Hawks, doves, bears, bulls...

In the blog title, we have two animals and two birds. If you think, it is about the beautiful wildlife, with a scene of a bull grazing in the African grasslands with a dove feeding on the bull's wound or a hawk feeding on the dead bear, flashing in your mind, I would like to say, I am sorry. I mean business here, literally!!

Before we start meaning business, I have some consolation for Nature lovers. When ever I think about Hawks, I always had this doubt: "What is the difference between hawks, falcons, raptors, kites, eagles and vultures?". Since I tried to find about them, I would like to share them. The Raptor is general term used to describe a bird which feeds on other animals, so we need not worry about it. Of the others, Eagle and Vulture are quite easy to differentiate. Eagles are the more majestic ones with large wing span and powerful claws and beaks. The Vultures are the larger birds with the distinctive neck which are always shown in Discovery Channel or NGC or Animal Planet as eating the leftovers of preyed animals after a lion, tiger or a cheetah has finished its lunch. As for the rest of list, they are fairly similar and is hard to differentiate for an untrained eye!

So much for the birds; lets get back to business. In the end of May this year, the US Federal Reserve System (shortly referred to as Fed) chief Mr Ben Bernanke hinted that the Quantitative Easing (QE) tapering may soon be started. In market jargon he was said to have used Hawkish tone. For people who do not know what QE is, it is an unconventional monetary policy used by Fed since 2008 financial crisis (or Great Dispersion II). It is actually the third leg of QE or QE-3, which is currently in place. According to QE, the US Fed purchases $85 billion worth of bonds every month from the market, there by infusing liquidity into the market. More liquidity means the market interest rates move down. And lower interest have simulating effect on economy(at least theoretically), as people tend to spend more now, than hold to their money. Thus by buying $85b worth of bonds and assets, Fed is trying to simulate the US economy.

As Fed chief had used a Hawkish tone, it spooked the markets world over; especially the developing markets like India, which have been enjoying the higher liquidity driving their markets - a Bull run. So the Hawkish tone has spooked the Bulls and the Bears had captured the market. The result, the rupee plunged to all time low against the dollar, and markets feel to the lowest point for this year. Then Dr Rajan was appointed as RBI governor and he used his 'tricks' and 'magics' to stabilized the market.

Yesterday the Fed has actually announced, "A $10b tapering will happen from January". Does it mean Bears will jump in again and the drive the Bulls away? I think otherwise and I have my reasons. First, the market was expecting a much steeper tapering. Second, the Fed has announced that, further tapering would be considered only if the US economy continues to grow at a robust rate. Third, the Fed has decided to hold the short term interest near zero. All these reason has made Fed sound Dovish, which the markets love. Moreover, it removes a great amount of uncertainty affecting the market and will make space for market participants to worry about other factors!

To put in short, in May end, the Fed was Hawkish and Bears enjoyed. Now that the Fed had sounded Dovish, will Bulls enjoy? In US the answer seems to be yes, with both Dow Jones and S&P-500 hitting all time highs. Will Sensex and Nifty follow suit? Hopefully!!                         
         

Sachin... Sachin...

24 years and a day after his debut, Sachin Ramesh Tendulkar retired from international cricket yesterday. Frankly speaking I am not a die-hard fan of Sachin, as some of my fellow country men and women; but the event of Sachin retiring does kindle sadness in me. This is because the event that happened yesterday has much larger significance than just a cricketer's retirement. 

First and foremost, Sachin has been an inseparable part of cricket, from the time I knew cricket. Playing for 24 yeas, he has been playing along with three generation of Indian team. So it had created a psychological impression that people come and go but the little master will be always there. Only when Rahul Dravid retired, I had similar feeling, but even at that time, Sachin was still there. Also, Sachin is one of the stars who have been in Indian team, since I have started watching cricket; the others being Dravid, Kumble and Gangully. When these players were around, the Indian team seemed to be more familiar. When I watch the match, these players would bring back memories of old matches which I enjoyed, also featuring these stars. But now,when I look at the current team, every one is new. In fact all of the current members in Indian team were infants when Sachin made his debut. All the familiar faces have gone and Sachin’s retirement has an effect of 'the last straw'.

I have not been a continuous follower of cricket, but there was a brief period when I would do nothing else but watch cricket. And coincidentally it was time when the government imposed the Set-top box rule in Chennai (Why govt., only in Chennai??), which made all the sports channel ‘paid’ channels and were excluded from the list of channels provided by the local cable operator. During that time India toured Australia (2003 - 04). I would keep watching the news channel for the whole match duration, just because they used to display live scores at the corner of the screen. (Though I switched over to a more sane way of following cricket  after that series – radio commentary!! ) [For readers who think I could have used mobile phones or Internet, guys it was time when a black and white mobile was Rs. 15000+ and 64kbps dial-up connection were the most common network available!!). This period of my love with cricket, actually started because of India’s performance in the 2003 ICC world cup. India in their second match, were beaten by then world champion Australia, but after that there was no turning back and India had a great run in that tournament and ended up as the finalist (again loosing to Australia in the finals, there by crushing my hopes of an revenge!!). As India kept winning in the World cup matches, I caught the ‘cricket fever’. I watched the matches so intensely that I could remember most of the matches even now.[ I even started my own cricket rating after that world cup and kept analyzing all matches for the next one year!!]. Though it was a complete team effort, the backbone behind such a great run in the world cup was Our Little master Sachin. He scored close to 650 runs in the tournament with a 150+ score and two score in 90s (see,I still remember these matches !!!)  Had it not been the great performance at the world cup, I would have not been into cricket so much. That is way Sachin is so special and his retirement is very hard to digest!        

Now the final day had come and like so many, I too watched the final moments at Wankhede stadium (through telecast, though). I actually liked what Harsha Bhogle spoke the most, just after the presentation ceremony. There were many interesting points that he made. First, he said about Sachin being a true ambassador of Cricket – a gentleman’s game. Sachin has always played the game in good spirits and with principles. As Harsh said, Sachin had never been spotted losing his temper on field. And there were instances when he walked, when he knew he was out, without waiting for Umpire’s decision. Also he had made a promise to his father that he will not endorse any Liquor brands, a principle which he always followed.

Another interesting point that Harsha made was about why Sachin is special, about why Sachin is worshiped as god, while equally good players like Dravid did not have such a unprecedented fan following. As Harsha said, it is more because of the circumstances during which he started playing International cricket. Most of the 1983 World cup team have retired, and Indian team was in rebuilding stage. The other two star players of that time, Azharuddin and Jadeja were caught in nasty match fixing scams. Economically too India was at worst position. Also we had Babri Masjid issue and Mumbai bomb blasts. So India was down in all parameters and was trying to regain a position in world. At that time it was Sachin’s brilliant performances which lifted India, brought a sense of joy and pride and brought the nation together. Again quoting Harsh, he did what Sir Don Bradman did after World War II. It is hard to image for people who have not lived that time,to understand this, probably they never will; but for people who experienced that period, Sachin will always be God!

Thank you Sachin for taking Indian Cricket to great heights and being a true ambassador for this Gentleman’s game. 

Is subsidy really helping India?

A simple but strong point was made by Prof. Amartya Sen in the recent public discussion held in Delhi University, "Every time I am here I have to carry a pullover at the height of summer because everything is, you see that Tokyo keeps the temperature 23 degrees, Singapore at 22 degrees, Bangkok at 22, Beijing at 22. We keep at 16 or 17 on subsidized power, air conditioning at 16 or 17. So I think we have to think of how it is valid?" 
The other eminent speaker of the discussion Mr. Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, made the important point about subsidiary "....there is no doubt that the subsidy structure that has evolved did not evolve from a presumption that look, let's do something for the poor. It was there, it was allowed to develop and there is a huge understandable, political resistance to be withdrawing subsidy. Most people are not aware to what extent these things are being subsidized. I mean for example, let's take diesel. Total expenditure in the Budget on food subsidy, which is, everybody agrees is a priority. We ought to do a better job, etc. There is no dispute on that. [It] Does not exceed Rs. 70,000 crore. The subsidy on diesel is Rs. 91,000 crore. "
So the big question is, does common man or aam aadmi of India really need the subsidiary he is getting?

Lets begin with subsidized electricity. In the same speech, Prof. Sen points out that about one third of people in India are without proper power. In addition to that, many states like TN, AP are reeling under severe power crisis, which has lead to closing of many industries and leaving many people to be jobless; and not surprisingly, these state's power utilities are in worst financial mess. The main reason being,: these utilities sell power at loss making rates. Hence no fund is available for modernization and expansion. (Incidentally India's average transmission loss is one of the highest among similar developing countries; In a country with almost 400 million without power, that is criminal!).

The details above, clearly show how valuable electricity is. Now going back to Prof. Sen's point: Can we be so careless about such a valuable commodity? The answer is blatant, such people should be penalized, not subsidized!! A great example is what happened in Gujarat. Mr Modi was strong enough to remove free power to farmers. [He actually calls it a curse]. Though he received strong resistance initially, now people of Gujarat receive uninterrupted power and of course they are very happy about it now. This is just the case of one sector. In Railways, tickets charged were at unviable rates until recently, when prices were revised. (Sadly the proposal to provide diesel at market price to bulk consumers has nullified all the gains). So are LPG which are sold at almost half the market price, and of course diesel for which govt and up-stream oil companies share 91000 Cr an year of subsidiary bill. And what do people do, they use domestic LPG for commercial purpose, smuggle kerosene and diesel to other countries where these commodities are sold at market rates and the biggest of all, super rich people drive ultra low mileage SUVs and luxury cars using subsidized diesel.  

As pointed by Mr Ahluwalia, people do not realize, how much of subsidiary they are getting and importantly the purpose of subsidiary. The main beneficiary of such subsidiary are not actually poor people, but "aam admi" as mentioned by Prof. Sen "... middle class, which has renamed itself aam admi i.e. they are relatively poor of the rich, that's the category and has a tendency to be vocal and all has to cooperate[with their demands]." These are the people who actually can avail all facilities at market price but still want to enjoy subsidiary because they are used to it. That sounds ridiculous, isn't it?

So what is the end result. Many govt. entities are under severe financial crunch or cannot be world class because of lack of funds. Worst of all, India is facing a risk of financial downgrade which can be disastrous to India inc, because of huge fiscal deficit. And what is there to check the fiscal deficit? This is what Mr Ahluwalia said about it: "You know, all the Fiscal Responsibility act does, is it forces the government to say what is its fiscal deficit going to be and somewhere, in November or so, report back are we on track or not, and if we are not on track, then explain to Parliament why the fiscal deficit is higher. There are no penalties other than what Parliament can impose. Now if Parliament had the approach, that if you've exceeded the fiscal deficit, we should have a vote of no confidence, there would be an immediate penalty. The problem quite honestly is that if you go to Parliament and say I had to exceed my fiscal deficit because I doubled the following subsidies, and I increased all these various others expenditures, generally you get applause. There is no perception I feel, generally amongst politicians, even amongst public that high fiscal deficit cause damage and that sort of view does it little bit as a free launch." People and importantly politicians, should realize the financial state of a country and act accordingly; if there is prolonged mismatch, history gives only one answer for it: economic crash!  

This actually doesn't mean, there should be no subsidiary, subsidiary should be given only to people who really deserve it. It should help development, not hamper it! Though the slew of tough measures in reducing subsidiary currently being taken, the revenue generated should be used to address the basic problem like healthcare, education and malnutrition. If all these saved money ends up in a 2G like scam or in Swiss bank, the whole objective will be defeated. Such tough measures should be backed up by strong political will . This week's financial and railway budget will be a clear indicator of how much will, the government has, to move towards a more sustainable economy. On one hand, this being the last budget before 2014 election, UPA may want to be more "aam aadmi" friendly and on other side, the lurking threat of financial downgrade; it would be interesting to see which side Mr Chidambaram takes!