Posts Tagged: India

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How not to think about inflation

Caravan magazine, January 1, 2012.

A certain kind of history, beloved by the Victorians and the Edwardians, made much of the significance of particular dates—history by the numbers, with a few years remembered for their momentous events (and always for just one) while all the others are relegated to obscurity. Unsurprisingly, this sort of list-making still flourishes in our schools, where one might be forgiven for thinking that nothing of note happened in India between, say, 1707 (“Death of Aurangzeb”) and 1757 (“Battle of Plassey”). Along similar lines, for modern Indian schoolchildren, the year 1974 figures as an “important date” because of the nuclear “device” detonated at the insistence of that Bangladesh-liberating, Pakistan-splitting only-man-in-the-cabinet, Indira Gandhi. 

But 1974 was noteworthy for another reason, and one that children are unlikely to be memorising: through the entire year, the country’s inflation rate was never lower than 20 percent. September 1974, in fact, was a “record month”: inflation as measured by the wholesale price index touched 33.3 percent. (In other words, prices were a full one-third higher than a year earlier.) Perhaps it should come as no surprise that Mrs Gandhi, never less than shrewd, chose that particular year—when the average Indian was earning essentially the same pitiful amount as he had done a year earlier (as was typical in those years of anaemic growth) while paying at least 20 percent more for his meagre purchases—to set off a bomb and whip up the jingoist fervour so beloved of embattled politicians. 

If this was the gambit, it seems to have worked, because one rarely hears talk of the fact that 1974 marked the worst inflationary episode in the history of independent India—even worse, though only slightly, than the only comparable period, between 1979 and 1981, when wholesale price index inflation remained in the double digits, often above 15 percent, for more than two years. Looking back today, in the midst of another sustained period of high inflation that began in mid-2010 and has continued for roughly the past 18 months, one sees both similarities and contrasts: as in 1974, the present spell of inflation has taken place against the backdrop of a global spike in crude and commodity prices and a period of economic weakness in the developed world. But in many other ways, today’s crisis looks very different from the one an earlier Mrs Gandhi had faced: inflation has peaked at around 11 percent and mostly remained in the high single-digits, which would have represented a trough in either earlier cycle. At the same time, the average Indian now sees his or her purchasing power double roughly in a decade; under the growth rates that prevailed between 1965 and 1979, doubling per capita GDP would have taken a century. 

Judging from the exasperation seen in the press at the government’s failure to rein in inflation—invariably accompanied by the fear that high inflation will irretrievably damage the “India growth story”—Indians are clearly agitated about inflation. And there are perfectly good reasons to worry. While the current bout of inflation is far less severe than those India has experienced in the past, several troubling aspects stand out: first, that it came in the wake of a period of broadly low and stable inflation, with a quick spike and a very slow return to “normal” levels; second, that while overall inflation hasn’t touched the heights seen in earlier such episodes, it has remained steadily high in large part due to more drastic spikes in food prices—which also means that this wave of inflation has disproportionately hurt the poor. Food inflation has begun to moderate in recent weeks, as one might expect after a reasonable monsoon. Yet this is hardly cause for comfort. Indeed, the very fact that food prices ebb and flow so sharply with the seasons points to serious structural problems that underlie the way Indian inflation behaves. 

… This piece can be read in full at http://caravanmagazine.in/Story/1224/Fear-of-Large-Numbers.html

Source: caravanmagazine.in
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A retail economy that allows stores to specialize in serving different niches of the market is more likely to provide consumers with what they need at any given point in time

In the Central Square area of Cambridge, MA is a store called Economy Hardware. It’s reasonably small but big enough to stock a pretty solid range of the sorts of basic home-wares – furniture, lamps, accessories, kitchen goods, bookshelves, rugs – that your average new-to-campus student needs. It is well-located to cater to the needs of such students, being but a hop and a skip away from the eastern end of the MIT campus and only a bit further from an area full of apartments shared by students at Harvard, MIT or one of the many other colleges in the Boston area.

A file photo of a supermarket

A file photo of a supermarket

Yet ask any a student from India or another developing country about Economy Hardware, and the kind of response you get will quite likely depend upon the length of time they have spent in the US. For new arrivals, the existence of Economy Hardware is a god-send. You don’t need a car to get there; pretty much anything you need is there; and, well, it’s a bit expensive, but this is the US, right? Those who have been around a bit longer are instantly dismissive. “Have you seen what they think they can charge for a floor lamp? You know you can get to IKEA on the commuter rail, right?” These students have discovered a fundamental fact about retail in America: to get the deals, you sometimes need to travel. But oh, the bargains…

The reason I bring this up is that the IKEA-Economy Hardware comparison captures an absolutely fundamental facet of the way people make choices about when, where and how to shop in most parts of the world which somehow never seems to make it into the discussion about big-vs-small, foreign-versus-local debate about retailing in India. In a very basic sense, people need different things from their retail outlets at different times, points in their lives, and so on. Poorer people will probably value low prices over much else (there is a reason why poor people in America bristle at attempts to wean them off McDonald’s – it’s cheap). Others may value other attributes more, at least some of the time. A retail economy that allows stores to specialize in serving different niches of the market is more likely to provide all of them with what they need at any given point in time.


Read the rest at: http://www.livemint.com/articles/2011/12/14113230/Views—Why-opposition-to-open.html

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The fundamental problem that Indians face remains low income rather than inequality per se


“We are the 99%”. Anyone who has been following the various Occupy protests in cities across America cannot have missed this slogan, or some version of it. These slogans capture something that unites most of the otherwise disparate groups that the Occupy protests have attracted: a deep disquiet at growing inequality and a sense that the vast majority of people in the world’s biggest economy are being left behind.

As, in some real sense, they have been. The reason that the “99%-vs-1%” slogan has such resonance is that it pithily captures one of the most remarkable trends in the evolution of the distribution of income in the US over the last few decades. Most recently, this has been underlined by the release of a report on income distribution in the US by the Congressional Budget Office (CBO). Between 1979 and 2007, the CBO finds that the real (that is, inflation-adjusted) post-tax income of the top 1% of the American population increased by 275% - i.e. nearly tripled. Over that same period, the take-home pay of the bottom 20% of the population rose by a measly 18%.

Read the rest at: http://www.livemint.com/articles/2011/11/07121425/Views—Is-the-US-more-unequal.html

Source: livemint.com
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Even assuming no big setbacks, crises, etc. the average Indian in 2030 will be about as well off as the average Turk or Bulgarian is today, and poorer than the average Mexican or Latvian is now

October 10th, 2011. 

The debate over India’s economic performance tends to veer towards one of two extremes. On the one hand, there are those who emphasize the robust rates of GDP growth over the past decade to the exclusion of all else. For the most extreme of these “9%-wallahs”, the fact that India’s economy has been growing at one of the fastest rates in the world means that concerns about poverty can be brushed under the carpet – or, at least, treated as something that will resolve themselves in due course. For their opponents – the “poverty-wallahs” – the continued existence of large numbers of the indigent and the dispossessed in post-liberalisation India is a clear indictment of the country’s economic structure and policies.

Read the full article at: http://www.livemint.com/2011/10/10143336/Views—Between-the-9wallahs.html 

Source: livemint.com
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Bhimsen Joshi, singer of India, died on January 24th, aged 88.

Feb 3rd 2011 | from the print edition

MUSIC seemed to require him to use every part of his body. From a slow, mesmerised, almost motionless start his eyes would roll upwards, foreshadowing the ascent of the notes that emerged from his distended, gaping mouth. His hands flailed, as though reaching for some imagined object just out of his grasp. Perhaps Bhimsen Joshi was trying to bring back to earth a soaring note from one of his magnificent taans, the series of rapid melodic passages with which great classical singers in the Hindustani tradition of northern India demonstrate how skilled they are.

Read the full article at: http://www.economist.com/node/18060826

Source: economist.com