On why the LPG subsidy is bad.....

The government of India(GOI) subsidizes upto 12 LPG Cylinders per household. This is disastrous to the Indian poor as well as the honest taxpayer due to many reasons.Here, I will try to explain how this happens...


Non subsidized LPG cylinders cost approximately INR 970.The price of Subsidized cylinder is approximately INR 430. That is a staggering INR 540 subsidy per cylinder. As most of you may know, I oppose all forms of subsidies as they are unhealthy to the economy in the long run due to the market distortions they create and my belief in the inherent inability of the government to target the subsidies in an efficient manner.


Average Household consumption of LPG Cylinders is estimated to be b/w 7 to 8 cylinders per year. I will use the conservative estimate for the purpose of this calculation.
So average subsidy intake per household= 540*7=3780...
A staggering INR 3780 in LPG Subsidies and we deride the government for bringing in the idiotic MGNREGA which we also call a Dole distribution program !!!
I agree that the MGNREGA is a stupid program, a program which has more costs than benefits, but hey- So is the GOI subsidizing LPG Consumption amongst Indian Households. Before we demand that the MGNREGA be scrapped, we need to demand a controlled yet reasonably fast abolition of LPG Subsidy.


Present MGNREGA wage rate is @ INR 174/day in Karnataka . Which means each household is getting the wages of 21.75 days without doing absolutely any work. This in my humble view is plain hypocrisy by the Indian Middle Class.

If the subsidy for 12 cylinders is taken into account, the total subsidy intake will amount to INR 6480 i.e. 37.25 days wages.....


Many of the readers might have noticed the increased sales of Gas Geysers in the Indian Market. This is the principal evidence of market distortion. Gas Cylinders are being diverted from the intended use- Cooking to other uses like water heating. Using them to fuel Cars is another non-intended use.

I suggest a cost efficient way of reduction of household subsidy. Dont give subsidies to car-owners.These users wont mind Subsidy abolition as much as the usual morcha-types..
Along with this, raise the rates of subsidized cylinders by INR 20/month. The Subsidy will be eliminated within 2 years and most people will  have factored in the increase by that point of time.

Whatever the means, the GOI should remove subsidies on LPG Consumption As Soon As Possible.

The FDI Tamasha

For the past 2 years, we consumers (well those of us who follow the news) have been watching with a certain amount of amusement- the grand tamasha of FDI (especially in Retail.)

In the Indian System, we try to do everything incrementally. We call it incremental reform. This system of  incremental reform is followed due to 2 reasons:-
a)Nobody in Indian Politics has the guts to do something which will be unpopular in the short run but is essential for economic growth and poverty alleviation-(the sustainable one, not the UPA method) i.e we do not have a politico who has the guts of  Margret Thatcher. No matter how much Modi-bhakts talk about how strong-headed their leader is, the fact is that he is just another Indian politico who wants a 'pro-poor' image- A 21'st century Indira.
b)This line of thinking has some foundations vis-a-vis Behavioral Economics. TN Ninan and Swaminathan Aiyar seem to think that this approach is much suited for a cacophonous democracy like India which is just coming out of the vice like grip of socialism.

So Instead of allowing in FDI in all sectors (Socialism has ensured that we Indians have largely ignored R&D and innovation in our attempt at giving doles to all. This necessitates FDI in most sectors if we are to compete in a globalized world.) , the government allows it in small doses.

Now coming to

Why do people oppose FDI in Multi Brand Retail?
1)The fear that the local kirana shops will shut down, rendering a lot many people jobless. This argument is extremely flawed due to the following reasons-
   a) As many if not more jobs will be created even if these kirana shops shut down. Consider the fact that due to space constraints, retail complexes like the ones Walmart usually builds is not feasible within the city. Mostly people with cars will take the effort to go to the city outskirts where such stores will plausibly come up are from the rich and upper middle class. At the same time, as our economy grows, people who used to procure from PDS will now start buying from the kiranas..yeh to accha phenomenon hey..Infact, more kirana shops will come up and these kirana shops will start using newer technology and use more efficient selling mechanisms..All in all..FDI in Retail is good... Remove APMC Act along with FDI in Retail, these companies will invest a lot of cash in creating cold storage and supply chains wrt fruits and vegetables. This will not only benefit farmers due to elimination of the APMC cartel but also consumers due to reduce prices.
    b)Many of the Indian organised retailers are suffering huge losses and low returns..Do you expect the firangis to have a magic wand?

2)The teamsters who day in and day out talk about Swadeshi and Marx. These loafers are perennially in search of an issue to fight for as they themselves are too lazy to work. Oh! how I wish I can lock these idiots up in gulags..They talk about how the government is selling the nation to foreign interests but at the same time wear the clothes and watches sent by their relatives in the west..They are hypocrites of the highest order..They deserve no respect and should be ignored as much as possible..

So the UPA first allowed it, then rolled back the decision , then due to falling investor sentiment, they allowed it again. All I can do is hope that the Swadeshi bunch ruling now doesnt roll it back now.


Now coming to FDI in Single brand retail-
UPA allowed 100% FDI in retail with a lot of conditions..I will explain the irrationality of these conditions through 1 example- 30% local sourcing norms..

Now why the hell will these cos invest so much money in creating their own stores, source 30% of raw materials from low grade un-specialized Indian suppliers , lower the quality of their products and their brand?

Thankfully the government (DIPP) is now abolishing this sourcing requirement . And as you might have guessed- the Swadeshi and Marxist loafers are crying hoarse and calling it a betrayal.
A better way to go about it would be to use an effective weapon in the government's arsenal. A weapon that would do more benefit than harm. A weapon called- TAX INCENTIVES.
Here is what I propose- An X% tax cut for X% local sourcing from the base tax rate. In a few years, these single brand retailers will start cultivating local suppliers if they find it viable.

DIPP Secretary Amitabh Kant, Are you listening?

Is the Iraq crisis a blessing in disguise?

The Kurds were cheated out of their cherished Kurdistan in the Treaty of Versailles after World War 1. After almost 100 years they have achieved defacto independence and the oil supplies have not been affected too. They have started exporting via Turkey.

The Shia's in the south have lost control over the Kurds and the Sunni dominated Areas towards the Syrian Border and Mosul.  A much needed  realignment and again here too, the oil supplies from Southern oilfields have not changed in a Major way.

Though the Salafi ISIL militants broadcast their Intentions of attacking Karbala and Najaf-Shia Holy Sites and Iraq's capital Baghdad repeatedly , the chances of them actually doing so is nil. The reasons for that are listed below:-

1) Baghdad no longer has the 35% Sunni population due to the collapse of the Baathist rule. It has little over 13% sunni population according to latest estimates and that too is rapidly declining since the outbreak of ISIL inspired revenge attack from Shia Militants. The are fleeing to neighboring   sunni ruled countries.

2) ISIL does not have such a strong manpower as the media has projected. Even there has been a humongous influx of 'fundies' settled in the west to it's Syria based training camps, it will take atleast 3 months for even basic training. Indian and Indonesian Sunnis have fewer ways of Joining it when compared to the beginning of 2014 as Turkey is closing down its borders in fear of these militants radicalizing the Syriac immigrant and local Sunni populations

3) As you may have read in the front pages of Indian Newspapers, Indian Shia's too have been mobilizing in huge numbers to be a part of Shia militias in Iraq. If this is the case in a country like India imagine what is happening in Iran. The militant threat of blowing up Najaf and Karbala is just adding fuel to this sectarian fire.

Now coming to the areas occupied by ISIL . Al-Bhagdadi does not have the fanatical following Mullah Omar enjoyed in Afghanistan and Pashtun Areas of Pakistan. He has been able to occupy these areas only with the help of disgruntled Sunni tribals and remnants of the Baathist regime of Saddam Hussein. This makes him a sitting duck . The Baathist and Sunni tribals will use their control as leverage for more control commensurate to their Strength in terms of population ( about 20% in total) in the Iraqi Government or form a government of their own. 

The real fan following of Al- Bhagdadi is in countries like India and Indonesia, In the muslim ghettos of Birmingham and Southern Paris . They are a bigger danger to the world than ISIL to the middle east.

This division of Iraq in Sectarian lines may actually be a ticket to security within the middle east.

AAP's Manifesto -AK's Nehruvian Socialist vision for India

The Socialist Manifesto- That is one phrase I would use to describe the AAP's Manifesto....
To describe the part of the manifesto concerning AAP's proposed Economic Policy I would use the phrase- Unadulterated Rubbish .

As most of you would know, I was a member of AAP- for about 8 months after it was launched. I believed it to be a necessary step to develop a platform for us liberal, ye free- market type fellows. Prithvi Reddy was appointed the Karnataka State convener of AAP- It was music to my ears. I was incredibly hopeful that AK and other senior AAP leaders would take the movement in the practical route and not the usual route- announcing freebies and  reservations coverage for a few more castes. The first time I felt I had judged the leadership incorrectly was when I read Prashant Bushan's interview to ET in which he said it was his hope that AAP would one day ally with the CPI and CPI(M). I dismissed it as an aberration. Then I met many AAP workers in Mysore and Bangalore. I was completely convinced that most of these fellows had chosen AAP because the CPI(M) was not strong enough in Karnataka. They spoke of radical re-distribution of wealth by the government, increasing taxes to support that and nationalizing manufacturing industries, Regulation of the IT sector and many other socialist dreams. I realized I was a misfit in AAP and left the organisation.

The recently released AAP manifesto is a testament to the AAP leadership's faith in Nehruvian Socialism.
The AAP manifest can be found at :-
https://app.box.com/s/q9k6f7e21265olkpxrzq

For any of the said goals to be achieved- high job growth, poverty alleviation, Rural development, 'Empowering Citizens,especially the poor and vulnerable' and 'Robust Economic growth with holistic well being'.....a lot of controversial issues should be addressed in an impartial manner. These include:-
1) The Revaluation and Rationalization of the Land Acquisition Act, 2013 so as to prevent excessive pandering to farmers and treat both farmers and industrialists as equals.
2) Labour reforms ( The labour market is over regulated and cumbersome., also preventing further growth of labour intensive industry in India)
3) Reforming the bureaucracy into a meritocracy of the highest standard.

Now let us see how the AAP manifesto deals with the
1) The Land Act.
The AAP lists a series of promises-

A new Land Acquisition Act was passed by the parliament in 2013. While this is a good beginning, AAP would like to work towards fairer rehabilitation by:-                                          1) Ensuring that all acquisition done pat september 2011( date when the bill was tabled in the parliament) comes under the ambit of the act.                                                                           2) Ensure a narrow and well- defined ambit of the term 'public purpose' for which land can be acquired.                                                                                                                                 3) Ensuring that acquisition happens only with the consent of the Gram Sabha . .................

In effect, the manifesto seems to endorse the idiotic Act passed by the government mainly due to immediate electoral considerations. To read about the excessively negative impact of the act -
http://www.business-standard.com/article/opinion/t-n-ninan-the-upa-s-worst-legacy-114032101235_1.html

The other huge problem is the retrospective intent expressed in the manifesto..would you be ready to pay new taxes for the year 2009-10 just because PC announces a new form of retrospective taxation in the 2014 budget???
I have absolutely no issues with the second promise. The 3rd point- again...it is illogical and regressive ..( Indira Gandhi type even)..they have mentioned something already in the Act.

2)Labor reforms

The manifesto calls for 'No contractualization of Labor '. It is admirable but again stifles industry. There are already 200 laws that they should adhere to and these idiots want new provisions to be added to them. Moreover, if this promise is implemented( not that I think that they have a chance of implementing), manufacturing growth will more or less stop, even decrease....do these socialist even understand the implications of their promise.

3) Administrative Reforms.

Again, these people harp on about reservations and 'continuation' of reservation policy. If we aim to become an economic powerhouse we need to institute a meritocracy in the government, some AAP and INC members are even suggesting reservations in the private sector. One wonders- What the bloody hell happened to these people?? I would understand reservations to the poor- to some extant ..but these people talk about reservations in promotions(continuations....)!! What have these people become- Disciples of Kanch Illiah???

Please read these fellows manifestos before you think about wasting your vote on them....You might be faced with loosing your jobs in the near future if you vote for such people!!!

The fall of Nitish Kumar in Bihar

I have and will be one of the most ardent supporters of 'Nitish Kumar for Bihar CM' , which makes me very sad when I say-'The man has lost the game in Elections 2014'. Nitish epitomizes the liberal values India stands for as well as moral integrity that Gandhi sadly made us famous for.My admiration for him developed after reading Pavan Verma's wonderfully researched book 'Nitish Kumar and the Rise of Bihar' . What I liked the most about him was his ability to use the right mixture of goondagiri as well as his image of a self-righteous human being. The man was( I repeat was) a political genius. He knew- whom to ally?,when to ally?, whom to distance?, which mosque to visit? the only questions that matter in Indian electoral politics.

But then 'Modi' happened to Bihar and the country. Nitish wasnt the same cold political strategist anymore.
The Reason- Modi was more cold and a more intelligent political strategist than him. Nitish broke the 17 year old JD(U)-BJP alliance due to one and only one issue- his ego. He just could not get along with a man who was more adept in strategy than him, a man more popular all around the state and nation than him, a man who would be a greater crowd puller than him in his own home turf- Bihar. Nitish's fall from power has only one contributing factor- Nitish's  ego.

What Modi has got right in Bihar for this elections can be summed up in one word- Alliances.That is one hell of a strategy to use when a 17 year old marriage ends- get into bed with your partners rivals. Everyone knows about the alliance between the BJP and dalit leader- Ram Vilas Paswan's - Lok Janashakti Party(LJP)  but not many know about its alliance with a former JD(U) member,OBC leader Upendra Kushwaha's Rashtriya Lok Samata Party(RLSP). The BJP/Modi is attempting to do a new kind of social engineering in Bihar, one which includes the 1) warrior brahmins-Bhumihars,the other Brahmins, Rajputs,Thakurs and other upper castes.
                   2) A major portion of the dalits and surprisingly 22% of the Muslims(refer CSDS CNNIBN                              poll)
                   3) A large portion of the Yadavs
            under its own banner.
The Paswans and another significant chunk of dalits under Lok Janashakti Party, the Kushwahas and a significant chunk of the EBC's under RLSP.

Here is how the fronts are stacked up-
1) The JDU is going with the CPI.JDU-39 and the CPI -1
2) The BJP is giving 3 seats to RLSP and 7 seats to LJP keeping 32 to itself.
3) The RJD(lalu) is giving the INC 11 and NCP 1 keeping 28 seats with itself
4) The AAP is a non-entity here.

The upper castes are angry at Nitish for jilting BJP, A large number of Yadavs are becoming more and more favorably disposed towards the person trying to portray himself as the protector-in-chief of the Yaduvamsha- Shri Narendra Modi. The division of dalits into Dalits and Mahadalits to cut Paswan out of the picture has Backfired-in a huge way and clever candidate selection and hostile takeovers of Bihari media houses and newspapers by Gujrathis over the last few years has payed off with BJP getting close to 22 % of Muslim support.

Let us see what the CNN IBN-CSDS-Week poll predicts-
Party          Vote Share             Seats
BJP+             43%                    21-29
INC+             28%                    07-13
JDU               16%                    02-05

This polling was done before the now famous Ram Kirpal Yadav- a credible Yadav face whom the BJP badly needed broke the 30 year old chord with Lalu and joined the BJP. This will have a huge effect in Yadav dominated areas such as Pataliputra and Maharajganj.

What is interesting to note is the return of Lalu.Remember - 'Jab tak samose me aloo rehega/Tabtak Bihar me Laloo Rahega'? He ha managed to increase his Muslim vote share and has come just short of compensating the loss of Yadav votes to the BJP .Bihar is overwhelmingly in support of Modi in this opinion poll with 42% preferring Modi with only 10% for Rahul.

Here is how I believe things will pan out in the next few days. My sources in the JDU tell me that BJP is going all out to woo the muslim vote bank in the coming days and has something rdical w.r.t. Muslim vote in the makin.This has 2 consequences -
1) More and More of the upper cast vote al Yadav vote of the JDU will shif to the BJP.
2) Nitish will chip away major chunks of the muslim vote-preventing strategic voting by them thus helping BJP

The whole political scenario is now stacked up in Modi's favour. The only thing that will change that is JDU joining the RJD alliance . The the tables will turn. However it is not likely to happen in the near future.

Whatever maybe the results, Nitish's coming out of the NDA will forever be taught to students of Bihari political history as the 'Great Nitish Blunder'...... 

Analysis of the Indian National Congress's Job promise.-Part 2

While the issues of Infrastructure and Land are prominent, the other two issues-money and labour are equally important.

Let us analyse the issue of money:-
Over the last few years, fiscal deficit(the excess of government expenditure over revenue) has exploded-thanks to 'rights based legislation' of Smt. Sonia Gandhi and Shri. Rahul Gandhi. This leads to increased government borrowing = increased demand for credit = increased cost of credit. This has in effect crowded out other borrowers thus decreasing the scope of private investments. 100 million jobs are not going to come out of thin air are they?? Private investments are of utmost necessity if it were to happen. Private investments are going to increase rapidly if and only if government borrowing is drastically reduced.

The question one must ask now is- Can a Congress or Congress led government reduce borrowing so drastically?

The answer for such a question would be an emphatic NO.  How can they do so when they legislate so many rights?
Food Security Act( the right to food)- annual burden is more than 1,25,000 crore

National Rural Employment Guarantee Act - annual burden is more than 35,000 crore this year.
Diesel subsidies- a whooping 70,000 crore this year.

To add to this waste, the duffer is promising Right to Housing, Right to Social Security and many more rights.Where the hell is the money to implement all this? In the Gandhi family swiss bank accounts??

Any form of the proposed massive increase in jobs would involve a greater increase in private investment. That would be impossible under the current spending patterns of the Government. We have scrap all these inefficient laws in order to enable such massive job growth.

Now coming to labour:-
If a large number of jobs are to be created in India, the government should encourage Labour intensive industries like textiles and consumer durables manufacturing. What it actually does is encourage such industries to be small, incredibly small= no job creation. The principle cause for this economic travesty is

- Labour Laws

This is what Arvind Panagariya and Jagdish Bhagwati write in their much acclaimed book- India's Tryst with destiny:-

“The ministry of labour lists as many as fifty-two independent Central government Acts in the area of labour. According to Amit Mitra (the finance minister of West Bengal and a former business lobbyist), there exist another 150 state-level laws in India. This count places the total number of labour laws in India at approximately 200. Compounding the confusion created by this multitude of laws is the fact that they are not entirely consistent with one another, leading a wit to remark that you cannot implement Indian labour laws 100 per cent without violating 20 per cent of them''    

“As the firm size rises from six regular workers towards 100, at no point between these two thresholds is the saving in manufacturing costs sufficiently large to pay for the extra cost of satisfying the laws”.

Why does the government not take any measures of corrective action? The Answer- The left intelligentsia of India will scream 'oppression'. The INC does not want to alienate it's only consistent pillar of support over the past 67 years.
The corrective action the next government will have to take is a complete overhaul of India's Labour laws. Especially the Indian Factory Act of 1948..These laws are 1st grade bullshit.


My only suggestions to the readers of this post...Please dont believe pappu's crap about inclusive growth and Job creation.

Analysis of the Indian National Congress's Job promise.-Part 1

The most interesting promise I saw in the INC manifesto was the Jobs promise. If you have not read the newspapers properly in the past 2 days, the promise was

'Creation of 10 crore(100 million) jobs in the next 5 years'
You may think that this promise is an excellent one and it is good to see the congresswallahs talk about India's job market.

Here is my verdict on the promise- It is nothing but a big joke. The biggest joke by any national political party ever in Independent India. These 'impotent' policy makers have done nothing but talk about labour markets in the past 10 years. The only legislation they passed related to labour markets was the NREG Act- National Rural Employment Guarantee Act- an act which has been aptly termed - A government Sanctioned Ditch Digging Programme. The SOB Rahul Gandhi counts it as his biggest achievement after RTI Act in his 'Rights-based Comprehensive Legislation Programme'. 20 billion USD has been spent on the damn thing already. And yet it created less jobs than poultry farming(poultry farming created 3.8 million jobs)!! At the same time, some estimates say that it may have killed 25 million jobs!! Is this the job creation needed in our country?? And the idiot goes on to proclaim that he will create 100 million jobs in the next 5 years.

In order to create such a large number of jobs in the country, four things are required- Infrastructure(Power,Roads/Transport and legal framework), Land( Land prices for industries in rural areas are higher than in rural USA, primarily due to RaGa's Land Acquisition Bill) , Money., Labour

So lets see how he plans to create Infrastructure- .........................................................................

He has no plan. The Border Roads organisation is outstretched( Thanks to the incredibly honest A K Anthony)-this leaves us with decreased ability to harness the hydroelectric potential of North East states and other Himalayan States.Moreover, grid connectivity has not improved as our power ministers Sushil Kumar Shinde and Jyothiraditya Scindia were too busy with ....party work.
India has the third largest coal reserves in the world and we produce less coal than the Aussies. Why?- We have an inefficient Monopoly called Coal India Limited(CIL) which the government refuses to privatize despite repeated requests from Industrywallahs and economists alike. Why doesnt the government privatize it? The answer is that CIL is and always has been a cash cow for the ruling party.
And we had to suffer from 'Jayanthi Tax' too..The fat bitch would not send out the files even after completion of the cumbersome bureaucratic process for a reason only know to her. It takes an average of 7 years for a coal mine to start operations in India-Compare this with 0.5-1.5 years in China and Australia.

Roads and other forms of transport are another BIG,  inefficient problem.They government is bent on not modernising the Indian Railways. Clearances are almost always late, and when they do come, they are unclear. The UPA has made the problem more acute than ever due to is Land Bill.

The way forward is breaking up CIL and then privatizing it, handing out road contracts to private entities under binding time frames with few extensions, placing professionals in the Power and environment ministries, ministers who do not impose extra constitutional taxes on businessmen and developing a non intrusive policy framework for Infrastructure development in this country.

Land:- Land is and always has been a controversial issue in India's politics.The government annexed land at rock-bottom rates from farmers and handed it over to industrialists and real-estate developers who have profiteered form it in a HUGE way. And then came pappu. He reversed the situation through the Land Acquisition Act and know any land acquisition has become uneconomical. 

As TN Ninan wrote in a recent column in the Business Standard “The land law stipulates that forcibly acquired land must be paid for at two to four times...market prices, in addition to other relief and rehabilitation costs. So the new law will make land acquisition next to impossible, or unaffordably expensive (which becomes the same thing) in most states.”
Ninan also points out that “land prices “ in significant parts of rural India “are higher than those in any rural area of the United States, and in almost all of Europe barring countries like Holland.”

The only solution to this mess is repealing the law in it's entirety . The playing field should be levelled. The concept of 'eminent domain' should be introduced and utilized effectively.

The other two issues- money and labour will be analysed in Part 2.