“Didi, Didi,”the man Friday came running into her room at the Reuters building. “I got the censor board to ensure that movie was not cleared.”
“Oh. Very good,” replied Didi. “It was all Maoist propaganda against me anyway. Making fun of me like that.”
“Yes Didi,” he replied looking at the bouquet of blue roses lying in front of her and wondering how the roses had turned blue.
“I got them specially made,” replied Didi sensing his doubt.
“I have never seen blue roses before this,” said the man Friday.
“Red signifies Maoism, so I got special blue plastic roses made for myself,” she explained.
“What a good idea Didi!” exclaimed the man Friday.
“And I have asked the state agriculture department to start working on developing real blue roses,” Didi continued. “Till then I will have make do with these artificial ones though.”
“I hope they are able to crack the formula for blue roses soon!”
“Acha call that police commissioner,” said Didi. “He seems to have arrested some of our boys.”
“Yes Didi,” the man Friday said. As he was leaving he gave her a left hand salute.
Didi reciprocated with the same left hand salute.
The police commissioner came ten minutes later and knocked on the door.
“Come in,” shouted Didi.
The police commissioner came into the room and made himself comfortable in the chair in front of Didi.
Meanwhile, Didi continued to stand with the fingers of her left hand touching her forehead.
“Do you have fever?” asked the police commissioner slightly worried. “Shall I get a thermometer? I normally have one in my car.”
“Ki moshai,” replied Didi. “You seem to have forgotten.”
“What?” asked the police commissioner, trying to figure out what this was all about.
“This is the neela salaam. The blue salute in English,” Didi explained patiently.
“Oh!” said the police commissioner, gradually getting up from his seat.
“And this is how you do it,” said Didi, lifting her left hand and bringing her fingers very close to her forehead.
“It is the exact opposite of the lal salaam Didi,” the police commissioner said, trying to state the obvious.
“How dare you say that?” shouted Didi. “I will suspend you.”
“Sorry Didi,” pleaded the police commissioner. “This won’t happen again.”
“Good. Anyway, lets get down to working.”
“I hear you have caught some of my boys in Jadhavpur.”
“Your boys?” asked the police commissioner. “But Didi…”
“Your police force has caught some workers of my party in Jadhavpur,” trying to get to the point.
“Oh. I did not know they belonged to your party,” explained the police commissioner. “I was just trying to maintain some law and order.”
“My boys are not at fault. Some students, you know how these intellectual types are, opened up a Facebook page.”
“Oh. They really shouldn’t have,” interrupted the police commissioner.
“First let me complete. There is nothing wrong with opening a Facebook page. After all we are an advanced state. What we think today, the rest of India will think fifty years from now.”
“Yes Didi. Of course Didi,” said the police commissioner. “So what is the problem?”
“Oh. The background of their Facebook page was red. And so some of party workers went to them and suggested they change it to blue. And you know how these intellectual types are, they started shouting cholbe na cholbe na.”
“Oh Didi. But that used to be your line. They stole it. They shouldn’t have. Do you want to file a copyright infringement complaint?” asked the police commissioner. “I still remember you walking down Chowringee in your white cotton saree with a slight grey border on that rainy day in the mid 1980s.”
“Yes. How can I forget that day. You really beat us black and blue.”
“Orders from above,” said the police commissioner. “But I was always with your cause.”
“So getting back to the point. These intellectual students started shouting cholbe na cholbe na and refused to change the colour of their Facebook page to blue. So my workers were left with no other option but to beat them up, like you did on that rainy day in the 1980s.”
“And to tell you the truth I am so used to shouting cholbe na cholbe na, if I don’t shout it five hundred times a day, I don’t get sleep at night.”
“Foolish students. They just had to change the colour of a Facebook page. Why invite trouble?”
“And they didn’t relent at that,” continued Didi.
“As in?” asked the police commissioner.
“They started singing a song,” replied Mamata.
“It must be one of those revolutionary songs written and sung by your party MP Kabeer Rumon.”
“It was a new song from a Hindi movie.”
“Oh, which one?”
“Some new song which Amitabh Bachchan recently sung for this Kahani movie.”
“You know, I don’t watch new movies anymore,” said the police commissioner. “The last movie I saw was Manik Da’sHirek Rajar Deshe in 1980, after that I lost interest.”
“Manik Da?” asked Didi. “Who’s he?”
The police commissioner thought it was best not to answer that.
“So madam you were telling me about that Amitabh Bachchan song.”
“Can’t remember it,” said Didi. “Let me call Proteek, he might know.”
“Yeah, please do.”
“Ae Proteeeeeeeek,” shouted Didi for her man Friday who came running in.
“Yes madam. I was just getting your Nano painted blue.”
“Never mind that,” said Didi. “What was that Amitabh Bachchan song which you had set as your ringtone and those students were also singing?”
“Ah madam, that one. It went like Jodi Tor Dak Shune Keu Na Ase Tobe Ekla Cholo Re (If no one responds to your call, then go your own way alone),” replied the man Friday. “Mr Bachchan has sung it very well.”
“Yes, but I don’t like it,” Didi yelled. “It smells of revolution. It smells of Maoism. Plus it shows women in the midst of sindoor khela during Durga Puja and that reminds me of red. And red reminds me of Maoism.”
“Oh!” exclaimed the man Friday.
“Also, remind me to issue an ordinance to change the colour of sindoor to blue,” said Didi.
“But Didi…” the police commissioner tried to intervene. “Women love the red colour Didi. So many of their beautiful sarees will go waste Didi,” the bureaucrat said, trying to rescue the situation.
“Never mind! The women of this state have made sacrifices in the past and they will continue to make sacrifices. Look at Bipasha she makes so many sacrifices to stay fit and bring out that DVD of hers,” Didi said vociferously.
“Yes, yes!” the men in the room agreed.
“Also getting back to the point lets arrest Amitabh Bachchan,” said Didi.
“But he has just sung the song Didi,” the police commissioner tried to explain. “And he lives in Mumbai, so we won’t be able to arrest him.”
“Yes, doesn’t come under our jurisdiction,” Didi conceded. “So let’s arrest the person who wrote it.”
“It was written by Robi Thakur, Didi,” said the police commissioner.
“Lets arrest him,” said Didi.
“Robi Thakur as in Rabindranath Tagore,” said the police commissioner.
“I don’t care. Put your entire police force behind this man and arrest him,” said Didi. “I want him by the evening. Or I will suspend you. And remember that if I could make Tatas leave the state…” Didi, threatened and walked out of the room.
The police commissioner sat there wondering what had hit him and felt blessed that the sky was already blue.
The article appeared on www.theunrealtimes.com on March 4, 2013
(Vivek Kaul is a writer. He tweets at @kaul_vivek)
Month: February 2013
Budget 2013: Why Chiddu deserves a Filmpair if not Oscar
Its early morning in Lutyens, Delhi. Chidu has just gotten up from sleep and is sitting in the lawn in front of his bungalow, waiting for his attendant to bring him his cup of morning coffee and the business newspapers. The attendant soon arrives very excited by the fact that Chidu has been awarded an Oscar by The Economic Chimes.
“Sir, sir, sir,” the attendant came running with the day’s pink papers and a cup of strong kapi like the way Chidu liked it.
“What happened?” asked Chidu. “Did Madam say something?”
“Madam?” the attendant asked. “When does she ever say anything? Mr Patel does all the talking for her.”
“Oh. You got me worried on a Monday morning,” said Chidu, sipping his cup of filter coffee, and adjusting his Ariel white Mundu. “So why are you so excited then?”
“Sir, you have been awarded the Oscar!” exclaimed the attendant.
“Oscar?” wondered Chidu adjusting his pashmina shawl.
“Yes sir, Oscar!”
“They must have given it to me for lifetime achievement then,” said Chidu with a proud smile on his face and a ‘halo’ around his head.
“Lifetime achievement?” asked a surprised attendant.
“Yes. What is politics if not a performance?” stated Chidu. “We politicians are the best actors after all.”
“But sir you are not even 70!”
“So?” asked Chidu.
“So you cannot be given a lifetime achievement award,” explained the attendant.
“But why not?” quipped an irritated Chidu. “In some cases things happen a little faster.”
“Arre sir, you are not getting my point.”
“What is your point?”
“Sir, lifetime achievement awards are given to those who have already retired. Or to those who are not retiring, and are expected to retire after they accept the award,” the attendant said. “
“And, you are a young turk by Indian political standards,” the attendant said. “Your days in politics are just about to start.”
“Oh, yes. Oh, yes. I am only 67 now. My best days are clearly ahead of me. I am just a little over a year older to Madam, you see.”
“For a moment you had me worried sir,” the attendant remarked with a slightly worried look on his face. “In my mind I had almost started to look for a new job.”
“Don’t worry. Don’t worry. I still have at least two decades of politics left in me,” said Chidu trying to pacify his attendant. “So what is this Oscar thing then?”
“Sir, The Economic Chimes has given you an Oscar,” answered the attendant.
“The Economic Chimes?”
“Well, when I was at Harvard, one of my dorm mates told me the Oscar is awarded by the Academy of Motion Pictures, Arts and Sciences.”
“So how can The Economic Chimes give me an Oscar?” wondered Chidu.
“Maybe the promoters must have picked up a stake in the Academy also, like they do in other companies. You know they must have assured the Academy some publicity in lieu of a stake?” said the attendant.
“Maybe,” replied Chidu, picking up The Economic Chimes to check.
“Sir how is the kapi sir?” asked the attendant. “Got my wife to make it today.”
“Oh. Is that the case?” said Chidu, talking to himself.
“Yes sir. She makes good coffee no?”
“I am not talking about the coffee,” blurted Chidu, slightly irritated by now.
“I am talking about the Oscar,” said Chidu. “The Economic Chimes has given me a growth Oscar.”
“Oh. I saw Oscar and your name in the headline and got totally excited.”
“I don’t blame you. These pink papers are so boring that it is very difficult to read beyond the headline anyway,” said Chidu. “On most days they put me to sleep.”
“But what is a growth Oscar sir?” asked the attendant. “I thought an Oscar is an Oscar.”
“Well it is a figure of speech. What they are basically trying to say is that I will do a good job in the budget of creating economic growth.”
“Economic growth?” wondered the attendant. “But sir things are so bad. Inflation is almost at 10%. Our growth in imports is nearly 13 times our growth in exports. Our current account deficit is at an all time high. Our fiscal deficit is reaching monstrous proportions. Our external debt is huge. The industrial growth contracted by 0.6% in December. Interest rates continue to remain high. Another pink paper reported today that fresh orders of companies are at a four year low.”
“Yes, I know all that,” said Chidu, sipping his coffee.
“So, where is the question of economic growth?” asked the humble attendant.
“Well, do you work for me? Or the opposition?” quipped Chidu. “Have you joined the BJP?”
“No sir I am totally secular till now. I work for you sir,” replied the attendant. “But then if you can’t convince me about economic growth, how will you convince the world at large?”
“World at large? What is that?” replied Chidu. “I only need to convince Madam, her son and Mr Patel.”
“But the world at large?”
“Oh The Economic Chimes is already doing that. They are batting for me.”
“But how can they so positive in such dark times?” wondered the attendant, finding it very difficult to let go.
“I can see through their strategy,” said Chidu. “I went to Harvard after all.”
“Be Positive is their strategy.”
“But as far as I know that is a blood group?” remarked the attendant.
“Okay. I am in no mood for poor jokes right now. See the idea is that if the largest pink paper projects news positively, then people will soon start believing that things are actually positive and once people start believing that things are positive, things might actually turn out to be positive.”
“It’s a mind game my dear.”
“But what if people don’t feel positive?” asked the attendant.
“Yes that is indeed a possibility. But then what is the harm in trying? It is like the concept of Aal is Well from the movie 3 Idiots. If you keep repeating Aal is Well, Aal is Well, things turn out well.”
“Yes sir,” said the attendant. “But isn’t that only in the movies?”
“That is the challenge my dear, to turn reel life into real life,” said Chidu, rather philosophically. “And for that we all need to be actors, from the media to the politicians.”
“Yes sir,” replied the attendant, finally getting the gist of what his boss was trying to convey.
“Oh and your wife makes wonderful coffee!” said Chidu.
“Ha ha! So you are trying the B+ strategy on me!”
“Well if I can’t convince you, how will I convince the world at large?” said Chidu, trying to have the last laugh. “We politicians are brilliant actors after all and if not an Oscar, I at least deserve a Filmpair.”
The article originally appeared on www.firstpost.com on February 25, 2013
(Vivek Kaul is a writer. He can be reached at [email protected])
Gold price falling? Why it’s still okay to buy the metal
Gold prices fell below Rs 30,000 per ten grams for the first time in seven months on February 21, 2013. Data from www.goldprice.org shows that the yellow metal has fallen by around 6.5% in dollar terms over the last 30 days. In rupee terms the fall has been a little lower at 5.7%.
This fall has meant that everyone who has been recommending gold (including this writer) have ended up with eggs on their face. But every forecast cannot be right all the time. There are situations when a forecast is wrong till it is proved right.
Allow me to explain. Every bull market has a theory. So why has the price of gold gone up over the last few years? The answer is very simple. Central banks around the world have printed a lot of money. This money has been pumped into the financial system with the hope that banks will lend it to people and businesses, who will then spend this money and thus help in reviving the economy.
The fear was that with all this extra money chasing the same number of goods and services, there would be a great rise in prices. To protect themselves from this rise in price and loss of purchasing power, investors around the world had been buying gold. This pushed up its price. Unlike paper money gold cannot be created out of thin air by the government and thus is looked upon as a hedge against inflation.
But the inflation is still to come. And so this theory which drove up the price of gold doesn’t seem to be working. As a result the price of gold has taken a beating. With no inflation there is really no reason for people to buy the yellow metal and protect themselves against loss of purchasing power.
As Gary Dorsch, Editor, Global Money Trends points out in a recent column “So far, five central banks, – the Federal Reserve, the European Central Bank, Bank of England, the Bank of Japan and the Swiss National Bank have effectively created more than $6-trillion of new currency over the past four years, and have flooded the world money markets with excess liquidity. The size of their balance sheets has now reached a combined $9.5-trillion, compared with $3.5-trillion six years ago.”
But even with so much money being printed there has been very little inflation. So money is being diverted to other asset classes rather than buying up what John Maynard Keynes referred to as the barbarous relic.
Also this lack of inflation has made central bank governors and politicians around the world victims of what Nassim Nicholas Taleb calls the great turkey problem. As he writes in his latest book Anti Fragile “A turkey is fed for a thousand days by a butcher; every day confirms to its staff of analysts that butchers love turkeys “with increased statistical confidence.””
With the butcher feeding it on a regular basis, the turkey starts to expect that the good times will continue forever and the butcher will continue feeding it. That is what seems to be happening with central bank governors and politicians around the world. The fact that all the money printing has not produced rapid inflation till now has led to the assumption that it will never produce any inflation. Ben Bernanke, the Chairman of the Federal Reserve of United States, the American central bank, has even gone to the extent of saying that he was 100% sure he could control inflation.
And using this conclusion central banks are printing even more money. This is like the lines from La Haine, a French film released in 1995 “Heard about the guy who fell off a skyscraper? On his way down past each floor, he kept saying to reassure himself: So far so good… so far so good… so far so good.”
But the person falling from a skyscraper has to hit the ground at some point of time. The good days of every turkey being reared by a butcher also comes to an end. As Taleb writes “The butcher will keep feeding the turkey until a few days before Thanksgiving. Then comes that day when it is really not a very good idea to be a turkey. So with the butcher surprising it, the turkey will have a revision of belief – right when its confidence in the statement that the butcher loves turkeys is maximal and “it is very quiet” and soothingly predictable in the life of the turkey.”
Or as the line from La Haine goes “How you fall doesn’t matter. It’s how you land!”
Similarly all the money printing has to end up somewhere. As Taleb puts it “central banks can print money; they print print and print with no effect (and claim the “safety” of such a measure), then, “unexpectedly,” the printing causes a jump in inflation.”
Or as James Rickards author Currency Wars: The Making of the Next Global Crises puts it “They can’t just keep printing…All major central banks are easing…Eventually so much money will be printed that this will lead to inflation.”
There is a reason to why the inflation is taking time even with governments around the world printing money rapidly. Henry Hazlitt has an explanation for it in his brilliant book, The Inflation Crisis and How to Resolve it.
In the initial stages of inflation, the man on the street does not know that the government is printing money and hence he has confidence in the paper money he is using. He does not think that the paper money is going to lose value anytime soon, and does not rush out to spend it. Gradually news starts to get around the government is printing money and this is when there is some rush to spend money before it loses its value. This is when prices start to go up at the rate at which money is being printed. In the final stage, as the central bank backed by the government of the day, continues to print money, people start to feel that this will continue indefinitely. And hence they try to get rid of paper money, as soon as they get it. This in turn leads to prices rising at a rate even faster than the rate at which money is being printed.
This is how most inflations evolve whenever governments print money at a very rapid rate.
Once the market starts discounting the idea of inflation, the price of gold will rise at a very rapid rate. But till that happens, people like me, who have and continue to recommend investing in gold, will look stupid. Also it is important to remember that every bull market has its bear runs. In the middle of the bull run in gold prices in the seventies gold prices fell by nearly 44%. The price of gold as of end of December 1974 was at $186.5 per ounce (one ounce equals 31.1 grams). By end of August 1976, it had fallen to $104 per ounce, or nearly 44.2% lower. But prices rallied again from there and peaked very briefly at $850 per ounce on January 21, 1980.
So as I said at the beginning forecasts can be wrong for a long time, till they are proven right. And when they are proved right, even for a brief period, its then when the ‘real money’ gets made.
Taleb talks about people who had been predicting a financial crisis in the developed world. There predictions were wrong for a very long till they were proven right. As he writes “You were wrong for years, right for a moment, losing small, winning big, so vastly more successful than the other way.”
Hence, I would still recommend buying gold, limiting it to around 10% of the overall portfolio or even lower, depending on how much money you are willing to back what is a particularly risky trade. Investment in gold has to be looked upon as a speculation on the continued printing of money and the eventual arrival of rapid inflation. This strategy can prove to be tremendously beneficial. As Taleb writes “If you put 90 percent of your funds in boring cash…and 10 percent in very risky, maximally risky, securities, you cannot possibly lose more than 10 percent, while you are exposed to massive upside.” Gold has to be played like that.
The article originally appeared on www.firstpost.com on February 22, 2013
(Vivek Kaul is a writer. He can be reached at [email protected]. Nearly 14% of his investment portfolio is in gold through the mutual fund route. He continues to buy gold through the SIP route)
Why Chidu can’t do a Warren Buffett in the budget
The legendary investor Warren Buffett wrote an editorial in the New York Times sometime in August 2011 where he made an interesting point. In 2010, his income and payroll taxes came to around $6.94million. While that might sound like a lot of money, but Buffett had paid tax at a rate of only 17.4%. This was lower than any of the 20 other people who worked in Buffett’s office in Omaha, Nebraska. The tax burdens of his 20 employees mounted to anywhere between 33-41% and it averaged around 36%.
So Buffett was paying $17.4 as tax for every $100 that he earned. On the other hand his employees were paying more than double tax of $36 for every $100 that they earned. Of course that was not right.
But why was this the case? This was primarily because Buffett’s employees were paying tax on the salary they earned by working for Buffett. Buffett was making money primarily as long term capital gains on selling shares and he was paying tax on that.
The tax rate on income from salary was much higher than the tax rate on income from long capital gains made on selling shares. This benefited the rich Americans like Buffett. The richest 10% of the Americans own 80% of the stocks listed on the New York Stock Exchange as well as the NASDAQ. Buffett wants this to be set right by making the rich pay higher taxes.
In India there has been talk about making the rich pay higher taxes as well. C Rangarajan, a former RBI governor, and an economist who is known to be close to both the prime minister Manmohan Singh and finance minister P Chidambaram, had remarked in January earlier this year “We need to raise more revenues and the people with larger incomes must be willing to contribute more.”
Chidambaram himself has advocated this school of thought when he said “We should consider the argument whether the very rich should be asked to pay a little more on some occasions.”
So does taxing the rich make sense? It is not a simple yes or no answer. Allow me to explain. Like is the case in the United States, even in India different kinds of incomes are taxed at different rates.
Income from salary is taxed at the marginal rate of 10/20/30 percent whereas long term capital gains from selling shares/equity mutual funds is tax free. Short term capital gains from selling shares/equity mutual funds is taxed at 15%.
Interest earned on bank fixed deposits and savings accounts is taxed at the marginal rate of tax. So is the income earned from post office savings schemes and the senior citizens savings scheme. In comparison dividends received from shares is tax free in the hands of the investor.
Long term capital gains on debt mutual funds are taxed at 10% without indexation or 20% with indexation, whichever is lower. Indexation essentially takes inflation into account while calculating the cost of purchase. Let us say an investor buys a debt mutual fund unit at a price of Rs 100. A little over a year later he sells it at Rs 110. Let us say the inflation during the course of that year was 8%. Hence, his indexed cost of purchase will be Rs 108 (Rs 100 + 8% of Rs 100).
In this case the capital gains would be Rs 2 (Rs 110 – Rs 108) and he would end up paying a tax of 40 paisa (i.e. 20% of Rs 2). Hence, a 40 paisa tax is paid on capital gains or an income of Rs 10 (Rs 110 – Rs 100), meaning an effective income tax rate of 4% (40 paisa expressed as a percentage of Rs 10).
In case an individual had invested Rs 100 in a fixed deposit paying an interest of 10%, he would have earned Rs 10 at the end of the year as interest from it. On this he would have had to pay a minimum tax of 10%(assuming he earns enough to fall in a tax bracket) because interest earned from a fixed deposit is taxed at the marginal rate of income tax. Whereas as we saw in case of a debt mutual fund the effective rate of income tax came to around 4%.
Along similar lines long term capital gains from sale of property is taxed at 20% post indexation. So the effective rate of tax is much lower in case of capital gains made on selling property as well. In fact, even this tax need not be paid if one buys capital gains bonds or another property within a certain time frame. And given that a large portion of property transactions are in black, the effective rate of income tax comes out even lower.
The point I am trying to make is that the modes of income for the rich like share dividends, capital gains from selling shares, equity mutual funds, debt mutual funds or property for that matter, are taxed at lower effective income tax rates, in comparison to the modes of investment of the aam aadmi.
The purported logic at least in case of long term capital gains from shares being tax free is that it will encourage the so called retail investor/small investor to invest in the stock market and thus help entrepreneurs raise capital for their businesses. But that as we all know has not really happened. And essentially this regulation has been helping those who already have a lot of money. What I fail to understand further is why should investing in a debt mutual fund like a fixed maturity plan (which works precisely like a fixed deposit does and matures on a given day) be more beneficial tax wise vis a vis investing in a fixed deposit?
As we saw in the earlier example a fixed deposit investor pays minimum tax at the rate of 10% on the interest earned. He could even pay an income tax as high as 30% . On the other hand a debt mutual fund investor pays an effective tax at the rate of 4%, irrespective of which marginal rate of income tax he falls under. Why should that be the case?
I think we need to move towards a more equitable income tax structure where various modes of income, at least those earned through investing, should be taxed at the same rate. For starters indexation benefits which are currently available on debt mutual funds and sale of property should also be available when calculating the tax on interest earned on fixed deposits and savings accounts. Inflation doesn’t only impact those investing in debt mutual funds and property, it also impacts those who invest in bank fixed deposits and savings accounts.
Further long term capital gains on selling shares/equity mutual funds should be taxed at marginal rates with indexation benefits being taken into account. That would make the tax system more equitable than from what it currently is.
It would also amount to the rich paying more tax without introducing a higher tax rate or a surcharge of 10% on the highest marginal rate of 30%(which would mean an effective rate of 33%), as is being suggested currently.
Several experts are against this move and I partly agree with them. As an article in the India Today points out “Economist Surjit S. Bhalla argues that there is no real rationale for taxing the top income segment any further. Bhalla uses official data to show that the top 1.3 per cent of income taxpayers in India already account for 63 per cent of total personal tax revenue. In comparison, in the US, the top 1 per cent of taxpayers contribute just 37 per cent of total income taxes.”
That’s a fair point against higher taxes for the rich. But what we really need to know is what is the effective rate of income tax being paid by the rich? Is the situation similar to Buffett’s America, where Buffett pays an effective income tax of 17.4% whereas his employees pay an average tax of 36%? Only the Income Tax department can answer that.
Having said that, I don’t see India moving towards a more equitable income tax structure. In order to do that long term capital gains on selling stocks which is currently at zero percent would have to be done away with. And that would mean long term capital gains on stocks being taxed in a similar way as debt mutual funds/property currently are.
Hence, stock market investors would end up paying some income tax. And that as we have seen in the past, this is something they don’t like. Any attempt to tax them is met by mass selling and the stock market falling.
A falling stock market would mean that dollars being brought in by foreign investors will stop to come or slowdown. When foreign investors bring dollars, they sell those dollars to buy rupees, which they use to invest in the stock market in India. This perks up the demand for the rupee leading to its appreciation against the dollar.
A stronger rupee would mean a lower oil import bill. Oil is bought and sold internationally in dollars. If oil is worth $110 per barrel, and one dollar is worth Rs 55, it means India pays Rs 6050 per barrel ($110 x Rs 55) of oil. If one dollar is worth Rs 50, it means India pays a lower Rs 5500 per barrel ($110 x Rs 50) of oil.
Lower oil imports would help control our current account deficit which is at record levels. It would also help control our fiscal deficit as the government forces the oil marketing companies to sell products like kerosene, cooking gas and diesel at a loss and then compensates them for the loss. It would also help oil companies control their petrol losses.
This is a dynamic that Chidambaram cannot ignore. He will have to keep the foreigners and the stock market investors happy to ensure that the stock market keeps rising. Meanwhile, the rich will continued to be taxed at lower effective rates.
The article originally appeared on www.firstpost.com on February 21, 2013
(Vivek Kaul is a writer. He can be reached at [email protected])
What happens when Vijay, Subratai and Arindam meet
It is sometime in late December 2012. Vijay Kaliya’s Woodpecker Airlines is in the process of shutting down. Subrata Noi’s Jahan Aara is also in major trouble. Kaliya is very worried and Noi is not.
Kaliya and Noi run into each other and are soon joined by a man with long hair and a ponytail.
This is how things went.
Vijay Kaliya was feeling very besahara when Subrata Noi happened to walk in.
“I heard the bad news about Woodpecker,” said Noi, trying to console Kaliya.
“Hmmm,” replied Kaliya barely acknowledging Noi.
“You still have a thing or two to learn about how to do business,” said Noi, with an odd smile on his face.
“And what can you teach me?” Kaliya asked, feigning curiosity.
“First and foremost you need to make sure that money should always keep coming in.”
“And how do I do that?”
“That can only happen if you have a business model.”
“Well I am not sure about the business, but yes I still do have the models!”
“As in?” asked Noi.
“Never mind,” replied Kaliya. “You were saying something?”
“So I was saying that for any business to survive you need to have a business model.”
“And how do you define a business model?”
“Ah. That’s how you hope to make money some day.”
“Yeah, I had hoped to make money someday,” replied Kaliya. “But now that’s not going to come.”
“Oh. Don’t worry why don’t you just sue them,” came a voice, as a man with long hair and a ponytail entered the room.
“Who are you?” asked Noi.
“They call me the Guru,” came the reply from the man with long hair and a ponytail.
“Ah, the love guru,” remarked Kaliya. “So tell me will I be able to hold onto my models?”
“What model…” Noi was about to ask, but was interrupted by the man with long hair and a ponytail.
“I am insulted. I will sue you in a court in Jhumritilaiya,” threatened the man with long hair and a ponytail.
“Chill maadi,” quipped Kaliya. “Here have a Woodpecker beer.”
“I don’t drink beer,” said the man with long hair and a ponytail. “But I use it for some other purpose.”
“What other purpose?” asked Noi, wondering what other use could beer have.
“Well. Don’t tell anyone. It’s a trade secret.”
“I won’t,” both Kaliya and Noi answered together
“I actually use it to wash my hair, you know. I tried various other brands but my hair only shines when I use Woodpecker,” explained the man with long hair and a ponytail. “And Star Rukh Khan gave me this idea.”
“That’s brilliant idea,” exclaimed Kaliya. “I could capture the entire hair oil market with it. Let me just call Yana and see if she would model for it.”
“Arre give me also some idea also no, Choti babu,” pleaded Noi.
“I am telling you I will sue you in Udupi if you continue to insult me like this,” said the man with long hair and a ponytail.
“Udupi?” asked Noi. “How can you sue me in an idli/dosa hotel?”
“Argh! Never mind,” said the man with long hair and a ponytail, almost pulling his hair out. “My name is Ravindran Aghauri and I am a management guru. I deserve respect because every student who comes to my business school pays me Rs 15 lakh.”
“Saala you must be collecting a lot of money,” quipped Noi. “That is what I was telling Kaliya.”
“What were you telling him?” asked Aghauri.
“I was telling him that it is important that the money keeps coming in, like is the case with you,” answered Noi.
“Of course. That is because we dare to think beyond the IIIM.”
“Nice tag line you have going there,” said Kaliya.
“Let me tell you another trade secret.”
“Batao, Batao,” said Noi.
“You know we never give the full form of IIIM in advertisements.”
“So?” asked Kaliya.
“Arre I don’t mean the IIIM which everyone thinks, but the International Integrated Institute of Management in Mughal Sarai.”
“Oh. Such a naughty boy you are,” remarked Noi.
“Marketing sir. Marketing. That is what its all about,” replied Aghauri, playing around with his ponytail. “I can sell an air-conditioner to an Eskimo.”
“So I was telling Kaliya that it is important that money keeps coming in,” said Noi.
“Yeah, yeah, education is a recession proof business. Everyone cannot get into the IIIM. So they will have to come to us. And I sell dreams!”
“Yeah, your business model is ekdum tight,” said Noi. “But I am worried about our friend Kaliya. Iska kuch karna padega.”
“Yes, yes we should help him,” quipped Aghauri.
“So I was saying that it is important that money keeps coming in,” said Noi for the nth time.
“You are stuck like Ravi Shastri yaar. Imagine saying the same things for twenty years and getting paid for it,” interrupted Kaliya, who was slightly irritated by now.
“Aage kya bolun. That is my business model.”
“As in?” asked the management guru, totally surprised.
“And I thought you were smart guys. Let me explain. See investors should always be ready to keep putting in money into your company. And then you can use that money to launch some business. Look at me I am into hotels, insurance, real estate, movies, newspapers, television and what not.”
“So?” asked Kaliya.
“So, I don’t know what I really do.”
“So?” asked Aghauri.
“Well when I don’t know what I do, how can the world know what I really do.”
“So?” asked Kaliya.
“So I can keep raising more money.”
“But how do you repay the guys whose money falls due?” asked Aghauri.
“Oh. That is very simple. I repay the old investors using money being brought in by the new investors.”
“Wow. What a formula!” exclaimed Aghauri. “I will now dare to dream beyond business schools.”
“Yes, yes, why not, it is always good to have some healthy competition,” said Noi, trying to show his large heartedness.
“But Kaliya why are you still sad?” asked Noi. “I have given you the fool proof business formula. Whether your real business makes money or not it is important to keep rotating money.”
“Ab ek baar muskura do na yaar,” said the management guru getting happy and gay.
“Arre, but this doesn’t solve my problem na.”
“But why not?” asked Noi. “Using this formula you can start another airline.”
“Yes. Airline. Aren’t you unhappy because Woodpecker Airlines is shutting down?”
“Not at all. I am unhappy because I have just finished shooting another Woodpecker calendar. This is what gives real meaning to my life. And I won’t be doing it for at least another year.”
“Yana ka jaana!” quipped Noi.
“Ah Kaliya, I have a solution for you,” said the management guru.
“Really?” asked Kaliya.
“Why don’t you make monthly calendars, you know. A different model for every day,” suggested Aghauri. “How about that?”
“Brilliant idea. That will keep me busy throughout the year,” remarked Kaliya. “And you know what, I love flying paper planes with my models around!”
The article originally appeared on www.firstpost.com on February 19,2013.
(Vivek Kaul is a writer. He can be reached at [email protected])