Response to FT article - India's 'bumble bee' defies gravity

Dear David,

I recently read your article titled "India's 'bumble bee' defies gravity” published on Financial Times dated February 16^th 2012. Here are some of the after thoughts that I wanted to share with you.

The front page of ‘Financial Times’ referred this article with the reference 'Undependable India'. That description was quite damaging. I do not agree with that. India has been an open democracy with the much open market for the last 2 decades. If today's India not dependable, then a communist China or an ex-Soviet Russia is more dependable to the capitalistic world is it?

Unlike the west, India does not have the ‘sophisticated’ incarnation of bribing called ‘lobbying'.
India is not a banana republic as you quoted somebody’s words in the article. It’s the largest democracy in the world. You should also understand that India is still trying to recover from devastation of the centuries of external aggression. It is a country where the national reconstruction is still under progress. The western world would interpret the word 'National Reconstruction' as ‘a contract to rebuild a country’s infrastructure after bombing that country . The 'National Reconstruction' that I am referring is a much deeper meaning. If a country is under continuous external aggression for centuries, the society would become rigid & selfish and divided. Rebuilding such fractured society into a vibrant nation is what I am referring as National Reconstruction’.

India is perhaps the most capitalistic country in the world today. We don't run ‘Government Motors’ (GM can also be called that way). We don’t have to bail out banks, insurance companies and mortgage agencies. We don’t have a large 'per capita external debt' that we cannot grow out of. Countries with those characteristics are the undependable ones, you never know when they will go 'bust'.

I personally feel that Vodafone should have been asked to pay the tax that was due ($2.9 billion) & that verdict was wrong. It has also sets a wrong precendence.

Other hand, the mentioned court verdict on the 2G spectrum case is a very positive one. Even during the court proceedings the corporate executives who tried to bribe were behind the bars. The judgement to cancel 2G licenses sent a very loud & clear message that 'if your company thinks that it can get a favourable deal by influencing the government, that deal may not last for ever'. Isn't it a positive message? It is. Especially for the people of India who have been let down frequently all the 3 pillars of Indian democracy (executive , Legislature & Judiciary)

It might not be positive for European companies like Bofors / BAE, (or even American companies like 'Enron' ) which are used to bribing governments to get business deals.

Business deals & asset valuations are not written 'on stone’. They should be re-negotiated with changing circumstances.

I don't agree with the cry that decision like this will impact 'Foreign Direct Investment' into India. ‘The verdict has not singled out any foreign companies. What is even more important is that ‘the foreign companies are NOT treated specially’ like the case of Vodafone.

Even if the 'so called' foreign direct investment dries up, it’s not a big deal for India. The statistics on foreign direct investment in India shows that the FDI is 'very little' compared to the investments derived from savings of Indians themselves. Most of the foreign money coming is the name of investment is 'hot money' chasing the stock market, which you cannot consider as long term capital investment.

You will not hear these opinions neither from the Indian businessmen in the cocktail parties that you attend / nor from the regular Indian English media. It is the voice of strong and vibrant, resurgent India.

Thanks for your closing remarks in the article. I am quoting it again, 'If India had a strong government, less corruption and more policy visibility', just imagine how high it could fly'.

with regards
Arul Krishnamoorthy
4mythoughts.blogspot.com

India pays for oil imports from Iran in Rupees

It is a major break through that India has worked out a Rupee based payment strategy with Iran for its oil imports.

The nuclear sanctions from the West (especially U.S) are irrelevant to India. It is an established fact that 'Abdul Qadeer Khan' was running a 'nuclear walmart' and was supplying technology to Iran, Libya & North Korea. Perhaps God knows (sorry Allah knows), who else bought the technology from that 'nuclear walmart'. Did U.S impose any sanctions on Pakistan. NO.

U.S does not import any oil from Iran. That's one of the reasons for sanctions. There will not be any 'oil shock' for them. That's not the case for India, which import 12% of its oil from Iran.

If Iran is a threat, what about Saudi Arabia. It has one of the most militant forms of Wahhabi Islam. It is not just a co-incidence that '16 out of the 19 hijackers' of 9/11 were from Saudi. Osama bin laden was from Saudi. Will U.S impose oil sanctions on Saudi Arabia.? NO. It will not becuase it is second largest oil supplier to the U.S. To protect this oil interest, the 2500 member Saudi royal family is protected by U.S troops.

So, the oil sactions are irrelevant for India, even if it gets the blessing of the United Nations. U.S acts to protect its own interest, similary India should protect its interests too.

The actual brighter side of the payment agreement is mode payment being Rupee. This was done to beause the current Euro based payment that go via Turkish banks will get blocked due to new sactions. The deal is for 45% of the oil imports from Iran totalling about $ 5 billion.

It is not just $5 billon worth of oil that India has managed to buy, but also the '$5 billon U.S Dollars that India did not have to buy'. (or an equivalent billons of Euros that India did not have to buy).

China also imports oil from Iran. India & China more import oil than all of Europe combined (second only to U.S). If both these countries start paying with their own curencies for their oil imports, just imagine the impact for U.S dollar & Euros. The key demand for these currencies in the form of oil payment will get reduced. The above currencies will take a bigger impact and Indian Rupee will appreciate against them.

A stronger currency is good for stronger India. I fully understand the compulsions with which this payment arrangement was made. Irrespective of the sanctions, I think India should try to push for Rupee based payments for oil imports, for India's own benefit. This was one of the developments that i forecasted ( yes. not a wish list anymore ) in my earlier 'letter to Mr. Soros' ( http://4mythoughts.blogspot.com/2012/01/letter-to-soros.html ) . I am glad it has started already started happening. Thanks U.S, for the oil sanctions imposed on Iran.

Letter to Soros

Dear Mr Soros,

Yesterday ( 26^th Jan 2012), CNBC covered your speech at Davos with your quote ‘the Heavily indebted countries that now are in a position of a Third World country that it is too heavily indebted in a foreign currency.’

Knowing you from some of your work, I was quite surprised to hear the term ‘Third world’ from you.

The term 'third world country' was created in the days of the cold war to denote that countries that neither subscribe to Capitalistic nor Soviet models. The term is generally used with the negative connotation as they were poorer. Not only the term is out-of-date since the Soviet era is over, but also ‘We have only have one world, whether some people like it or not’ . We all share it with others with other inhabitants of this planet.

The term ‘developing nations’ could have been a better alternative. Especially given your background in nurturing open societies, the mentioned term was not expected out of you.

I am a citizen of India. I neither like my country referred to as ‘Third World ‘ nor any other country referred that way.

Secondly, coming from the developing part of the world, we don’t want to be compared with failed nations in Europe for the following reasons:

· The current state of the poorer countries and the developing nations can be attributed to the external aggression and colonial rule from Europe that plundered them. But these western nations that are getting bailed out their own bad governance. These nations simply failed to live within their means.

· We are hardworking people and not ‘hardly working’ category that live on government hand-outs in Europe

· We don’t run the huge governments (that even overtake soviet models in some cases) that nurture entitlement culture in the name of social welfare.

Coming to the third part and the most interesting part of the statement, i.e. ‘owning debt in foreign currency’.

The above scenario is not favourable to the borrower because the borrower cannot manipulate the currency in which the debt is ‘to be’ paid off. Majority of the western nations today enjoy the ‘skewed model’ for own in debt in their own currency. It’s not only the whole model is skewed in the borrower's favour but also the mountains of debt have grown higher than ‘the Alps’. These debt mountains are often described in dollar value, % of annual GDP, etc. But the term that we have not heard much in sovereign debt episode of the current crisis is the ‘per capita debt’. I think the above term describes the magnitude of the problem.

http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

As of year 2011, the per capita debt of Ireland is 500,000 U.S dollars whereas the per capita debt of Ethiopia is 51 U.S dollars. Let’s keep aside the hypothetical belief that many countries like Ireland will grow out of this mountain of debt and repay it.

What I infer from the per capita debt figures is that ‘if Ireland had to have a fire sale of national assets to pay its debt obligations tomorrow then it will not be very different from the present day Somalia.’ (I don’t have anything against my Irish brothers; I have just picked up a country from the top and bottom of the debt rating list.)

Just because a country is located in the Europe does not mean that it cannot be poor. It is sad that Greece and few other nations that lived beyond its means will default eventually. At the same time, it is also unreasonable to expect the rest of the world to pay their bills.

The current crisis, we have gone from bailing out companies to bailing out countries. Now are we are at the stage of bailing out continents. We need to fix this debt culture before we get stage of bailing out the whole planet.

The current debt levels are not only sustainable for many of the countries, but also they are ‘too big to bail out’.

In addition to current debt, the western economies have bigger holes in their budgets in the form of social security obligations. Their debt problems get more complicated with higher social issues like higher percentage of broken families, alcoholism, falling number of marriages and lower number of children that are born.

If you consider the amount of debt piled up by countries, ‘the rich countries are not really rich and poor countries are not really poor’. The western countries have had their share favourable terms in the international financial & political arena for a reasonable amount of time. I would like make the point by quoting by George Orwell ‘All animals are equal, some animals are more equal than others' from the novel 'Animal farm'. But this trend will not continue for ever,

The countries in the eastern hemisphere will start dictating terms by

· Not deciding to buy any of the debt from the west and can start selling their current debt to the western central banks (that are already actively buying sovereign debt)

· Reducing the forex reserves in currencies by moving to commodity reserves

· Economic unions with local settlements that does not involve western currencies

· The whole concept in which currencies are traded in pairs may change

· - The idea of a reserve currency itself will be challenged (not that just whether the reserve currency is U.S Dollar / Euro)

The next meeting to save the capitalism might not even be anywhere in the western hemisphere (forget about meeting again in Bretton Woods).

The end of the welfare state

Last week, the finacial daily newspaper in UK, Fiancial Times ran a series of articles titled 'Capitalism in Crisis'. There were lot of good articles from eminent persons, inlcuding Alan Greenspan.

I did enjoy their insights but for me this whole series sounded more like an obituary to welfare state rather than an analysis of current state of the soverign debt issue.

Majority of the western nations have been living beyond their means for a long time. They have been borrowing money and printing money to unsustainable levels. They had balance sheets with of mountains of debt even before the credit crunch. For many nations, the problem only got exasperated by the credit crunch episode.

The austerity measures that these countries have started, is just the beginning. Its the beginning of the end of the welfare state.

In my opinion, the western nations should rethink their concepts of a welfare state not only due to question of affordability but also look into its relevance today. Their welfare state model was created when half the world was under the communism. It's not relevant anymore.

America delivers justice, will India deliver justice too?

The news about American assasination of Bin Laden is on the front page of newspapers and it is the main news in the Television channels. But how many realize that Bin Laden was a CIA creation during the years of 'USSR occupation of Afganistan'. Bin Laden was helpful to America in creating headache for USSR. Bin Laden was not a saint when America supported him 20 years ago in Afganistan. He was evil at that time too. He is a product of 'principless' American foriegn policy. One of America's 'Frankentein' is put to permanant rest at last.

The way in which the operation was executed is something to notice. The operation has be carried out in a very low-profile way especially for such a high value military target . It does not appear that they tried to capture him. After Osama was killed, he is buried with in 10 hours on the same day. May be there is a message in the way in which this operation was handled. (or) just America's PR exercise to be cautious that operation does not invoke sentiments in the Muslims. (or) May be they want to avoid the operation being shown to get recruits for Al Queda. We may not get the facts on what went on behind the scenes, but we may get fiction in the form of movie after few years :-) ( similar to the movie ''The Kingdom' )

Anyway there is no doubt, It is a significant step forward in "America's war" on terror. America has delivered justice, even if it means going half a world away.
Inspite of repeated deniel by Pakistan, the man behind the 1993 Mumbai bomb blasts ('Dawood Ibrahim' ) is believed to be in Pakistan. Hundreds of people who lost their lives in blast, even they deserve justice. Its my wish that India 'delivers' similar justice to the perpetuators of that heinous crime.

Illegal Bangladeshi Imigrants

The Illegal Bangladeshi Immigrants is real threat to Indian Sovereignty. These illegal imigrants have changed the demographics of many of our border districts in Assam and West Bengal. In some districts their pupulation is large enough that they decide the winning candidate in many parliment constituentcies.

Its a shame that 'only BJP' is lonely raising this issue with out any real support from other political parties. I felt its really important to preserve the extract that i found in one of the emails that i received recently.
-------------
If You Cross The North Korean Border Illegally You Get 12 Years Hard Labor.
If You Cross The Iranian Border Illegally You Are Detained Indefinitely.
If You Cross The Afghan Border Illegally, You Get Shot.
If You Cross The Saudi Arabian Border Illegally You Will Be Jailed.
If You Cross The Chinese Border Illegally You May Never Be Heard From Again.
If You Cross The Venezuelan Border Illegally You Will Be Branded A Spy And Your Fate Will Be Sealed.
If You Cross The Cuban Border Illegally You Will Be Thrown Into Political Prison To Rot.
If You Enter Britain Illegally You Will Arrested, Prosecuted And Send To Prison And Deported.
If You Illegally Cross The Indian Border
You Get A, Ration Card, Voter Identification,
Passport, Haj Subsidy, A Drivers License,
Identity Card, Job Reservation, Special Privileges,
Credit Cards, Subsidized Rent Or A Loan To Buy A House,
Free Education, Free Health Care, A Lobbyist In New Delhi And Voting Rights.
-------------------
Wake up India, Wake up.

Are the rich countries really rich?

Are the rich nations really rich?
Couple of days ago, I came across a presentation in CNBC website on the worlds most inbebted nations. The summary statistics is as follows:

15. United States
External debt (as % of GDP): 95.09%
External debt per capita: $44,358
Gross external debt: $13.627 trillion (2008 Q3)
2008 GDP: $14.330 trillion

14. Norway :
External debt (as % of GDP): 114%
External debt per capita: $118,353
Gross external debt: $551.59 billion
2008 GDP: $481.1 billion

13. Finland :
External debt (as % of GDP): 116%
External debt per capita: $62,579
Gross external debt: $328.56 billion (Q4 2008)
2008 GDP: $281.2 billion

12. Sweden :
External debt (as % of GDP): 129%
External debt per capita: $73,245
Gross external debt: $663.58 billion (Q4 2008)*
*Data from Riksbank

T-10. Spain:
External debt (as % of GDP): 137.5%
External debt per capita: $57,091
Gross external debt: $2.313 trillion (Q4 2008)
2008 GDP: $1.683 trillion

T-10. Spain:
External debt (as % of GDP): 137.5%
External debt per capita: $57,091
Gross external debt: $2.313 trillion (Q4 2008)
2008 GDP: $1.683 trillion

9. Denmark:
External debt (as % of GDP): 159%
External debt per capita: $107,026
Gross external debt: $588.7 billion (Q3 2008)
2008 GDP: $369.6 billion

8. France:
External debt (as % of GDP): 168%
External debt per capita: $78,070
Gross external debt: $5.001 trillion
2008 GDP: $2.978 trillion

7. Austria
External debt (as % of GDP): 191%
External debt per capita: $100,787
Gross external debt: $827.49 billion (Q4 2008)
2008 GDP: $432.4 billion

6. Switzerland:
External debt (as % of GDP): 264%
External debt per capita: $171,478
Gross external debt: $1.304 trillion (Q4 2008)
2008 GDP: $492.6 billion

5. Netherlands
External debt (as % of GDP): 268%
External debt per capita: $145,959
Gross external debt: $2.439 trillion (Q4 2008)
2008 GDP: $909.5 billion

4. Hong Kong
External debt (as % of GDP): 295%
External debt per capita: $93,539
Gross external debt: $659.93 billion (Q4 2008)
2008 GDP: $223.8 billion

3. Belgium
External Debt (as % of GDP): 327%
External debt per capita: $155,362
Gross External Debt: $1.618 trillion (Q4 2008)
2008 GDP: $495.4 billion

2. United Kingdom
External debt (as % of GDP): 336%
External debt per capita: $153,616
Gross external debt: $9.388 trillion (Q4 2008)
2008 GDP: $2.787 trillion

1. Ireland
External debt (as % of GDP): 811%
External debt per capita: $549,819
Gross external debt: $2.311 trillion (Q4 2008)
2008 GDP: $285 billion

I used to wonder how the U.S would come out of its huge debt. The above statistics changed that perception. U.S has a huge debt but the greater risk is in Europe.

My worry now is all these 'spending maniacs' need cash badly. Dear Indians & Chinese please safe guard your valuble savings, from ending up as 'investments' of these countries.

Book Review: Rich Dad Poor Dad

I came across this book in accidentally in the local library. I took it since it was recommended by one of my fr long time ago.

Even though many of the concepts like 'tax advantage of a corporation', real estate forclosure investment are already familier to me, I am certainly delighted with the ease of explanation and presentation.

Here are some of the 'simple' definitions will i will be remember for a while,
Asset: Puts money in your pocket.
Liability: Takes money from your pockets.

I did not even imagine cash flow statement and balance sheets can be easily demonstrated with
some simple diagrams. Its a must-read for anyone who wants to take to start a business and especially if its will be in the investment domain.

Response to Article by Philip Stevans

This Article is a reponse to the Article by Philip Stephens in Financial Times dated 19th March 2009.
( http://www.ft.com/cms/s/0/92dbb440-14bc-11de-8cd1-0000779fd2ac.html )

First of all thank you very much for acknowledging the change in the global political equations.

China might be hesitent to challenge the existing powers, but we (Indians) are not. Espcially with power like America thats consistently undermines the credibility of UN.

Kashmir problem does not play any role (forget about vital role) in India's relationship with Pakistan. Your idea that 'Kashmir issue resolution will result in a stable democratic government in Pakistan' is nothing more than a fantasy. 'Pakistan' just one more example of a manifestation of Islamic intolelence towards non-believers in their 'Prophet'. Let me tell in simple words. Muslims can't be democratic. I have come to this conclusion after going over the entire list of muslim countries in the world.
(Refer: http://4mythoughts.blogspot.com/2006/05/can-muslims-be-democratic.html )

I dont understand how you classify India's Interests has 'narrow'. Let me quote Henry Kissinger's words 'People have principles and countries have interests'. This is the narrowest definition of foreign policies that i have ever come across. In my humble opinion, India should act ONLY to protect its interest and stop worrying about how it will be perceived by the west.

India will not support 'elevation of basic human rights above those of states' in UN. The reason is simple. Just like many other countries, in India the 'human rights' is the proganda mechanism supporters of Islamic Extremists and communists. Those who kill unarmed civilians, with bomb blast and automatic gun shootings can't be classified as humans, just because they have human body parts. They are lowest form of animals and 'human rights' dont apply to them.

Instead of wasting their time on NPT with India, the west should infact be working on preventing the dangerous 'Nuclear Walmart' run by 'Abdul Qadeer Khan' in Pakistan.

In response to global trade, India will sit across the table and 'talk Business'. you can't expect these negotiations as if East India company is ruling India. Coming to failure of Doha round, espcially issues of agricultural trade, India is an Agrarian society and will protect that. India is blessed by nature with maximum percentage cultiviable land out of available land. We (Indians ) are already One billion & we dont have to relay on any foreign farmers to feed us. It is not only in the Indian interests but also in the world interest. Last year when India decided to import wheat, it caused a rally in the world wheat prices.

Just one closing remark, unlike the current world powers, India is not just a country. Its a civilization. Its not just another civilization, its one of the worlds oldest and still the only living civilization. It has survived continous on-slaughts over centuries. India is raising again to the glory of its ancient past. Some countries might not see this raise espcially with their distorted scales. They might see India as a 'Slumdog millianare'. But, India will raise as great leader by the virtue of 'its own strengths'. In every aspect of national life Indians are working for it.

The future of American Dollar

Is American dollar worth what it is today? Is the recent rally in the dollar justifiable? What is the near term and long term trend for the dollar? These are some of the common questions that linger around in the minds of some people today. This article is an attempt to explore the possible answers to the above questions.

Fundemental factors:
These are basically factors the develop slowly and have a long-term impact.

1. National Debt: U.S Treasury department periodically releases the report on countries holding the U.S debt. Even with a momementary glance through the report, you will find out that there are very few countries in the world to whom, U.S does not owe money.
2. Personal Debt: A statistics that i came across recently suggested that the number of outstanding credit cards in U.S is about 4 times the population of that country. I don't know the validity of the above statement but those who lived in U.S will acknowledge that the above statement is not very far from truth. The 'Credit Crunch is a classic example of the impact of personal debt. The crisis unfolded as 'some individuals' failed to make their mortgage payments in U.S. (Some people might not account 'Perosnal Debt' as a fundemental factor. But I do because a country is made up of nothing but Individual citizens. 'Personal spending' is also an Economic indicator widely followed by Wall Street.)

Technical Factors:-
These are the result price action in the relavant markets. These have a relatively shorter term impact compared to the fundemental factors.

1. Crude oil
2. Commodity consumption
3. Currency pairs impact

Political Factors:-

1. 
   

(to be continued........)


Related Articles:-
UN team warns of hard landing for dollar
Dollar's Days Numbered; Buy Commodities: Jim Rogers

May be the U.S Fed has adopted the Islamic Model of Finance.

Moving a bit too far in Kynesian model that 'the economy' can be fine-tuned like tuning a 'violin' by manipulating the monitary policy, the U.S federal reserve , today annonced a near zero interest rate policy.

May be you might be wondering, whether the U.S has adopted the Islamic model of Sharia law ( interest rates being unethical). As per the U.S Fed, you should be a 'real fool' to save. Spend, Spend and Spend, the U.S is planning to 'spend' its way out of recession.

The interest rates are already near zero, i.e for overnight interbank rate it was only announced today. Even before today's announcement, the 3 month treasury yield has beeing trading with near zero for the past 2 weeks. It closed at zero in 3 out of the past 5 days.

How low can the interest rates go? If the ec0nomy does not recover before the next meeting, will the U.S fed announce negative interest rates?

You might wonder how can there be negative interest rate. here is the explanation: Under the negative interest rate, you need to pay the bank to deposit your money the bank. If you are lucky you will get your principal back. On your bank deposit, the bank will add its own share and pay the borrower. If the borrower wants $100 loan, the bank will pay $105. If at all he wants to repay it, the borrower needs to pay only $100.

All this loans will securatised and branded as 'highly sophisticated instrments' and sold around the words 'Debit default swaps' (like CDS) and sold around the world. There are enough number of idiots the world who will buy these DDS instuments.

If the borrower defaults then the U.S Treasury will buy those 'Toxic Assets' with 'Tax payers money'. I mean the money collected through taxation in foreign countries and invested in U.S Tresury notes.

Wow. What a special form of 'Capitalism'?

So, don't worry, if the U.S Economy does not recover before the next fed meeting, the fed exactly knows what to do?

HBOS acquried by Llyods TSB

It's natural that the people of Scotland are upset that the 'oldest bank' in Scotland is facing liquidation because 'some folks' failed to pay their mortgages in U.S. 'Bank of Scotland' is the first bank in Europe issue paper currency successfully. It is one the 3 banks in Scotland to print their own notes. May be the new entity will stop this practice.
There were some people who were upset that the new entity (to be called 'Llyods Halifax' did not have word 'Scotland' in the name. Personally i feel, if the name has to reflect all the past aqcuitions it would be 'Llyods TSB Halifax Bank of Scotland', which is too big to be printed on a cheque book. :-)

Is Capitalism at crossroads?

The past week has been a roller coaster ride in the capital markets.
The week started with the 'surprise' announcement in Bollywood style from Bank of America that it had got married to Merrill Lynch urgently over the weekend. The global markets were mourning for the orbituary news of Lehman Brothers. Then there was this debate whether AIG will make it to the prestigious 'Hall of Fame' of 'Too Big to Fail' following 'Freddie Mac' and 'Fannie Mae'. There were detailed coverage on AIG. I was under the impression that AIG stands for American Insurance Group, then I came to know that its 'American International Group'. I never understood the common link between personal insurance, leasing aircrafts and insuring suprime mortgages ( these are some of the AIGs businesses). I have heard 'forward integration' and 'backward integration', i think this a new type called 'no-where integration'. The only thing that I was able understand was that AIG currently has a nasty balance sheet and it did not have enough cash to run the company.

A rating agency (i guess its S&P) was pleading to AIG to raise some cash with in few days. If its some other company they will downgrade it straight away. They can't do it to AIG, since its a big American company and potential candidate for 'too big to fail' royal league. The western financial media was not able to digest even this 'royal' treatment of AIG, they were crying foul that the rating agencies are creating liqudation problems 'big' companies.

The there was the usual blaming of short sellers and 'Cruel' Hedge funds driving 'down the value' of these 'big' companies. Lehman Brothers is a 158 years old company it went public only in 1994. Stock price can make borrowing 'expensive' for the company it can not force a company bankcrupt. Stock price is not the cash flow for a company, borrowings are not cash flow for the company, only revenues are the real cash flow of the company. These troubled financial institutions invested its way to bankruptsy. I think people are forgetting (or perhaps hiding) the very fact the these companies extremely over leveraged ( read mis-managed) that it did not have enough cash to run the company.

Under these troubled times, arranged marriages are becoming more and common in the West (at least in financial markets). Bernake, Paulson & their team (read Fed, Treasury & team) work really hard over each weekend trying to figure-out 'whom' they can get married to 'whom'. 'Purohith' Paulson arranged for the marriage of 'JP Morgan' and 'Bear Stearns' few weeks ago. Perhaps this inspired 'Broker' Brown (in U.K) to arrange for the alliance of 'Loyds TSB' and 'Halifax Bank of Scotland' (HBOS). The way these governments (U.S & U.K) and its agencies are so desparate for these arrangements, it looks as if these are 'Forced' marriages.

Apart from looking for marriage proposals, thursday overnight Fed and ECB 'pumped' billons of currency into the corresponding money markets to ease liquidity issues. The SEC and FSA have come up with the 'Fantastic' idea of stopping shorting of financial stocks. Personally I feel, this decision skews the market in one-direction i.e. only long. As the markets move from 'excess' fear to excess 'greed', will they consider banning long (i.e buying of stocks)?. This argument might sound rediculous to some, but i pesonally feel banning shorting is equally rediculous. Especially in so-called 'matured markets'.

Before the end of the week AIG again made headlines by managing to get some oxygen in 'Trauma Care'.

As I am writing this, In U.S a 'Fabulous' $700 billion bail-out plan is being announced. Maye be Fed would be funding using revenue from the Treasury notes. About 40% of U.S treasury notes are held by foreigners. India's current forex reserve is about $250 billion, China has about a $trillion in reserve. I dont know much of is already made its way to U.S treasuries. But it is certainly a risky investment. As recommended by the 'Tarapore Commission', to safegaurd itself, India should consider maintaining its reserve as commodities rather than foreign currencies. If not 'what happened to investment banks' today can happen to Indian forex investments in treasuries.

We never know. May be every thing will be fine after 1 or 2 years or may be Capitalism is at the crossroads? God Bless America.

Book Review: Alai Osai

Book Title: Alai Osai (Tamil)
Author: Kalki Krishnamoorthy
Publisher: Saradha publication.

The story happens in the context of the period preceeding Indepedence. It describes the mindset of people during that era.

The author has visited the hindu refugee camps in Delhi to depict the emotions of people driven out of their land that is currently known as pakistan.

The largest exodus in human history took place during the partition of our Bharat. Unlike the abundent literature that describes the Jewish Exodus, there is very limited literature that describes the tragic patition of our motherland. This is the first major work in Tamil that I have come across that gives adequate coverage partition.

When our Hindu brothers in exile were shivering in the refugee tents and experiencing the Delhi's severe winter, Gandhiji was more interested in the protection of muslims in West Bengal. He was stationed in Kavkali in west bengal for this cause. The successive Congress governments also downplayed the suffering of millions of Hindus for the purpose of muslim appeasement.

I am particularly amazed to see a gandhian like Kalki giving a detailed description of Hindu sufferings during patition.

Book Review: Pooniyin Selvan

Book Title: Ponniyin Selvan (Tamil)
Author: Kalki Krishnamoorthy
Publisher: Saradha publication.

It has been my long term wish to read the works of Kalki. I came across this book in the last Chennai book fair. Since the works of Kalki have been nationalized. There were many publishers.I choose Saradha publications for the competitive price. There were typographical errors in few places, it could have been corrected by the publisher.

Out of all the historical novels written by Kalki,this is the last novel. It's the largest one. It comprises of about five volumes totoalling around 2000 pages.

Amazing book. It takes us back by about 1050 years in time, to the historical period in Tamilagam, when the Chola kingdom was the dominant empire. It discribes the power tussle that happened for succession. Unlike the blood bath you find commonly among the muslim rulers in such a scenario, you will see how amicabily it has been resolved.

The Hindu revivalists have been advocating rewriting history. Kalki has set the stage about 40 years ago. If you talk to the generation who are about 60 plus, you will be surprised to know that the craze for reading this novel in those days even surpassed the 'TV Serial Mania' of today. Instead of writing a dull historical document,Kalki has presented it as an excellent novel that has reached wider audience.

We need more such work that cover different periods in our glorious history.
This is an effort that is worth replicating in different Indian languages. If I had read this book in my school days, I might have developed better writing skills and I might have changed my career.

Definition of the term Hindu

What is the origin of is the word 'Hindu'?
Why is 'Bharat' called as 'India'?

If you have ever wondered about these questions.  here is the answer to the first question ?

There seems to be consensus that the term "Hindu" is the Persian equivalent of the word "Sindhu". It seems in Persian "Si" is pronounced as "Hi". No wonder that the mighty river "Sindhu" that was the cradle of our civilization is used as reference.

Some have hesitation to use the term "Hindu" due to its foreign origin and instead prefer to use the equivalents from our terminology like Sanatana Dharma and Manav Dharma. We should avoid this hesitation since there is always exchanges of words & terminologies between languages. It is a natural phenomenon.

Especially after the advent of Islam, due to its natural intolerance towards other faiths, the Persians who had just converted into Islam started giving abusive meaning to the word "Hindu". These meanings are quoted by the anti-national organizations like "Dravidar Kalagam" in Tamil Nadu. The intolerance of Islam towards other belief systems is the reason behind abusing other faiths. Even if there was another term in place instead of "Hindu" the Islamic intolerance would have tarnished that term too.

"The Iranians used the word Hindu to designate the river Sindhu and the countries and populations situated around and beyond the Sindhu. From Persian, the Greeks borrowed the river name as Indos and the peoples name as Indoi, hence English Indus, India, Indian."[1]

The terms Hindu and Indian were synonymous. Both had territorial meaning. It also denoted the socio-cultural aspects of our people in that territory.

Today, It is strange that the term "Indian" is considered secular and the term "Hindu" is considered communal.

Lot of thought process have gone in defining the term Hindu. Each of those definitions certainly captures major aspects of Hinduism. But none of them seems to be simple and complete. The Belgian Scholar named Koenraad Elst has written a book with title "Who is Hindu?" on this subject. This book has been a great source of information and inspiration in writing for this section even though I differ from the author in few aspects.

My simple definition of the term Hindu is,
"All sampradayas (belief systems) that originated in Bharat including the vanvasi forms".

As per the above definition the different sampradhayas like Vaishnavam, Shaivam, Bauddham, Jainam, Sikh panth and various derivatives of them and all our vanvasi sampradhayas should be classified as Hinduism.

Some of you might feel that the second part of the definition "including the vanvasi forms" is redundant. The reason for explicitly including it is, the legal definition of Hindu in Indian Constitution [2] (and also in the Hindu Marriage Act of 1955 [3]) is more in tune with the above definition except that it excludes the scheduled tribes (Vanvasis).

Why were the Vanvasis excluded?
The general argument put forward for excluding vanvasis from Hindu fold is that 'the tribal worship the natural forms trees, snakes, etc. and hence it is animist nature'.

Sri Golwalkar responds to this argument as follows "These protagonists of separatism argue that these 'tribal' worship things like trees, stones and serpents. Therefore they are 'animists' and cannot be called 'Hindus'. Now this is something which only an ignoramus who does not know the ABC of Hinduism will say. Do not the Hindus all over the country worship the tree? Tulasi, bilva, ashwattha are all sacred to the Hindu. The worship of Nâg, the cobra, is prevalent throughout our country. Then, should we term all these devotees and worshippers as 'animists' and declare them as non-Hindus ?'[4]

Another major reason for the exclusion of vanvasis from the legal Hindu definition may be the the adviser on tribal affairs to Jawarharlal Nehru, Mr. Verrier Elwin is an ex-missionary.

It is worth studying the real motive behind this exclusion of vanvasis from the legal Hindu definition.

Historically, If you look at way Christianity spread in Europe, it initially spread in the cities and moved to rural areas. The converted city folks referred the rural religions as 'Pagan". The Latin root of the word Pagan is Paganus that means rural.

When these Christian historians and sociologists started studying our culture they started classifying on similar basis as urban and rural. They concluded that rural here is nothing but the tribal form and it different from the urban nature of religion. This approach of theirs is wrong.

Instead, We should classify the components our belief systems into 2 major classifications one is the common (or Vedic) and the other the local. The common components can be seen in different parts of the nation where as the local components are specific to that geography. The ratio of these components might vary from location to location (even within the same belief system) but all our belief systems have these these 2 components. For example the 'Kula Theivam" (the god of the heritage) might be different for different sects within the same caste. Since Vanvasi's are more in tune with the nature and their geography, their local component in their tradition will be more. They do have the common components that are seen in other parts of the Nation. As Sri Guruji pointed out, the concept of worshiping trees,snakes itself a national characteristic.

definition-of-term-hindu.htmlVanvasis are an integral part of the Hindu society. I would like to assert this by quoting the words of Sri Rama "We were 4 brothers, we have become 5 including Guha" [5]. Guha is the vanvasi boatman who helped Sri Ram ( with Lakshman and Sita) to cross the river Ganga in Ramayana.

References:-
References:-
1 "Who is Hindu?" by Koenraad Elst. Chapter 2.
2. Article 25 (2)(b) of the Indian Constitution
3. Section 2 of The Hindu Marriage Act of 1955
4. M.S. Golwalkar: Bunch of Thoughts, p.471-472.
5. In Aranya Kandam in Kamba Ramayanam(Tamil). Sri Rama says "Guhanodu Aivaranom".

Limitations in Indian GDP Calculation Methodology

The central statistical organization that releases GDP data in 2 time series.

1. GDP at factor cost at constant (1999-2000) prices ( for Q3 of 2006-07 this value is 8.6 %)

2. GDP at factor cost at current prices.( for Q3 of 2006-07 this value is 14.1 %)

The first series data receives wider publicity. But it does not take into account the price change in the years after the base year. Similarly it does not take into account the price change before the base year also. Since it does not take into account the price change it does not get affected by inflation. In my opinion, the Whole Sale Price Index (base of 1993-94=100) might not have any impact on the GDP calculation of the first series.

The second series data considers the price change over the years. But the inflationary impact needs to be subtracted from it. GDP deflator is used for this purpose. Since we don’t use that indicator in our country instead i am considering the inflation (based on WPI ). The average inflation for Q3 of 2006-07 is approximately 5.5 (I don't have the exact figures). If you subtract it (from 14.1) the resultant GDP growth will be around 8.6 %.

The following are the possible limitations in the Indian GDP calculation methodology.
1. The effect of inflation might not be fully factored in the second time series described above (The methodology used for calculating inflation itself has some serious limitations.)
2. The Indian economy is not black and white. Most part of the economy is in between the two colours. i.e grey. It will be evident that only about 2% of the population pays income tax. How do you account the good / service that does not have a paper trail from production to consumption?
3. The output of unorganized sectors like Agriculture labourers, construction workers, artisans, house wives are not take into account.
4. There has been a lot of changes in the Indian economy and the world’s perception of India since the year 2000. Income from IT and IT-enabled services have increased significantly. Medical tourism to India has evolved. I don’t think these are accounted for in the GDP methodology.

The GDP methodology was adopted even by U.S as a measure on National output only from the year 1985. Before that, they were using only GNP. We should not be copying the approach from those western nations.

Earlier we had a bunch of economists who were looking at the soviet model for solutions. Now we have economists who are looking at the west for solutions.

In my humble opinion, our economic view and thought process should be indigenous. It should factor-in the ground reality of our nation. That’s what Mahatma Gandhi did during the freedom struggle.

Similarly, every aspect of our economic view, including GDP calculation methodology should be customized for the Indian conditions. Otherwise, it will be just a number that does not have great  correlation with the actual economy.

Note: The central statistical organization does not describe its methodology used for GDP calculation in its website. The above article is based on my current understanding of the process.

Book Review: Sonia-In the perception of a Nationalist

This book is a collection of articles written by Sri Gurumurthy,Co-convenor for Swadesh Jargran Manch. This book discusses in-detail the background of Antonia Maino(also known as Sonia).

Whenever I raise objection about having a foreigner for the highest office in the nation. There is always some one who asks me in response "Why not?", "What's wrong?", "After all she is also a citizen of this country",etc. If I had come across this book earlier, I would have certainly asked them to read it or atleast would have answered them better.
For me, the only fact that she is a foreigner is sufficient to reject her.
But, It's not just her foreign origin that is the problem. The deeper problem is her loyalty towards this nation.

Among the various facts discussed in this book,you have to know the following about this lady.

1. She remained as foreign citizen for 15 years after entering this county as the wife of Rajiv. Even after giving birth to 2 children in this country, she has renewed her foreigner status twice.That means that for 15 years she did not want to be even called as Indian after living in the home of the then Indian Prime Minister Mrs. Indira.

2. Even after 15 years,her Indian Citizenship application had her Italian name "Antonia Maino". She did not accept the name "Sonia" given to her by her mother-in-law.

3. She fled the nation and took refuge in Italy during the India-Pakistan war in 1971 along with her family. i.e. Rajiv-then commecial pilot also left the country. (During war times the commercial pilots are not allowed to leave the country for obvious strategic reasons).

4.Again in 1977, after the Congress party was defeated in elections after emergency, she took refuge in Italian Embassy. Sanjay & Indira Gandhi went pesonally pleaded and brought her home. (For us, this Nation is our Mother land. But for her, its Mother-In-Law's land. What do we expect from her!).

5.Our RAW Agency was not interested in having liason with the Italian Spies. They thought we dont have common interests and it was waste of time. But under Rajiv's pressure they had to agree for liason. A meeting between Italian spies and RAW was arranged. Guess, who arranged for the meeting from the Italian side. It was none other than our Sonia Antonia Maino. Yes, she had contact with the Italian spies.If you are one among those people who believed that she was just a simple housewife before entering politics. It's time you change that opinion.

6.She never trusted the Indian Agencies for Security. She depended Italian Agencies to arrange for security whenever Rahul / Priyanka were travelling abroad. This happened even when her own sweet husband Rajiv was Prime Minister. The relevant Indian RAW offcials were not even informed. At times, they later found it on their own to their embarassment.

7.The Quatorocchi the prime accused in the Bofors scam case is her family friend. Narasimha rao government just let him escape from India. He has been absconding since then.

This book was published about 3 years ago and it is still more relevant even today. Because Sonia is still in politics and Quatorocchi is still roaming free some where in Argentina.

Is Our Prime Minister Mr. Panneer Singh?

When AIADMK won the majority last time, There was a verdict against Jayalalitha in one of the several cases against her (I think it was TANSI case). So, she had to give up the Chief minister post temporarily. So she selected an obscure MLA from her party to be a place holder for that temporary period. His name was Panneer Selvam! He was never even a minister before.

As many of us are aware of the dominent personality of Jayalalitha. She would have been looking for a more sub-ordinate person (i.e. spineless). The rubber stamp candidate should be harmless, even if it means that the candidate is useless. That's exactly why the Panneer selvam was choosen.

It's another Irony that our Lalu, who was in a similar situation was not even able to find a trust-worthy candidate from his own party.

Maino Antonia (who is also known as Sonia) was in a similar condition, after the last parlimentary elections. The NDA led by the BJP did not have the necessary majority for forming the government. Supporting foreigners has been one of the consistent policies of Communists, so they decided to support the foreign lady for forming a government. There was a strong national sentiment against accepting Maino Antanio(a.k.a Sonia) as the Prime Minister. It still exists even today. So, Maino Antanio had to look for a rubber stamp. Hence, Our Manmohan Singh become the prime minister.

We have been known to misunderstand popularity for capability. Thats why we have been electing film-stars as M.L.As, M.Ps and even as Cheif Ministers. Just because some one has a Phd. from a foreign university, it does not mean that the person is a good administrator.

If you were involved in the hiring process for your company, you would have realized that people with flashy resume doesn't necessarily deliver on the job. Many times they don't even fit the job.

The purpose of this article is to examine what Manmohan Singh has been delivering during his tenure as Prime Minister. Did he make any difference Or did he manage to remain as Mr. Panneer Singh.

.... to be continued

I decided not to continue this article, because writing about Mr. Panneer Singh is not even worth it. 

Measuring Inflation in India

This article attempts to describe the process of calculating Inflation in India and tries to identify the anomalies in the process.

Inflation is generally calculated based on price indices.A price index is a basket of items with weightage for each item.
We have 2 price indices:
Wholesale Price Index (WPI): Based on whole sale (in some cases Producer's Price) of commodities. This data is available on a weekly basis released by the office of economic advisor to government of India. This department comes under the Ministry of commerce and Industry. http://eaindustry.nic.in/
Consumer Price Index (CPI): Based on the retail prices of commodities. This data is available on a monthly basis released by the Central Statistical Organisation. The department comes under Ministry of Statistics & Programme Implementation. http://mospi.nic.in/

In India, the Inflation is calculated based on WPI. I feel this approach has the following fundemental flaws.
Apples with Kangaroos
Currrently, the WPI has a base of 1993-94=100 where as the CPI has the base of 1984 - 85 = 100. I dont think they have the common basket of items for the calculation. If we try to compare the WPI with CPI then we will not just be comparing apples with oranges, perhaps we will be comparing apples with Kangaroos. i.e. two entirely differnt things.
(I think the term Kangaroo might better represent the rate of the rapid raise in cusumer prices recently :-))

Responsibility of calculation & Frequency
If both the indices (WPI & CPI) are calculated by the same organization then atleast the approach will be consistent. Both the indices should be available at the same frequency. currently, one is weekly and the other is monthly. In my opinion, monthly frequency for both should be sufficient. After all, most of us buy groceries for our home on a monthly basis.

The final price matters the most
1. Each commodity in the index might be sold to the end customer after going through a series of middle layers before reaching the end customber and with varying profit margins at each layer.
2. When the Wholesale price( or the Producer Price) of a commodity increases the profit margin changes doe not get cascaded uniformly. i.e. each layer will increase the profit margin differently and usually the margins increase towards the end of the chain.
3. The final consumer price can differ due to government subsidies, sales and excise taxes, and distribution costs.

Assuming that the WPI & CPI are comparable (currently they are not), if we try to plot them on a single graph as overlays then the gap between them will never be uniform in a given resonable period of time. What i am trying to say is that WPI does not properly represent (i.e no uniform correlation to) the price paid by the consumer.

I think inflation is meant to measure the additional burden to the consumer. If it fails to do that then it defeats the whole purpose of the exercise.

The inflation number for last week was around 6%. I would be happy, if our Finance minister could name a single commodity whose end price increased only by 6% the past one year.

I think the reality is much worse that what is being presented. I think we are having Real annual inflation of atleast 10% - annualized for the past 4 years. If we include housing cost inflation rate will be much higher. This will be (and should be) an issue at the upcoming elections.