The house that Jack built

Back in the December of 2014, I finally caught the unicorn. Well, not literally. Our group of really close friends, finally managed to materialize an actual holiday – a trip – from a WhatsApp plan. *pauses for applause*

It was what we then called an ‘epic’ trip, I am not sure what the popular term now is, I am happy I don’t know. The trip was a culmination of everything we thought it would be, right from boarding the flight together, to road tripping through beautiful Kerala, to crazy amounts of laughter and a decent amount of alcohol. I reminisce this trip for a particular reason.

One evening, in Munnar, we found our poison, in one of the government controlled liquor store, in the form of Officer’s Choice XXX Rum. And in the gorgeous weather among the tea gardens, we had partaken enough to make the Officer proud. Amongst us, was a Juventus fan, and as it happened, there was a Juventus match being played which he was following on the football app on his phone. However, as the match progressed, in typical Italian fashion we did not hear any goal notification for what seemed like well over 2 hours, by when the Officer was already playing his delirious tunes in our heads. Suddenly, the phone pinged and my friend squealed as Juventus had apparently scored, evidently making the Officer in his head proud. Within a couple of minutes there was another ping and it seemed the opposition had already drawn level, he couldn’t believe it and slumped. As luck would have it, Juventus scored again within what seemed like just a minute and he literally screamed, incredulous. He exclaimed to everyone, who also followed football supporting various other clubs, ‘This has literally never happened in the history of football before!’ Just as he finished saying this, there was another ping and his eyes opened wider than the mouth of the only non-football fan amongst us, it was apparently 2-2. This seemed like the last straw and in the sheer faith that he could not have missed such a ridiculously exciting match, he wore his glasses and opened the app. Seconds later out came a stream of expletives declaring that we had been following was actually a penalty shootout, and not the actual match. But we will never forget the delirious excitement in his eyes for those 4 minutes, something even the cheap rum couldn’t match. To quote the great James Hetfield, ‘The higher you are, the farther you fall’, and eventually, my friend did literally fall on the floor, and stayed there till dawn.

2014 was the start of something similar for the entire nation, at a much larger scale. There were delirious celebrations, sky-high expectations, positivity that would put the most optimist person to shame and a sense of satisfaction that we were all a part of something that has never happened before. It is nearing the end of 2019, and we are seemingly on our way to the floor, what we don’t yet know is how far the floor is, or how hard it is.

Should the auto sector slowdown be our biggest concern?

The weeds of India’s economic slowdown have been growing pretty rapidly over the past 12 months. There have been various stories in news of varying levels of concerns over the systematic reduction in growth of different sectors and commodities. Probably the earliest indicator was the lack of job creation across the country, and this concern got a major boost thanks to the elections with every opposition party highlighting this. I did a simple Google Trends search on the term ‘jobs crisis’ and it has been searched pretty consistently over the last year. However, given the current state of our media, apart from the opposition’s concern leading up to the elections, the unemployed haven’t found solidarity from anyone since then.

This gets me to the other end of the spectrum of attention, the slowdown in the auto sector. Again, looking at the Google Trends data, the term ‘auto sector crisis’ really started being searched from July 2019, peaking in late August and September at the time of writing this post. While any sector that is facing tough times deserves air time and attention (especially one which is facing its worst crisis in 19 years), this still is a fly in the ointment for me. India is largely a poor country with over 21% living below the national poverty line in 2011 – this is approximately 280 million people (that is over 10 times Australia’s population). The GDP per capita in India is about INR 182,500, which is a pretty misleading statistic for a country which has the number of poor people India does. Is there a more relevant measure we can look at?

Every year, Credit Suisse publishes a Global Wealth Report which analyses the household wealth of 5 billion people across the globe. I do believe wealth is a much more important metric to look at as opposed to income. For a simple comparison, wealth is the net worth of a person, which takes a large amount of time to acquire, while income is amount earned by a person for a transaction and is often immediate. When one looks at a sizeable investment in an asset like a car or a house, wealth I believe is a better measure than income. As per the 2018 Global Wealth Report, the mean wealth per adult in India is $7,024 which is approximately INR 512,752. However, this again is misleading. India has an adult population of about 850 million, and as per the report, 90.8% of the adult population has wealth below $10,000 or INR 730,000 and we still have managed to rank sixth in the world for the number of people with wealth above $50 million. Given this kind of absurd gap in wealth, median wealth would be a much better indicator than mean. As per the report, the median wealth per adult in India is $1,289 or INR 94,097. To simplify, there are approximately 425 million adults with wealth less than INR 94,097. The average Indian cannot even think of affording a car (also read this, maybe another post to discuss it later). With this in mind, should slowdown in auto sales be the concern that needs to be given so much attention to?

I do understand that the auto sector generates a lot of employment in India and propping it up would also help us boost availability of jobs. I also understand that they are large borrowers, and those defaulting would hit our already limping lending sector with a blow so hard it might be difficult for the lenders to recover. However, the jobs crisis and the lending crisis preceded the auto crisis, so the latter is not the cause of the former. In fact, this is exactly why the auto sector should have seen this slowdown coming given all the indicators, and gradually reduced their production avoiding the excess inventory problem. Now they stand in line with others in front of the GST Panel demanding a tax cut. The government meanwhile even announced a policy to replace existing government cars with new ones just to clear the auto companies’ inventories. I am not even going to mention their months of ranting over the BS VI norms and impending electric vehicle boom which is still years away for India. I do not understand why we can’t just allow them to fail, that should be the cost of doing any business, after all isn’t that what we do to small businesses when we allow more FDI in any sector?

Going back to the search trends, it is interesting to compare the two above mentioned search terms, which you can see here. As is visible, the peak for auto sector crisis is higher than that of the jobs crisis, which is what is irksome. I do understand this is a very crude way of looking at media coverage or public awareness, but I do believe it can be used as a rough trend to understand where our priorities lie generally. In this case, the backing the auto sector has received for its slowdown is much higher than that received by the unemployed millions in the country. That, I believe, is our biggest crisis.

Future News: RBI eases withdrawal norms

MUMBAI: On Monday a senior RBI official announced new measures which he said he hopes would potentially and probably ease the suffering suffered by the suffering common sufferer. The new measures came as a huge relief for 7 Indian citizens. This journalist was able to speak with over 50% of these benefited citizens and all of them praised the foresight and compassion shown by the bank and the government, both of whom ironically are called central.

Among others, some of the measures announced were:

1. All citizens who don’t have bank accounts will be allowed to open new bank accounts in 3 minutes under the ‘Please bank on us’ scheme and will be immediately allowed to withdraw unlimited amounts of money from any ATM in the country. There will however be a limit on their deposits which is set at ₹100 every 17 seconds.
2. All unmarried people who have kids are allowed to withdraw ₹2 lakhs per kid per day provided they can furnish DNA evidence proving they are the parents of the said kid. This resulted in a lot quick Facebook ‘Relationship Status’ updates, however their children have been depressed ever since they were made aware that they will never be allowed to get a passport or any other government identification which requires both Father’s and Mother’s name, until the time the parents marry each other.
3. All petrol pumps selling air turbine fuel will accept old and fake notes till 31st March 2019. This is said to be a major relief for all the common men who own cars which work on jet fuel.
4. All those holding a salary account with any bank and earning a net income of less than ₹10,000 will be outside all withdrawals limit set till date, provided they have a minimum account balance of ₹2 lakhs and own at least 2 credit cards. This is seen as a direct reward for all in the lower and middle income group who have wholeheartedly embraced digital and electronic banking.
5. Anyone living more than 15 kilometers away from the nearest bank branch are allowed to withdraw any amount they desire if their journey to the bank branch was on foot and they can tender such proof.
6. All previous announcements made by RBI during ‘Rahu Kaalam’ have been revoked. All citizens benefited by these announcements will be investigated on once the auspicious time for all such investigations are announced by the relevant experts.
7. All citizens who are suffering from serious withdrawal symptoms post the exit of Arnab Goswami from Times Now are allowed withdraw any amount of cash required to cope with their depression. A qualified dentist’s certificate would be necessary.
8. All those who take an oath to stop honking while driving are allowed to withdraw ₹25,000 a day and they will be gifted this amount if they uninstall horns from all their vehicles. Bank managers will check the vehicles personally in these cases.

All through Monday there were violent protests by all rich tax payers as they see this as an invasive attack on their evasive practices.

It seemed like stress had taken a toll on Mr. Das as his usually impeccable spectacles looked heavily smudged and his tea-stained tie looked befittingly unfitting. When questioned on the absence of his boss at all public announcements, he said Mr. Patel has been busy signing all the new notes by hand to curb out counterfeiting and honour our soldiers. He then spontaneously started singing the national anthem, visibly moved by the patriotism displayed and sacrifice made by the Governor. Two journalists at the press conference suffered minor injuries. They later disclosed that they were surprised by hearing the national anthem and fearing public displeasure stood up too fast, the movement causing whiplash in their neck and back. They’ve been prescribed painkillers and balm but they said they don’t have cash to pay for the medicine.

Seven Billion

via mastersdegreeonline.org

Gulp.

The weight of Walmart [Infographic]

Via Frugal Dad.

Shop small.

via holykaw.alltop.com

Try and stop FDI in retail.

What’s Inside the House of Warren Buffett?

via mint.com

:O

Bears wear Blue in August

We Indians have had a terrible month of August. If someone could measure the general happiness of a general Indian, it would possibly break the wrong end of the scale. The Happiness Barometer of the mentioned general Indian is majorly governed by three key factors, the performance of the Indian Cricket Team, the performance of the stock markets and the performance of the Indian Government, in that particular order.

The Indian Cricket Team is currently on the tour of England and for the sake of being nice to them, let’s just say they are being humiliated. The first two tests of the four test series showed the glaring difference between a fitter, hungrier and better prepared side and India. Indian supporters typically were not prepared to throw in the towel. We believed this team could still level the series come August. But the bad news kept on coming. Players started getting injured and backups kept boarding flights to England every other day. The scheduled warm up match before the third test too ended in disappointment. We still believed we could pull it off, after all Sehwag and Gambhir were both again fit to play. Well, nothing of that sort has happened and it seems the number one test ranking will be unceremoniously snatched from us.

Let us move on to the more serious topic of global economy. Somehow, global economy seems to be doing worse than Indian Cricket. America has quite unceremoniously lost its AAA rating and stock markets the world over have obliged by replicating the domino effect. Investors the world over have lost Trillions of their hard earned dollars and it is no different in India. Oil prices are shooting up, dollar is getting stronger, gold prices are breaking new highs, every share is breaking their lows and ‘Double Dip’ no longer means an ice cream flavor. People are genuinely worried about how the economy will play out in the next few months and eventually in the next couple of years. For the first time in a very long time, America seems to be coming down to its knees and no one really knows how long they will take to stand back up. Everyone is getting ready to hang onto their jobs now and preparing to go on an austerity drive thanks to the lessons they got from 2008. If the bulls don’t show up anytime soon, panic will be the order of the day.

From the serious topic of economics we will now move to the much lighter topic of politics. Shambles is the word that springs to mind when one thinks of the state of the Indian Government right now. The ruling party does not know how many they need to fire to regain face, the party leader is ill (may God bless her) with a secret illness, the Prime Minister doesn’t speak much and when he does come prepared with a speech, the opposition party boycotts proceedings and doesn’t let him speak at all! Apart from all this, there are people going on fasts, CMs refusing to resign and then resigning, inflation spiraling out of control and the economy is not being kind either. The only miraculous reason this government still exists is that there is no other possible alternative.

The irony of this entire situation is that this nation will be celebrating its 64^th Independence Day on 15^th. This date nicely and symbolically splits this month. Maybe the start of the 65^th year will be brighter and happier for its people. But the cricket team might still lose.

Big Mac Index made easy

This is one of my favorite economic parameter. It is simple, practical and hence brilliant!

Anyway, look and learn 🙂

Debt Management – CreditSesame.com

World’s Most Profitable Companies

via reflectionof.me

This is what I call an awesome graphic!

The Changing Face of the World Economy

via gregmankiw.blogspot.com

I like this economist a lot 🙂

Greg Mankiw I mean.