Cost of Demonetisation

This week has been intriguing – Donald Trump’s win and demonetisation of Indian Rupee. Remember we had Brexit this year? I am not particularly penning down anything on Brexit or the U. S. presidential elections. Just wanted to take count of situation here in India and put a word of caution on INR demonetisation. According to Investopedia, Demonetisation is the act of stripping a currency unit of its status as legal tender. Demonetisation is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit. Common people around here in India are unhappy only because they can’t get the currency notes as the ‘older’ notes of Rs. 500 and Rs.1,000 ceased to be legal tender from midnight on Tuesday, 8 November 2016. The existing Rs. 500 or Rs. 1,000 notes can be deposited in an individual’s bank or post office accounts between November 10 and December 30. Currency value of up to Rs. 4,000 can be exchanged from any bank or post office a day till November 24 by showing a government identity card. This obviously leads to loads of black money hoardings useless. In addition, deposit of over Rs 250000 attracts tax as well as questions on source of income. There is so much of patriotism and celebration about the act of demonetisation. I like all of these, and the Government even assured agriculture income continues to be tax free and cash deposits will be hassle free. So far so good, if someone has un accounted money, it is illegal and hence let them face some music.
However, the Government also launched higher denomination currency note of Rs 2000! This is where people are celebrating unknowingly. I vaguely remember the introduction of Rs 1000 note, and I am of the camp that a country needs higher denomination notes only when the real value of money depreciates. It appears to be true and hence we have Rs 2000 note. Meanwhile, I have no interest to compare Indian currency in FOREX market. Even though the exchange rate of the Indian rupee (or INR) is determined by market conditions, in order to maintain effective exchange rates, the RBI actively trades in the USD/INR currency market. The RBI intervenes in the currency markets to maintain low volatility in exchange rates and remove excess liquidity from the economy. All that I am looking to know is , how aforesaid changes affect my livelihood.
Apart from possible operational hazard I have no further information on why Rs 1000 note was not reinstated immediately. In a hypothetical world, India may simply have abolished two top tier denominated notes and re-instated with differently designed new notes at the same denominations. And all other action points to curb corruption and black money may still have worked, people had to get the new notes, and banking transactions to ensure money supply is smooth – just like what is being done now. But with higher denominations, and expected interest rate reduction we are embracing higher money supply and thereby potentially an inflationary economy. Most common example is Zimbabwe, where money can barely buy goods based on denominations, instead volume of notes is used to determine value – give me one Kilogram of pulses I will give you 200 grams of Zimbabwean Dollar!
If we look at developed economies the lowest currency measurement (Penny/Cents) can buy some goods, while I remember spending money by paise only in my childhood. If cost of coin becomes greater than face value of coin itself, coins are smuggled out & melted. Hence coins of 1 paisa, 2 paise and 5 paise were discontinued. In 1980s stainless steel coins of 25, 50 and 1 rupee coins were introduced. Slowly and gradually even 10 paise went out of circulation in the market. When inflation increases, the value of money goes down. This means that the same Rs. 100 which was thought as considerable amount, 10 years later, the same Rs. 100 is thought as relatively less considerable. What was once available for Rs. 10 now either costs more than Rs. 10 or less quantity of it is given in the same amount. Inflation, over the time, becomes so high that some types of denominations become redundant.
In general terms, a country with an endemic liquidity problem (that is, unrestrained cash availability) will ultimately experience an uncomfortably high level of inflation as productivity will inevitably lag sluggishly behind the propensity for monetary expansion. In other words, you will have too much money chasing too few goods and one would require larger sums of money to make dwindling purchases. The present government wants to be business friendly, and one the most important way is to reduce interest rates. Which helps to inject more cash to the system. Now more cash and higher denomination notes! In other words, a rapidly depreciating currency will require higher denominations of currency to avoid the need to use a wheelbarrow to carry cash for such mundane activities as shopping for domestic grocery. 1 Chinese yuan = 10 Indian Rupees and you only get 100 Renminbi as the highest denomination! With increasing population, Indians will have to fight for livelihoods more as the resources get scarce.
Demonetisation and inflationary economy mean my savings worth less today than yesterday! So increased income is not helping me to have a better lifestyle. A breakfast cost Rs20 in 2005, but now Rs 50 – that means either my savings had to grow by 2.5x or I earn 2.5x more just make approximately same ends meet that of 2005! Word about salaried people, for whom the income reaches after tax to spend. In 2005, a fresh out of college graduate would get a job with starting salary of Rs 250000. And today’s job market is still offering similar salary for freshers. However, in 2005 a tea would cost Rs 4, while today it costs Rs 15. How about the sky high college fees, rents, transport or household expenditure that all have gone up more than what our inflation figures suggest? If the money I saved can buy lesser goods over time, should we consume today more by taking debt? I thought that was well and truly tested already – western economies are credit card debt ridden for years. Raghuram Rajan did not like to cut interest rates soon? Get rid off him – call him anti-Indian. A hungry lion has no choice but to figure out its prey every time. However, humans figured out something called currency or money. That is supposed to help me eat food and have lifestyle even on the days I am not productive per se. I hope we do not end up becoming animals – fight out to earn every day because yesterday’s/yesteryear’s earnings aren’t worthy anymore!

52 Days and Random Thoughts

Right now I’m recovering from a wrist fracture that I suffered on 2nd September 2016. I consider myself to be good at household chores but on that day stool slipped (while I tried to fetch some stuff stored at the top) and with that my independence too! Fracture on the right wrist meant, I could only move my fingers since the POP cast covered forearm to palm.
I predominantly use right hand for most things. All of a sudden, I had to come to terms with almost a standstill in life – cannot write, drive, eat easily, ride a bike, even tie shoes laces, open slightly tighter door while carrying a lunch box. Waiting for my wife to do everything that a family needs – ugly feeling that. All my life, I used to feel guilty for not being productive and here I was – those 52 days I had to wait and get used to imperfection.
Apparently, doctor mentioned that fractured bone is healing up well. It was two seconds that resulted an injury to my hand and inflicted agony. Academically, for events there should be a Plan B. Life is not so academic! I learnt patience the hardest way in those 52 days. I hope to be fit better than ever before. As much as I like to do extraordinary things in my life I also come to realise, ‘it’s okay to lead a normal life – that’s also a successful life’. Nope, I am not even proof reading it – I hit publish!

Scarcity Teaches Discipline

Recently, I happened to meet one of the persons whom I admire. For the sake of this post, let’s call him an old pal. He is quite successful in his corporate life and talks straight to the point. He has come a long way up in his life, and happens to be no-nonsense, simple person. We (along with other friend of mine) chatted for couple of hours, kind of catching up with contemporary topics. I like my old pal because he generally walks down the talks!
The topic turned towards discipline, specifically the personal financial discipline. Old pal was very particular about the phrase – scarcity teaches discipline. He elaborated it saying, if a person has to spend Rs 15 on a cup of tea in the afternoon, but all that he has is Rs 25 in his pocket for the day, he is likely to spend on some stomach filling food rather than just a cup of tea. On the other hand, if he had Rs 500 for the day, spending Rs 15 may not seem that big of a deal. If your monthly earning is many multiples of your basic necessities, you are likely to aspire/splurge for luxurious products.
Let us go one step further. Assume someone’s dad was working in a low paying job all his life. If the dad was financially well disciplined, children may have had access to what they needed more or less consistently. Furthermore, starting point for those children is way higher than their dad! There is very less likelihood of children being that well disciplined as did the dad, since there was no real scarcity or unpredictability. Instead, if someone faced more unpredictability early in his life, is likely to be well guarded at his approach. Very few people can claim that they’re life driven and ready to take up uncertainty with ease.
If an individual has the goals and objectives clear I would expect the person to far more disciplined than the one doesn’t aspire to have clarity about future. My mom would always say, ‘rich man won’t find reasons to rest while the poor man won’t find reason to move out of couch (of his comfort zone)’. Lazy person may not find the value in time and waste it, while an ambitious person would consider even the right amount of sleep to improve productivity. That’s right – optimum amount of sleep means discipline that’s the result of time scarcity!

Quick thought on sandboxing

Many people dislike Apple’s tight control over the hardware software integration because there’s very little work around in most cases. Many people make a somewhat legitimate case that software should be allowed to tweak as per individual choices, like placing an App icon at the bottom of blank screen of an iOS device. But what Apple choses to do is to think that they’re the ones creating platform and hence it should be in the best interest of the people who build it (Apple themselves), developers and consumers alike. Therefore, there is app sandboxing in Apple’s operating systems. In simple terms, sandboxing guidelines set the extent to which inter-app communication is allowed in iOS App Store and Mac App Store (let’s ignore tvOS and watchOS for the time being). These guidelines are way stringent when compared to Android or any other platform.
I am thinking about sandboxing because, today I played with an Android phone that belongs to one of my colleagues who has a One Plus X. Even though I do not fully immerse myself into Google’s ecosystem, I like the reliability of Google services. I call them the best software company for masses. About eight months ago, Google launched Google Photos, to backup ‘every picture’ onto cloud storage without any upper cap on space with a quality limit of 16 megapixels. That sounds like a good idea, but my colleague had turned it off intentionally. Reason? It uploads every photo onto cloud, including images from Whatsapp or any other app in his phone. Then I spoke to another colleague of mine who told technical details – because there’s no sandboxing, all photos and videos from any app that is capable of handling media, come and sit in ‘Gallery’. Naturally, Google Photos is designed to back up the Gallery.

Quick comparison of the same on iOS. Whatsapp media can be set to download to Photos or can be turned off to stay only inside Whatsapp application. So even if a user turns off automatic media saving to Photos app on iOS one can still selectively save a few to And then Google Photos, it can continue to back-up the gallery, with unlimited un-throttled storage. Therefore, in Android, either users have to manage Google photos all the time to keep it clean or simply refuse to hit auto back-up (I hope Android has gotten better at background task handling since my last rant). As much as I hate to see apps going out of Mac App Store, I am also happy for ‘normal users’ who do not have to do something like this.

Why Technology is Attractive?

Before getting into the headline topic, I have a confession to make. My passion is not to remain the same for my life time, instead it gets changed over time. Am I feeling guilty or do I regret this? Nope. Living as natural as possible – is important. Time and again, I come across this – ‘you should never end up regretting what you have not done, because that opportunity cost is not going to be compensated in your life time’. So if there is a new found passion – just go for it! I know people who switched career from computer graphics to earn Ph.D. in economics and finance. And there are full time journalists who were engineers before. All this is happening because of internet and the length and breadth of information availability.

So, what are the fields that you can choose for making a career these days? In a broader sense, software and hardware engineering, medical science, economics and finance, arts and craftsmanship, education, supply chain and operations, etc. are the avenues (not a precise list, I understand). If you observe closely, each one of the above is influenced by technology. With due respect to what it is meant for, let us start with an example of accounting and finance. How much do they change over a period of past five to ten years? Not so much. Do they change at all? Yes. Probably new financial products get designed while evolving ever so slowly. However, we still have the same accounting conventions and concepts that haven’t been modified or added with, for decades (not that it should be changed for the sake of it though). Taxation gets refined but its impact for citizens remains same. Quantitative finance has grown leaps and bounds for the last couple of decades. Unfortunately, more sophisticated products have not helped the stakeholders. Subprime crisis appears to be one of biggest self inflicted pain in our time.

In India, there are lots of people moving from villages to towns to metro cities (probably so in many other countries too) to make a living. Are they really improving their lifestyle? I don’t know. If you are well qualified graduate (and above) it makes sense, because white collar opportunities at country-side are way too limited. However, what is the fun at doing a same blue collar job at even more stressful conditions at (most cases) equal or less than the standard of living that they had in countryside life? Movement itself is the issue. For example, what is a jail? It is a place where you get food and shelter but have no movement from one place to another or to do different things! That is the basic form of punishment we have in judiciary. Something that does not move is a pain to bear. The excitement and fast changing environment makes cities more attractive. Why people change companies to work for or switch careers? Because, movement is a necessity for human beings. Even the government employees who work at the same organisation for over 30 years are transferred to different places to avoid jail-like feeling. If water, which has no brain or feelings, doesn’t retain the quality without movement and ends up generating mosquitoes while destroying itself, imagine what would happen to humans without movement.

This is the exact reason why technology field is attractive. To begin with there is Moore’s law, which is the observation that, over the history of computing hardware, the number of transistors in a dense integrated circuit has doubled approximately every two years. Right out of the box your iPhone (and most mid-to-high smartphones) can replace 20 to 30 different objects you had to carry otherwise. Technology evolves, and it never stands still albeit carrying a risk of obsolescence for the greater good. The experiments of drones to Google Glass to self-driving cars to many others, all are in an effort to see how do we evolve for a better future. Not everything will become commercial success and hence we need to remember a few jargons. Lifestyle has changed a lot because of technology. There was/is meter taxi and then there is Uber. There was money-order via Post/Wire, and then there are NEFT, RTGS, SWIFT, IMPS. Recall the traditional agriculture system as against this one! There could be hundreds of such examples to illustrate the importance of technology.

Art and craftsmanship are the purest form of creation. Even copying an old song or a picture means you reproduce it by yourself. Humans are destined for creations. I don’t have an empirical evidence but have always observed most engineers at heart are also artists of some form. They are musicians, photographers of highest calibre or painters or writers. These engineers and artists helped us to shape our life better. Remember Steve Jobs’ take on technology, “It is in Apple’s DNA that technology alone is not enough—it’s technology married with liberal arts, married with the humanities, that yields us the results that make our heart sing.” How come we do have better medical facilities? Better supply chain management? Better education and information reach? Better and simpler mode of communication sitting in different continents on this planet? How do we understand the history of mankind better than a century ago? All have one word answer – technology.

The world of technology is also a change agent which happens to be the leader for everything else. People do not want to use feature phones anymore, or to buy TFT display TV even though LED TV shows same channels. Imagine the financial/data analysis without spreadsheets, SQL, Matlab or R Studio, etc. For every field, technology has contributed immensely. I am so happy to have my passion towards technology. It makes my brain strive to create new things, helps me to reduce effort on redundant tasks, can speak to my beloved wife and son even when I am not with them physically, and for many more reasons. Do we like perishing? Not necessarily. But death takes care of itself, and naturally there is something new born every moment – baby, idea, craft or whatever. Hence I chose to live with movement for my life over staying stale.

Uber’s Common Sense

I have always endorsed Uber iOS App over the Ola in my friends and family circle. I ranted about Ola taking ages to update the app to use location only when the App is in use, a feature that was introduced in iOS 8 beta (June 2014). This weekend, I had an offer from Uber to give me half the normal rate in for a couple of rides during 11AM to 5PM. Before starting a ride, I had INR 1172 Uber credit, 3 free rides worth INR 600 as well as one free ride worth INR 300 (all free rides had expiry dates). Note that, all of these were my referral promotions on my Uber account. I booked the cab with a promo for half the normal rate and total bill came up to INR 234 (albeit rate surge applied was 1.4x). Having counted for half the rate promotion, my final bill was INR 117. This bill amount was deducted from Uber credit but not from any of the free rides. Therefore, at the end of my pick up journey, I had INR 1054 left in my Uber credit. While coming back, I booked again and had no half rate promotion. Total bill this time around was 308, as the peak time rate surge 1.8x was applied. Instead of deducting from my Uber credit, this time they debited one of my free rides the one worth INR 300.

I had Ola INR 250 promotion previous weekend and even though the bill had come up to INR 179, they deducted full INR 250 from the offer. But the biggest story about Ola quality can be found right here. Consider the above case, in which my Uber account had all the promotional rides and account credits. In the pick-up trip, INR 117 could have either been deducted using INR 300 worth free ride or INR 600 worth free ride which were already on the account. Similarly, in the drop trip, INR 308 could easily have been deducted from remaining INR 1054. Instead, some human being at Uber chose to showcase common sense! Thank you Uber for making my weekend nice, and here is my promotion coupon if you are yet undecided about Uber – BHASKARB12 – enjoy your first free ride up to INR 600.