Addressing the problems of Rupeezone

While everyone is pondering the ways in which Eurozone is not an optimal currency area, I found myself worrying about the ways in which Rupeezone is not an optimal currency area. In the Financial Express today, I have a column: Addressing the problems of Rupeezone.

Here are interesting materials on Greece which set the stage for this:

• A money too far by Paul Krugman, in the New York Times.
  
• A response by Greg Mankiw on his blog. He refers to this AER article from 1986 by Christine Romer, and this article by Christopher Hanes in AER in 1993.
  
• A response by Paul Krugman on his blog.
  
• A blog post by David Beckworth.
  
• On the subject of labour mobility, Casper van Ewijk and Michiel van Leuvensteijn have an important column on voxEU making the link between labour market mobility and the transactions taxes which governments impose on real estate transactions.
  
• Here is a column by Feldstein on these issues back in 1998.
• Greek lessons for India, in the Business Standard, by Suman Bery.

This is an interesting demo of how economics happens today: an interleaving between journal articles, newspaper columns and blog posts.

Comments are now moderated

An employee of Unicon Investment Solutions started spamming this blog on a big scale (over 50 commentspams a day). So, sadly, comments are now moderated. Blogger: you really must have a mechanism to shutoff a given person from posting comments.

Interesting readings

Pratap Bhanu Mehta in the Indian Express on the problems of getting to an effective State.

Can the courts help get us out of the mess that is Indian labour law? A report in the Indian Express says that the courts are inclined towards penalising striking workers of Indian Railways for the pain they have caused commuters of Bombay. Similar principles can help put the fear of large financial penalties upon political parties contemplating disruptive activities also. As an example, the courts have stopped the Shiv Sena from producing noise pollution at Shivaji Park in Bombay.

Anne Applebaum gets a taste of India (on Slate).

Integrating into the world economy is about removing government-induced barriers to movement of ideas, goods, services, capital and people. It involves a lot of little pieces - such as reducing the hassle of getting a visa to come to India. [also see]. It involves better connecting up with Bangladesh and India. It involves getting away from a deeply ingrained notion that the colour of the skin matters, that Indians and foreigners should be treated differently. See this editorial in the Financial Express on the capital controls against FDI by foreigners in the business of cigarettes.

DNA forgot to show the author's name for this excellent piece titled Make RBI/MoF's forex market interventions more transparent. Ila Patnaik in the Financial Express on the choice between inflation control and exchange rate targeting.

Rajkamal Iyer and Jose Luis Peydro have a column on voxEU where they talk about contagion with weak banks in India. Interesting new derivative contract launches: box office futures approved at CFTC, and futures and options on cheese launched at CME.

The nice new McKinsey report on India's urbanisation.

Vikas Bajaj in the New York Times on Walmart's work in Indian agriculture.

A great animated image showing the growth of information for one Indian town (Ludhiana) on Open Street Maps (OSM). Till late 2007, there's nothing there, but after that, almost every month we see the data growing. [back story]

M. R. Madhavan on new laws in higher education, in the Indian Express. Jessica Wallack in the Financial Express on the Right To Education Act. Richard Levin of Yale on universities in Asia.

Reading in a digital age by Sven Birkerts on The American Scholar.

On Poland's sorrow: the speech that Lech Kaczynski was to read at Katyn. I was astounded and delighted when Russia announced that it would start opening the archives on Katyn. For the first time, I see the Putin regime in a slightly less pessimistic way. Roger Cohen in the New York Times says that Poland is an inspiration to all of us: a piece that every Indian and Pakistani must read. And read Nina Khrushcheva on Project Syndicate.

Wen Liao in the Financial Times on the analogy between the problems of Bismark's Germany and what China faces today. The phrase 'great chain of production' that she uses seems reminds me of the phrase 'Greater East Asia Co-Prosperity Sphere' used by Japan in the 1930s. Also see Jonathan Holslag on Project Syndicate about the limitations of China's charm offense.
There's quite a bit of concern about China's economy: See Gordon G. Chang in World Affairs Journal, and Takatoshi Ito on Project Syndicate.

Laszlo Bruszt, Nauro F. Campos, Jan Fidrmuc and Gerard Roland give us fresh insights into why India evolved as we did after 1947, and what will happen in China when the communist regime collapses.

Cory Doctorow in Publishers Weekly on the dangers that publishers face by cooperating with closed systems like Apple's iPad or Amazon's Kindle. A great deal of information and creative output is being produced today in the form of video files. I was not aware of this earlier: there are terrible patent problems hobbling this field. It is as scary as some corporation owning the English language.

Harald Hau on how financial markets in the crisis: he thinks it was more about missing markets than market failure.

William Kerr and Ramana Nanda on what governments can do to fuel entrepreneurship.

Malcolm Gladwell has a great story in New Yorker magazine on spycraft. I have a one track mind: it made me think about monetary policy.

Did you know that women have the power to shake the earth? [Statistical testing scheduled for 26 April]

Investigation in New York

The first and foremost function of government is law and order, the proper functioning of police and judiciary.

US authorities have built up an impressive track record for getting hold of the bad guys after an attack. In the case of the bombing attempt at Times Square, investigators got the attacker 53 hours after the attack, and in the nick of time before he'd make it to Dubai. The New York Times is doing a great job of telling the story:

• A suspect leaves clues at every turn by Jim Dwyer.
  
• Suspect is said to admit to role in plot by Mark Mazzetti, Sabrina Tavernise and Jack Healy.
  
• Evidence mounts for Taliban role in car bomb plot by Mark Mazzetti and Scott Shane.
  
• Another middle class terror suspect by Robert Mackey.
  
• Lapses allowed suspect to board plane by Scott Shane.

With such high quality investigative capabilities, each time an attack takes place against a US target, a part of the terrorist network gets lit up and taken out. This also exerts a deterrent effect. I am reminded of first Iraq war: Iraqi soldiers were so intimidated by the rapid and accurate return fire based on gun-laying radar, that they often refused to switch on their field artillery. Effective responses are a powerful deterrent.

When such police capabilities were not put into place, there is a greater temptation for policemen to ask for restrictions of human freedom in order to make their life easier. As an example, open wifi networks are banned in India but are legal in every other democracy that I can think of: This is a testimony to the incompetence of the police. It reminds me of the police having banned mobile phones for many years in J&K. High quality investigation is hard work, and interfering with personal freedom is easy. It is only in a police state that a policeman's job is easy.

For a contrast to the investigation in New York, the court threw out the claims of the police on two suspects in the Bombay attacks. Also see Mustafa Plumber and Sukanya Shetty, reporting in the Indian Express. This speaks well for the honesty and independence of the courts, but badly for the capabilities of the police in tracking down the actual perpetrators.

In a positive development, the Indian Supreme Court has blocked the use by police of narco-analysis and brain-mapping. In my mind, these have been a mixture of ineffective snake oil and torture. See reportage
by Rahul Chandran and Jacob P. Koshy in Mint, and by Vinay Sitapati in the Indian Express. Also see this editorial in the Indian Express.

Building financial supervision agencies

I have a column on this in Financial Express today.

The cutting edge of Indian financial reform

In recent years, there has been an upsurge of difficulties in Indian finance, rooted in the `financial regulatory architecture' - the block diagram of which agency does what. A lot of what is found in India's present block diagram is rooted in obsolete legislation.

On the SEBI/IRDA problem about ULIPs, Vivek Kaul is writing a series of good pieces in DNA: Why IRDA seems an industry lobby and not a regulator, Guess what got SEBI's goat?. Also see Jayanth Varma in Financial Express. Deepak Shenoy has a good post showing why ULIPs are bad for your health.

Jayanth Varma smells a rat when insurance companies, banks and NBFCs in India have been exempted from IFRS. And, see his Indian example of rules versus principles.

Shobhana Subramanian in the Indian Express on FSDC.

Ila Patnaik in the Indian Express and T. K. Arun in the Economic Times both come at the idea of unification of all financial supervision into a single agency. On this subject, you might like to also see an old piece of mine in Business Standard.

The bogey of exports growth

There is a lot of talk about rupee appreciation in recent weeks. It is claimed that rupee appreciation is bad for exports growth and that RBI must trade in the rupee-dollar market so as to force the exchange rate back to (say) Rs.50 a dollar. I wrote a piece in Financial Express yesterday, about the real effective exchange rate, exports growth, and the Chinese exports miracle.