Why off the air and back again

For the last year or so I have been writing for the Indian edition of GQ, which has used up my blogging time. Ironic, because it's the blog that got noticed by the editor.

I have also restarted photography - digital to boot - because I got my paws on an M9 and could resurrect my lens collection of 20 years.

I will post the GQ stuff, some stuff that was rejected as too mean to the babu's who run our lives and a few photos.

Pushing Chateau X

I was off to a wine tasting of a rather well known Bordeaux wine, one I used to drink as a somewhat impoverished young man but can no longer afford, though my circumstances are monetarily rather happier than before.

The reason is that the price of this wine has risen loonily because of the effects of one Robert Parker and, now the Chinese. The latter also follow Mr. Parker but, out of a combination of being Chinese and self preservation of their mouths from the big and oaky that the man pushes, pop ice cubes even into this one high Parker rated wine that does not need them.

Demand from the New World and the New New World runs up prices is the reason given by the trade anyway; for the nonce it also happily maintains the Chimerica illusion.

But could there be a bankerly element to this? An attempt to sell something for much more than it is worth to those who know no better?

Perhaps. The event was cancelled because of the ash cloud but not before the reps of said chateau tried to get themselves on a private plane to India. Usually that kind of dough is splashed out by drug dealers. But then status is the new drug for our nouveau riches. Long may they be hooked on Chateau X for that means they will not spend the effort to find better value wines.

Burgundy Zindabad!

Education

Below is the latest regurgitation of his own work from Prater Tom (Friedman) in today's NYT.

"I think keeping a constant flow of legal immigrants into our country — whether they wear blue collars or lab coats — is the key to keeping us ahead of China. Because when you mix all of these energetic, high-aspiring people with a democratic system and free markets, magic happens. If we hope to keep that magic, we need immigration reform that guarantees that we will always attract and retain, in an orderly fashion, the world’s first-round aspirational and intellectual draft choices."

One does not have to change a word to have the second sentence apply to in toto to India. Which is why the new bill to allow a few foreign universities into India has merit; someone who never leaves his cultural comfort zone but can leave his intellectual comfort zone may well opt to stay in India.

I note that many commentators in India are now saying that the two tier structure being set up in India will give new entrants a leg up and decimate our current IIT's and IIM's and others much as private airlines decimated Air India, Bharti bombed BSNL and Reliance whacked ONGC and OIL.

None of them mentions the two tier reform that has made much of the current Indian economic miracle possible - that of allowing private banks. True, they have taken a chunk of business from nationalized banks; it is also true that the nationalized banks have themselves reformed under business pressure.

And merit does not matter; so long as overall India has better education, just as it now has better telephone service and more oil and gas, you and I should not care. It is about the nation and not about fairness or certain interests. Of course there will be clever Indian businessmen who make money out of this and the IIT's may die. But that is the way we embraced in 1992.

All we can hope for is that as tax revenues grow and as people are better educated and more involved we can take back the state from our evolving plutocracy. The question of whether we become an America or a Europe is what lies before us. Either is way better than our starting point.

Crying Wolf

I was feeling pretty good about the prospects for the Indian economy, and so about the prospects for my business, where we have just hauled out all the stops for a massive expansion.

Then I read an FT column from Martin Wolf on how he could see India growing at 10% per year for a very long time (http://www.ft.com/cms/s/0/750747e0-262c-11df-aff3-00144feabdc0.html).

Remember, this is the lapsed acolyte of the 'grandeur of finance capitalism school'. If he is as right about India as he was about finance capitalism it may be time to start timing an exit. The only good thing is that any Indian growth is likely to be about making and selling real things, so if Martin runs true to form, the hangover will not be as bad.

I found his recommendation that Britain give up its pretensions and hand over its security council seat to India amusing for another reason. One of my betes noir is how developing countries are always foolishly being told to get into the garment export business. As Britain lapses it can take solace from the fact that it still makes some of the best men's clothes in the world.

Stealing

We live in a very nice building in Bombay that buys tanker water to make up for the shortfall in the city supply.

We are all familiar with these tankers; we see them on the roads all the time, and every one of they leaks water. Today is Holi so the building arranged for extra tankers for the festival and I had the chance to see one up close and measure the leakage which on this tanker was about 3 litre per minute.

The fellows charge 3,000 rupees for 10,000 litres, or .30 per litre.

Assume a 3 hour trip with the water and they owner just blew INR 162, or just over 5% of his take on waste which could be prevented by fitting about 162 INR of valves.

Why does the fellow tolerate a loss of very 5% of revenue when less than 1% of legitimate businesses in this country make even a 15% net margin? Because he is reselling us the water that he has in all probability stolen from the BMC, water that we have paid for.

Poor people naturally pay even more for their meager water supplies which go by hand pulled tanks, so there are fewer economies of scale.

He has in all probability paid for at least some of the diesel that he has used so he whines when the prices of fuel rise. But does he care about the water. Nah.

This is but a small and measurable example of the wretchedness wreaked upon us by our political masters, for masters they are.

The same happens in a much bigger way when the same masters give free electricity but not paid irrigation in order to pump our groundwater dry. They rob the entire country of water, and rob a great many people of their lives.

Two numbers to make a difference - go get them Nilekani

1) UID
2) GST

Why? Because these two numbers will make most things traceable. It will take a decade before the infrastructure is up, and the law able to track a transaction through bank accounts. But it will happen because:

1) GST will reduce the attractiveness of cash in transactions for legitimate businesses of any size. A 12% GST for a cash business could kill all profit if input credit is not taken.
2) GST will therefore dry up the source of black money in business.
3) Anyone want to guess why there is such a clamour to leave real estate out of GST? Because real estate is where politics meets the economy. Even if it is left out there will be a problem for politicians and their familiars, because where will the black money arise? Land speculation does not create money; only banking transactions do.

Add the UID and it is simple to trace money flows to companies, and to and from the accounts of their authorized signatories, directors, officers etc., and because it is already enshrined under Indian law, that of their relatives.

Straightforward software could reconcile the income and expenses of each of these individuals' tax returns to the gross money flow data in their bank accounts. If all sources and uses match the what the taxpayer has provided it is a full return. If they do not then the state has the data to compute a tax return for the missing amounts and send a bill.

Ever wondered why the same man is in charge of the system for both?

I found Mr. Nilekani's book rather a rah rah India bore, but that and his sterling track record got him this job. I hope his success at the numbers game beats his success at Infosys. Now that will be a rah rah India story.

Goodbye New York Times

This blog has been corrected on the advice of my friend Jerry Rothstein who sent me the NYT's coverage, so the sentence below has been changed to 'The Times barely covered India's budget' from The Times did not cover India's budget'.

The Times carries on about how net journalists are not enough and a newspaper has to have the dough to pay for a staff to properly report what is of importance.

The Times carries on about how they have a global reach.

The Times carries on about how developing countries are key to the US and Europe.

The Times did not cover India's budget.

The WSJ did and the FT did.

NYT RIP.

Taxes 1

I was speaking to a German expatriate friend who was bemoaning high Indian income taxes. At 33% I reckoned that those were pretty low compared to Anglo Saxon countries. This surprised me, since the editorial writers of the Angles and Saxons (though barbarians is too kind a description of those with the WSJ) are forever telling us how continental Europeans are very highly taxed compared with those of us blessed by the English language.

It turns out that having kids is a tax break in Germany, but anyway the effective income tax rate is about 30% and a bit.

I checked with people in my French office; it is the same there.

Perhaps the Angles and Saxons should check their facts before they bray.

Labour Laws 3 - Why India is not China and why the memory of Jean Dreze will forever be hated by the commies.

Bihar is growing, that is why. Our growth is not confined to the coasts, and not as dependent on migrant workers as that of the coastal regions of China in their growth heyday. And anyway, where are the damn migrant workers anymore? Gone to NREGA every one.

The knock on effect of fewer migrant workers will also revolutionize agriculture, particularly in Punjab, where the fellows have become used to paying a few pfennigs a day to get their work done and make up for their abysmal farming practices that have ruined the soil and depleted the water table.

The reason is economics. If they do no longer have cheap labour farmers will have to find a way to sustainably increase yields to pay for the required mechanization.

By freeing people from slavery Mr Dreze has robbed his own revolution of needed revolutionaries and instead handed them over to the super middle class vision of Mr Singh and Mrs Gandhi.

Labour Laws 2 - Jean Dreze will go down as the father of automation and labour productivity in India

First, I think NREGA is fabulous because its about time the poor bastards in the fields got something from the government, instead of always having their land and lives taken away by politicians.

Second, I love NREGA because it is going to usher in a manufacturing productivity revolution such as has never seen before. NREGA has made labour scarce in India before, during and after the harvest seasons because buzzing off to 'the native', as we Indians call it, at harvest time means paid for work during the harvest, and NREGA on the shoulders of that time.

Factories cannot deal with a fluctuating labour force so they will have to find ways to automate jobs done by coolies earning 3,000 to 5,000 rupees per day. Its tough to do because it means re-engineering (and not reverse engineering) machines that can be bought in Europe for EUR 90,000 for less than EUR 10,000. Can it be done? Yes.

When that happens you are going to see a boost to TFP that should throw manufacturing into a different orbit, make us more than competitive with China, Vietam et al and see the industrial workforce take on a totally different hue in terns of education, productivity and wages.

Private factory jobs will pay more than government factory jobs and that will weaken the hold that unions and their political masters have on asset divestment by the government because all the fellows currently at state owned firms will decamp to the private sector.

We have seen that before. Remember the start of private banks and the end of bank strikes?

Poor Jean. The man who destroyed the labour unions by freeing its members from overpaid jobs.

Now all we need is the electricity to power all those machines.

Labour Laws 1 - Proof positive because its endorsed by the commies

Those who follow this blog know that I rant on about how we do not need low value added jobs in this economy, nor do we need to gut our labour laws to make Walmart happy.

Yesterday's economic times carried an op ed by a JNU professor (therefore my characterization of her as a commie, but I may be wrong) carrying on about how we needed more jobs making T shirts. She said it, and since all such JNU prescriptions are wrong, I must be right and we should not encourage T shirt making.