The International Trilemma – Is it an answer to India’s FX Depreciation?

The International Trilemma was first found by Mundell and Flemming. The trilemma is for a country to maintain integration, regulation and sovereignty.

1. Integration: Implies a free flow of goods, services and capital into and out of the country. (ie. integration with the world markets.)
2. Regulation: A freedom to decide the forex rate, that is keeping a constant forex rate or pegging it with another currency.
3. Sovereignty: Implies the independence of the Central Bank of a country to decide on the money supply in the economy.

The trilemma is primarily that a country can choose any 2 of the above and regulate the same. Managing all three is not possible and creates disequilibrium in the economy. For example if a country chooses Integration and Regulation, then it cannot maintain money supply. Say the country reduces its interest rates to increase the money supply in the economy in an attempt to fuel growth. As the interest rates have fallen, capital flight will occur as capital will go to countries offering relatively higher interest rates. Demand for forex will increase, which would put depreciatory pressure on the domestic currency rate. If the exchange rate is fixed, then a disequilibrium situation occurs and the government will require selling massive amounts of forex to support the exchange rates. The government may try to control capital flights by way of imposing foreign exchange norms, thus reducing the level of integration with the world economy.

As we have seen above, a country may only control any 2 of the 3 parameters. In the present situation of India, the government is trying to control all the above 3 parameters viz. Maintain exchange rates, ease capital flows and control money supply. As Indian economy needs to be fuelled and inflation has tempered, the central bank is reducing interest rates, which in turn increases capital flight and therefore depreciating the currency. Stepping-in of the central bank for selling forex will not rectify the disequilibrium situation but only deplete the reserves. Exchange controls or increasing interest rates could be a possible solution as per the Mundell-Flemming model.

In the words of Paul Krugman “The point is that you can’t have it all: A country must pick two out of three. It can fix its exchange rate without emasculating its central bank, but only by maintaining controls on capital flows (like China today); it can leave capital movement free but retain monetary autonomy, but only by letting the exchange rate fluctuate (like Britain – or Canada); or it can choose to leave capital free and stabilize the currency, but only by abandoning any ability to adjust interest rates to fight inflation or recession (like Argentina today)”[i]

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[i] http://www.slate.com/articles/business/the_dismal_science/1999/10/o_canada.html

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“20 Million” Missing Indian Men

Yes, you have read it correctly; over 20 Million men are missing from the working population of India based on the data tabulated for the past 15 years. The results are shocking, the death rates of Indian men increase once they are born. The number of deaths of Indian men over a 5 year time period from 1995 – 2000 in 5 year age groups are given below [i]–

(in ‘000)
Age Group	2000	2005	2010
15-19	364.3	327.2	295.0
20-24	477.8	438.4	399.5
25-29	575.3	549.1	501.4
30-34	608.9	632.9	579.6
35-39	670.3	706.2	680.3
40-44	719.1	766.3	762.9
45-49	828.5	863.7	876.8
50-54	1,048.0	1,080.9	1,116.0
55-59	1,333.0	1,386.0	1,447.2
Total	6,625.1	6,750.8	6,658.7

Can a person eat a scrumptious meal with Rs. 12? – A Data Backed Analysis

Recently many politicians have remarked that a scrumptious meal can be eaten at Rs. 12, Rs. 5 and even at Rs. 1. Let us try to scientifically analyze these statements with backup data.

As per Indian Council of Medial Research[i], the average daily calorie need for a working man (ie. Labourer) is 3490 Kcal. For a scrumptious meal atleast the daily calorie requirement needs to be met. Let us assume that the labourer eats only the staple food, say wheat.

Sexual Harassment at Workplace Act

The Protection of Women Against Sexual Harassment at Work Place Bill (Act) had been passed in the Rajya Sabha recently and has become a law. This Act deals with protecting women from harassment in workplace and providing a safe environment.  Let us now analyse the provisions of the Act in detail –

1. This Act is not gender neutral as only women can file a complaint. No man can file a sexual harassment complaint. Are men not harassed sexually? Do refer to the links here, here, here and here.

Process and Method of Change – Part 1

There are many issues, policies and rules around us that we want to change for betterment of the society. In other words bring about a positive change for humanity. Societies in general discourage and penalizes ideologies that request change. Change is difficult to fathom as it challenges status quo. The other party at that point of time comes out with justifications on why the status quo is required giving examples of history, religion, political reasoning or legal issues. These justifications are generally motivated to prove such movements are unfair, unethical or illegal.

‘Rules for Radicals’, a book by Saul Alinsky provide implementable suggestions on the issues faced by people wanting to change status quo. It suggest howto organize the resources and then use it in a way to carry out change, in a peaceful manner. Below is part 1 of the 3 part series having a short summary of Saul’s book with my interpretations and twists.

IrBM Arguments in the Media

Recently there has been a spate of discussions in the media on the upcoming Irretrievable Breakdown of Marriage Law (IrBM). Some important highlights of the proposed bill are –

1. Divorce can now be filed as a ‘No-fault Divorce’ stating that marriage has broken down irretrievably.
2. Husbands do not have the right to oppose the divorce petition filed by their wives, whereas the wives can oppose the divorce petition filed by the husbands. Hence, the irretrievable break down of marriage can only be claimed by a wife and not the husband as husband’s petition can be challenged by the wife.
3. All the property of the husband that he currently owns and his ancestral property (inherited or inheritable) will be divided between the husband and the wife.

Some arguments that have been promulgated for supporting this bill during media debates are –

1) Poverty is a gender issue and primarily in India women are poor: This is a baseless argument as the data shows just the opposite. Two most important features of poverty are malnutrition and substandard healthcare due to which the life expectancy reduces and deaths due to diseases increase respectively.

Roads in Potholes

Representative Picture

Everyone travelling in Mumbai would have felt the pain of traffic jams and broken roads. There are hardly any roads in the city only back-breaking potholes. Every year crores of rupees is spent on the road infrastructure of Mumbai but still we don’t see any improvement.

For financial year 2012 -13, the total projected revenue for BMC was Rs. 26,581.02 crores (~US$ 5.32 bn) and a projected expenditure of 26,474.10 crores (~US$ 5.29 bn) of which allocation for road infrastructure was Rs. 1,466 crores (~US$ 293.2 mn) which has increased from Rs. 713 crores (~US$ 142.6 mn) from the past year.[i] Over the past 7 years BMC’s revenues have increased exponentially from Rs. 6,715.5 crores in FY 2006-07 to Rs. 26,581.02 crores in FY 2012-13, which is roughly a growth of 4x times (ie. 22% y-o-y growth rate).

Let us try to analyze the above numbers in perspective of road length of Mumbai –

1. Total length of roads in Mumbai [ii]: 1,889 kms
2. Average maintenance expenditure for 1 km of a 4 lane highway per year[iii]: Rs. 10 lakhs (~US$ 20,000)
3. Total estimated maintenance expenditure per year for Mumbai based on above data (1*2): Rs. 188.9 crores (~US$ 37.78 mn)
4. Assuming inflation and increased maintenance of Mumbai roads due to extra wear and tear and traffic, we use a multiple of 3 times. Hence, the total estimated maintenance expenditure comes to about Rs. 566.7 Crores (~US$ 113.34 mn)

The total budget allocation of Rs. 1,466 crores for road infrastructure for FY 13 was about 2.6x times the estimated maintenance requirements; and still we get a road infrastructure which creates this:

Why do we get such a poor infrastructure even after spending more than 2.6 times the estimated requirement for upkeep of Mumbai roads?

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[i] http://wonderfulmumbai.com/mumbai-bmc-budget-for-2012-2013/

[ii] http://en.wikipedia.org/wiki/Mumbai_statistics

[iii] http://www.infrastructure.gov.in/pdf/NHDP.pdf  (Annexure 1, page 23 of Financing of the National Highway Development Programme)

Conversion rate used 1US$=Rs. 50

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NSSO Employment Survey Analysis

I was reading the news article today which hinted that there is a Job Crisis in the rural areas for women and they have lost 9.1 mn jobs in 2 years.  Another link to the article can be found here. The number seemed astonishingly high. The data from the NSSO survey is:

2009-10	Labour Force Participation Rate		Presently Unemployed
	Men	Women	Men	Women
Rural	548	208	11	5
Urban	556	128	17	9

2011-12	Labour Force Participation Rate		Presently Unemployed
	Men	Women	Men	Women
Rural	547	181	12	5
Urban	560	134	18	9

Rebutting Patriarchy Theory

As per Wikipedia[i], Patriarchy (rule by fathers) is a social system in which the male is the primary authority figure central to social organization and the central roles of political leadership, moral authority, and control of property, and where fathers hold authority over women and children. It implies the institutions of male rule and privilege, and entails female subordination.

In the recent past most of the feminists talk about their movement as against patriarchy and not against men or demonizing men. Per the definition of patriarchy there are 2 important points to it –

1)      Female Subordination

2)      Creating a social system them deliberately subordinates them with pressure.

As per the feminists we are living in a patriarchal society which means you and I deliberately, with pressure subordinate women. Now these are not women of a different country or a different sect / religion but our own family members with whom we share an intimate bond like mothers, daughters, sisters and wives. Meaning, men are ready to hurt and subordinate with pressure, the very person they love and share a bond for their own gains. We can only think of a Sociopath or a Narcissist who does like this[ii].

National Crime Records Bureau – 2012 Crime in India & Suicide statistics Analysis (Final Part)

A few charts showing data on crimes in India –

Male Suicides and frivolous cases plotted on a graph and scaled to 100 is given below:

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Notes:

1. ‘% of convicted cases’ has been calculated as a percentage of the number of incidents reported during the year. (ie. Number of cases in which convictions were made during the year / Number of reported incidents during the year).
2. ‘Frivolous Cases’ mean sum of a) Cases Declared False on Account of Mistake of Fact or of Law, b) Cases not Investigated or in which investigation was refused, c) Cases Withdrawn by the Govt., d) Cases withdrawn by the Govt. during investigation, e) Cases Compounded or Withdrawn and f) Cases Acquitted or Discharged.
3. Data Source: NCRB Software for analysis Crime Info and ADSI Info.
4. Please feel free to drop a message if you believe any data / graph is incorrect above. I would try to address your concern as appropriate.

Related articles

• National Crime Records Bureau – 2012 Crime in India Analysis (standupforacause.wordpress.com)
• National Crime Records Bureau – Suicide Stats – 2012 (Part 1) (standupforacause.wordpress.com)
• National Crime Records Bureau – Suicide Stats – 2012 (Part 2) (standupforacause.wordpress.com)

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