Saturday, April 30, 2011

Cows won’t fly, even if you are in love ;)

Rohan was imbued deep into “Linda Goodman Sunsign”, the bible of lovers, to see what actually went wrong in his relation with Smriti, because after much "deep contemplation" he had no one else to blame than the poor sparkling harmless stars. Then the post analysis with friends led to the ever known conclusion that he was never in love with her. Two days later, a sudden and incessant outburst of sad songs from room no S-33 were making the life miserable for everyone in the hostel. He diligently made a long play list in his laptop, though he never showed any sign of indulgence in making any presentation with the same machine. No one needed a second thought to know what has happened to Hemant. The vaunted love guru entered his room just to find Hemant spreading himself wider than the bed sheet. He gave him the palliative dose to cure his poignancy, just to stop this brouhaha, for the relief of rest of the masses. The last year of B.Tech in IIT was becoming more of the last year of love.
After two three and even four years of ingenuous love, the love stories were coming to an abrupt end. The college was full of gossips; everyday a new breakup story to give bon-fire to the hostel nights, obviously whisky was free that day by the protagonist, and the faithful friends to share his sorrows (or was it whisky that was more enchanting?). Everyone was talking love, love was in the air. The concepts like love at first sight, made for each other which were considered more universal than the Schrodinger wave equations, the bonding, sharing and affection stronger that the Sodium’s affinity towards water, and the trust as sacred as the concept of god (only to be felt and not seen) were all shattering.
Why is it that what students thought was love never actually was. What should happen to make it sure that it is love and not infatuation or attraction or lust or need? Is it that guitars and violins will play once you are in love, or there will be a different feeling in which everything will look nice, the angels will be seen flying around, the heart bubbles will keep on bursting here and there? Rest assured cows won’t fly, even if you are in love, its not that perspicacious. Love is not an instant process, that it will happen suddenly and things will change, it takes time. But in this fast track world the young generation doesn’t have time. They are too fast to imply the simple gestures of familiarity as signals of love (in colleges like IITs where the ratio of girls is so poor the situation becomes more vulnerable). Dating is in vogue. People change partners just to find the perfect match. As they move out of college, maybe there is someone better. After all world is such a big place, and who knows that Mr./Ms perfect is waiting outside the college. The comparison between the love lives of friends, lessons of psychology, philosophy and even astrology to make relation better are just futile efforts. What makes a relation stable is its uniqueness, because no two individuals are same, so the relation they share can’t be explained conspicuously and perspicuously by any of these study lines. The perspective may and will differ on most of the issues, that doesn’t mean that there is no compatibility, or there is no chemistry, what is needed is understanding. Respect the relation and respect the thoughts of each other, differences appear when we are unable to understand the rationale behind the thinking of the other person. Expect no miracle to happen in love, but believe in magic of love. The magic will be felt only if the hunt for the better will stop, when there will be sense of belongingness, each thing done for the other will give more pleasure than things done for yourself. Answer to “if you are in love?” lies not in the socially acclaimed signals or theories, but in the inner satisfaction that you derive out of you own inimitable relation. Love is not a scientific fact, but a value laden thesis, take time, be loyal, be emotional and take good care of those you love.

Friday, April 22, 2011

The Inflation Conundrum... (Part-3)

"The Global Liaison"

Globalization no longer is a strange word. It has been cursed a zillion times, and still revered for mutual development. World has recently seen the worst financial crisis, still recuperating, but no country can cut itself off from rest of the world, to delimit its effects. Though some countries are adopting protectionist tendencies, but it has been proved time and again, that this will only worsen the situation. Globalization has put the economy of developing countries at times in vulnerable situations, Inflation being one of such many.  

Central banks no longer are in a comfortable position to goad market in the way and direction they want. Earlier, in order to increase the demand, suitable mechanisms were adopted to increase the money supply. As soon as money enters the market, people are in a better position to buy. Calculations are not that simple these days, courtesy "globalization". Now, in a developed country when money supply is increased to increase the demand, the equation becomes quite complex.  Looking at more lucrative offers in developing markets, people tend to invest more in these markets, causing twin problems. One, the policy making country does not get the desired results of increasing domestic demands. Two, the developing country cannot match this inflow surge causing demand increase in the nation without corresponding supply increase, hence resulting in domestic inflation. So, even if the central bank of developing nations are doing nothing to increase the demand, it can increase due to a policy change in any of the other country and further cause inflation. In solving the inflation conundrum, globalization is a puzzle that still has no known existing solution.

Its a general rule of economics that no country should have more than one central bank, as multiple money creation agencies will cause destabilization in economy. Now, world has become a single economy with multiple money creating agencies (central bank of each country), this is bound to cause destabilization in world economy, brunt of which has to be faced more by developing nations like India. This has been realized by most of the countries and therefore platforms like G-20 are taking a center stage and deciding policies as a whole, so that a policy change in one country should not cause problems in others. Its heartening to see India flexing its economic muscles in such platforms and becoming an integral and important part of any such consortium.

It clearly indicates that inflation is a by product of growth and development, but excessive inflation is a matter of concern for India, especially food inflation. Inflation has the power to change governments, and so UPA government will take all possible measures to curb inflation, but solving this enigma is not easy this time. The question remains how much price do we have to pay, or if UPA will pay the price. In Inflation someone has to pay, lets see who pays...

Note: This ends the three part series of inflation conundrum...

Friday, April 15, 2011

The Inflation Conundrum... (Part-2)

"THE PPP Catch-up factor"

Two major milestones in Indian Economy, first one being the liberalization of economy in 1990s and other one being the onset of growth explosion in 2005. For three consecutive years India posted a huge GDP growth rate, bolstering its economy. Brakes were applied by the global meltdown, but India is again poised for high growth rate. The growth is coming but again at some cost, lets see what cost are we paying for this high growth rate.

As a country grows the per capita income increases, which in turn increases the purchasing power of the people living in that nation. PPP(Purchasing Power Parity) is low for any developing country like India. Currently India's PPP correction factor is 2.9. Which indicates that a basket of goods costing 100$ in India, will cost around 290$ in US. The equation is simple, as US is a developed economy so prices of goods are higher as compared to India. As India grows, this PPP correction factor will come down (Indian economy will start matching the US economy). Supposedly after 30 years, it becomes around 1.6. Now, the same basket of goods costing 290$ in US will cost 181$ in India!!. If I take exchange rate to be 50, then the basket costing 5000 INR today, will cost 9050 INR 30 years later.

So, making no policy changes, doing nothing, the inflation will grow by around 2%, just because of the growth of the nation. The point of contention here can be that the exchange rate would not remain the same after 30 years, If India grows then Rupee will appreciate. If Rupee appreciates and the exchange rate becomes 1USD=27 INR then this PPP correction factor will balance the exchange rate. But, the empirical studies of various fast growing economies like Brazil have shown that the exchange rate does not change by this much amount. Rupee will definitely appreciate, but not this much. So, if we take a major contribution by PPP correction factor and a small by Exchange Rate change, then also there will be inflation.

This is the second puzzle government needs to solve, the growth brings with itself inflation, so comparing today's situation with a comfortable 3% inflation during 2001-2004 makes a little sense. Inflation has to be controlled, the policy review is reflecting the concerns and efforts of RBI in this direction, but growth is coming at a price and we all are paying it right now...

Note: Major Inputs from Indian Economic Survey

Sunday, April 10, 2011

The Inflation Conundrum... (Part-1)

In a country where people in the bottom quintle spend about 67% of their earning on food items, the current inflation is literally burning them out. The growth saga of India is known to one and all. I feel there are three puzzles contained in the inflation conundrum. Growth is coming at a price, lets see what price we are paying and for how long do we have to pay.

Faster and Inclusive growth”, that’s on agenda for the eleventh five year plan of Government of India. Inclusive growth contains in itself both social inclusion and financial inclusion. Where social inclusion is the end, financial inclusion is the means to achieve that end. Let’s first look out for how the financial inclusion is taking place. Keeping it very simple, by Financial Inclusion, Government of India is trying to bring more and more people into the ambit of banking. The equation will work both ways, people will get interest on savings, which otherwise was lying in their homes, and banks will get more funds. “Swabhiman”, a scheme where bank correspondents/bank sathis are created for a door to door service is being launched. This way financial inclusion looks a pretty good thing for any economy, which I will not deny. But this inclusion comes at a cost…

Banks in any country play a role of mobilizing the funds, in turn channelizing them in the market. Now what financial inclusion brings with itself is the money that was lying dormant in the common rural household. People start saving their money in financial institutions like banks, so as to gain some interest on their saving, which was not giving any returns earlier. The money, as soon as it reaches the banks, gets into the channel and thus becomes available for investment in the market, which imperatively means that the liquidity in the market increases. It needs no explanation that outcome is inflation.

In earlier days, when the society was not so convoluted, the economy was not liberalized, a few private players in the market, investments more in the control of public sector, RBI with its monetary policy was in a better position to increase or decrease the money supply, which further directly affected the demand. It was easy to control inflation then. Now the equation has become complex, with money and investment pouring from different sources, the monetary policy plays a crucial role in tackling inflation. This also gives the reason why RBI has started mid quarter reviews, as we can’t wait for three months in such dynamic society. The savings are increasing through financial inclusion, people are getting benefitted, but Inflation is bound to increase with financial inclusion, but that cannot be the reason to stop financial inclusion as other benefits are far reaching. This puzzle has to be solved…

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