January 22, 2008
This Indian Express anchor story on how Bihari migrants send 18 crore (180 million) rupees home through money orders every year gives me a warm fuzzy feeling. The money (heh!) quotes:
Noida’s post offices send out over Rs 36 crore a year through nearly 3.65 lakh money orders.
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The rise in money orders shows the growth of Noida and its migrant population. Officials say migrant workers send 95 per cent of these.
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Santosh Pradhan, who runs a paan shop in Sector 33, has been sending Rs 5,000 home every month. Noida has been good to Pradhan who has to look after a family of eight.
“For a saada-paan I would get just a rupee in Bihar, whereas I sell it for Rs 4 here. The profit is more and that’s the reason my whole family is doing well now,” (emphasis mine – Aadisht) he says. Pradhan claims he has been able to repay all debts in his village and is now planning to buy some land there.
When he came to the city eight years ago, he could send only Rs 10,000 a year. Two years ago, he brought his wife and two children to the big city so that “they get better education and learn English and Maths and study among the children of rich people.”
(link)
Arising out of this:
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This is yet more real evidence against the widespread subconscious illusion that ‘India lives in her villages.’ The problem with that is that India makes a living in her cities, and most villagers would rather live in the cities.
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On that note, an Urbanisation Feeds poster on the lines of Samizdata’s Socialism Kills poster would be fun.
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And arising out of point 1, the whole motivation behind the National Rural Employment Guarantee Act is flawed, forget the structure and the implementation. It’s easier to generate wealth in cities and then send it to villages – so what public policy should be doing is creating cities – as Atanu Dey has repeatedly been pointing out.
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1.8 crore commission on 36 crores of money orders works out to 5%. SBI charges 30 rupees on a demand draft, and 0.15% on electronics funds transfer (with a minimum of Rs. 100). According to the Boston Globe article I linked yesterday, Basix charges 2%. The post office is ripping people off, but that’s because they have to cover the costs of their brick-and-mortar infrastructure. In Basix’ case, they aren’t dragging overheads around. Mobile banking matters.
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Finance, MSM, Public Policy and Politics | Tagged: atanu dey, basix, bihar, commission, india lives in her villages, migrant, migration, mobile banking, money order, money transfer, national rural employment guarantee, noida, nrega, nregs, postal order, remittance, rural, socialism kills, transaction banking, urban, urbanisation, urbanisation matters, wealth | 
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Posted by Aadisht
January 21, 2008
This Boston Globe oped (free registration might be required) is astonishing. The author, somebody named Jeremy Kahn, has violated the Sominism-cheat-sheet and Neelakantan’s guide to writing about India left, right, and centre. He appears to have actually understood the nuances of what he’s writing about! And he doesn’t mention caste, growing inequality, pollution, or elephants on the road even once!
OK, that’s the sarcasm out of the way. Seriously, the oped is a very good read. It’s about how Third World conditions are forcing cellphone companies, banks, and Tata Motors to innovate and come up with low-cost technology, and how this means that design and innovation is now splitting up and being driven by two different things: luxury in the First World, and productivity and low costs in the Third World. In the bargain, First World and Third World innovation are both leading to high technology, and the Third World is now actually in a position to export technology to the First World.
Excerpts:
This might seem like a classic example of the Third World struggling to catch up with the First. After all, people in the United States and Europe have been using ATM cards and the Internet for years to perform the simple banking tasks Das is only now able to do. But look again: The technology used to bring slum-dwellers like Das their first bank accounts is so advanced that it isn’t available to even the most tech-savvy Americans – at least not yet.
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This represents a stunning reversal of the traditional flow of innovation. Until recently, consumers in the Third World also had to tolerate third-rate technology. Africa, India, and Latin America were dumping grounds for antiquated products and services. In a market in which some people still rode camels, a 50-year-old car engine was good enough. Innovation remained the exclusive domain of the developed world. Everyone else got hand-me-downs.
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And as they do, companies are confronting the unique challenge of making high-tech products cheaply enough to make a profit. In some cases, this means shifting jobs for talented designers and engineers to the developing world – not just to save labor costs, but in order to better understand the markets they are now trying to reach.
“Developing markets offer the best opportunity for global firms to discover what is likely to be ‘next practice,’ as contrasted with today’s best practice,” Prahalad has written. “The low end is a new source of innovation.”
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In a globalized world, people in emerging markets want first-class products – but at prices they can afford. Meeting that demand, particularly in countries where basic infrastructure is weak, requires more creativity than designing a product for a more advanced, affluent market.
Read, read. It’s worth the two-minutes it takes to register.
Leave a Comment » | Business, Finance, Links, MSM, Technology, Telecom | Tagged: axis bank, basix, biometric atm, boston globe, bottom of pyramid, citibank, ck prahalad, design, first world, innovation, jeremy kahn, microfinance, mobile banking, motofone, sominism, tata nano, Technology, technology transfer, third world, transaction banking | Permalink
Posted by Aadisht
December 13, 2007
This is brilliant… not:
With several hydro-power projects stuck due to disputes among states over water-sharing and related issues, the Ministry for Water Resources plans to bring some rivers under Central ambit by identifying them as “national rivers” to tap their potential for hydro-power and irrigation.
Speaking to The Indian Express today, Union Minister for Water Resources Saifuddin Soz said: “The country has failed to properly harness the hydro-power and irrigation potential of several rivers due to inter-state disputes. Even conservation of rivers has fallen victim to ownership. For better conservation, better utilisation of irrigation and hydro-power potential and to maintain better flow across states, I plan to get some rivers adopted as national rivers.”
(Indian Express)
Oh joy. So the solution to a tragedy-of-the-commons problem is… to enforce the commons status of the resource in question through the force of law. And instead of removing the scope for disputes, to give the Central government the power to resolve disputes, stakeholders be damned.
Hey, I have an idea! Why don’t we try this for telecom spectrum? Oh, wait…
Leave a Comment » | Infrastructure, Public Policy and Politics | Tagged: economic illiteracy, hydel, irrigation, river water, rivers, saifuddin soz, spectrum allocation, tragedy of the commons, upa government | Permalink
Posted by Aadisht
November 22, 2007
On the flight back to Bangalore from Delhi, I was on seat 16D. There was a kid on 16C. There was another kid on 14C. And yet another somewhere around row 20. And they all howled through the flight.
Howling kids are always annoying but the problem is even worse on a flight. You can’t walk away to a quieter place. The kid can’t be taken away to a quieter place. You’re basically trapped listening to the howling kid.
In many ways, the situation is the reverse of Alex Tabarrok’s flu vaccination:
People who have the flu spread the virus so getting a flu shot not only reduces the probability that I will get the flu it reduces the probability that you will get the flu. In the language of economics the flu shot creates an external benefit, a benefit to other people not captured by the person who paid the costs of getting the shot. The external benefits of a flu shot can be quite large. Under some conditions each person who is vaccinated reduces the expected number of other people who get the flu by 1.5.
Since a large fraction of the benefits of the flu shot, perhaps even a majority of the benefits, go to other people and not to the person paying the costs, the number of people who get a flu shot in the United States is well below the efficient level.
In the case of Alex Tabarrok’s flu vaccination, there was an external benefit. However, in the case of howling kids, there is an external cost. The kid is suffering, but the kid’s howling makes all the other people in the aircraft suffer more.
What are the implications? Well, Alex Tabarrok is asking people who are benefiting from the positive externality to send him money to compensate him for creating the externality:
I just had my flu shot. Please send your checks to my George Mason address.
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I only got the shot because, as you well know, I’m altruistic. I care about you. But do send your checks, that will help.
Applying the situation in reverse, the parents of the howling kid should give all the other passengers money to compensate for the suffering they have inflicted on them through their inconsiderateness. This has staggering implications. If each of the passengers is to be compensated 500 rupees for the suffering they have endured, that raises the cost of carrying a kid on board by 9 kilorupees. The best way to implement this would be to make the price of the ticket for a kid 9 kilorupees – in sharp contrast to Simplify Deccan’s abominable policy of letting infants travel in laps for only a 250 rupee surcharge- and give all other passengers a five hundred rupee discount or rebate.
Alex Tabarrok also says:
Of course, we know from the Coase Theorem that there is an alternative approach. We could charge people who do not get their flu shots. (Thus, if you haven’t had a shot you must still must send me a check.) Or to reduce transaction costs we could fine people who get the flu.
The equivalent of the fine in this case would be making the cost of the ticket for the kid 9000 rupees, but not distributing the extra money to the passengers. That would still have the beneficial effect of making it too expensive to carry your kid on board a flight.
Of course there is a way to cut out transaction costs entirely. You can bring in the Kansa Society, which will slaughter the kid. No howling, and no worrying about surcharge transfers. Oh sacred simplicity!
1 Comment | Business and Economics, Kansa Society | Tagged: alex tabarrok, coase theorem, externality, flight, flu shot, infant sacrifice, infant surcharge, kids, marginal revolution, negative externality, positive externality, ticket, vaccination | Permalink
Posted by Aadisht
November 21, 2007
This year, Diwali was not as renumerative as it used to be. This is because I am now a grossly overpaid MBA (who is also no longer forking half his salary over to a Parsi thatha in Malabar Hill as paying guest charges) and noblesse oblige demands that:
- I no longer accept gifts from grandmothers with no independent income.
- I no longer rely on my parents to finance Bhai Dooj chanda for my sisters.
Conscience and noblesse oblige may not be neglected. Social traditions which promote the voluntary transfer of wealth from the earning and productive to the weak and unemployed encourage the spread of Edwardian values. Failure to carry on such traditions will lead to a society in which free exchange and taking responsibility for one’s property are abandoned, precipitating the collapse of enlightened civilisation. Thus, all cash which came in on Diwali went out equally rapidly to sisters two days later at Bhai Dooj.
However, I face a dilemma. I would rather cut down upon cash gifts to the sister who brought shame upon the clan by marrying into a family of uncultured barbarians who steal electricity and whose approach to religion is to feed goats. The cash saved could then be given to the sister who brought honour upon the clan by eloping. And yet, I shy away from making gifts on the basis of virtue, when tradition demands that sisters be given gifts of equal value. More so because deviating from established processes on the basis of arbitrary valuations of virtue violates Saivite tenets of adherence to eternal law.
However, in this as in most other things, Tyler Cowen provides a solution: merit based gifting. Instead of giving people gifts on occasions like birthdays or Christmas (or indeed, Bhai Dooj), give them gifts at random times based on how much you value them.
This is excellent. Tradition only specifies giving gifts of equal value at Bhai Dooj. But I can give merit based gifts throughout the rest of the year, at random occassions. Edwardian objectives of rewarding virtue can be achieved after all!
I think the best way to do this going ahead is to avoid Bhai Dooj gifts completely. However, since all the sisters have kids, give the kids gifts in proportion to their virtue. This is a good thing, because:
- Noblesse oblige is even more vital when it comes to being a rich uncle who can give gifts to children with no source of income whatsoever.
- Nephews and nieces whom I approve of (because they bugger off to a secluded room and engross themselves in Roald Dahl) can be rewarded with more Roald Dahl (or Phillip Pullman for that matter). Gifts to nieces who watch Shah Rukh Khan movies and nephews who bite can be cut back accordingly.
- Gifting to nephews and nieces is an investment, while gifting to sisters is merely an expense. Investment is more Edwardian than expense.
The virtue of nephews and nieces must therefore be tracked going forward.
4 Comments | Business and Economics, Consumerism | Tagged: bhai dooj, cash flow, deepavali, diwali, edwardian values, family, gifting, householder, marginal revolution, merit based gifts, noblesse oblige, obligation, parsi thatha, presents, relatives, saivite neo-edwardianism, tyler cowen | Permalink
Posted by Aadisht
November 16, 2007
Namy Roy wrote in and asked me if I’d read Niranjan Rajadhyakhsa’s column on Bangalore and the Coase Theorem, and suggested I blog about it.
I had read the column on Wednesday itself, and thought of mentioning it in a post on kids in aeroplanes. Since I’m busy making the quiz, I won’t be writing that post for a while, but do read the column. It’s good.
Leave a Comment » | Business and Economics, Links | Tagged: Bangalore, coase, coase theorem, coasian economics, column, mint, niranjan rajadhyaksha | Permalink
Posted by Aadisht
November 6, 2007
The Jagadguru says:
What I am against is the deregulation of the banking sector. Cutting off or weakening the regulatory arm is not good for the country. Letz have private players, with a strong regulatory body, under the control of a democratically elected government. I think this will ensure the best of both worlds. We will have private players in the industry bringing in the much needed competition (and hence better service) and we will also have strong regulations ensuring that needy people are not sucked out of their blood.
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The only way to stop such misuse is by having strong regulations on the market. Only strong regulations can stop ICICI kinda atrocity or zamindari system.
The RBI had come up with a regulation against employing goons or intimidation for collections two years ago. But ICICI kinda atrocity wasn’t stopped. Why is this?
Dumbhead free market fundamentalists will tell you it’s because regulation makes honest people overcautious while not changing the behaviour of rogues. But they are wrong. The true reason the strong regulation failed was because K V Kamath has not let the Jagadguru into his heart. When he surrenders himself to the Jagadguru, ICICI Bank will be transformed, and so will its outsourced collections agencies.
Even strong regulations are useless if we do not surrender ourselves to the Jagadguru.
Leave a Comment » | Business, Finance, Think Deeply | Tagged: collection agencies, collections, credit cards, goons, icici bank, jagadguru, lending, rbi, regulation, unsecured | Permalink
Posted by Aadisht
November 2, 2007
Mint has an interview of Hernando de Soto today, where he talks about how clear property titles empower the poor, and what India needs to do about this.
Hernando de Soto is a Peruvian economist. His major insight was that poor people may own or occupy land and houses, but the legal status of this property usually isn’t clear. So, even if they aren’t actually occupying anyone else’s property, they can’t reap the full legal benefits of this.
The legal benefits of this include:
- Being able to establish a proof of residence (important whenever you need to get something that requires a billing address- phones, bank accounts, credit cards, and so on)
- Reducing the risk of living in a neighbourhood classified as a ‘negative area’ by a bank, and so losing out on access to credit – this is a huge problem in India.
- Being able to borrow against your property, which provides capital to start a business, meet unexpected expenses, and so on.
He has written a book called The Mystery of Capital in which this is explained in detail. Unfortunately it is also explained very badly, and the book is very complex and difficult to get through. Tragically, the Mint interview is the same, and his answers are very long and complicated, though still very insightful if you can penetrate them.
However, the last paragraph has this great quote:
But if you are able to document your extra-legal sector, document its entrepreneurality, and show how that could be many times better if it takes place within the rule of law, it has got to motivate politicians. You have got to say, if you do this, it will increase your votership by 20-30%. Then you will win. That’s the way politicians think.
Related post: this one, with a link to Gautam Chikermane in the Indian Express talking about de Soto and property titles.
Leave a Comment » | Business and Economics, Finance, Public Policy and Politics | Permalink
Posted by Aadisht
October 30, 2007
One last Indian Express link for today: Gautam Chikermane’s column on what India can learn from Hernando de Soto:
Take de Soto’s theory a little further and you’ll probably reach a conclusion that like the sub-head of his 2000 book The Mystery of Capital, capitalism may not be able to triumph in India. While the dreamer in me disagrees, my pragmatic side tells me that in some states the bridge towards that triumph is being built in the form of lower stamp duties.
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Going forward, the Delhi government plans to reduce it further — the state cabinet has approved a fall to 6 per cent for men and 4 per cent for women — which is good news for all stakeholders: households, the real estate and construction industry and the government. By lowering rates, the incentive to dupe the exchequer of legitimate taxes falls. The average black or unaccounted cash component in Delhi, at between 40 and 60 per cent, remains high, but it’s early days. Marry this fall in stamp duty rates with the way the Central government is trying to plug every possible loophole on the spending side, and the future of unaccounted wealth moves from black to bleak. Scholars have argued that state governments could double their stamp duty receipts if properties were valued correctly.
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But like a chicken-and-egg syndrome, I don’t think that’s likely to happen unless, ceteris paribus, stamp duties fall like they have in Delhi, West Bengal and Uttar Pradesh.
The emphasis in the last quoted paragraph is mine.
Read the whole thing.
And this reminds me that I really should write followups to my post about allowing farmers to sell their land.
Leave a Comment » | Business and Economics, Finance, Links, Public Policy and Politics | Permalink
Posted by Aadisht