Patrick Chovanec has a fascinating article in ForeignAffairs, titled a href="http://www.foreignaffairs.com/articles/136963/patrick-chovanec/chinas-real-estate-bubble-may-have-just-popped?page=show">China'sReal Estate Bubble May Have Just Popped. This is interestingand important from two points of view./aFirst, bad news for China is bad news for the world economy. We arealready in a bleak environment, with difficulties in Europe, Japan,the US, and India. It will not be pretty if China runs into trouble aswell. I am reminded of the feeling of...
Saturday, 24 December 2011
Friday, 16 December 2011
Google started maintaining data about blogs from May 2009 onwards. In this data, I find the most read posts were:The Right to Education Act: A critique, by Parth ShahWhat in the world is happening to the rupee?The rupee: Frequently asked questionsWhen and where do great feats of architecture come about?Guide to the Eurozone crisis, by Percy MistryThe US sells chopsticks to China, by Jim HansonHousehold financial choice of the hapless households of IndiaDon't like the SKS valuation? Compete, don't complain, by Bindu Ananth and Nachiket M...
Thursday, 15 December 2011
By and large, I have felt that RBI has done a pretty good job of the exchange rate. They doubled currency flexibility twice, in 2004 and 2007. In 2009, they shifted to a floating rate. There were two problems:They continue to sometimes do tiny blocks of trading on the currency market. In a market of $70 billion a day, a small scale of trading (e.g. $1 billion a month) is irrelevant, so why bother doing it? This has been pointless, but it has done no damage.They have failed to correctly communicate to the market that the exchange rate is now a float....
Tuesday, 13 December 2011
Mistake upon mistakeIn recent months, we've had a few slip-ups by the official statistical system in India:Yesterday's IIP release was preceded by a mistake. Mint says: On Monday, the government was guilty of a similar error in its factory output data. Till it corrected the number pertaining to capital goods output, analysts were left scrambling for explanations as to how this had grown 25.5% while overall factory growth had shrunk 5.1%. (The answer: it hadn’t, and had actually shrunk by 25.5%).On 9 December, we discovered there were important...
Sunday, 11 December 2011
China's Pakistan Conundrum by Evan A. Feigenbaum, in Foreign Affairs.The most important task of government is the public goods of law and order: laws, courts and judiciary. The first step towards strengthening these lies in sound measurement. Writing in Pragati, Sushant K. Singh has an excellent article on the problems of measurement of crime in India.An independent judiciary by Ruma Pal.Devesh Kapur, in the Business Standard, on the HR crisis in the Indian State.Shyam Saran in the Business Standard on a more sensible ...
Saturday, 10 December 2011
There is a lot of gloom in India today about the broad-based failure of the UPA strategy of combining left-of-centre populism, fiscal profligacy, theft, and a lack of interest in the foundations of India's growth. We learn from history that we learn nothing from history; India has clearly learned very little from its escape from the Hindu rate of growth. The moment we got a little bit of growth, the old style socialism and theft reared up again. In one of the many pessimistic articles of this theme, Shekhar Gupta in the Indian Express says:What...
Friday, 2 December 2011
Thursday, 1 December 2011
q: How big is the market for the rupee?The rupee is now a big market. Summing across both spot and derivatives, perhaps $30 billion a day of onshore trading and $40 billion of offshore trading takes place. Both these markets are tightly linked by arbitrage. In other words, for all practical purposes, it's like NSE and BSE which are a single market unified by arbitrage. If you place a small order to buy 100 shares on either NSE or BSE, you get essentially the same price, and arbitrageurs are constantly at work equalising the price across both markets....
Tuesday, 29 November 2011
Friday, 25 November 2011
In India, NGOs are fashionable. It is almost never wrong, in the Indian discourse, to give more money and more functions to NGOs.Many people have worried about the extent to which NGOs are being used to supplant failing State machinery. This may seem expedient, but no country every became a developed country on the back of NGOs. There is no alternative to fixing the core mechanisms of the State.In recent days, two pro-NGO policy elements seem to be in the pipeline:A new Companies Bill seems to require that 2% of profit be spent on corporate social...
Thursday, 17 November 2011
by Percy S. Mistry.How did it happen?The worst financial crisis in the western world for nearly 80 yearsbroke in September 2008.It required banking/financial systems to be supported andrecapitalised by governments across the EU and in the US.In June 2009 it became apparent that the peripheral countries ofthe Eurozone (Greece, Portugal, Spain and Ireland) were grosslyover-indebted.Yet in some instances (Spain) their public debt to GDP ratioshappened to be lower than those of the US, France, the UK andGermany.The continued viability of their public...
Tuesday, 8 November 2011
A pioneeringconference of the academic community in the field ofinternational relations in India.Pramit Bhattacharya in Mint on the impact of transaction charges on the currency futures/options markets.In continuation of my blog post on Pakistan, India, MFN, readBibek Debroy on the subject.Watch me talk about risk aggregation in the Indian economy, presenting joint work with Sucharita Mukherjee. This is from a fascinating conference organised by IFMR. From this same conference, also see the most excellent opening talk by Nachiket...
We know a lot about price controls from the field of exchange rates. Here's an argument from way back, in 1998:When change comes to a stabilised currency, as it must, that change is painful. Change in the long term is inevitable. The random walk doles out a little change every day, which is less painful than sudden large changes. ...Currencies which are random walks yield a deeper sort of stability. The steady pace of small changes every day generates realistic expectations about currency risk and continual realignment in production...
Monday, 7 November 2011
On 25 October, Dr. Subbarao announced a 25 basis point hike in the policy rate. Alongside this, he made statements that were widely interpreted as being dovish:Keeping in view the domestic demand-supply balance, the global trends in commodity prices and the likely demand scenario, the baseline projection for WPI inflation for March 2012 is kept unchanged at 7 per cent. Elevated inflationary pressures are expected to ease from December 2011,...
In continuation of my previous post on piped natural gas, I found that Mahanagar Gas charges Rs.33/m^3 for natural gas. The energy content is 8500 kcal/m^3 or 35.56 MJ/m^3. This corresponds to 10 kwhr i.e. 10 units. In the units of electricity pricing, then, this gas is priced at Rs.3.3 per unit (i.e. $0.066 per unit). This is slightly cheaper than electricity but not by much. I'd have expected gas to be cheaper than this. This isn't a pricepoint at which one can obtain a big shift from electricity to NG. It is more convenient than shipping...
Sunday, 6 November 2011
When electricity distribution networks fall into place, people start using electricity for everything. Heating, air conditioning, cooking, etc.: electricity is the supple path to all applications. Electricity is conveniently accessed at home, but at a system level, there are problems. Electricity is typically made in big facilities, primarily by burning coal or gas. It is then inefficiently transported to the home. Coal has the worst carbon...
Wednesday, 2 November 2011
For once, I am pleased at how India played it: India gave Pakistan MFN status way back, in 1996, without getting into the silliness of reciprocity. A hallmark of professional competence in international trade is the idea of unilateral liberalisation: Even if another country is silly enough to have barriers against us, we should not have trade barriers against them. Removing barriers against India's globalisation is a favour to us, regardless of what it does to anyone else. India often gets into cul de sacs by obsessing on reciprocity - e.g....
I recently read Daniel Yergin's fascinating book The Quest. It's a panoramic view of the global energy industry. For me personally, many parts were familiar territory. But many parts were new to me, and the overall integration of the story was valuable. I encourage every non-specialist (like me) who is curious about energy to read the book.But I was left thirsty for two more books.The first book would be a more technical treatment of the same material.I repeatedly found myself wanting more technical detail. The pollution from cars has come down...
Sunday, 23 October 2011
I was at a meeting in London recently, organised by a href="http://www.theigc.org/">the IGC, on the subject of theresearch agenda in macroeconomics for developing countries. This mademe think about how to make progress./aThe US as the shared dataset for mainstream macroeconomicsAll existing knowledge on macroeconomics is rooted in data aboutthe US economy. The US is seen as a canonical developedcountry. Economists all over the world have treated it as a commonobject of study, when building macroeconomics. It is a shareddataset. Researchers and...
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