Post-liberalization India – Free For All?

My Airtel broadband was down (second time in a month) so I called Airtel customer service number from my Airtel mobile number. For about two hours, I couldn’t get through ‘cause the “network was busy”. Finally four hours later when I tried again, I got through. By “got through”, I mean, I got through to the irritating menu system. I punched in my account number, reason for calling, type of problem and finally over five minutes of this annoying IVR later, a real live person came online. And her first question to me is, “what is your account number?”

The Sure Race to Stupid

Headley, Copenhagen, Liberhan, Telangana have dominated the news for days, weeks interspersed with some impassioned rhetoric on Naxalism, regionalism, and whatever trivial comments Rahul Gandhi makes at some university or about landing his chopper in poor visibility etc. Is it really possible that a country of India’s size, diversity and development challenges, will have such paucity of newsworthy events/issues

“Trading” priorities

In a recent NY Times op-ed, Bob Herbert argues for a financial transactions tax to raise revenue, and curb speculation. He notes, “This would impose a small fee — ranging up to, say, 0.25 percent — on the sale or transfer of stocks, bonds and other financial assets, including the seemingly endless variety of exotic financial instruments that have been in the news so much lately”. He quotes Dean Baker (co-director, Center for Economic and Policy Research, Washington) to explain, “It raises money in a way that comes primarily at the expense of speculation …The fees would be a considerable expense for someone who is buying futures, or a stock, or any asset at 2 o’clock and then selling it at 3. The more you trade, the more you pay … It’s a very progressive tax that discourages nonproductive activity [emphasis added]“.

In India, while we have Securities Transaction Tax (STT), it is a paltry .125% and deductible as a business expense; short term capital gain tax is only 15% (up from 10% last year). Both of these do little to curb speculation (India has one of the highest trading volume to total market cap). However, this is an economic policy point and somewhat tangential. The more central point is that shouldn’t we as a society worry about the the colossal waste (and warped incentives) of bright minds in India, lured by the easy money and the pseudo-intelligence of speculation, be it in real estate or trading puts and calls in the stock market. How can we justify making money on the stock market simply based on hunches/knowledge of which way a stock/market will go in a certain period. That’s not the underlying tenet of the stock market – of fueling investment in companies that produce valuable goods and services in the economy. Nowhere in the world are the short-term gyrations of the stock market based on any rational understanding of the fundamentals. Yet, we idolize, envy, and emulate the traders who make a ton of money through speculation. Paul Krugman (‘08 Economics Nobel) notes “There’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing”.

Personally, I feel that a preponderance of those who acquire such off-the-graph gains are either lucky (riding the wave) and/or unethical (active collusion). And we shouldn’t encourage or glorify those who make personal gains at the society’s expense.

Fawning over the Gandhis

The Indian National Congress recently talked about the suitability of Rahul Gandhi as the prime minister of India. While Manmohan Singh is still the de-facto nominee, the logic behind Rahul’s candidature seemed to be loosely based on his and Omar’s age (both 38; Omar is the new CM of JK), Rahul’s “clean” and youthful image, and of course the blue blood of the Gandhi family.

Jawaharlal Nehru spawned Indira Gandhi, who screwed up royally and imposed state of emergency for 21-months, suspending both elections and of course civil liberties. Indira found martyrdom in her assassination, and thus paved the way for her son’s (a pilot, married to an Italian) confirmation as prime minister (can we imagine either of the two Bush daughters having an easy time becoming President after his spectacular failures). Also assassinated, his Italian wife (and hitherto completely removed from Indian politics) became the INC president (she was recently voted as one of the 50 most powerful people of the world by Newsweek, one of the only two from India – the other is Shahrukh Khan (an actor!) – more on this later). Having declined the post of PM herself, naturally the Gandhi devotees looked to her progenies: Priyanka and Rahul Gandhi. Priyanka declined, and now Rahul is poised for takeover. In India, apparently, inheritance rights extend beyond personal property to leadership of an entire country.

Give me a G! G! Give me an A! A! …

Our "independent" head of state (Pratibha Patil) handheld by Sonia Gandhi

And of course, this is important too

On a related note, here’s a quick poll:

Good to know: What does 49-O really amount to? Not much , especially in its current non-secret ballot form

iPhones in India

What’s the deal with Airtel selling iPhones in India for INR 36K (~USD 750)? To add insult to injury, the phones are locked! What gives? Specially when Apple’s online store in HK is selling unlocked iPhones for roughly the same price (but shipped only to HK addresses).