Inflationary Woes

My house help yesterday asked for a salary rise citing the increasing prices as the reason. It then struck me that inflation is actually now affecting at the grass-root levels. Inflation in India has been historically measured as the percent change in the wholesale prices as opposed to the world which measures the price change in consumer prices. Thus the trickledown effect of the price increase is lagged in this part of the world. Inflation since the start of this financial year has been close to double digit levels. In October the inflation was 9.73% as compared to the October of last year; which means that as compared to last year, prices on an average have increased by 9.73%.

Most of this price rise has been attributed to imported inflation in the form of oil imports and food inflation. Increasing rural incomes and standard of living has pushed up the overall domestic demand. The rural economy is generally doing well, (with a good monsoon season and a good harvest) and higher disposable incomes are increasing demand for food and white goods. As demand increases, prices increase in the short run as supply does not catch up with demand.

While on one hand a ‘comfortable’ level of inflation implies that the economy is growing; a high level of inflation might give mixed signals to investors. A comfortable level of inflation is the threshold level (decided by the central bank of a country; for India that level is 5%) of inflation that is targeted not to cross. Inflation reduces the value of your money; thus every marginal increase in your salary may not equal any value addition!

So how does one hedge one’s income in such an inflationary scenario? Well, for starters, start investing from the day you receive that first salary check! (Sounds too ideal, but trust me folks, life is a bed a roses only till your dad foots all your bills!!). Now before I start sounding too idealistic or pessimistic, let me say that I did not invest my first salary check either! However, I do believe in investing wisely now.    

Trust me, when I discussed this investment bit with my house help, she gaped at me for a long time, and finally (after much thinking) told me, “So it’s settled then, Rs. 100 more this month onwards…”

The city that never sleeps

“This city never sleeps….”

“Great, then we’ll see you tonight”. Finally after almost a month two of my friends were meeting us over dinner. We planned to keep things simple and decided to go to some non-fancy place (since it was a working day). As luck would have had it, some of us got late and we had to post-pone our dinner time.. We stretched it to almost 2300 hrs.! (But considering you live in today’s age, 2300 hrs. doesn’t seem that farfetched anymore!)

My friend had just recently purchased a car and we decided to drive down all the way to Tardeo from the suburbs. Now on at a normal time of the day this would have taken us about 2 hours, but since it was nearing mid-night, we reached Sardar’s Pav-Bhaji, Tardeo within no time. What amazed me and made me write this blog today is that even at that odd hour, this place was teeming with gluttons! And the waiter told us it would take about 15 min to get a table! By then our hunger did not give us a choice and we waited…soon enough victory was in sight and we made our way through a lot of stuffy mouths, smiling, welcoming faces to our seat…

Trust me one would not really venture into this place all alone, if not in a group. it takes effort to ignore the hygiene, and since we were those who prefer to sanitize our hands instead of washing them.. it took us more than ignorance to have dinner there..(we were definitely very, very hungry!!). after making ourselves (un)comfortable, we hit a masterstroke! We actually asked the waiter, “Bhaiyya khane mein kya hai?” (“What’s on the menu tonight?”); to which he answered matter-of-factly “Pav Bhaji” (mind you it was very tasty).  None of us even looked once at our watches. Now it was time for some desserts and we headed to Haji Ali juice center, gulped some of their delicious crème and were busy talking, generally enjoying the open sea breeze; only to realize it was 2 o’clock in the morning when the guy told us it’s the “last order for the day”! The city was up and about even at that time… there were about 50 odd families enjoying the crème and juices besides us!

Mumbai, Bombay, Bambai; call it what you want; the spirit of this city is always alive. As we bade each other good-bye, I was singing in my mind “Am Alive…”

Mr. Mistry resolves the Mystery!

The suspense over the heir to India’s oldest, and most respected entrepreneurial house; The TATA Group is finally over. Mr. Cyrus P Mistry will take over the group realms from Mr. Ratan Tata when Mr. Tata retires in December 2012. Mr. Mistry has been on the Tata board for some time now. He is the son of Mr. Pallonji Mistry; the single largest shareholder in TATA sons with an 18% stake.

Some more gyaan on the subject concerned: Mr. Cyrus Mistry is 43 years of age, has a BE in Civil Engineering form Imperial College London and a Masters in Management from London Business School.  Prior to his appointment as the Deputy Chairman of TATA Sons he is a serving director at Shapoorji Pallonji and Company; Forbes Gokak; Afcons Infrastructure; and United Motors (India).

It’s interesting to know that the group is consciously trying to build in youth into its setup; with a lot of its top-level managers being in their 40s. Mr. Mistry inherits a group that has been the most respected in the country; functioning over 100 years; now setting its foot around the world.  Mr. Tata has been a force to reckon with. The group went global in the real term under Mr. Tata’s astute business acumen. Even though the Jaguar Land Rover and Corus acquisitions came about during the recent financial crisis time, the management at Tata Motors has been able to turn things around. With the launch of Nano; the cheapest car in the market, the group added one more feather to its cap.       

The choice to take over the baton seems logical enough; given Mr. Mistry’s global exposure and experience is in tune with the group’s current trend but one will have to wait and watch to see how he carries the legacy forward in these dynamic and turbulent times…

Depression Economics or Behavioral Economics? (Part I)

The world seems to be more in depression than recession!! Every morning, one gets depressed reading the newspapers and hearing the latest on the news channels. Leave alone companies, countries are going bankrupt here. What’s with the world? This is like an economic tsunami. The elite G7 still believe they have the power to make decisions while the market share is continuously being dominated by the emerging economies like the BRIICS (Brazil, Russia, India, Indonesia, China and South Africa). Markets are dominated by the highest shareholders; thus hitherto changing the king maker and the pawn game.

The world economies were growing all through 2000 till 2006 at a healthy pace. A lose monetary policy in the United States, high consumption and investments in China, and the Middle East were pushing markets and keeping investors happy. Asset and equity markets all over the world were booming. Then what happened suddenly that completely shattered this bliss? It seems that the asset markets were overheating since some time in the US and the Middle East. Banks were flush with funds and ready to lend to anyone; many times without running a back ground check on the borrower’s credit history. Most of these loans were home loans. The banks hedged this risk of default by exchanging it with other banks. As this risk exchanged hands it was leveraged multiple times through different derivative products. Now, every derivative has an underlying and here the underlying were the (increasing) house prices. With booming asset prices, it was generally believed that the best was yet to come.

In the meanwhile, world politics took a sudden change for the worse, with the US fighting two wars (in Iraq and Afghanistan). US slowly started unwinding its loose monetary policy stance; interest rates started rising. Sure enough, home loan borrowers felt the pinch and the number of defaulters increased. What is heartening though is that greed had taken over common sense, and bankers and fund managers had taken huge positions with almost irrecoverable losses. Soon the whole banking system was on the verge of a collapse, with some banks and fund houses filing for bankruptcy.

My question is how come no one saw this coming? Was everyone so engrossed in making a million bucks every day to downplay such huge risks involved?! It’s very depressing to know that the tax payers are now paying for the sins committed by Wall Street. More than not, depression economics is turning tides to behavioral economics! So my message to everyone: Let’s BEHAVE ourselves!    

Happy Children's Day!

Happy Children’s Day! Yes, today is Pt. Jawaharlal Nehru’s birthday, also celebrated as Children’s Day. The reason being that Chacha Nehru loved kids! Now who does not love kids? They are small, cute, look good in almost everything (even when they are chubby), can eat anything, anytime, have people to take care of them and love them always, are guided and easily forgiven… the question that I pose here today is whether you like being a child?

Just ask yourself, when was the last time you got wet in the rain and enjoyed it? When the last time you rolled down a grass slope, stayed up all night reading novels, watching movies not looking at the watch once? With age, it’s the outer self that grows old. The human mind has immense capacity to stay young forever. According to Hinduism, the human mind is the only immortal thing; making it timeless and ageless.

I met a friend of mine and her toddler yesterday and just realized how quickly young ones grow, how much more they know and how quickly they grasp things. It was amazing how at a tender age of 1.5 years, this little one was able to understand a lot of our conversation. His hand, eye co-ordination was very good, (we were busy playing with a tennis ball) and his movements were swift for that age!

Today’s children are tomorrow’s future, and every parent (on the micro level) and every nation (on the macro level) should invest in them properly. They will be what you want them to be: Intelligent, Innovative, Creative, Dangerous, Crass, Uncouth, Educated, Literate, Responsible…

It’s in our hands to teach them to lead a good life, full of moral and ethical values. They will after all learn from us. Let them inherit good values, from our generation and not a scheming mind full of scandals, scams, strikes, riots, murders, terrorism, ugly fights, and wars.

Let’s give them hope; hope for a better, enlightened future. Let’s give them the basic rights: right to education, and to vote freely.  Let’s “Heal the world and make it a better place…”

The Backbencher

The Backbencher

Are you a backbencher? Or have you ever been a backbencher? The so called “underdog”, the “black horse”? So many terms determining an individual with almost nigh confidence levels, intelligent, creative but not having the courage to own up to credits and/or brick brats.

This term probably came into usage because of some over enthusiastic students in school, the overzealous ones with all the answers at their fingertips and thus the teacher’s favorite. The one’s who do not answer the question in lesser time than the favorite is termed unintelligent and basically shifted down the ranks. In many ways than not, the blame lies with the education system.

India has always been the land of knowledge. According to the Vedas, one can leave behind knowledge and thus remain immortal; thus making knowledge the greatest wealth ever. And Indian parents follow this adage to the T. Every parent wants his or her child to be at the top of the competition. As a result the child is reared in the best of the schools, colleges, coaching classes; and is expected to excel in all the co-curricular activities too; be it cricket, dramatics, music… however what one forgets in this process is that ultimately the child is only educated and has not gained knowledge!

Bollywood actor Aamir Khan in one of his films has driven this point home by incidentally portraying a character of a back bencher. In this dog eats dog world we are losing ourselves to competition and forgetting the true back bencher within us. I say set him/her free and let him/her guide us to see the world without fear, without insecurities, without unhealthy competition. For where fear and insecurity resides, knowledge does not and where knowledge does not reside, HE does not. 

Time Bound

Trrrrr….Trrrr… the alarm rings. I try to locate the mobile out of sheer habit. After a minute of a halfhearted search in the darkness, I realize that the alarm has been set on my laptop! So I fumble to find my specs, and rush to find the laptop (which by the way, is hidden nicely under a huge pile of clean, fresh smelling dry clothes!).  And even though I have told myself (after reading “The Secret”) that I’ll wake up each day full of positive energy; I end up cursing aloud (there goes my positive energy).

So now I have to brush, cook, eat, clean, read the newspaper, comment on the daily happenings, discuss yesterday with my (over-worked) husband, catch an auto-rickshaw, and still manage to catch my 8.47 Churchgate bound local to reach work..! By now you must have guessed that I live in Mumbai and am an atypical Mumbaikar! My life literally revolves around the clock!

So after a grueling morning session, I make my way through the crowd, out of the station and on my way to office. Now is the time to put on a serious face and work… So I am an Economist working with the country’s oldest and most respected entrepreneurial house! Like every other working member of the teeming Indian diaspora, I love my job (analyzing markets).

You see, the clock plays a vital part in our lives, we live by it literally sometimes making one feel do we own time or does time own us? Tell me when there weren’t any clocks were people still bound to time? Even God in his Gitasar to Arjuna had said that only time is eternal… But I do not have any time to ponder on these issues, remember I have a 6.29 train to catch back home?!

Right, so on my journey back home, (from the town to the suburbs; you see, the mortals can only eke out a living in the suburbs with the “affordable” rentals), I read a book, listen to music, eves-drop, catch up with friends over the mobile (thank god for that!)

By the time I reach home and rid myself of the sin of overeating at lunch by going for a run, it’s time to hit the kitchen, cook some healthy food (I just ran!), watch tv, catch up with family and generally enjoy the luxuries of life. Oh yes, did I forget, its 11pm already and I am yet to set the alarm for tomorrow…..?