India Finance

Random news bites.

The NYT (here) talks about items that traditional growth measures like GDP omit or mis-state. Created during the 1930’s, these tools are constantly being revamped to reflect changes in consumer tastes, preferences, and the corresponding weights of components in the “typical” basket of goods and services. Still, what is counted is stuff that is traditionally produced (read: manufactured) and consumed, stuff that has a price. Despite hedonic adjustments for innovation and the consequent quality improvements, much does not get counted. Martin Feldstein points to how increasingly prescribed statins have significantly lowered the incidence of heart disease, but the benefits of that well-being does not get captured anywhere. Furthermore,  in this digital age it is not these goods, but many services that we consume-most must have a value but do not have an obvious price.  Free software updates that we periodically download, streaming services, wikipedia instead of a trek to the library are some examples. Ad revenue is the ubiquitous substitute for a number to capture the economic value of such services, but how good a number is it really? Have to wonder if global growth is being understated.

Meanwhile, the FT (here), talks about demonetization in India offering opportunities for insurers.  Not just insurance, but the abililty to market various financial products was somewhat sneakily given to the newly licensed payment banks which offer mobile banking services to the cashless economy. Of course, “free’ insurance upto a max is bundled with their offerings. Potentially a $60 billion-plus market, says the FT and I think of Fairfax Holdings cashing OUT part of their ICICI Lombard stake for a cool $ 1 billion couple of weeks ago (here). Nice.

And from Al Jazeera (here), admittedly a tiny, symbolic step towards reducing global dollar hegemony as the BRICs have been wanting to do for some time.

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Pieces from India -1

As I settle into this side of the planet and get familiar with local concerns, many of these India tagged posts will seem obvious to local observers. For me, they serve as  place to store things my aging brain cannot recall as efficiently as before.

1. THIS piece from Project Syndicate provides food for thought. It talks about the entrenched behavior of Western governments towards the IMF and World Bank-both entities created, funded and staffed with intent of maintaining post WW-2 financial stability. As developing economies have grown the BRICS appear increased frustrated with the dictats, turf battles, bilateralism and decreasing funding from the West that impedes the functioning of these institutions and are considering creating their own BRICS bank.

2. In the same vein of resource allocation, the recently disbanded Planning Commission is increasingly viewed as a now irrelevant independence era creation. In earlier times, the PC’s role was to assess the available resources of the country-material, capital, human and technological, and make a plan for using them, augmenting them, to achieve the best and balanced outcome. Central planning at its intended best. With the Finance Commission charged with deciding how the allocations were made from Center to State (the bulk of revenue is central (taxes, indiv and corporate), the expenditure is at the state level). Now largely rubber stamps, with the states proposing a plan and some haggling and rounding off in terms of what they get.