergent property, a complex and unintended outcome of simpler interactions on the whole. The modern European economic miracle was the result of contingent institutional outcomes. It was neither designed nor planned. But it happened, and once it began, it generated a self-reinforcing dynamic of economic progress that made knowledge-driven growth both possible and sustainable.

How did this work? In brief, Europe’s political fragmentation spurred productive competition. It meant that European rulers found themselves competing for the best and most productive intellectuals and artisans. The economic historian Eric L Jones called this ‘the States system’. The costs of European political division into multiple competing states were substantial: they included almost incessant warfare, protectionism, and other coordination failures. Many scholars now believe, however, that in the long run the benefits of competing states might have been larger than the costs. In particular, the existence of multiple competing states encouraged scientific and technological innovation.

Superb read..

There are so many things which we just take for granted now but were so instrumental back then..

How did the heart symbol become mainstream despite being so anatomically incorrect?

February 16, 2017

Zachary Crockett has a terrific piece tracing history of the heart symbol. I mean there is fascinating history even behind things like a symbol.

The heart is a rather unsightly organ. A twisted, bulbous mass of ventricles, veins, and muscle, it inspires neither romance nor lust. Yet in a grossly simplified form, it has become the reigning metaphor of our love.

We’re talking, of course, about the anatomically incorrect heart () — a symbol at once cherished by teenage texters and detested by crusaders of medical accuracy.

The symbol is ubiquitous in our modern world. It dangles from necklaces, earrings, and bracelets. It shows its face in an endless sea of Valentine’s Day cards. It’s emblazoned on t-shirts, graffitied on walls, and is offered, in an endless array of colors, across all mediums of technology.

How did this weird-looking, medically-inaccurate symbol become the go-to representation of the human heart — and moreover, an expression of our love and desire?

More specifically, how did this:

…become this?:

 Read the article for more details..

Zimbabwe’s new currency Bollars meeting same fate as Zimbabwe Dollars…

February 15, 2017

Interesting piece calling Mugabe as King of Funny Money.

The central bank recently introduced a new currency called bond notes which were called as Bollars. But old habits die hard:

Read the rest of this entry »

Did I read this right? Bill in Lok Sabha seeks cap on number of guests in weddings!!

February 15, 2017

Hope there is more to this.  Now the Government proposes a new bill to put cap on number of guests in weddings:

A Bill in the Lok Sabha seeks to put a limit on the number of guests to be invited and dishes to be served in weddings to check “show of wealth” and wants those spending above Rs5 lakh to contribute towards marriages of poor girls.

If a family spends above Rs5 lakh on a wedding, it has to contribute 10% of the amount on marriages of girls from poor families, according to the Bill introduced by Congress MP Ranjeet Ranjan, wife of MP Pappu Yadav.

The Marriages (Compulsory Registration and Prevention of Wasteful Expenditure) Bill, 2016, may be taken up as a private member’s Bill in the upcoming Lok Sabha session. The purpose of this Bill is to prohibit extravagant and wasteful expenditure on marriages and to enforce simpler solemnisation, Ranjeet told PTI.


It says that after this proposed legislation comes into force, all marriages shall be registered within 60 days of the solemnisation. The government may fix the limit of guests and relatives and number of dishes to be served to the guests and relatives for solemnisation of marriage or for the reception held thereafter as it may deem necessary or expedient to prevent the wastage of food items, it adds.

Everything should be registered be it business or marriages..

Increasing awareness towards less expenditure and wastage is fine but a bill to cap/limit is outright crazy. Trust government to keep coming with such ideas..


Creating emerging markets: Lessons from (India’s Business) History…

February 15, 2017

Interesting Conference hosted by Harvard Business School recently. The Conference invited hosts of experts on business history. There are videos of senior leaders and some resources as well..

Read the rest of this entry »

Ongoing battle in Central Bank of Barbados: Board of Directors vs. Governor

February 15, 2017

It is nice to be back to blogging after a short break.

One came across this interesting bit of battle in Central Bank of Barbados. The Board of Governors asked the Finance Minister to fire the current Governor Worrell. On being fired, Worrell used the Court to remain in job:

Minister of Finance Chris Sinckler, represented by Solicitor General Jennifer Edwards, will head to the High Court today to have a temporary injunction preventing him from firing Central Bank Governor Dr DeLisle Worrell lifted.

It is the latest development in a blow-up at the Central Bank which was exposed a week ago by the SUNDAY SUN in which it was revealed that the board of directors was no longer prepared to work with Worrell, who is the chairman.

The directors met with Sinckler days earlier and insisted that if Worrell was not terminated, they were prepared to step down.

Moreover, a major rift had also developed at the bank between the governor and his top management team who claimed he had not held management meetings for almost two years.

Meanwhile former Prime Minister Owen Arthur says Barba-dos is facing a serious financial crisis that must be resolved within the next 90 days in order to avoid a financial calamity. According to Arthur, that is the distinct possibility of the country running out of foreign reserves.

He said the weekend upheaval involving Central Bank Governor Worrell might give the country a chance to correct the disastrous financial policies pursued by the Government.

Arthur, a former Minister of Finance, told the DAILY NATION in New York on Monday that the bad policy of printing money had played a role in both the current crisis Barbados was facing and the Freundel Stuart administration’s move to oust the governor.

Well, well. Another evidence of what Central Bank Board can do
Further, there are economists asking Worrell to go as economy is bleeding:
Economist Ryan Straughn believes that Central Bank Governor Dr DeLisle Worrell is not the only one who deserves to lose his head for poor management of this country’s monetary and fiscal policy over the past seven years.
Speaking on radio here Monday morning in the wake of reports that Minister of Finance Chris Sinckler was demanding the Governor’s immediate resignation, the Opposition Barbados Labour Party (BLP) spokesman suggested that Sinckler should also be forced to step down given that the
Governor is a creature of the Minister of Finance who is ultimately responsible for the current instability of the Barbados dollar “I believe the Governor has embarrassed himself professionally and as a result of that he is now being embarrassed personally,” said Straughn, a former Central Bank employee. 
However, he highlighted Sections 47,48 and 49 of the Central Bank Act to show that “anytime any Governor believes that both the monetary policy and the fiscal policy run contrary to maintaining the fixed exchanged rate in Barbados, he has the responsibility to write the Minister of Finance and state specifically why he has come to such a conclusion and what are the remedies that need to be taken to rectify the situation”.
He was therefore adamant that the current threat of currency devaluation could not be pinned on Worrell alone, since Sinckler was a much as fault as the Governor for the recent money-printing binge. “What you are seeing manifested right now between Bay Street [the seat of Government] and Spry Street [the Central Bank] is just a symptom.
“I believe it is an attempt basically to hang the Governor out to dry [and] he would get no sympathy from me on that from a professional standpoint [since] I think he has done the country a disservice, because the Central Bank’s job is not to support Government, [it] is to protect the mandate of the fixed exchange rate. [But] it has been a willing participant in supporting the policies of the Government, which have led us to this position”, Straughn said.
He also suggested that Prime Minister Freundel Stuart must also share in the economic blame, while contending that the country lost $219 million in the
last three months of 2016.
Interesting case on ongoing issues in central banking.. 
This bit is also interesting:
Apart from the criticism over the Central Bank’s continued lending to the Government, regarded as the printing of money, Worrell has stopped holding press conferences for the past three years, choosing to only issue press releases and media programmes created by the bank with panellists hand-picked by the bank.

History of Kiwi fruit: combines considerable luck and a stroke of marketing genius.

February 13, 2017

This is a fascinating article which points how Kiwis were actually Chinese gooseberries which somehow came to NZ. Then one of the firms renamed it to Kiwi fruit as its shape resembled the Kiwi bird of NZ. Then it just took off:

Historical consensus — as presented on New Zealand’s official history website — suggests that the first seeds arrived on New Zealand at the turn of the 20th century.

It all began in 1904, when Mary Isabel Fraser, the principal of an all-girls school, brought back some Chinese gooseberry seeds from China. They were then given to a farmer named Alexander Allison who, planted them in his farm near the riverine town of Whanganui. The trees went on to bear their first fruit in 1910.

New Zealand’s appropriation of the Chinese gooseberry wasn’t inevitable. Around the same time the first seeds were introduced to New Zealand, the species was in fact also experimented with as a commercial crop both in the U.K. and the U.S., wrote New Zealand plant physiologist Ross Ferguson, one of the world’s top kiwifruit researchers, for Arnoldia, the magazine of Harvard’s Arnold Arboretum.

But, as luck would have it, neither the British nor the American attempt at commercializing the fruit was as fruitful. For example, the first batch of seeds brought to Britain’s Veitch Nursery all produced male plants, thwarting the growers’ plans to produce edible fruit. The same fate befell the U.S. government’s attempt. “It seems ironic that the sending of seed by a missionary to an amateur gardener should eventually lead to a new horticultural industry, when the efforts of the Veitch Nursery and the U.S. Department of Agriculture were so much less successful,” Ferguson remarked in his 1983 essay.

The gooseberry’s rebranding didn’t happen until almost 50 years after Allison’s trees bore fruit, according to New Zealand’s official history, when agricultural exporter Turners & Growers started calling their U.S.-bound Chinese gooseberries “kiwifruits” on June 15, 1959.

The fruit’s importer told Turners & Growers that the Chinese gooseberry needed a new name to be commercially viable stateside, to avoid negative connotations of “gooseberries,” which weren’t particularly popular. After passing over another proposed name, melonette, it was finally decided to name the furry, brown fruit after New Zealand’s furry, brown, flightless national bird. It also helped that Kiwis had become the colloquial term for New Zealanders by the time.

Demand for the fruit started to take off, and by the 1970s, the name kiwifruit took root across the Chinese gooseberry trade, cementing its popular imagination as the quintessential New Zealand product. All this happened while China was busy tearing its own social fabric to pieces, during the decade of terror that was the Cultural Revolution.

“I think it was a matter of luck and suitable climate” that the fruit thrived in New Zealand, Ferguson tells TIME. Now an honorary fellow at the New Zealand Institute for Plant & Food Research, he helped classify the Actinidia deliciosa — the furry, green kiwifruit — as a separate species in the 1980s.

In a twist of irony, Chinese are both the largest producers of Kiwifruit and also think the fruit as foreign..

This is amazing. To see kiwi originate in china is quite similar when people in India are told that potatoes came from Portugal.

Central Banks are served by club of elite PhD economists and suffers from groupstink…

February 10, 2017

A former Dallas Fed employee has written a stinker of a book accusing Federal Reserve (applies to most central banks) for all kinds of things. The book is titled as: Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America.

The WSJ article provides a glimpse:

Read the rest of this entry »

Predicting human behaviour is legal, predicting machines is not?

February 9, 2017

Prof JR Varma of IIMA has a food for thought post.

He points to casinos saying they look for whatever possible ways to predict human behaviour and make you gamble more and more (and lose). However, any person who looks to predict these machines and play the game is deemed as illegal. Why?

Read the rest of this entry »

Would Aristotle have tweeted? Would Isaac Newton be distracted by Facebook? Would Ayn Rand snapchat?

February 9, 2017

An interesting piece by Kirk Barbera.

He says instead of complaining about today’s technology, we should actually be appreciating it. Likes of Rand would would have been amazed by how much technology enables one to do in this era:

Read the rest of this entry »

McCloskey’s Dutch Problem: Capitalist Rhetoric and the Economic History of Holland

February 9, 2017

A nice paper reviewing Deridre McCloskey’s work on Dutch economic history. It is written by Prof. Michael Douma of Georgetown University.

One gets a good glimpse of differences between Dutch and Other Scholars on why Dutch made progress ahead of others:

Deirdre McCloskey argues that rhetoric and ideas were essential for the rise of capitalism in the Netherlands in the seventeenth century. Dutch scholars could benefit from McCloskey’s views on the topic, but they will be reluctant to engage her work because it is void of primary research and does not engage most major works in the relevant historiography. Indeed, McCloskey appears to mostly select older English-language works sympathetic to her thesis, but ignores competing views. Contemporary scholarship, in Dutch and in English, emphasizes the important role of institutions and government actors in early Dutch capitalism. This article aims to situate McCloskey’s work within this literature, with the hope for more discussion in the field.
Superb stuff..

Three months after demonetisation, Adivasis in Maharashtra are still getting IOUs instead of cash

February 9, 2017

Both the Government and the central bank continue to be at their arrogant best by saying cash troubles are all but over. It is the Marie Antoinette moment all over again.

Dejure they may have done away with most restrictions but defacto most restrictions remain. Yesterday there was news that ATMs are again running dry which needs to be investigated for its veracity.

In all this the basic idea of velocity of money has but been forgotten. Demonetisation was not just about taking currency away but hitting the velocity of currency circulation severely. Likewise, remonetisation is not just about replenishment of stock of cash but improve the flow of currency as well. The Rs 2000 note which has partly replenished the stock has failed miserably to resurrect the flow as it was expected.

So we will keep hearing such stories for a while especially from hinterlands. In these places, even stock has not been replenished:

On Sunday, days before the third month after demonetisation drew to a close, a group of men and women gathered under a mahua tree in Khadkipada to discuss what had changed for them since the demonetisation announcement.

The village, home to the indigenous Warli community, is located at the foot of a hilly outcrop around 20 km from Dahanu town on Maharashtra’s western coast. The land here is dry, allowing for cultivation only once during the monsoon. The men tend to their fields during the rains and travel for work for the rest of the year, be it to the Gujarat Industrial Development Corporation as Nimbhal used to, to the brick kilns spread out across Palghar, to fisheries along the coast, or cutting and selling dried grass for press machines.

Nimbhal is not the only one who has had to make do with a limited flow of cash since demonetisation. Cash supply at banks in the area continues to be stilted a month after the deadline to deposit old notes ended. Even when employers pay workers by cheque, there are delays in withdrawing that money, which results in loss of working days. Add to these problems the fact that many in the village, like Nimbhal, do not have bank accounts.

Sunita Narle, a resident, had a few of the old notes she had saved over the years. The news of demonetisation took a little more than a week to reach the village through the men who work outside. When she realised a part of her savings were no longer legal tender, she was at a loss for how to exchange it.

“Since I don’t have a bank account, I gave it to others to deposit,” Narle said. “I have not got the money back yet because there is no money in the banks and my friends have not been able to withdraw it.”

Sakharam Umbersada, another resident of the village who had gathered at the meeting, spoke of problems villagers still faced at the nearby bank branch. “It takes people two or three weeks just to get their money out of the bank,” Umbersada said. “We go to the banks and stand in line, but our number is not called. When big people come, they get money immediately, but not us.”

Instead of shunning all claims that demonetisation woes are all but over, the Government should be more sensitive to what is going around. It should encourage rigorous reporting of facts from all possible areas and share with citizens.  But we have a case where even the central bank refuses to give any details after nearly 40 days of the exercise being over.

It is this arrogance and hubris which eventually is behind all falls from perceived heights…

The economist as an expert: a prince, a servant or a citizen?

February 9, 2017

Recently Esther Duflo’s Economist as a plumber speech made huge waves in economic circles. Earlier Keynes had suggested economists to be humble and competent like dentists and also added various qualities for an economist.

However, all these attributes put economists and their craft on a pedestal over other social sciences (0r studies?).

In this  superb post written from the lens of history of economic thought, Alessandro Roncaglia explores this idea of economist as an expert.

The author says we can divide the role as three types:

  • A prince who leads from the front say an economist as a Prime Minister/Finance Minister etc.
  • A servant who makes policies on behalf of the government
  • A citizen who engages with the public writing and debating actively on policy issues.

The author says increasingly economists are seen in the first two categories but they should try and remain in the third one:

Read the rest of this entry »

RBI courts unnecessary controversy by not inviting The Economist for its post monetary policy press conference…

February 8, 2017

There was big furore last time when Stanley Pignal of The Economist was not allowed to attend press conference post monetary policy decision in Dec-2016.

This time again Mr. Pignal tells us that invites have been sent to journos for today’s meeting but TheEconomist is not invited:

Invites to next RBI press conference have gone out. Sad to say again not invited. Journalists trying to figure out who is.

He also says some other journalist who has been critical of the demonetisation policy has not been invited without naming the person.

This is just needless really. One does not know why these invites are sent. All journos should be allowed if they fit basic guidelines and manners. The central bank should not really disallow a journalist who is critical of monetary policy. It should actually welcome criticism and look to answer questions from critics first.  There is no point in having journalists who are merely going to nod heads and ask meek/usual questions.


We are increasingly told by the government and its esteemed advisers that demonetisation is such a great idea and so on. After all the Central Bank and its Board agreed and advised the government on the idea. Now we are told discussions were on since Februray 2016 on the move.

In such a case, why get into needless controversy. Just let critics come and look to answer their questions.

One does not know what is going on really. New lows for Indian central bank..