Archives 2017-04-03T00:57:18+00:00

ARCHIVED POSTS

Is India headed for a recession

A question I get asked often these days is this: Is India headed for a recession? The standard definition of recession is a drop in GDP for at least two consecutive quarters. In other words, negative GDP growth rates and a contraction in the economy, signified by a decline in real income, employment, industrial [...]

By | September 22nd, 2019|

LOOTING THE RBI

The Reserve Bank of India (RBI) has three main areas of responsibility. It is a banker of banks and is responsible for maintaining public confidence in the banking system. It is also the government’s banker, responsible for managing the country’s money supply--printing new money, destroying old bills, etc. In this role, it helps to [...]

By | September 9th, 2019|

SHOULD INDIA BORROW OVERSEAS?

In the 2019 budget, the FM announced that the government would increase its borrowing in the international market. This was being done to avoid the "crowding out" effect—a phenomenon where the government borrows money that could otherwise have been borrowed (and used more productively) by the private sector. The ubiquitous Pareto principal, also called [...]

By | July 28th, 2019|

ROUGH TIME FOR INDIAN EQUITY MARKETS

The 2019-20 budget is done and dusted. As with most Indian budgets, this one too was a big yawner except in its implications for the stock market. Any prediction about the direction of the Indian stock market must be laced with caution. It is a market driven by a small universe of stocks. Although [...]

By | July 13th, 2019|

STATE-SPONSORED OR MARKET DRIVEN CAPITALISM

Mr Modi will encounter a tough economic climate in his second term. The combination of heightened expectations and a weaker global economy will act as headwinds. Plus, he can no longer deflect the blame to past leaders. A hodgepodge of government schemes, without a clear underlying philosophy, will only expand the reach of the [...]

By | May 28th, 2019|

MODI HAPPENED AT THE RIGHT TIME FOR INDIAN DEMOCRACY

  Truth is not the first casualty of war alone; it is the first casualty of populism Today’s world is being increasingly shaped by charismatic leaders. In the US, Europe, and more recently in India, Indonesia, Philippines, Brazil and Turkey, we see the rise of populist leaders who claim to champion the cause of [...]

By | May 17th, 2019|

INDIA’S GDP GROWTH: FACT OR FICTION

“A single lie discovered is enough to create doubt in every truth expressed.” Recently there has been much debate about the Indian economy. Surveys conducted by government agencies such as the National Sample Survey Office (NSSO) and data collected by reputed private agencies like the Centre for Monitoring the India Economy (CMIE) show a [...]

By | April 23rd, 2019|

INDIA’S FIRST REAL ESTATE INVESTMENT TRUST (REIT)

Stable, liquid and transparent financial markets are a necessary condition for the growth of a modern economy. An economy grows by developing new products and services and incubating new ideas, and this requires capital. Financial markets (also called capital markets) provide a marketplace where savers can find those who need money for new products. [...]

By | March 30th, 2019|

CONTRADICTORY MOVES IN INTEREST RATES

There are broadly two kinds of pension plans. In defined benefit plans, the employer guarantees a fixed (defined) pension benefit to the employee upon retirement. The risk associated with investing the pension corpus is borne by the employer. In defined contribution plans, the contributions made by the employee are defined but the retirement benefits [...]

By | March 5th, 2019|

ABOLISH THE ANGEL INVESTOR TAX

We live in the age of entrepreneurship. The vast majority of products, services and technologies we use today come from new start-ups, and over 70 per cent of global employment is attributed to these new-age entrepreneurs. It is vital for policymakers to understand how this ecosystem works and how to incentivise it to generate [...]

By | February 17th, 2019|

RBI’s INDEPENDENCE AT STAKE

The Ministry of Finance and the Reserve Bank of India (RBI) are engaged in a dangerous game of chicken. Game theory tells us that "winning" or playing such a game to its conclusion is not in the best interest of either player. The consequences will be devastating for the country’s shaky banking system and [...]

By | November 13th, 2018|

VALUE DESTRUCTION IN STATE RUN BANKS

Who pays when you make a mistake? You do. Who pays when the government makes a mistake? Yes, Still you…..Anonymous In a bizarre move the government, which controls seventy per cent of all bank assets in India through state-controlled banks, decided to merge three banks into a larger entity. Two smaller banks, Vijaya Bank [...]

By | October 1st, 2018|

PEOPLE’S FIGHT AGAINST GOVT. CORRUPTION

There is an important and growing trend in democracies around the world. Public outrage over governmental corruption is toppling more and more leaders. In the last six months alone, leaders from Malaysia, Spain, South Africa, Armenia, Peru, and Slovakia have been forced to resign on charges related to corruption. In the past five years, [...]

By | August 16th, 2018|

INDIA’S LOST DECADE

Countries pass through stages on the road to economic prosperity. Economist W.W.Rostow postulated five such stages of economic development: the traditional society, pre-take-off, take -off, drive-to-maturity, and period of mass consumption. The year 1991 was a watershed point in India’s economic history. It marked a distinct move away from socialist economic policies and an [...]

By | August 8th, 2018|

INDIA’S ATLAS SHRUGGED

It is estimated that since 2014 about 23,000 millionaires have left India to settle in other countries (Morgan Stanley). The vast majority of them weren't tax evaders or bank looters running away from the law. They were the risk takers, wealth creators and employment generators that built this country's industry. And despite all the [...]

By | August 1st, 2018|

TIME TO SELL STOCKS?

In an article dated May 31st, 2017, I wrote that the Indian stock market had room to run on the upside and that a 20% increase over the next two years was highly probable. I mentioned two things that would bring an end to this bull run: a declining currency, and disappearing liquidity. Since that [...]

By | July 22nd, 2018|

WATERING DOWN EMINENCE

What comes to mind when you hear the word “eminent” ? Most reasonable people would associate eminence with someone that has attained a level of achievement far beyond others through years of hard work, has a proven and demonstrable track-record of excellence and has unquestioned integrity. Think Abdul Kalam, Mother Teresa, Sachin Tendulkar, Lata [...]

By | July 12th, 2018|

NOT HEDGING OIL PRICES IS REALLY DUMB

Governments and bureaucracies were never designed to produce strategic thinking and efficient outcomes. Decision making requires courage, and when the primary objective is self-preservation, courage takes a back seat. As a small-government libertarian I don’t expect much from governments or their bureaucracies, but sometimes even I am shocked at their level of incompetence and [...]

By | June 25th, 2018|

WHAT MODI CAN LEARN FROM TRUMP

The New York Times (NYT) is as rabidly anti-Trump as any other newspaper in the world. So recently (June 1, 2018) when the NYT carried an article claiming that “we ran out of words to describe how good the job numbers are” it was the strongest endorsement of Mr Trump’s economic policy that has [...]

By | June 11th, 2018|

POOR PLANNING SCREWS UP THE AIR INDIA DEAL

Recently the government put Air India up for sale. Predictably, they made the terms of the deal so onerous that there were no bidders. Not only is this an embarrassment for a government already reeling from complicating and destroying a good tax like GST, but, sadly, it also reduces the market price of a [...]

By | June 3rd, 2018|

POLITICS AND INDIA: A DEEP EMOTIONAL CONNECT

India will hold its national elections in the next 12 months. Indians love their politics and emotions are sure to get charged up. The evening news will be full of shouting matches, charges and counter-charges, lies, promises, and the obligatory fake news. There will be political discussions on social groups and disagreements will flare up [...]

By | May 31st, 2018|

TIME FOR INDIAN VOTERS TO WAKE UP

Governments never learn--only people learn. Voting, therefore, is a right best exercised by people who have taken time to learn about the issues It will soon be election time in India--a season for meaningless rhetoric and false promises. Politicians will outdo each other in making irresponsible statements about a lot of things. A big [...]

By | May 30th, 2018|

INDIA NEEDS LEADERS NOT POLITICIANS

We need leaders not in love with money but in love with justice. Not in love with publicity but in love with humanity. Leaders who can subject their particular egos to the pressing urgencies of the great cause of freedom…..a time like this demands great leaders. — Dr Martin Luther King, Jr. As India [...]

By | May 20th, 2018|

DOES INDIA’S SHAME-BASED CULTURE ENCOURAGE WRONDOING?

The recent rape and brutal murder of an 8-year old girl in Kathua ( Jammu ) have been universally condemned. What is equally shocking is that many politicians and lawyers whose oath of allegiance is to fight for justice came out in support, not of the girl and her family, but the alleged killers. [...]

By | April 18th, 2018|

SKILLING MODERN INDIA’S WORKFORCE

Education and skill development fulfil two goals simultaneously: an economic goal to provide businesses with a skilled workforce necessary to enhance productivity, improve competitiveness and increase economic growth, and a social goal of creating employment, reducing poverty and inequality and helping people realize their potential. Traditionally, education and skills-development policy have largely been driven [...]

By | April 13th, 2018|

MORE SELF-RESPONSIBILITY, NOT MORE REGULATIONS

You signed on to Facebook, voluntarily. You posted information on it freely. You liked other people’s posts and commented on them willingly. You connected with friends and updated your information and activities on Facebook without any coercion, and you were free to stop posting information whenever you wanted. It was your choice to keep [...]

By | April 1st, 2018|

INCOME INEQUALITY: FACTS AND FICTION

There is a world of difference between treating people equally and attempting to make them equal It appears fashionable these days to blame capitalism for all that ails modern society including inequality, environmental problems, global warming, extinction of animal species, unemployment, healthcare costs etc. Everything miserable is somehow caused by capitalism. One thing is [...]

By | February 12th, 2018|

INDIA NEEDS PRINCIPLES NOT POLICIES

I hate watching evening debates on Indian television. Besides the uncontrolled shouting and the lack of intelligent and respectful discussion, it is always a slugfest about policies and rarely about principles. Most Indians would be hard-pressed to identify the set of principles that guide the different political parties. Election manifestos are a worthless listing [...]

By | December 6th, 2017|

CRYPTOCURRENCIES: MONETARY FUTURE OR FAD

Imagine a world with no controls on how you exchange money with people. There are no global boundaries on where goods and services are produced and you can use a ‘global currency’ to purchase anything anywhere without the help of a third party and no transaction costs. And since the currency is not controlled [...]

By | December 3rd, 2017|

MOODY’S HELPS MODI

Various Indian governments have been pushing the global credit rating agencies (CRA’s) to reexamine the country’s credit rating given its clean seventy-year credit history and recent economic growth. Last week Moody’s finally relented and raised India’s sovereign credit rating by one notch from Baa3 to Baa2. What does this mean and what is the [...]

By | November 25th, 2017|

INDIA’S BIGGEST PROBLEM: BIG GOVERNMENT

November 8th, the “ anniversary ” of demonetization, was also a day that hazardous airborne pollutants crossed critical levels in Delhi. One event caused enormous economic damage because of needless government intervention in economic activity, and the other caused great environmental damage because of government apathy and indifference. What a poignant reminder of the [...]

By | November 16th, 2017|

LAISSEZ FAIRE–LESSONS FOR INDIA’S BIG GOVERNMENT

Even Mr.Modi’s most ardent critics will acknowledge his immense enthusiasm and self-belief. But it is his misguided belief that he can somehow “fix” the economy that may be responsible for India’s current economic issues. The economy is a complex, dynamic and fast evolving ecosystem with millions of stakeholders each with their unique set of [...]

By | October 31st, 2017|

REFORMING INDIA’S WELFARE SYSTEM

Most countries provide some form of welfare assistance to those who are less fortunate. And while there might be disagreement on how to deliver such aid or even who should receive it, few dispute the principle of a basic safety net. India’s current welfare system suffers from two major inefficiencies: High bureaucratic costs associated [...]

By | October 22nd, 2017|

ECONOMIC FREEDOM–INDIA’S PATH TO PROSPERITY

Economic freedom is the bedrock of modern capitalist societies. It is based on personal rights, voluntary exchange, and open markets. The link between economic freedom and prosperity has never been clearer. The chart below shows the results of a study of more than 150 countries over a twenty year period conducted by the US-based [...]

By | October 14th, 2017|

I AM A LIBERTARIAN–ARE YOU?

Libertarianism is the philosophy of liberty--of personal, political and economic freedom. The modern concept of liberty emphasizes the right of individuals to live as they choose, to speak and worship freely, to own property, to engage in commerce, and to be free from arbitrary arrest or detention. A free person is free to do [...]

By | September 30th, 2017|

10 WAYS TO GET THE ECONOMY MOVING

There are reports that the government is contemplating a Rs. 50,000 crore stimulus to boost the economy. The notion that governments need to stimulate aggregate demand when the economy slows down was first proposed by economist John Keynes in the 1930’s. This Keynesian approach to fighting economic downturns by increasing government spending has been [...]

By | September 23rd, 2017|

CAN MODI TRANSFROM INDIA

Mr. Modi came to power with the promise of being a transformational leader. But most of his recent “big bang” ideas have been anything but transformational. Transformational ideas should not be confused with governance. Building 10 Km of new roads a day, constructing toilets, providing infrastructure for power and clean water--these are all [...]

By | September 16th, 2017|

INDIA’S NEW RULES ON HIRING

No relevant background for the job, no problem. India has set a precedent by being the first country to make it illegal for employers to ask for a candidate’s experience, track record, or background during an interview. Henceforth, all candidate names will be put in a box and a random draw will determine who [...]

By | September 6th, 2017|

RAM MANDIR OR BABRI MASJID

Recently a friend of mine lost her mother. The 'chautha' meeting was atypical of a Hindu-family prayer meeting. There was a Muslim muezzin, a Sikh granthi, a Hindu bhajan singer and a Catholic priest, each of whom delivered a beautiful chant and sermon to honor the dead. It was the most heartwarming and beautiful [...]

By | August 21st, 2017|

HOW MODI CAN TRANSFORM INDIA -4

Dear Mr. Modi: In the first three parts of my letter to you, I argued that the principal cause for many of India’s problems was a big government that tries to do too many things as a result of which it ignores the things it should be doing. Eventually, the government does nothing well. [...]

By | August 15th, 2017|

HOW MODI CAN TRANSFORM INDIA – 3

Dear Mr. Modi:  (Part 3) In Part 1 of my letter, I analyzed four of your recent decisions to illustrate the sizeable expansion in the power of government under your administration. In Part 2, I outlined the primary reason for your recent policy failures: focusing entirely on the immediate visual effects of a policy [...]

By | August 2nd, 2017|

HOW MODI CAN TRANSFORM INDIA –2

Dear Mr. Modi:   ( Part 2) Over the last three years, we have been witness to a great increase in the power and reach of the state. Recent decisions of your government ( outlined in Part one of this letter ) are a dangerous display of the encroachment of state powers into the private [...]

By | July 27th, 2017|

HOW MODI CAN TRANSFORM INDIA –1

Dear Mr. Modi: Your commitment to making India great is unquestionable. Your tireless promotion of Brand India is unparalleled in Indian politics. And your effort to run an honest government is commendable. Your energetic leadership and international appeal have brought India glory and investment capital. For that this country will owe you a debt [...]

By | July 18th, 2017|

GDP: AN ABSTRACT CONSTRUCT

We all want economic progress.  But how should we measure economic progress? In last week’s newsletter, I used the analogy of a factory producing widgets to illustrate the concept of GDP. In simple terms, the GDP of a country measures the wealth being generated by its citizens. The larger the GDP, it is assumed, [...]

By | June 26th, 2017|

INDIA’S FALTERING ECONOMIC GROWTH

India’s GDP growth has declined now for four consecutive quarters. Total GDP ( Gross Domestic Product) has dropped almost 3.1% since the 4th quarter of 2016. Future GDP will likely get worse as the complete effects of demonetization play out. It is important to read GDP numbers with a grain of salt since they are [...]

By | June 13th, 2017|

WILL THE MARKET’S BULL RUN CONTINUE?

The Indian stock market has had a good run. Stock prices have more than doubled over the last ten years. How long will this bull run last? I spent fifteen years as a Global Investment Strategist and a Hedge Fund manager. Those long, fourteen hour days, pouring over copious amounts of data from dozens [...]

By | May 31st, 2017|

RANKING INDIA AGAINST OTHER COUNTRIES

How does India stack up against other countries on attributes like economic freedom, ease of doing business, corruption, educational opportunities, environmental sensitivity, liberty, individual rights, and happiness etc.? Comparison of countries across a whole host of attributes has now become easier. There are about 170 global indices that provide easily understandable quantitative ratings of government [...]

By | May 25th, 2017|

THE POWER OF FREE MARKETS

“The record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.” ( Milton Friedman, Nobel Prize-winning Economist) One of the most compelling arguments made [...]

By | May 17th, 2017|

WHAT RIGHTS DO WE HAVE ?

When most of us think of “rights,” we imagine the things we are free to do, like make our own decisions, practice our religion, speak our minds, travel without limitations, or engage in the free exchange of goods and services. We assume that nobody can stop us from doing these things. When we study [...]

By | May 10th, 2017|

SWACHH BHARAT: SOLUTIONS

The only way to solve India’s waste management problems is by getting the government and local municipalities out of the waste management business and creating incentives for private companies to bring in cutting-edge technologies to collect, transport, segregate, recycle, reuse and dispose of waste. A formalized waste management industry built by private entrepreneurs, backed [...]

By | May 1st, 2017|

SWACHH BHARAT: PROBLEMS

Almost three years ago the then newly elected Prime Minister Mr. Modi used the bully pulpit of his office to address a vital cog in India’s development. In his first Independence Day speech he openly mentioned how dirty India was and announced the Swachh Bharat (Clean India) campaign. Much credit goes to Mr. Modi [...]

By | April 25th, 2017|

THE SIZE OF GOVERNMENT IN INDIA

 The underlying cause of most problems in India is big government and the excessive reliance on the government to solve problems. This dependence allows people to shift responsibility from themselves to the government. A vicious cycle is thus created. Big government creates dependence, which reduces personal responsibility resulting in indiscipline, which then allows [...]

By | April 17th, 2017|

WHAT JAITLEY SHOULD HAVE SAID IN HIS BUDGET SPEECH

Madam Speaker:   For almost 70 years, Finance Ministers have come to this august body and said: “ the government will do this, and the government will do that.” As a result of this ever-increasing involvement, the government has gotten bigger and more expensive to maintain. Running the government machinery today consumes about 20% of [...]

By | February 25th, 2017|

GST TAX: A GOOD TAX POLICY BOTCHED BY THE GOVERNMENT

The ability to simplify means to eliminate the unnecessary so that the necessary may speak….Hans Hoffman In a World Bank ranking on the ease of paying taxes, India ranks at the very bottom --172 among 190 countries. India also ranks at the very bottom in the percentage of voters that pay taxes--less than 7%--lowest [...]

By | February 5th, 2017|

RECALIBRATE CAPITALISM SUGGESTS INDIAN MINISTER

At the World Economic Forum in Davos, India’s Commerce Minister Nirmala Sitharaman, made a preposterous statement. She suggested that the world needs to do a “reality check” and that in countries where capitalism and democracy co-existed, it was “time to pause and recalibrate”. Now, Ms. Sitharaman is no ordinary citizen. As Commerce Minister of [...]

By | January 27th, 2017|

ELIMINATE BLACK MONEY BY ABOLISHING INCOME TAX

Here is a radical proposition. Abolish all current taxes in India: by all I mean all the 50 or so different direct and indirect central and state taxes that exist in India. No income taxes, no corporate taxes, no capital gains taxes, no service tax, no excise tax. Replace all these taxes with one [...]

By | January 14th, 2017|

GOING CASHLESS: THE DANGER TO LIBERTY

As demonetization unravels into a spiraling disaster the government is looking for new narratives to justify the policy. The latest justification that it will enable a quick transition to a cashless society seems to be gathering steam but it too is baked in fallacy. It is disappointing that the opposition is so intellectually depraved [...]

By | January 9th, 2017|

MODI’S INTEREST RATE MANIPULATION: BAD ECONOMICS

Almost all government programs are started with good intentions, but the results are always the opposite of the intentions of the well-meaning people who originally backed it. – Milton Friedman (Nobel Prize, Economics, 1976) In a free ‘laissez-faire’ market, the interaction of supply and demand leads to price discovery. The market automatically adjusts supply and [...]

By | January 5th, 2017|

A NEW TAX POLICY FOR INDIA

Taxes distort economic choices and impede economic growth. Empirical evidence shows that a tax increase of 1 percent lowers real GDP by 1.5 percent after two years. But they are also necessary to fund government spending. So, the issue is how to maximize revenue collection at the lowest possible disruption to the economy. A [...]

By | December 18th, 2016|

GET GOVERNMENT OUT OF SPORTS

The Niti Ayog, the government’s premier think tank, recently unveiled a plan called First Play which lays down a strategy for getting India 50 medals in the 2024 Olympics. For a country that won just two medals in 2016, and a grand total of 23 medals over the last 70 years, this goal seems to [...]

By | December 9th, 2016|

TRUMPONOMICS/ INDO-US TRADE

Donald Trump will soon become the most powerful man on earth. The rhetoric of the campaign is over, and while it is hard to say exactly which one of his many promises will eventually become a reality, one thing is for sure: Trump represents a radical change from the past both in persona and [...]

By | December 2nd, 2016|

THE BLACK MONEY BOGEYMAN

Much has been written about demonetization and the impunity with which the elected leader of a country destroyed the currency of the fastest growing economy in the world. How can a rational and intelligent leader, who got elected on a platform of development, make a decision to undo the very development that he so [...]

By | November 22nd, 2016|

DEMONETIZATION: A RECKLESS GAMBLE

When people start losing faith in the currency, it marks the start of the nation’s decline Thomas Jefferson   Mr. Modi’s decision to demonetize the currency was a bold move. But it was not the right move. And while we can applaud the need to be bold and to think out-of-the-box, many big bang [...]

By | November 10th, 2016|

TAX TERRORISM: THE 21ST CENTURY WAR

A wise and frugal Government, which shall restrain men from injuring one another, but shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned... this is the sum of good government...Thomas Jefferson The power a government derives comes [...]

By | October 14th, 2016|

INDIA’S TSUNAMI: A BANKING CRISIS

All big disasters start off as small events. Hurricane Katrina was a small ripple in the South Atlantic Ocean before it killed 2,000 people in New Orleans ten days later. Research conducted by a group of scientists who replicated avalanches using sand grains found remarkably that it is always a small perturbation in one grain [...]

By | September 22nd, 2016|

INFLATION TARGETING IN INDIA

The Reserve Bank of India (RBI) has several roles. It is the banker’s bank and is responsible for maintaining public confidence in the banking system. It is also the government’s banker and is charged with managing the country’s money supply--printing new money, destroying old bills, etc. But its primary role is to be India’s central [...]

By | September 22nd, 2016|

OPEN LETTER TO MY KASHMIRI FRIENDS

It is sad to see the current state of affairs in this beautiful land of your birth, Kashmir. An entire generation is being lost, manipulated by devious people whose only interest is to benefit from chaos. And while your children are being lured into violence, theirs live safely outside of Kashmir. The sad fact [...]

By | September 12th, 2016|

THE URI ATTACK: A CHESS GAME

The recent attacks on Uri by Pakistani trained terrorists is part of a strategic chess game that has been slowly playing out over the last decade, but one that has been ramped up recently in moves made by the Modi government. A little history first on how we got here.   There are 2 [...]

By | September 5th, 2016|

Archived Posts

Posts by categories