Change = constant

Human societies are resistant to change, it seems. Bankers’ unions in India often protest against any kind of change, whether its for the good or bad. I remember the furore in nationalised banks when computers were introduced in the late 90s to maintain accounts. Tellers would spend enormous amounts of time punching the codes on the keyboard, frustrating bank customers to no end. I believe the conspiracy continues to date in nationalised banks.

Another change is in the academic front, as more and more schools turn “international”, adopting IB, IG or Cambridge curricula, they are also moving to online examinations that require little to none writing by students/candidates. The benefits of this are enormous as randomly distributed questions can be programmed for different students thereby foregoing the whole paper-leaking/copying process and examination results can be announced immediately. I foresee protests, over digitzation of school exams, by teachers who would otherwise be paid extra money to validate and assign marks to the answer sheets of each and every student.

In recent times the uproar over a Billionaire being elected as President of the U.S.A is also a case in point. So the man has funny mannerisms, and probably tiny hands too, but in an age when countries are competing against each other on GDP growth numbers and Debt to GDP ratios, having a businessman as President is probably a good idea. They pulled out all stops when they elected a once-bankrupted businessman, who would know how to leverage the system to his benefit. 

Protests against President Trump have focused on how unPresidentially he behaves. Well he’s not a career politician, and so he might need to learn some people-skills while at it. The important thing to note is that he defeated a career politician who seemed to have overwhelming support from more vocal citizens of the U.S., and yet against all odds won the elections because of a need for change. And President Trump is ushering in the change in the face of protests. (The U.S. citizens voted him to power based on his agenda and manifesto. One cannot blame him for doing what he promised to do.)
Closer home, the big debate on whether Indian GDP numbers reflect the real state of the economy is raging on between Harwardians and Hard-workers. Chinese GDP data has been treated with suspicion for many years because of the lack of transparency and methodology to explain the data. Perhaps we are “Making” in India the numbers that ought to raise the country’s ratings. More importantly, why should the ratings deny the Indian economy any legitimate investments? The blip in the Indian economy caused by the Demonetization episode may have long-term impacts whether positive or negative, but in the near-term it will bring to the forefront a parallel economy that was so far hidden in plain-sight. This should motivate investors (as long as they can play along the Nationalism charade).

A recently released report by the US agency National Intelligence Council also seems to suggest that countries will increasingly become protectionist in the years to come. The shrinking of the globalized markets should be seen as an opportunity to fix gaping holes in an economy that make manufacturing unfeasible. Think of it as a reset button of sorts.  

Change is imminent!

Jingoism in the Shark Tank

A recent analysis of global emerging markets seems to suggest that India is the least attractive amongst its peers. Mexico was adjudged as being the most attractive since its currency had crashed after Donald Trump’s presidency win.

Credit rating agencies analyse macro-economic data collected over several years and compare the data against their projections for the next few years. This “simple” process takes into account the reported GDP of a nation, its Debt, Current Account Deficit, and Balance of payments amongst many other indicators/points. These data points form the basis of the forward projections, coupled with a political risk analysis. Assigning a political risk assessment for a country such as India may seem difficult, but given the historical data available to analysts, it can be correlated much easily. For example, an incumbent government might consider populist measures to ensure re-election, but the impact of such measures on the economy are worked into the projections based on past incidence. The projections are then compared with those of similar nations and a rating is published for each sovereign nation. This report is then distributed amongst the agency’s clients who then allocate funds to invest in a “basket” of countries depending on their strategy.

Mexico is attractive now for 2 major reasons: Cheap labor & Currency exchange rates that make exports from Mexico more attractive. These were the very attributes that made China the world’s manufacturing hub. (Well, the government mandated aggressive pricing also helped. A lot!)

One might say a Trump presidency could be a blessing in disguise for the Mexican economy, but mere wishful thinking alone cannot help Mexico. The right amount of capital investment in manufacturing, processing, storing, logistics, etc. would determine future prospects. All in all, growth is a matter of time.

A basic thumb-rule of investment is to buy low and sell high. Therefore, it is only fair that the cheapest country in terms of valuation would attract the largest share of sovereign investment. India attracted a lot of capital in the past decade, during which the economy grew on account of pro-business government policies and favourable global conditions. In this context, one might even consider moving India into a sub-category of partially-developed nations. Much like the middle-class in India was sub-divided (by the people) into upper-middle-class and lower-middle-class!

India is going through a major economic change triggered by the Demonetization process in November last year. The negative analysis hinges upon metrics that are prone to revision. The recently announced India GDP data that flew in the face of rating agencies would hold the clue to the revision. If the GDP data were to be taken at face value, India would retain its “attractiveness” as an emerging market, thereby leading to further in-flows. Alas, the GDP data released by the Central Statistics Office of India seemed so incredulous, it would require a serious re-thinking of economic theory to digest the data. An event such as Demonetization has no recent precedent and therefore a lot of GDP projections may miss the mark. Think alternate-reality.

The Indian government in its quest for upgraded ratings by credit rating agencies had snubbed some foreign media outlets by not allowing them to attend a news conference, kicking off a virtual war with international news agencies in India. With the scare of being branded as anti-nationalist, a lot of rational citizens are silent on such issues, and thus it is the analysts at rating agencies who state the facts in their reports. Apparently nationalism-driven aggression is the most favored action of the government of the day. One might also note the eagerness displayed by the Government to score a ratings upgrade which begs a bigger question: Why hasn’t the government developed its own rating agency yet? After all, why bother dealing with the videshi companies when a yoga-based ratings system can be developed in the foothills of the Himalayas, or at the banks of the Ganges.

In the absence of irrefutable data, it is only fair that analysts maintain their ratings. After all, the analysts who dared not upgrade the Indian economy, couldn’t possibly be a right-wing hindu nationalist with a Namo wallpaper on his smartphone.

A narcissistic government would do well to pay heed to unbiased analysis of its economic data. India is being compared with China for the unreliability of GDP data for the first time in several decades. This fact alone should alert the government to the perils of its actions in the global scenario.

Until the Government can replace analysts with their loyalists, India might not see a AA+ rating anytime soon. Jingoism might play well in the political arena, but in the shark tank of economics, its strictly financial performance that matters. No amount of Modi-fication can alter ground realities of a slowing economy.

Christmas in Corbett

Christmas in Mumbai is more about turning down the fan speed or turning off the air conditioner, but to experience the true magic of winter, we head for the mountainous parts of North India that are otherwise un-reachable for a weekend trip.

As last year, our first port of call was Delhi from where we proceeded to Corbett national park. The weather in Ramnagar was simply outstanding. Pleasant during the days and cooler in the nights with temperatures ranging between 16-11 °C.

Our resort was situated on the banks of the river Kosi in Dhikuli village, around 11 kms out of Ramnagar, Uttarakhand. The crisp cool air was fresh and unpolluted.

View from our room : Dark clouds in the sky at 4:30pm

As we settled in our room, around 4:30pm dark clouds had shrouded the otherwise blue skies. By 5:30pm it was raining steadily with thunder and lightning providing the much needed streaks of lights in complete darkness. The ambient temperature dropped by 3-4 degrees, as we thought of venturing out for dinner with our teeth chattering.
I had been referring to the TripAdvisor app on my phone along the way, picking out places to dine at after reading reviews. A recommended place called “Safari Cafe” seemed to offer us sufficient variety to suit all age groups, and so we thought of a visit the next day. The owner of the cafe, a gentleman by the name of Sukhwinder Pasricha, extended a warm welcome with his wit and experience in hospitality. In the evening he set up a projector in the cafe to play videos shot by people who had encountered tigers during the safari trips in Corbett. Kids, to say the least, were enthralled by the experience. Thank You Mr. Pasricha!

Our favoured dining spot in Corbett

Post lunch, our scheduled safari trip inside the Corbett national park was embarked upon. We were travelling in a topless Gypsy, with the cold wind smacking our faces and running a number in our ears.

Gypsy ride

Once we went past the first check-post, the adventure unfolded as our driver/guide spoke to us about the entire sanctuary and it’s vastness. As we were approaching a small bridge, the Gypsy slowed down and our guide told us excitedly that there was a wild elephant walking on the road, a few metres away from us. 

Caution! Wild elephant on road!

As is the norm in these parts, all vehicles must give way to the wildlife and thus our Gypsy had to be stopped until the elephant had crossed the road back into the jungle. This gave us an opportunity to take a few pictures of the majestic animal going about its business. Besides, elephants in these parts are known to spontaneously rampage through the jungle causing a lot of destruction as a by-product of their rage. It is therefore a general practice to avoid confrontation with these giant beasts in their natural environment.

Our guide then showed us ficus trees (strangler fig) that grow around other trees and absorb away all the nutrition from the host tree ultimately killing it before withering away themselves.

Ficus tree in the jungle

We saw a couple of woodpeckers at work. The guide said these birds are considered  doctors of trees because they feed on termites, but they are shy creatures and soon hid themselves from our view around the tree trunk.

Dr. at work

We did spot the occasional barking deer, spotted deer and Hog deer, but the experience of venturing into a protected habitat for wild animals is always thrilling. More importantly, there’s something magnetic about Maggi noodles in shivering cold weather. Even kids who are otherwise fussy eaters, happily gulped down portions of noodles, relishing the warm flavors.

The next day, we had an open agenda and thus ventured around the resort. We located a few individuals who were conducting tours of the Sitabani forest on Elephant-back. The mahout directed us to a ladder and platform from which we could mount onto the padded crib-like seat that was secured around the elephant’s body.

Once all four of us were securely seated, the mahout began the tour with the elephant obeying him. The elephant then walked on a narrow path made between two farm-yards towards the Kosi river. As we reached the edge of the farmlands, the white round pebble-shaped boulders of the Kosi were visible, as was a 45 degree gradient down to the river bank! The elephant adapted to the terrain superbly well, meanwhile we were saying our last prayers. For if the beast were to misjudge a step, or falter in anyway, it was curtains for us. 

View of the Kosi river banks.

Thankfully, we managed to get past the steep decline and onto the river banks. The elephant then made its way through bushes and shrubbery to the very edge and walked right through the algae and fish infested waters onto the other side. 

Once across the river and into Sita bani forest the ambient sounds of human activity were replaced by the rustling leaves as we brushed past bushes, trees and vegetation deep into the forest. 

Caught in the act! : Spotted deer

Our mahout whispered and pointed out to us as we encountered wild animals in their natural habitat. A spotted deer didn’t even think twice and carried about with its business, chewing leaves as the elephant stood a few feet away from it, with us atop taking pictures. The silence was only broken by the excited voices of children even as the mahout shushed us to ensure that the animals do not get startled.

The silence and the multiple layers of bushes, shrubs all made for an eerie experience. The entire jungle experience lasted for 90 minutes, with the elephant posing for a “salute” across the river on our way back.

Successfully completed tour of Sitabani forest.

We enjoyed every moment of this trip and would highly recommend the elephant tour. The next day, it was time to bid adieu to our home away from home in Corbett. 

Though we didn’t encounter any tigers in the region, we came away with a sense of awe and respect for nature and wildlife.

A case for legalized Gambling

Some of you may remember the night of November 8th, 2016 when the honorable Prime Minister of India addressed the nation with his appeal for a non-corrupt nation and the demonetization of high-value currency. (Yes, brings back the pain doesn’t it?) As it turns out, the entire scheme was a gamble on several levels : Hoarders of unaccounted-for money would have no exit opportunity other than depositing the tainted money in their bank accounts. Income tax officers would have a lot of new tax-payers to assess. Banks would get huge sums as deposits and lead to lower interest rates owing to excess supply. Undeposited currency would cease to be legal tender and hence land the govt. a windfall profit. (How? Think of a casino that gave you chips to play with, but you forgot to cash them on your way out.) All in all, the objective of a virtual cleansing of the economy would be achieved in a short span of time. But what if it doesn’t?

The gamble might end up giving the govt. rich dividends in terms of an unassailable political lead over all the other contenders or it might cause the eventual demise of the govt. Not very good odds, I might add. In the land of the Mahabharata, where a kingdom could be staked away in a gamble, this is small fry. Yet, state governments look down upon gambling as a nuisance and social evil. On one hand while Bhaang is openly and legally sold in Haridwar, Rishikesh, & Varanasi, gambling on the other hand, remains a social evil as per the powers that be. So the lowest strata of society can have easy access to a real social menace while Casinos where barriers of entry can be enforced, and where super-tax revenues can be realised, remain taboo. Many prominent citizens have admitted that legalisation of sports betting can be a lucrative source of revenue while promising better monitoring, and regulation of sports, but state governments seldom get swayed by voices of logic and reason. (Sure! Build a mega structure in the middle of the Arabian Sea to pay homage for the nth time)

Revenue earned from the casino industry in Goa during FY 2012-2013 totalled upto Rs.135 Crores from just 10 On-shore casinos and 5 off-shore casinos. The industry also contributed towards job-creation to the tune of 5000 employment opportunities in the state apart from providing an additional stream of tourism. Rough estimates suggest that a revenue of $1.1 billion can be collected by 2021 from Greater Mumbai alone! It’s no surprise then that gambling firm Delta Corp. is trading at several multiples of the EPS with presence in the states of Daman and Goa.

On the flip-side, anti-gambling laws date back to 1867 and stipulate a fine of Rs.200 or imprisonment of upto 3 months for breaking the law. Just as other obscure laws that were handed to us by the British, this is an oft abused law for its harassment value. A serious re-think on such outdated laws would be real reform.

If nothing else, state governments should realize that simply making laws cannot transform society. The willingness to change must come from within. We all know how the “Dry state” of Gujarat has easy access to bootlegged alcohol, and is the epicentre of Dabba-trading rings that bye-pass all stock exchanges allowing traders (read gamblers) to trade on their favourite stock or index with settlement in cash. Clearly, the people like their alcohol and their bets on the Nifty. Perhaps the Government should try and dial into these hard-coded basics of our society, and earn revenue in the bargain. Afterall, if the PM can gamble away his voters in the name of Swachh Bharat, the citizens should be able to stake their own money too.

2016 : The Disaster Movie

I have been waiting for ground-breaking events that would jolt me into writing on this blog. Little did I know there would be a double-whammy in November. The demonetization of High-value currency in India, followed by the shock (?) Presidential win by Donald J. Trump in U.S.A, has given enough material for creative people around the world to last atleast a couple of years.

Personally, I’d like to see a crossover story that traverses both events, like that of a Hawala Operator who took bets on Trump winning at odds of 5 to 1, in 500 and 1000 Rupee notes, or for a more comic-based story, something along the lines of a Heist on 7th November 2016, with the money being buried under a large “T” and a whole host of funny characters chasing after clues to the whereabouts. Yes, tried and tested formulas often receive the best response.

But mentioning such stories now would amount to insensitivity towards the millions who are either facing a cash-crunch or protesting their President. Never in the recent history have we seen an American President being protested by his own people. Never in recent history have we seen Indian citizens die in a queue for exchanging their own money which had been suddenly pronounced Non-legal tender. The winds of change have been working overtime it seems.

One thing is for certain : Trade dynamics around the world are in for a big change. The demonetization of high value currency in India will prompt the non-corrupt to reclaim their place, though not-necessarily affect efficiency. Scores of small-scale industries across India that were used to the system of under-reporting labourers or workforce would either have to correctly report their labour force and hope for enhanced Nationalism to grow their revenues or become unsustainable. Perform or Perish being the prominent theme.

Sure, the Government of India will finally have its way with the S&P ratings that would not budge into positive region, come what may. I fear this has more to do with politics and governance than credit ratings. After all, the shock-move will suddenly propel India’s GDP into the stratosphere way above China’s, attracting investments from afar. A clear case in favour of re-election (and for a re-rating). I would be happier to see the average Indian citizen investing in the financial markets through legitimate means to counter the threat of contagion by Foreign Institutional Investors. If the Indian Pension Funds could break free from their colonialistic thought-process and invest aggressively in equities, the market liquidity would soar, stock manipulators would have to work really hard for their sliver of illegal gains, and the average Indian investor would have greater peace of mind.

I can already imagine the large number of small-businesses that will suddenly become visible to the tax-man, leading to a wider tax-base, greater tax compliance, and most importantly declining influence of politicians. The long-term effects are positive and should make Indians proud of the bold step, but I’m sceptical about maintaining the momentum. Every Bollywood cliche has time and again reinforced the notion that corruption runs deep in our society. Imagine the scenario where a slum-dweller suddenly wakes up and realizes that he can no longer bribe the local utility guy for the illegal water connection, or the illegal gas cylinder. In some cases, even electric supply is illegally acquired by slum-dwellers by paying a monthly fee to “distributors” who are nothing but local thugs. I do not see these irregularities being brought under control. Rome, quite understandably, was not built in a day.

Undoubtedly this event belongs in the Disaster Movie genre. I shudder to think what would happen if suddenly the slums disappeared. Who would deliver the milk? Who would wash our laundry and who would clean our homes? Are we suddenly going to time-warp into a society that pays minimum wages and has labour laws that protect the urban workforce from being layed-off? Are we going to see traffic discipline on Mohammedali road because all the traffic cops have become fearless? The horror!

On the other side of the blue orb that we inhabit, the elections for the Most Powerful Man on Earth have turned a real-estate tycoon into the Commander in chief of the most in-debt nation. So what is it that makes Trump so hateworthy? Bigotry, Sexism, Chauvinism, – Pooh! the man can barely make a coherent sentence without trailing off like an uncle having Alzheimers. This is the deal of his life though. The Biggest Deal ever! And he seems to have bit off more than he could chew as the lyrics of a famous song suggest, but he seems to know what he’s doing even if he doesn’t seem to look like it. Like a swashbuckling cowboy he unloaded on all of his pet-peeves and then some, probably hoping that the American citizenry would be smarter than him. Little did he know that the ‘Muricans would take him up on his offer to build a wall on the Mexican border, funded by the Mexican government.

Some people draw parallels between running a company and running a country. Well, there are certain major differences : You can’t jail an employee if he speaks against you, but the FBI/NSA can detain suspects for anti-state activities. You can fire an employee if his performance is unsatisfactory or if he acts against the interests of the company, Trump can simply deport people who diss him, or if they’re muslim immigrants. So yeah, I can see how they draw parallels. One would need a shock of orange hair to make the connections.

My view is that given Mr. Trump’s economic policies, the influence of America over the world as a Superpower will wane slowly, giving rise to a Global Power struggle. Nature abhors a vaccuum and thus, space vacated by America would attract contenders like China or India. A surprise dark horse in the form of Indonesia may emerge, but it doesn’t have Superpower material yet. Yet.

The most significant changes are yet to come, and my gut feeling is that we are in the midst of a historic upheaval in global dynamics. Things will likely get a little worse before they can get better. The next shocker might not be in the form of a terrorist attack, but an attack by the Government on its own citizens. The internet, as usual, will have a field-day poking fun at the slightest of actions, indeed transforming the year 2016 into “the year we do not speak of”.