Inflation In India

I have generally avoided social media for last few months just because I wanted to avoid negativity associated with political discourse in India but now elections being so near, I feel I have a role to play and try to steer discourse in slightly positive direction based on facts and data. So I will try to write few articles based on data with primary sources. I will also try to interpret the data so that everybody can make sense of it.

For first article, I am picking up inflation as I believe

1. Stable and low inflation is basic necessity for progress in any economy

1. Inflation affects common people by compounding which is very difficult for them to comprehend

1. Inflation disproportionately affects lower and middle class of the society

1. Difference between high inflation (8%) and low inflation (4%) appear very small in first glance and people do not appreciate the difference it causes in medium to long term

1. Mostly people remember with nostalgia that prices used to be low long time ago but they can not associate Govt’s with them.

1. In Short term people always believe prices are increasing and hence do not appreciate efforts a Govt. undertakes to reduce inflation

For this exercise I have used World Bank Database to get data on inflation in India as far back as 1960. Here is basic chart showing inflation in last 28 years

This chart clearly shows India mostly had inflation hovering around 8-10% in last 28 years apart from two periods of 1999-2005 and 2014 onwards when it was/is distinctively lower
Before making any further let me quickly go over Economics 101 and explain impacts of inflation. I am just copying from Wikipedia and explaining its meaning in plain english

1. An increase in the general level of prices implies a decrease in the purchasing power of the currency. It means if inflation over a period of 5 years is 10% than monthly budget of a family will increase from ₹20K per month to ₹32K per month

1. Debtors who have debts with a fixed nominal rate of interest will see a reduction in the "real" interest rate as the inflation rate rises. It means value of your money (in bank or post office and FD) will actually decrease instead of increasing. Raghuram Rajan explained this very well using Dosanomics

1. High Inflation increases overhead in the economy like frequent price adjustment, extra effort for planning instead of production and incentivises illegal activities like hoarding. All of them are written on Wikipedia

Overall wikipedia article and most of the economists agree that a moderate inflation is good for growing economy like India while high inflation is bad. RBI and GoI have decided that moderate inflation for India is somewhere around 4% and they have put it in RBI targets as well. Another thing to note about inflation is that its spiral in nature which means that high inflation in a year pushes even higher inflation in following years
Now with all these facts in mind let’s examine the inflation during last 20 years divided by various Govt’s

1. 1998-2004 Vajpayee NDA Govt: Average inflation during this time period was 4.05% and this looks even more commendable since  it was time of War( Kargil), International sanctions (Post Pokhran 2) and International economic turmoil (dot com burst and 9/11). This time period also ended almost 10 years of high inflation (10% and more).

1. 2004-2009 Manmohan Singh UPA-1 Govt: Average inflation during this time was 7.2% and it increased every year as shown in below exhibit.

1. 2009-2014 Manmohan Singh UPA-2 Govt: Inflation continued to be on ~10% levels for most of UPA-2 as well and touched 16% for few months in 2010. Average Inflation for UPA-2 was 9.5%

1. 2014-Now Narendra Modi NDA Govt: Average inflation in last 4 years have been moderate 4.4%. Though inflation had reduced to 6.6% in 2014 but it have been brought down significantly to 4% level since then

Above data clearly shows that NDA Govt’s have been more successful in controlling inflation. Just to add color to Inflation for a middle class person, Let me add an illustration showing effect of inflation during various Govts on monthly expenses of middle class Indians. Let’s assume a common family spending about ₹20,000 a month on various needs, following table shows increase in monthly expenses after a tenure of 5 years from various Govt’s

Prime Minister	Increase in Monthly expenses for a family spending 20000 initially
Vajpayee	4,392
Manmohan Singh 1	8,314
Manmohan Singh 2	11,485
Narendra Modi	4,805

1. For 2017 and 2018 data, I have used other data sets as WB data is no available. Full data set here
2.  Data Source https://www.inflation.eu/inflation-rates/india/historic-inflation/cpi-inflation-india-2010.aspx

I guess it’s pretty clear by now who does a better job in economic management

Mob Lynching: Consequence of corrupt Police and Judiciary?

Last evening, I read a bone chilling news of lynching of an engineer in Karnataka. This was specially traumatic because engineer was employed at Google (my employer as well). But sadly this was not an isolated incident. We have been hearing news of mob taking law in its own hand from some time now. I am not sure when exactly did it started but I remember hearing about such incidents from my childhood. Actually I can connect this incident to stories I used to hear when I was kid that some people caught hold of a thief and beat him badly before handing him over to Police. One such example is shown in Movie Munna Bhai MBBS as well when Sunil Dutt caught hold of a pickpocketer and public started beating him. Finally he have to intervene as an old and wise person to save him.

Though some people and media argues that public lynchings in India have grown after 2014, there are enough reportings which disputes it and prove that there were enough examples of mob justice before 2014 as well. But I do not want to get into political or communal argument through this article. As I do not want to get into communal argument, I will focus on incidents where unknown individuals are targeted by people who do not have any preconceived ill will towards the victim as happened in this case.

Though it’s unadvisable to assume everything media reports as correct, but largely Karnataka incident happened in following sequence. Some people were passing through a village, there they saw a group of children and offered some Chocolates to them. Villagers developed a suspicion on them assuming visitors were part of child trafficking racket. An argument followed after which visitors ran fearing escalation but were caught in next village as their pics have been forwarded to next village using WhatsApp. Residents of next village caught the visitors and started beating them. Eventually they killed one of the visitors while 3 others were hospitalised. This incident is shocking and actually anybody can be victim of this kind of violence because we all travel and anybody can be suspected to be a child trafficker considering methods they use now a days.

Some people have blamed WhatsApp for this and many other incidents like this but I do not believe WhatsApp is in any way responsible for this. For a second let’s assume that the victims were not normal civilians but actual criminals and were not beaten but handed over to Police. (Due to times we live in, I will have to reiterate that I am in NO WAY blaming victims but just hypothesizing to prove that WhatsApp or any other technological platform just dissipates information, Its THE PEOPLE who consume the information in a certain way and commit crimes like this). It would have been a very good use of technology for law enforcement as happened in this case where a vigilante passenger noticed something wrong and informed authorities about it using Twitter, who acted and busted a human trafficking racket.

Being an optimist, I believe in general goodness of people and will give benefit of doubt to villagers who constituted the mob which killed this person. I believe, In hindsight even villagers are kicking themselves for doing what they did, as they are not hard core criminals but normal simple people who just was angry on that day and passionate about saving their children. But two wrong things definitely happened on that day

1. Villagers became suspicious about some visitors offering chocolates to children. Though it feels really bad that people in our country distrust fellow humans so much, but we have seen enough example of crime where all sorts of things happen and we still do not know fully the situation and some people can really be protective about kids. So to again giving benefit of doubt to villagers I am assuming that visitors unknowingly did something which led to suspicion in villagers mind that they were in their village to do something wrong.
2. Instead of informing law enforcement agencies, villagers decided to do justice themselves and beat those suspicious visitors themselves. Now there can not be any explanation for this. In almost all the incidences of mob violence, this mob urge to do justice then and there is present. It may be a case of stolen cattle or beef eating, mob isolates a group of person believing they committed a crime and punishes them. I believe this kind of behavior is rooted in deep distrust towards our law enforcement agencies including Judiciary. There is a legitimate perception that our police and our judiciary do not punish the guilty in a timely manner but actually harasses the complainant and due to this people fear going to police and even when they do, they do not have much hope that police will be able to get them justice. On top of it we have a judiciary which is biased towards the criminals. Bias is hopeless if criminals have money or influence (which can be bought using money). This distrust or trust in incompetency of law enforcement agencies work 2 ways. First there is no incentive to take matters to police. So in this example, If police will not do anything as these child traffickers must have already paid money to them why even bother calling them. Let’s beat the heck out of them so that they learn their lessons. Second there is an impunity associated with crowd because hundred people means influence of four- five hundred votes, which is enough for local politicians to derail police investigations after a mob crime have been committed. So again coming to this case, because we are hundred people we can just beat these visitors up and anyway it’s not just me who is doing so. There are also Psychological aspects which bring out the worst in people when they are acting in mob

I think mob lynching in cases like this is an ugly consequence of poor and corrupt law enforcement (again including judiciary). Its high time Indian police and Judiciary do something to gain confidence of people otherwise cases like this will only increase. As citizen on India, we can contribute by not asking clemency for mob criminals whether they are stone pelters of J&K or fellow supporters of a convicted Baba who committed arson as by doing so, we just increase the feeling of impunity of mob.

Dwarka Expressway: Cost of Bad planning

This weekend one of my old friend visited me and as it happens, discussion invariably wandered into politics. I was shocked to hear him saying that previous UPA Govt was similar to present NDA Govt in terms of getting works done. For a political junkie like me this statement shocked me like anything. It also reminded me how short public memory is. So I thought it's on me to remind my fellow Indians about what Sonia Gandhi led Congress did to India. In first of this series (hopefully) of articles, I would like to pick up one of monumental failures (usage of failure is actually a eulogy because most of the actions are far more than just failures, I am going to write about were actually deliberate act of fraud and corruption but I don’t have any proof and due to incompetence of our legal system we will always remain without proof).

First of them I would like to tell the story of an Expressway which was planned to decongest one of India’s Busiest Highway. It was supposed to be a 8 lane on signal road connecting a upscale modern new city which had offices of about 80% of fortune 500 companies and The seat of Govt of India. I guess it’s clear now that I am talking about Dwarka expressway. It was planned in 2006 and was supposed to be completed before Commonwealth Games. (Yes, the same Commonwealth Games which can be topic of a 1000 page book on corruption). Along with highway, they planned an entirely new city along the highway with all modern facilities like Hospitals, Shopping Malls, Schools etc. It appeared meticulous planning except it wasn’t. It was gargantuan inaptitude in town planning that resulted in a highway which looks like this in 2018 on Google Maps

Currently, Highway starts near NH8, near Toll Plaza and runs parallel to NH8 few km North of the highway until it vanishes in homes and buildings in New Palam Vihar and reemerges just 200 meters away as if vehicles will go airborne at point A and land at point B and continue with their journey. Road again does in vanishing act once more about 2 KM west of Palam Vihar, this time on Delhi Gurgaon Border just that this time it does not reappear


And this is not a land issue as Palam Vihar patch is, This portion was never planned. Town-planners just planned this road without any connection on Delhi side. They didn’t even bothered extending their plans inside Delhi and now this road just sees an abrupt end at Haryana Delhi border. This abrupt end, probably makes this expressway as world’s widest, best made and most expensive single outlet road. Actually not a single outlet road but a no outlet road actually because on the other end as well, planning left few hundred feet before joining with Delhi Jaipur Highway (NH8), as if traffic (~ 2 Lakh cars per day) will take village roads from NH8 to come on this expressway

They did not plan a junction or even a traffic signal on its junction with NH8. Though we know what happens when NH8 have a traffic signal in Gurgaon.

I think after reading this most of you would be convinced that this was bad planning but so what? India have had more than its share of bad planning in past few decades. This case is special because of cost it imposed on average middle class. As I stated earlier, Dwarka Expressway was not just a road, Govt promised a complete township along with it. The dream was sold as New Gurgaon, A world class city with modern infrastructure which would have been very well connected to one India’s biggest airports, A business center which probably have highest concentration of fortune 500 companies in India (means a lot of jobs) and an upcoming diplomatic enclave (still upcoming since 2008), an Interstate modern class Bus Stand in Dwarka (Again still upcoming since 2008) and what not. This is a map shows a subset of residential projects that were launched in this area on promise of Dwarka Expressway.

Now almost all are stuck or useless because of lack of connectivity.

This was a dream which more than 2 lakh middle class families including your truly bought. And this dream was not cheap. Average 2000 Square ft flat was selling for ₹80 Lakhs (₹8 Million) in 2010. And this was before RERA, when 2000 SFt actually meant 1300 SFt. which is not a huge home for a 4 member family. So a ballpark calculation assuming average unit price of 50 Lakh for 2 Lakh flats comes to be around 1 Lakh Crore. Almost on par with 2G scam which was presumptive loss but this is real loss to a) Middle Class (as they paid for flats they never got back, b) Construction workers and Contractors as they were not paid for their work, c) banks in form of NPAs and overall real estate industry as many builders went bankrupt and overall trust in industry dropped significantly (not that it was better earlier).

And this is not not all. There are other hidden costs of this bad planning and incompetence of UPA Govt of India and Haryana. I am listing few of them

1. Noncompletion of this road means there is only 1 exit on south west side of Delhi. As below map shows that there are many exit roads on East side of Delhi to go to different cities of UP, On western side there are only 2 exits: 1. Rohtak Road connecting Rohtak, Hisar, Sirsa and ending at Fazilka border in Punjab and 2. Jaipur Road connecting Jaipur, Ajmer, Udaipur, Ahmedabad, Vadodara, Surat and Mumbai. And it is also clear that this particular road deals with very heavy traffic from many nearby cities like Rewari and Alwar with vehicles having no alternative route to enter Delhi. If you are ever stuck in traffic jam on Delhi Gurgaon expressway, one of the reasons is there being no alternate route between Iffco Chowk and Rajiv Chowk in Gurgaon. This puts an extraordinary amount of pressure on NH8 and Dwarka Expressway would have eased a lot of burden from this road had it been completed. It would have provided an alternate route to vehicles in case of traffic jam like this

2. Again no other major road in Gurgaon means, Gurgaon is an elongated city which puts extra pressure on NH8 and make unnecessary long travel distances and by extension travel time in the city of Gurgaon. Off course this have implications for pollutions and what not.

3. A lot of new home inventory in last 10 years in Gurgaon was supposed to come along this route but that never happened and it created a demand supply gap in availability of homes in Gurgaon, hence rentals and home prices soared which most of Gurgaon residents are paying in form of everything being so expansive there.

While this is beyond argument that this problem was created by UPA Govt, question is what is 4 year old BJP Govt. is doing about it in Haryana and Center. Unfortunately nothing. Actually they are trying but there are so many issues, legacy plan created, it’s too difficult now to sort them out. Though I have found that will to sort this out quickly lacking in present Govt. but to their credit, they have resolved most (and believe me there were 100’s if not more) of the issues in terms of planning and land acquisition. They are now claiming they that this expressway will open in next 18 months. Though I am low on hopes but track record (They completed, well almost, 6 laing of Delhi Jaipur Highway, KMP and KGP expressway which were stuck from a decade) of this Govt. gives me some hope that this road will be used some day. But I am not sure if it will help me because, builder, who was building the under construction apartment, I own have tried to fled and have gone bankrupt with no chance of them completing the project.

Though this is only one of the reasons, this is more than enough for me to decide that I will not want to see Congress again handling crucial job of Governance in India. They just do not deserve that. Hopefully, some of the readers will remember days when we used to hear about a new scam every day on the voting day and not vote Congress even for lack of a choice.