Agni - The voice of revolution

Thursday, March 05, 2009

Funny woman who missed her flight

Field report - Future of India and commodities

In January, I was visiting a few villages in India partly to understand how global markets are affecting them. After spending a week in Europe and a few weeks Indian cities, the villages marked a refreshing contrast. As I walked in the fields, I saw that the villagers were happy, gave me free juicy sugarcanes and they were more upbeat about economy than anybody else. As we will see, if India were to consume as much oil per-capita as a relatively poorer Eastern European nation like Slovenia, it alone needs 30 million barrels/day (mbpd) more (40% of world consumption) apart from another 35 mbpd from China. If they both want to consume as much as US, India needs about 60 million addition barrels apart from 70 mbpd for China (current world production of the order of 85 mbpd).

These villages might never get to the economic level of an average American or European countryside, their per-capita income might never get closer to that of an average American, but the changes going on in these nameless places will have a profound impact on world’s commodity, tech and consumer markets. And this could change the wage-commodity price relationship substantially.

Changes at the ground level

Kovil Esanai, a small village in southern part of India and about 200 miles from the tech center of Bangalore could have easily qualified for those UN ads on world’s poor with people earning less than $1/day. I spent my formative years and primary schooling in such villages where even the best village school is only slightly better than a glorified cowshed in terms of amenities & hygiene. Till about 2004, this village of Esanai didnt have a telephone, most of the homes were constructed with mud & dried coconut leaves, people couldn’t even afford bicycles, the village school was a little more than concrete benches under big trees, and most of energy usage was in the form of burning dried cow dung & wood.

However this village of 2009 is drastically different. Almost everybody has mobile phones, the village school has a brick building and every classroom has DVD players, projectors and PC, people drive new motorcycles built by Indian collaborations of Suzuki, Yamaha and Honda, more houses made of concrete with the “modern” amenities like refrigerator and gas stoves, and people have far more world awareness. The village is not some model village adopted by a world organization, nor is it near a outsourcing base or some major global factory. The nearest major town is 3 hours away and it takes more than half-day to reach a major city. The village is yet another part of developing world whose carbon footprint has dramatically grown and whose inhabitants have started to get a taste of the modern world. My back-of the envelope estimate shows that their average carbon consumption would have grown more than 5 times in as many years.

Image source: Market Research analyst

Implications for carbon consumption

Now, you are thinking so what? Almost everybody in Us has an automobile, concrete house, phones and good schools, why is this change relevant. Look at the graph below using the data from CIA factbook.

Data Source: CIA factbook

Compare India’s 2005 electricity usage with other countries – it is 30 times lower than US and 60 times lower than Iceland. If India and China were to reach the economic level of Eastern Europe and consume the level of Easter say Slovenia, there will be a run on world oil markets. We would need additional 60 million barrels/day (75% world consumption) for India and China alone, leave alone the growing demand for countries like Brazil and Saudi Arabia.

Wage differentials

While globalization has flattened a few wage rates for a few professions like Software development, Project management, portfolio management, etc, there is still a huge gap for non-globalized professions. For example, till 2004 a typical harvester or sowers in agricultral fields earned $0.5/day (for about 10 hours of work) and this is 150 times less than a comparable wage in the developed world. Even a slightly more sophisticated job in McDonalds has a wage differential of more than 20 as the study below shows.

However, globalization train has left the station and more professions are coming closer to flattening the wage differentials across geography. With more education and labor development, the villagers in the kovil esanai could be turned to produce goods that will substantially contract world prices and counteract the commodity inflation.

Data Source: Cross-country comparison of wage rates

New growth, New markets, New cash requirements

Unlike the west, India and China are still growing by over 5% of GDP and every year. You all must have heard the often hype-combine story of Indian and China, but the reality is their growth have real implications even if some of the hype is not true. The global recession is not going to change a lot of that. In the short term there might be slowdown in growth, but the previous growth has set off a real growth in India supported from domestic market. This would act as a cushion and be the base for the future growth. So, if you look past the next 2-4 years, Indian market looks very attractive and for the world markets as a whole the following markets look the most to be impacted.

Commodities: As villages like Esanai step into modern amenities, their energy consumption will go through the roof. We need a lot more oil and electricity to satisfy the demand. India’s per-capita food grain consumption is one-fifth of US, and if it starts eating better then 2008 food grain shortage might get back. USO and DBA could get big.
Capital: Right now countries like China and India are surplus in capital, because majority of their citizens don’t have access to formal credit markets. As villages grow and people want to expand their economic signature there might be a dramatic need for capital. Assuming that a per-capita capital requirement to expand, educate and establish is about $1000/year, India and China can suck up $3 trillion every year. It might not be far off from the point they could consume all their reserves (for China it is around $1500/per capita) and start requiring capital from world markets. That would be a good thing for millions of retirees looking for high yield savings.
Technology: Indians and Chinese might be skipping the computer revolution and directly going to the mobile revolution. India is estimated to go for 750 million mobile phones in next 2 years and already rank the highest in world mobile minutes usage. As they mature up into more powerful handsets it would be big for tech companies. Goog is already making use of the growth, by various initiatvies like mobile search, google bus, etc.

The Future

I see a future for world economy where the relationship between commodities to human labor, completely reversed. The last few decades we moved in a fashion that made labor wages grow faster than commodity prices. In the developed world, workers with minimum wage ($7.25/your) could buy 8700 gallons of gasoline with the yearly salary and drive 261000 miles in an average rated car. The price of food-grains to household income also reached among the lowest in human history, a couple of years ago. However, these will change and the events in 2008 summer was just a sampler. In the long term, the effect of entry of villages like esanai to the global scene will put downward pressure on services and upward pressure on commodities, and commodity prices to wage rates will grow significantly more than the levels in summer 2008. This will cause a significant realignment in the current global economy where developed world is moving mostly to services and developing world into manufacturing. The pains of adjustment will be hard, but in the long term will help improve the strength of the global fabric.

1. Newsweek - Why India’s economy will keep growing?

2. New york times – India retains optimism and growth

Wednesday, March 04, 2009

India’s thopukaranam is touted as Super brain yoga

This is something a lot of south Indians do it as a part of prayer (and part of school punishment). Now, it is funny that this is getting into the fitness and medical community as a big thing.

'Slumdog Millionaire' opens a new passage to all things Indian

Here is an interesting article in USA today. Is India getting closer to American mainstream like Latino and Chinese culture? Every Indian knows A.R. Rahman is one of the best world musicians, but sadly till now the world didnt know it. There are so many of these untapped talents that might start coming out. Who knows, maybe Amir Khan might be the next Tom Hanks (ok, Tom Hanks is uncomparable, but there is nobody else in Hollywood who can take up his mantle when he retires, so why not somebody from Bollywood?)

http://www.usatoday.com/life/lifestyle/2009-03-03-india-slumdog_N.htm

Hurray for ... Bollywood?

Not exactly, but there's no doubt the success of India-set Slumdog Millionaire — eight Academy Awards and more than $100 million at the box office — has magnified India's profile and accelerated the mingling of American and South Asian cultures.

Who knows? Just as salsa came to rival ketchup as America's top-selling relish with the diffusion of Latino culture, maybe Slumdog is a sign more Americans will be consuming even spicier fare.

So pass the chutney.

"Now you can find Indian food even in mainstream grocery stores," jokes Vin Bhat, the American-born co-founder of Saavn, a New York-based company that, as the largest digital distributor of Bollywood movies, music, videos and ringtones, is benefiting from the success of Slumdog.

Music to more and more ears

"We're seeing a tremendous impact," Bhat says. "We're already seeing record downloads on iTunes and other major carriers; we're seeing a lot of people purchasing tracks and albums by (Slumdog composer/musician) A.R. Rahman."

In fact, the soundtrack is top the album on iTunes and vaulted 26 spots to No. 22 on the Billboard chart in the days after the Oscars.

"People are buying Slumdog— it's an access point for people to explore other movie and musical content from India," which is easier to do nowadays, thanks to the Internet, Bhat says.

Indians in America, long concentrated in the tech industry, say it's about time. (Indians are the largest ethnic group among the South Asian population.)

"Perhaps it took something as spectacular as the Slumdog sweep to confirm our 'arrival' as a cultural, and not just professional, force," says Ragini Tharoor Srinivasan, editor of the American monthly India Currents.

The India-is-cool trend has waxed and waned for decades. "It goes back to The Beatles, Ravi Shankar, the Maharishi — look at how yoga is mainstream now," says frequent visitor Dan Storper, founder and CEO of Putamayo World Music, which expects its first, just-released all-Indian music CD, India, and coffee-table book, India: A Cultural Journey, to be best sellers in part thanks to Slumdog.

"There has been a curiosity about the region for a long time, but it always takes one big thing to take it to another level," Storper says. "The stage is now set."

Hollywood might be more willing to gamble on Indian-themed movies and other East-West collaborations now that Slumdog has established audience interest, says Chitra Banerjee Divakaruni, the Indian-born American novelist and author of The Mistress of Spices and just-published The Palace of Illusions.

"We're kind of on the cusp, and Slumdog might tip us over," she says. "Fiction touches the imagination, and the impact lives on long after the facts of non-fiction have faded."

More and more, Bollywood and Hollywood are hooking up. Aussie singer Kylie Minogue is making her Bollywood debut in Indian superstar Akshay Kumar's upcoming film, Blue, and has already recorded two songs for it, including the title track by Rahman.

Sylvester Stallone is appearing in an Indian film co-starring Kumar, Incredible Love, made in Hollywood and due out this year. Warner Bros. released the Hollywood-made Chandni Chowk to China, a Bollywood-style martial arts movie aimed at the world market, also starring Kumar, last month. Will Smith, Tom Hanks, Julia Roberts, George Clooney, Brad Pitt, Tom Cruise, Bruce Willis — all are said to be working out deals with Indian entertainment companies.

"There's all sorts of people going to work" in India, Slumdog director Danny Boyle told reporters backstage after winning his Oscar. "The world's shrinking a little bit."

But don't expect pure Bollywood down at the local multiplex. The genre is not really most Americans' cup of tea: no sex, not even kissing, and lots of over-the-top song-and-dance numbers. Five years ago, Bride and Prejudice, a Hollywood-Bollywood version of Jane Austen's Pride and Prejudice, flopped at the U.S. box office.

"The people who go to see Paul Blart: Mall Copa ren't going to start watching Bollywood films," says box-office analyst Gitesh Pandya, editor of BoxOfficeGuru.com. "But the exposure opens up more eyes."

Slumdog itself isn't very Bollywoodish: There's only one musical number. It's a British production with a British director, a British-Indian male lead and a Dickensian story of a Mumbai slum-dweller's rags-to-riches romance.

Nor is it the first India-themed movie to sweep the Oscars: Gandhi, a British production with a British cast and crew, took home eight top awards in 1982 but had almost no effect on U.S. culture.

Increased familiarity

By contrast, Slumdog lands in the American consciousness just as South Asian names, faces and accents are being heard more, thanks to immigration and population growth.

Nowadays, many Americans have Indian doctors — in fact, Indian-American Sanjay Gupta, a neurosurgeon and CNN correspondent, is being considered for U.S. surgeon general.

"For years, Indians complained about TV hospital shows that had no Indian doctors — it was completely unrealistic," Pandya says. "Then (British actress) Parminder Nagra was cast in ER, and everyone celebrated. This second generation born and raised in the U.S. wants to be represented" on TV.

And in politics. Louisiana Gov. Bobby Jindal, who delivered the GOP response to President Obama's address last week, is the first Indian-American ever elected to a statewide office — and the first Indian-American politician to address the nation on national television.

South Asian names and faces are becoming more familiar in screen credits (director M. Night Shayamalan, The Sixth Sense); on TV (Kal Penn in House, Naveen Andrews in Lost, Sanjaya Malakar and Anoop Desai on American Idol, Aasif Mandvi on The Daily Show, even Apu on The Simpsons); on the news (Martin Bashir on Nightline, and Ali Velshi and Fareed Zakaria on CNN); and advertising (Indian-American Ajay Mehta stars in Fiber One cereal ads).

In music, Western pop stars such as Snoop Dogg, Jay-Z and Britney Spears, hook up with Indian stars and make hits. Singer M.I.A. is a London-born Sri Lankan; No Doubt bassist Tony Kanal is a London-born Indian.

Golf fans follow Vijay Singh, a Fijian of Indian descent, lifestyle junkies follow Deepak Chopra, and readers snatch up books by the likes of Salman Rushdie, Arundhati Roy and Jhumpa Lahiri.

"We're trying to bridge the gap between East and West, and there's a natural musical and creative synergy between Western music and classic Indian music," especially the rhythmic Bhangra genre that blends well with hip-hop, says Ted Chung, chairman of the Cashmere Agency, a Los Angeles company that brought Snoop Dogg together with Akshay Kumar to make the title track of Singh Is Kinng, a hit in India last year.

"The passion that drives us is to show each other's culture and expose people to new things, so they're not so ignorant or afraid of something they don't know," Chung says.

Funny Math Video

Who said recessions must be gloomy. Enjoy the fun with the recession math:

Monday, March 02, 2009

Funny video on Optimism

This video is awesome. How many times we take modern things for granted? The credit crisis is partly led by customers who felt entitled to various things - new homes, biggest Plastma TVs, shiny cars... all on credit.

World's best companies - Fortune list

This year's list of best companies is released by Fortune.

World's most admired companies:

Best companies to work for:

Wednesday, February 25, 2009

The curious case of Chander Mohan and the anachronism of the sharia law in India

Today's Wall Street Journal reports about an Indian politician's escapade.Basically, this guy wanted to have an affair and marry his mistress and made full use of India's archaic legal system. While even many Islamic countries don't have sharia law allowing folks to marry multiple wives, India has them. One cannot believe a secular 21st century democracy, giving equal rights to both sexes still follows some archaic law that is hopelessly out of place with the march of the modern civilization.

When will India come to modern age and repeal such anachronistic laws?

....................

http://online.wsj.com/article/SB123552228845764863.html

chander mohan and second wife anuradha bali "Chander Mohan, deputy chief minister of the northern state of Haryana, made a shocking announcement. Mr. Mohan, whose overwhelmingly Hindu state of 23 million people is among India's most prosperous, declared that he had converted to Islam. The 43-year-old father of two added that he had also just wed a second wife, another Muslim convert....

What's happened since has all the trappings of a Bollywood plot, replete with an alleged kidnapping and mysterious disappearances. The drama's serious subtext shows how crucial religious identity remains in a country that bills itself as the world's largest secular democracy....

...A divorcee, Ms. Bali says that her affair with the politician began after the two met by chance at a juice stall in 2004. She says she yielded to Mr. Mohan's insistent messages and love letters -- some of which, she claims, were written in blood.

...Indian law, however, prohibits bigamy and makes divorce a complicated procedure. It might have been especially complicated in Mr. Mohan's case because his house and numerous other assets are registered in the name of Ms. Bishnoi and their children.

Yet, there was a loophole: India's 150 million Muslims, unlike other Indian citizens, are exempted from the secular legislation in family matters. Instead, they are governed by Islamic personal law, or sharia, which permits Muslim men to have up to four wives. "

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Tuesday, February 24, 2009

What do Indians search?

I was going through google search trends - http://www.google.com/intl/en/press/zeitgeist2008/world.html#top and it is fascinating to see what Indians search the most J. I have not seen so many actors in the zeitgeist for any other country. And interestingly there is no male actor in the list. So, I think search in India is highly dominated by boys and I guess any search company trying for Indian market should note the demographic trend and configure the product accordingly. The overall theme fits with the fourth column.

Top searches on Mobile

1. orkut

2. yahoo

3. waptrick

4. gmail

5. games

6. katrina kaif

7. rediffmail

8. yahoomail

9. namitha

10. google

Fastest Rising

1. youtube

2. orkut

3. katrina kaif

4. cricket

5. irctc

6. facebook

7. genelia d'souza

8. beijing 2008 olympic games

9. sixth pay commission

10. ipl

Most Popular

1. orkut

2. gmail

3. yahoo

4. google

5. youtube

6. yahoomail

7. indian railways

8. rediff

9. cricket

10. katrina kaif

Top 'how to' searches

1. how to reduce weight

2. how to kiss

3. how to earn money

4. how to get pregnant

5. how to learn english

6. how to gain weight

7. how to play guitar

8. how to create a website

9. how to impress a girl

10. how to tie a tie

Wednesday, February 18, 2009

Contribution of Computers and Internet to Economic growth

Also appears in: http://econjournal.com/2009/02/11/contribution-of-computers-and-internet-to-economic-growth/

How come we see the computer revolution everywhere except in the [aggregate] productivity statistics?

- Robert M. Solow, Winner, 1987 Nobel Prize for Economics (Sveriges Riksbank Prize)

Computers, Internet and mobile phones have fundamentally changed our life the last 2 decades. We could do more efficient shopping, connect to a lot more people and be more productive at work. As an engineer who have been a part in developing an Operating system, a search engine and a social networking tool - the three main products of this revolution, I feel they are great things to both build and to use. They make individuals much more productive looking at the micro level. However, looking from an economic point of view and see the Macro picture I’m bogged down with “Show me the money”. Economists of the 1980s and 90s have debated a lot about this and suggested that they may not have caused a lot of economic growth. As this review shows, the economists of late 80s successfully argued that this paradox is due to “mismeasurement, lags, redistribution and mismanagement”.

However, over a long period of time you should see the effect in economic growth, as the indirect effect of the productivity increases reflect in the macro economy. And things have changed since the original “productivity paradox” came, as PCs came into the living room and internet connected the ordinary people to do their mundane stuff in networks originally designed to survive nuclear attacks.So in this decade, have the powerful PCs, Smartphones, Search engines, Facebook led an explosive economic growth? In reopening the debate and looking at the recent data, there still seems to be dismal evidence for the productivity growth from the modern revolution. It is possible that the economy might have reached a saturation as a $10 trillion economy cannot continue to be sprinting like a $1 trillion economy, but still 1.7% annual growth in per-capita income since WWW came seems less. There might be other small causes too. The article concludes with what might be a possible cause for this.

GDP growth in the last decade

Here is the annual GDP growth since the War. We see some big spikes in the 1950s, 60s and the 70s, but the growth since the 1990s has been pretty muted, inspite of all the hype of the late 1990s.

Let me take two sample years 1995-2007 to compute the range. 1995 is year of the Windows 95 (that brought PCs to common people), Yahoo (the first search engine), Java (the language that will become the foundation of the web for the next few years) and of Netscape that brought the world of Internet to a lot of people. The next year Hotmail came in and brought email access to everybody. So, 1995 is the pretty much the start of the revolution. And, 1995 was in the start of a massive boom and 2007 was at the peak of another boom – so we should be seeing some real super growth in the period.

According to BEA statistics the GDP (chained 2000 dollars) has grown from $8.03b to about $11.6b a 45% growth in 12 years from 1995. Well that might sound great till we see the Census stats that says the population has grown from 261 million to about 303 million now. So, the GDP per-capita has effectively grown only 24% in this time - growth rate about 1.7%/year. Not bad, but definitely not close to an explosion.

Contribution to GDP:

Now, how much of the growth is really caused from the real productivity growth. There were four other parallel forces that contributed to the growth.

1. Globalization – with the rise of China, India and other countries, US had access to cheap capital, labor and goods. They consumed a lot of American goods and services and gave in return a lot of cheap goods that US retailers used to sell the customers and generate jobs. Thus, there was a lot of growth from personal consumption.

2. Financial “Innovation” – Wall street created a phantom growth over the last decade as it played with ever more greater financial tools. This produced rich profits for the financial companies, cheaper credit for corporations and individuals, and increased the leverage. All these directly fed into the GDP. Well, this doesn’t last long but still contributed to the growth over that period. OECD research shows that this growth contribution could be more than 1%/year.

3. Government expenditure – US government had embarked on a substantial spending program since the start of this decade (duh) with the war in Afghanistan and Pakistan, leading to a spurt in the government component of GDP growth. The spending on homeland security has given a lot of work to defense manufacturers, and the tax cuts introduced by Bush had contributed to economic growth. All these came at the back of heavy national debt notwithstanding, for the temporary period we saw some growth.

And last but not the least:

4. Housing markets – Well, Americans spent a lot on housing between 1995-2007 will be the world’s biggest understatement. Because that is a kind of spending that has put the world in this peril. They built ever greater McMansions [Massive homes that become kind of commodity at the hands of common people], decorated it with expensive toys and spent on all the related stuff, giving jobs to millions of people. People also used their homes like ATM machines and drew money to buy all sorts of stuff. BEA statistics show that over 1% of growth per year in this period could be attributed to increasing housing spending.

Now, out of a 1.7% annual growth in the economy, we have financial sector, globalization, increased government spending and housing growth all could have contributed to growth upwards of 1% each per year, that must be subtracted from the overall growth. So where do we see the explosive growth from Computer and the Internet? As the snippet below shows, the effect of computers and information systems might have even contributed a small negative growth to the economy since 1995.

That sounds incredible to me, but that is what I see from the facts, and fits in the picture given the growth contributors above. Thus, I have to conclude that the computers, internet and social revolution might cause a long term productivity growth, but we have not seen that yet.

Where did all the time go?

Well, computers really save us the time and that cannot be denied. So, if it doesn’t go to economic growth, where does it really go? One possible explanation is people are spending more leisure time. In fact, according to this research from the Federal Reserve of Boston Americans spend 6-8 hours more than they did in the 1960s and according to this research from TNS Market Research more than a third of it is spent online.