he year 2018 would go down best described as various Acts in the Theatre of the Absurd, a la Samuel Beckett. The most bizarre scenes were enacted with such aplomb that it made them memorable. Let’s view these scenes through a kaleidoscope that is laced with irony and humour.
Act I had Donald Trump as the protagonist, who made the world move according to his wishes. Going to war is passé where there is unnecessary bloodshed. It was much simpler to impose sanctions where required, and if the issue was more serious, a trade war was even better. The world was in a tizzy as China was found buckling with increased tariffs. Iran and Turkey faced the wrath of sanctions and the world stared with pleas to the Lord.
The Organisation of the Petroleum Exporting Countries (OPEC) featured in Act II, which was hilarious. At the start of the year, the clarion call was to lower output to push up prices. As prices rose and soared past $85 per barrel, the world approached the oil sheiks who promised to increase output to counter the loss in output from Iran. As parleys were held with the US and temporary forgiveness was promised to the affected countries including India, oil prices crashed to less than $50 for WTI (West Texas Intermediate) and had the sheikhs huddle this time to cut output again. The world surely goes around.
Act III had all the economic forecasters fight for credibility. When they spoke of the rupee going past the 80 to a dollar mark, it looked credible. Post November 4, when the sanctions on Iran were temporarily lifted, the rupee gained, and went below the 70 mark. The forecasters were quick to talk of 65, but now it is 72 or so. That’s the problem with adaptive expectations where every directional move is erroneously extrapolated to the limit. There is solace that even the US Energy Information Administration (EIA), International Energy Agency (IEA) and International Monetary Fund (IMF) went on the one-way street when they spoke of oil crossing $100.
Back to the Indian shores, Act IV was on Mint Street when there was this grand plan to divest RBI of its reserves. It belonged to the people is what was said, as the central bank held on to the key of the locker. Everyone discussed why this should be done or not done, and how it can be done. Everyone is now talking of Section 7 with authority for the first time. The iconic pop sensation Air Supply had this song “Making love out of nothing at all.” But we Indians have perfected the art of making money instead. One PSU buys into another and we call it disinvestment. By moving the pen, we capitalise banks by having bonds issued and subscribed without anyone paying money. Life’s getting better!
Act V was in banking. We had the Insolvency and Bankruptcy Code (IBC) and Prompt Corrective Action (PCA), and everyone applauded. When it started to hurt, we withdrew support with the same alacrity. We did it for plastics ban and alternative day plying of vehicles in Delhi. So why not for companies and banks that don’t perform? We blamed the system first for doing nothing. Now we are after the same people for doing something. What is one to do?
Act VI was the fiasco called the minimum support prices (MSP), which were increased to assuage farmers. We all squealed and said that this will cause fiscal disarray and RBI used this as a reason to warn against inflation. Then, as the crops were cut, farmers were distressed as there was no one offering these prices at the mandi. Words without action, which is so typical of we Indians, and farmers protested with long marches. Now with three state elections supposedly being affected by these low prices, the same set of people who criticised high MSPs are sympathetic to farmers who are not getting their dues. The English language is so malleable as our emotions and explanations. If only words could increase farmer incomes like how RBI reserves can … farmers will actually ride horses!
Act VII was in the North Block. The fad of writing books after departing from an official position is compelling. The only way to be heard after leaving Mint Street or North Block is to be called for conclaves when you are heard again, or better still write a book. Then you can say what you couldn’t say when holding the position. The frame on demonetisation has a different view taken. Economists can never be beaten with the dexterity in using two hands. Also based on reactions we get to know that the word ‘draconian’ does not mean draconian but only a ‘tough call’! Please take note, Oxford dictionary.
Act VIII was enacted on the Mint Street and having a MPC (Monetary Policy Committee) makes it more exciting. There is a document that reads like the earlier ones and the risks for the future are given, which is almost always the same, yet the decision taken is different. While repo rate dominates as do the forecasts of GDP and inflation, analysts and media now look at the stance. While we all debated whether it will be neutral or accommodative, the MPC had its innovation with ‘calibrated tightening’. But you can have ‘calibrated tightening’ and appear to increase rates next time, or even have ‘calibrated tightening’ and appear to lower rates. But we economists are made of sterner stuff and have our calibrated reasoning on this concept of ‘calibrated tightening’.
Act IX is on the fiscal front. A lot has been said about our tax reforms. Demonetisation has increased the number of taxpayers. GST has increased the number of tax assesses. But where are the collections? One is still not sure whether tax revenue is going up or not. The nation is still debating if 3.3% will be maintained this year, with loan waivers being spoken of. How will all this add up? Take a guess?
Act X, which is the finale and probably the blast for the year, was the back series calculation on GDP. The first one showed that the past was better than the present. That didn’t do, and so another set of economists came up with numbers that showed the past was worse than the present. The first was unofficial and the second official. And we economists indulged the media with explanation on which was right. When we have forecasts of GDP ranging from 6.5-7.5% and exit polls show different elections results, then why can’t back series have different interpretations?
Friedrich Nietzsche had said: “There are no facts, only interpretations.” So be it. And now improvising a social media analogy that went wild, we can have a new back series in cricket. Virat Kohli is the best batsman in the world and can be used to reinterpret the 1975 World Cup, where India would have won and the best batsman would have been Sunil Gavaskar (who now tells how one-day cricket should be played) who batted for 60 overs and was unbeaten on 36.
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