Pension tension

The decision by the Employees’ Provident Fund Organisation (EPFO) last week has unequivocally and irreversibly opened the gates for pension reforms. While the decision to open fund management to three private sector fund managers — HSBC AMC (Asset Management Company), ICICI Prudential and Reliance — and to the State Bank of India is rather simple, the fact that the EPFO’s powerful Central Board of Trustees felt the need for better fund management — and found private firms worthy of shouldering that responsibility — is a step that shows a new thinking in tune with changing times.
I am enthusiastic about this move not merely from the political or public policy perspective. The numbers thrown up as a result of this decision show a high level of economic efficiency, unseen so far. The charges bid by the three firms to manage about Rs 30,000 crore per annum are the lowest we’ve seen in independent India. At less than one basis point (100 basis points make a percentage point), HSBC, ICICI and Reliance are offering economies of fund management that scale allows them.

Opinion in Hindustan Times, August 03, 2008

Inflation! 11.91%

Tuesday’s trust vote was not merely about who governs the nation for how long, but also about tackling something much larger: a daily cash flow that’s gone awry ever since the inflation rate climbed to 11.91 per cent, double of what it was less than four months ago.
Regardless of how it ended, the debate about the future of the UPA government in the Lok Sabha was as dignified a discussion as we can possibly get in a political environment of ‘single-digit’ parties leveraging their presence to extract their pounds of flesh. The economic stage was set with both Prime Minister Manmohan Singh and Leader of the Opposition L.K. Advani agreeing that the nuances of signing the Indo-US nuclear deal is a non-issue when inflation has hit — and threatens to stay — in double digits, eating into the very vitals of Indian households. So what about the Real McCoy: double-digit inflation?

Opinion in Hindustan Times, July 22, 2008

No matter who wins, you lose

Whether the government stays or falls, be prepared for hard times. That’s the message from beleaguered Prime Minister Manmohan Singh.
Singh believes a “non-issue” is occupying our minds at a time inflation is threatening to reduce living standards, a source, speaking on condition of anonymity on behalf of the PM, said on Saturday.
“This is possibly the biggest (inflationary) challenge since 1973,” said the source, referring to the days of the world’s first oil shocks: Indian inflation soared to about 30% and stayed there for over 18 months.

Opinion in Hindustan Times, July 20, 2008

Multi-armed with knowledge

When I see the cut-off percentages needed to get into any respectable college in Mumbai or Delhi today, I find myself cut off from all avenues of what we term ‘education’ and a traditional ‘career’.
With the marks I got in my Class 12 board exams, only a miracle got me a leg into a decent college through what the University of Delhi calls ‘Third cut-off list’. If I wanted to study my course (economics) today, I would have had to go to some other university as no college would give me admission based on my marks. if I wanted my college, the only course available to me with my marks would be Sanskrit.

Opinion in Hindustan Times, July 07, 2008

Why you should worry about the latest market crash

At a point when the Sensex has fallen by 5,000 points — that’s by 25 per cent — from over 20,000 in early January to 15,000 today, why should a 500 point fall make news? Because these 500 points bring out the first sentiments of investors: fear and greed.
History tells us that we’ve lost money in earlier falls, the greed years of the dot-com boom, for instance. Then, some of the tech shares that quoted at over Rs 1,000 could be picked up for a few paise. Many investors are still holding on to them, in physical form, waiting for them to rise to their previous levels — or at least to Rs 500 or thereabouts so that the investment can be salvaged.
The bad news is that that’s not going to happen in their lifetimes.

Opinion in Hindustan Times, June 09, 2008

The future lies in history

By raising the prices of diesel and petrol by Rs 3 and 5 per litre respectively and that of LPG by Rs 50 per cylinder, the UPA administration has shown rare courage. This is especially brave in these ominous times of political economy constraints. But beyond the petty politics of power-seeking and power-sharing lies one fact: the price Indians pay for petrol has no relationship with the usual demand-supply equilibrium under which any free economy operates. All developed economies pay more, few emerging economies pay less. Inflation, say political parties, will rise and wreak havoc on the household economics of the common man. There will be strikes by the Left; then by other parties; and, of course, criticism from the BJP.
It is coincidental that the price rise follows the the BJP’s electoral victory in Karnataka last week. Among the many reasons being cobbled up for the Congress loss is the rising inflation rate, which after yesterday’s oil price hike will go up by 0.5 percentage points. How much of this is a cause-effect relationship and which half is the effect leading up to ‘cause-seeking’, I’m not so sure. For, to stay afloat in this Age of the Sound-bite is not easy unless you have a short, snappy and easy-to-digest ‘analysis’ to offer. Hence the popular misconception that inflation was the prime reason for voters turning away from the Congress — and that this ‘morning’ will show the ‘day’ in other states like Madhya Pradesh, Chhatisgarh and Rajasthan.

Opinion in Hindustan Times, June 04, 2008

Eat the rich

Beyond falling profit margins, slowing industrial growth, high interest rates and voter uncertainty, there are two new beasts that high inflation, across the world, is unleashing — riots in poor countries and lifestyle changes in richer ones. Backed by a 39 per cent rise in prices over the past year, food riots erupted in countries as diverse as Egypt and Indonesia, Guinea and Mexico, Haiti and Uzbekistan, Mauritania and Yemen.
On the other side of the wealth divide, the rise in oil prices is going to change more than just diets; US citizens are going to see lifestyle changes. Under risk is the country’s suburban economy, where workers drive 100 miles to work on cheap gas. Will workplaces move to where the workers are or vice versa, will technology replace human interactions, these are questions companies and employees there are asking.

Opinion in Hindustan Times, May, 14, 2008