Friday, December 26, 2008

Easy Economic Stimulus for India?

In India now. Not very impressed with Rs 52 per liter petrol when crude oil is trading at $40 a barrel.

A liter of petrol costs around Rs 52 in India right now. That translates to $4.06 a gallon. That's how much the US used to pay, back in July, when everyone was weeping about how unaffordable everything was. Right now, average cost of a gallon of gas is around $1.70 in the US. That is Rs 21 per liter (after taxes). When times were bad the US paid $4.10 per gallon, India paid $5.

Now, then, India is clearly a low income tax nation (i.e. there's very few rich blokes who pay their 33%). So, of course, the petrol tax must be a significant cash cow for the government. Reducing the petrol tax to zero, therefore, is not a tenable solution. And kicking it up to infinity also will kill tax revenues by asphyxiating demand. Clearly, there is a case for an optimum tax rate which shall yield maximum revenue to the government.

My expectation is that this "optimum" tax rate is probably not what is being levied right now. I believe that the petrol tax rate ought to go down - and that petrol ought to be available at a cheaper rate. Perhaps Rs 35 a liter or so. We're probably in the regime where lower tax rates equal larger revenues by stimulating demand.

Clearly, there shall be ecological repercussions. Indians consuming more shall emit more. And in a warming planet that would not be good news. But one must keep Shyam Sharan's words in mind while comparing Indian CO2 emissions with the emissions of the developed world. "Ours are survival emissions. Yours are lifestyle emissions". Worrying about Indians consuming a tad bid more when Americans (and the rest of the world) are hedonistically over-indulging is misplaced, stupid altruism. The bottom line is, India must consume more, emit more to raise its billion from poverty. Any reduction in emission must come from the developed world. Not India.

So, here's my suggestion to MMS and Chidambaram (and whoever else it may concern).

Cut fuel taxes. People will buy more cars. (Roads will get more congested - but that will result in greater and quicker infrastructure development and public transport use). More cars mean more demand. More manufacturing. More jobs. This will act like a stimulus which shall not be financed by a deficit. A win-win situation for all. (Even the environment as the resulting increase in demand shall increase fuel prices around the world a bit) - therefore increasing petrol prices in regions that use it inefficiently (the US basically).

Europe has a good incentive to keep prices low. They're plenty rich anyway and they need to curb their per-capita emissions. India can afford to keep it cheap. We're desparately, miserably poor. We need to emit more to develop more. Cut fuel prices now!

Monday, December 15, 2008


Why would anybody do this? Is there a rhyme or a reason to the way some people behave?

You take a leap of faith and send in your troops to liberate a country from a tyrant (even though the tyrant probably was not going to harm you or your people, making this deed all the more altruistic). You sacrifice 5000 of your troops in this noble endeavor.

You take a beating in the court of public opinion in your own country because you sacrificed 5000 precious lives to liberate a nation of 25 million from the throes of an evil, genocidal dictator.

Clearly, having been such a savior, you would expect a little gratitude. You would expect, perhaps humble words of thanks. Tears of affection, perhaps. But shoes? Would you expect shoes to be thrown at you when you were so instrumental to the state of freedom Iraq is in?

What was the attacker thinking? Every Iraqi is obviously happy now, that he has been liberated from the evil dictator. How can anyone bear animosity towards such a benevolent benefactor? Human beings are such ingrates. Dear reader, let this be a lesson to you: the next time you see a dictator, don't liberate his subjects. They will throw shoes at you later.

Or, you could refrain from killing 4% of the subjects while liberating them. That could help.

Tuesday, December 09, 2008

Few Thoughts on the Indian State Elections

The media is rife with stories about maturing Indian voters "not being swayed by divisive rhetoric" purveyed by the BJP. The liberal in me likes that take, but the skeptic in me cannot help but wonder, Really?

Terror has been a given in India for a long time. Terrorists slaughtered 24 in Delhi a few weeks ago. And people must remember the horrible incidents in Modi- governed Ahmedabad (and almost in Surat) earlier this year, not to mention Guwahati, Hyderabad, Bangalore, Delhi... . These attacks in Mumbai don't change anything. The common man in India knows that. Analysts, of course, have an elitist bias - and to them the Mumbai attacks have a deeper emotional significance.

National issues in India seldom outweigh local issues. One of the rare occasions they did outweigh local issues was when the elecorate threw out Indira Gandhi's paranoid emegency. But terror is nowhere as significant as the emergency. Terror in India is little more than an unpleasant irritant - something that should certainly be dealt with - but not something that should occupy center stage when farmers are commiting sucide by the lakh.

If any national party wants to make terror a national issue in the elections, I am sure that the electorate will reject it - because it is not as significant an issue as others. Last time the BJP tried something stupid like this, it lost badly. (Remember India Shining? What a travesty that was!. When farmers on the verge of commiting suicide and the desperate poor struggling to eke out a living were informed that their nation was shining, the boot is what they got).

To me, it is not as if the electorate has developed a maturity overnight. India has always had a functioning democracy (as has been proven by the voters booting out Ms. Indira Gandhi - and rejecting the irrational "India Shining" campaign). The voters have voted for development in Delhi. Ms. Dixit is doing a great job over there. Voters appreciate the MP and Chattisgharh BJP governments - which are actually doing good work.

And that's why Modi stays in power in Gujarat. Whatever we liberals might say about him, he does have a staunch development record. The Indian voter is trying to vote his/her way out of poverty. And statistically, terror is a little too minor to scare the electorate right now.

Friday, December 05, 2008

How big a problem is terrorism in India?

Based on the list of terror attacks for 2008 in Wikipedia (,_2008), the question (title) has been addressed.

Here are the results:

Iraq: 728 deaths, at 29.12 deaths per million people
Sri Lanka: 214 deaths at 10.7 deaths per million people
Pakistan: 646 deaths at 3.91 deaths per million people
Israel: 13 deaths at 1.9 deaths per million people
India: 364 deaths at 0.4 deaths per million people

These statistics cannot be fully accurate, because terrorism is a tough term to define. For instance, all the Sri Lankan deaths are essentially because of Hindu terrorists (LTTE). Those deaths are included in this survey, wheras shootings like the Virginia-tech massacre would not be. That's why the US has 0 deaths. Statistics pertaining to India also include Naxalite encounters - but not muders.

Compare that with crime rate. India has 32,000 murders every year - which is 29 deaths per million. Basically that means one is 100 times more likely to be killed by a murderer than an islamic terrorist. And now, let's get to India's 130,000 annual road accident deaths - or 150 deaths per million. This makes India's roads five times more dangerous than terrorism in Iraq, by far the world's most terrorist encumbered state. If India re-allocated 90% of her defence budget to road-infrastructure, even in these apparently "troubled" times, more Indians would live.

These statistics make one question very basic assumptions regarding security. Islamic terror is certainly not a problem worth losing sleep over, if statistics are to be believed.

People contend that statistics hide more than they reveal - a thoroughly debatable contention. What does one have to go by, if one doubts the credibility of statistics?

Is outrage proportional to how wealthy the victims are? 180 dead in Rich Mumbai, the whole planet comes to a standstill. 200 dead in Mumbai (2006) - and hardly anybody notices. Clearly, socio economics is a factor.

What do you think?

As an aside, clearly, terrorism is a problem in Iraq. That's something that statistics show immediately. And this is considered one of the better years for Iraq. Iraq witnessed the destruction of its entire middle class and death of a million people - and the ruin of 20 million more - all because of "bad intelligence".

Tuesday, December 02, 2008

No War, Please

There seems to be word that the Indian Government is planning to take out some "terrorist training schools" in Pakistan. India must avoid doing so at all costs. Because doing so will be (justifiably) looked at as a deed of agression - and before we know it, a nuclear war looms in the sub-continent, pushing the planet closer to doomsday.

Firstly, the civilian government in Pakistan seems to be well-intentioned. The president, Mr. Zardari, seems to be as dovey as they come in Pakistan. Clearly, the politicians want peace - as do the people.

With Pakistan, one can never be too sure about its Army - and certainly not about the ISI. They could very well be aiding the terrorists, analysts feel. (But why they would like to blow up their own hotels, and keep killing their own people is beyond me). So, there's probably rogue elements of the army and rogue islamist elements of the ISI which are creating these problems.

Since the expectation ias that these radical elements are rogue - and not the norm, there could be a strong case to force the apparently well-intentioned government's hand - and make the army bomb the terrorist camps - or authorize the Indians and Americans to bomb the areas in question.

It is imperative that the Pakistani government in power be treated with care. Because, if some islamist nutjob yanks power away from Zardari through a coup (because of some way-too-unpopular measures Zardari is forced to take), we have a terrorist state with a nuclear bomb - which is a bone-chilling possibility. The terrorists would not think twice before using said bomb on India.

Whatever is done has to be done with care; with minimal entropy generation. Because disgruntlement today means more terror tomorrow. And there's a whole lot of potential terrorist recruits. Pakistan's population is 160M.