Vivek Kaul
Silent Movie is a wonderful Hollywood comedy which released in 1976. The movie has no audible lines spoken by its characters, except one. Marcel Marceau, who was a noted mime artist of that era has the only speaking line in the movie: “Non!”.
Due to this the movie is listed in the Guiness Book of World Records and holds the record for having the fewest spoken lines of any movie which has sound. The irony of course was that the only character in the movie who spoke was the one who was not expected to speak at all, given that he was a mime artist.
In India, the Congress party works in exactly the opposite way as the Silent Movie. Its top two functionaries, Sonia Gandhi and Rahul Gandhi, rarely open their mouths, whereas the other leaders of the party speak all the time, speaking much more than they should, more often than not.
Rahul Gandhi ended his Silent Movie yesterday when he addressed the Confederation of Indian Industries (CII), a lobby for big business in India, and spoke for 75 minutes straight. And from the various accounts that have appeared in the media today, he had them floored.
As far as first major stage performances go it wasn’t a bad act. While he wasn’t in the same league as Amjad Khan was in the 1975 mega hit Sholay he was not as bad as Armaan Kohli was in the 1992 mega dud Virodhi. He was somewhere in between. While he might have got his audience to laugh and clap, there wasn’t much substance or vision for that matter, in what he said.
His speech had a a holier than thou attitude, blamed everybody except the Congress party for the mess that India is today and had a very simplistic way of looking at things. Let me to elaborate.
At the beginning of his speech Rahul baba talked about the journey he made a few years back on the Lokmanya Tilak express from Gorakhpur to Mumbai (Lokmanya Tilak is a station in Mumbai at which many long distance trains coming from the Eastern part of the country terminate). “I spent a large part of the Thirty Six hour journey moving across the train and talking to travellers – youngsters, weary families, and migrants moving from the dust of Gorakhpur to the glitter of Mumbai. Took us Thirty Six hours. It is called an Express!”
Yes, the train takes 36 hours and is still called an Express. But the question is who is to be blamed for this? Between 1947 and 2013, the Congress Party has ruled India uninterrupted, for long periods of time. Gandhi’s great grandfather, grandmother and father were Prime Ministers of this country. His mother came close to being one, and still is the defacto prime minister of this country. So if an express takes 36 hours to complete a journey, I am sure we cannot blame Kapil Dev for it.
The fault lies with the Congress party, of which Rahul Gandhi is now the Vice President.
On a slightly different note, The Deccan Queen, a train that runs between Mumbai and Pune, now takes more time to complete the journey, than when it started in 1929.
Rahul baba’s blame game did not stop at this. Some time later in the speech he said: “I am a pilot. I learnt to fly in the United States, I came back. I wanted to convert my license. So I went to the DGCA and I asked what do I have to do. They gave me the curriculum, I opened the book. A large section in the book talks about how to drop mail from aero-planes. How many of you are getting your mail dropped from airplanes in the sky?…And it’s not only in pilot training, it’s everywhere. Look at our text books, open them out. Most of the stuff is not really relevant to what they are going to do.”
This is very true. Our education system sucks. It doesn’t encourage people to think. It encourages them to ratta maar (i.e. mug up) and go vomit it in the exams. It doesn’t make them employable. But the question, as earlier is, who is to be blamed for this? In case of Railways one can at least partly excuse the Congress party that given the compulsion of coalition politics the ministry has not been with the party for a while now. But what about the human resources development ministry which overlooks the education scenario in this country. That has always been with the Congress.
So was Rahul effectively trying to tell us that various human resources development ministers that the Congress has had over the years have been sitting on their asses doing nothing?
Rahul baba then went onto to dismiss China as a simplistic place. This was a very stupid thing to say. China has a history and a culture which is as old as India’s. Paper, ink, printing and paper money, things we take for granted now, where all invented in China. And such a country can be anything but simplistic.
He cited the example of a Chinese bus driver who ran over a pedestrian and then drove away immediately. The idea was to show the lack of accountability that prevails in China. I guess he has a very selective memory to say the least. Incidents like this happen regularly in India. And since he has chosen to forget let me remind him about what happened on December 16, 2012, in the city of New Delhi, where he lives. A twenty three year old woman was trying to get home but since the autorickshaw drivers of Delhi wouldn’t drop her, she along with a friend chose to take a bus. We all know what happened after that.
Since Rahul baba will be performing more and more in the run up to the 2014 Lok Sabha elections it is important he remembers a line written by Akhtar-Ul-Iman and spoken by Raj Kumar in the 1965 superhit Waqt, which goes like this: “Chinoi Seth…jinke apne ghar sheeshe ke hon, wo dusron par pathar nahi feka karte(Chinoi Seth…those who live in glass houses don’t throw stones at others).”
Rahul baba did not stop at this and he went onto further criticise China. China applies power in a blunt, obvious way, he said. On the other hand India applies power in a gentle, soft and supportive way, which works better in the long run.
But what he forgot to tell his esteemed audience was that since 1978, over the last 35 years, China has pulled out millions of its people out of poverty. This has been done at a very fast rate which has never been seen before in the history of mankind. As The Economist put it “In all it was Mr Gandhi who sounded rather simplistic about China. Anyone in the room might have pointed out China’s stunning successes in cutting poverty, improving health, promoting manufacturing and jobs, building infrastructure, and so on.” Also, it is important to remind Rahul baba here of a statement that John Maynard Keynes, the greatest economist of all time, once made: “In the long run we are all dead”. And that includes Rahul Gandhi as well.
And if all this wasn’t enough he assured Indian businessmen who had gathered in droves to listen to him speak that if a person could succeed in doing business in India, he could run a business “even on the moon”. Isn’t that a matter of shame that it is so difficult to do business in India? The Rahul Gandhi led Congress party has presided over the total loss of governance in this country.
Even with all this, lets give Rahul baba the benefit of doubt and believe that he is ready to cut himself out from the misdeeds of his ancestors and his party. He is ready to make a fresh start. So given that what are his ideas for India?
It is one thing hiring a good speech writer and making motherhood and apple-pie kind of statements like “A rising tide doesn’t raise people who don’t have a boat. We have to help build the boat for them.” It is another thing spelling out specifically how does he plan to go around building boats for people, so that they can use that and flow with the tide. And if he can’t do that in a speech and performance which lasted all of 75 minutes when else will he do it?
As The Economist puts it “Mr Gandhi could have spelled out two or three specific measures, ideally in some detail, that he would support—for example, getting an Indian-wide goods-and-services tax accepted; promoting investment in retail or other industries; or devising a means by which infrastructure could be built much quicker. If he were really brave, he might have set out thoughts on ending bureaucratic uncertainty over corruption, or on land reform.”
Rahul Baba was very emphatic in saying that “one man on a horse” cannot save India. That is definitely true. And even if one man on a horse could have saved India, Rahul baba wouldn’t have been riding it. That is for sure.
The article originally appeared on www.firstpost.com on April 5, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)
The Economist
Why Montek has a turkey problem while forecasting
Vivek Kaul
How the mighty fall.
Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, is now talking about the Indian economy growing at anywhere between 5-5.5% during this financial year (i.e. the period between April 1, 2012 and March 31, 2013).
What is interesting that during the first few months of the financial year he was talking about an economic growth of at least 7%. In fact on a television show in April 2012, which was discussing Ruchir Sharma’s book Breakout Nations, Ahluwalia kept insisting that a 7% economic growth rate was a given.
Turns out it was not. And Ahluwalia is now talking about an economic growth of 5-5.5%, telling us that he has been way off the mark. When someone predicts an economic growth of 7% and the growth turns out to be 6.5% or 7.5%, one really can’t hold the prediction against him. But predicting a 7% growth rate at the beginning of the year, and then later revising it to 5% as the evidence of a slowdown comes through, is being way off the mark.
And when its the deputy chairman of the Planning Commission who has been way off the mark with regard to predicting economic growth, then that leaves one wondering, if he has no idea of which way the economy is headed, how can the other lesser mortals?
Forecasting is difficult business. The typical assumption is that those who are closest to the activity are the best placed to forecast it. So stock analysts are best placed to forecast which way stock markets are headed. The existing IT/telecom companies are best placed to talk about cutting edge technologies of the future. Political pundits are best placed to predict which way the elections will go and so on.
But as we have seen time and again that is not the case. Surprises are always around the corner.
One of the biggest exercises on testing predictions was carried out by Philip Tetlock, a psychologist at the University of California, Berkeley. He asked various experts to predict the implications of the Cold War that was flaring up between the United States and the erstwhile Union of Soviet Socialist Republic at the time.
In the experiment, Tetlock chose 284 people, who made a living by predicting political and economic trends. Over the next 20 years, he asked them to make nearly 100 predictions each, on a variety of likely future events. Would apartheid end in South Africa? Would Michael Gorbachev, the leader of USSR, be ousted in a coup? Would the US go to war in the Persian Gulf? Would the dotcom bubble burst?
By the end of the study in 2003, Tetlock had 82,361 forecasts. What he found was that there was very little agreement among these experts. It didn’t matter which field they were in or what their academic discipline was; they were all bad at forecasting. Interestingly, these experts did slightly better at predicting the future when they were operating outside the area of their so-called expertise.
People get forecasts wrong all the time because they are typically victims of what Nassim Nicholas Taleb in his latest book Anti Fragile calls the Great Turkey Problem. As he writes “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.” 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.”
When Ahluwalia insisted in late April 2012 that the economy will at least grow at 7% he was being a turkey. He was confident that the good days will continue, and was not taking into account the fact that things could go really bad. As Ruchir Sharma writes in Breakout Nations a book which was released at the beginning of this financial year “India is already showing some of the warning signs of failed growth stories, including early-onset of confidence.”
In fact, expecting a trend to continue, is a typical tendency seen among people who work within the domain of finance and economics. As a risk manager confessed to the Economist in August 2008, “In January 2007 the world looked almost riskless. At the beginning of that year I gathered my team for an off-site meeting to identify our top five risks for the coming 12 months. We were paid to think about the downsides but it was hard to see where the problems would come from. Four years of falling credit spreads, low interest rates, virtually no defaults in our loan portfolio and historically low volatility levels: it was the most benign risk environment we had seen in 20 years.”
Given this, it is no surprise that people who were working in the financial sector on Wall Street and other parts of the world, did not see the financial crisis coming. This happened because they worked with the assumption that the good times that prevailed will continue to go on.
Taleb calls the turkey problem “the mother of all problems” in life. Getting comfortable with the status quo and then assuming that it will continue typically leads to problems in the days to come. That brings me to Ahluwalia’s new prediction. “I would not rule out 7% next year”. He continues to be believe in the number ‘seven’. How seriously should one take that? As hedge fund manager George Soros writes in The New Paradigm for Financial Markets — The Credit Crisis of 2008 and What It Means “People’s understanding is inherently imperfect because they are a part of reality and a part cannot fully comprehend the whole.”
For the current financial year Ahluwalia as someone who closely observes the economic system could not comprehend the ‘whole’. Whether he is able to do that for the next financial year remains to be seen.
The article originally appeared on www.firstpost.com on February 18, 2013
(Vivek Kaul is a writer. He can be reached at [email protected])
Dear Beni Prasad, it’s govt, not farmer, who benefits from inflation
Vivek Kaul
“Beni Prasad Verma is not a particularly bright fellow,” said Mohan Guruswamy, Chairman of Centre for Policy Alternatives, a New Delhi based think tank, on Times Now late last night.
The remark was in reference to Beni Prasad Verma’s comment that “dal (pulses), aatta (flour), rice and vegetables have become expensive. The more the prices, the better it is for farmers. I am happy with this inflation…Media says the cost of food has increased, but it is benefiting farmers… and the government is in favour of farmers’ profit.” Verma is the union minister of steel.
There are several logical inconsistencies in what Verma said during the course of the day yesterday. An increase in price and the farmer benefitting from it are two very different things. As we know the farmer does not sell his produce directly to the consumers. His produce goes through a series of middlemen. That being the case it’s the middlemen who buy agriculture produce from the farmers, who might be gaining the most from a rise in price. And not the farmer. This has been the case in the past whenever India has seen a shortage of onions.
But what if the farmer is benefitting from the rise in price? This means that the farmer is actually able to sell his produce at a higher price. Even then Verma’s statement does not make sense.
It does not take into account the fact that a normal farmer does not produce all the goods he consumes. So a rice farmer may not be farming vegetables. And a vegetable farmer may not be producing dal and so on. Hence, a rice farmer might gain when the government announces a higher minimum support price for rice, but he loses out because he also needs to buy dal, vegetables, sugar and so on. And the prices of these food products have also been going up.
The latest inflation number based on the consumer price index was released today. The inflation for the month of July 2012 came in at 9.86%. This means that prices on the whole were up by 9.86% in the month of July 2012 in comparison to July 2011.
The inflation for July 2012 was marginally down from the inflation of 9.93% experienced in the month of June, 2012. Within this the food price inflation stood at 11.53%. The number was at 10.71% in June, 2012.
The point I am trying to make is that farmers other than growing what others eat, also eat what other farmers grow. This is a basic fact that Beni Prasad Verma did not realize while making the statement that he did. And if food prices on a whole went up by 11.53% in July 2012, it surely does not benefit farmers because other than being producers of food products, they are its consumers as well.
Now that’s one part of the argument.
A high inflation also hurts consumers at all levels, which includes farmers. They cut down on their planned spending as prices rise and this in turns hurts businesses and the overall economy. Businesses do not like to spend money on newer projects as consumers cut down on consumption.
So the question is who benefits in an environment when the inflation is high? “The most obvious beneficiary of higher inflation, at least in the short term, is the government. Since…the government will always be able to pay its debt, at least domestically since higher inflation effectively reduces the long-term cost of borrowing money,” writes Kyle Bumpus in an article titled Who Benefits From Inflation? (you can read the whole article here)
Let’s take a look at this statement in the context of India. The return on a ten year government bond as I write this is around 8.22%. The government essentially issues bonds to finance its fiscal deficit or the difference between what it earns and what it spends.
The consumer price inflation for the month of July 2012 has come in at 9.86%. What does this mean? This means that the government can effectively raise money from the market at the rate of 8.22% when inflation is at 9.86%. This effectively means that the real rate of interest is negative (the nominal rate of interest i.e. 8.22% minus the inflation i.e. 9.86%).
Hence the interest that the government offers on its bonds is even lower than the rate of inflation. So technically investors who are buying government bonds are effectively losing money, given that the interest they get paid is lower than the rate of inflation.
The question is why are investors then ready to buy government bonds which pay an interest lower than the prevailing rate of inflation? “So negative real rates may simply indicate that savers are incredibly cautious, and that businesses are reluctant to invest in new projects,” wrote The Economist in a recent edition. “When an economy is growing rapidly, there should be an abundance of profitable investment opportunities. Businesses are happy to borrow at high real rates, confident that they can still earn an even higher return,” it added.
But given the state of the economy right now the businesses and savers would rather buy government bonds and lose a little money on it, rather than invest it anywhere else. This demand for government bonds, allows the government to pay a rate of interest which is lower than the prevailing rate of inflation. In the strictest sense of the term the government gets paid to borrow. Hence, it benefits from inflation.
And not the farmer. This is something that Beni Prasad Verma either does not understand or is simply catering to vote bank politics with the assumption that higher food prices benefit farmers. Its time he heard the only Hindi film song written on inflation from the movie Roti, Kapda Aur Makan, written by Verma Malik, “Baakee Kuch Bacha Toh Mehangayi Maar Gayi”.
The article originally appeared on www.firstpost.com on August 21,2012. http://www.firstpost.com/economy/dear-beni-prasad-its-govt-nor-farmer-who-benefits-from-inflation-424931.html
(Vivek Kaul is a writer and can be reached at [email protected])