Lawrence Summers’sweeping allegations and ill willed prophecy about India’s demonetization -A rebuttal

The article Most sweeping change in currency policy in the world in decades  coauthored by Natasha Sarin and Lawrence Summers makes sweeping statements of India’s demonetization unhindered by facts.

While PM Modi’s Big Bang demonetization has gone down well with a large majority of ordinary Indians despite inconveniences and difficulties, the global media’s coverage has been heavily biased.  This is not surprising given the vested interests that control media empires.

But one expects economists to give well reasoned assessments.

Lawrence Summers is no ordinary economist. Among other things, Summers was the Chief Economist of the World Bank, Undersecretary for International Affairs of US Department of Treasury under Clinton Administration, and Director of National Economic Council a forum used by US President. He is the one who had recommended abolition of US $100 and Euro 500 notes.   “One of us (Larry) has long advocated the abolition of the $100 note in the US context and the 500 euro note (aka the Bin Laden) in the European context

Since Summers is undoubtedly the far more accomplished of the two coauthors and since article is published on his website larrysummers.com, we can assume that he fully stands by the article.

 

Bye bye, facts

The economist duo ‘recognizes’ that ‘many who hold large quantities of cash in India have come by their wealth in corrupt or illegal ways’.  Do those who hold cash in large quantities in the US or Europe have come to be wealthy in legal ways? But that’s another subject.  The duo criticizes that what was legal tender was suddenly no longer legal. It doesn’t see that secrecy and suddenness of demonetization is a must to ferret out black money in cash form. In India, even critics (most of them) of demonetization agree that the suddenness and secrecy are critical success factors and they focus on execution issues.

Nor does the duo take into account the fact that India has been facing terror attacks from Pakistan which are funded by fake Indian currency -almost all of it in denominations of Rs 500 and Rs 1000.

The duo questions ‘equity and efficacy’ of India’s demonetization.

As far as efficacy is concerned, we have already seen that Pakistan paid stone pelting in Kashmir has stopped. Concerning black money in other forms, PM Modi has already announced that demonetization is just the beginning and that more actions like crackdown on benami holdings will come soon.

Equally importantly, India has near universal banking and it is rapidly digitizing. A nation-wide GST is another way of bringing large number transactions out of the black economy. The united payment interface (UPI) that makes person to person e-payments possible has been launched. The duo fails to factor in all these fundamental changes.

The economist duo also doesn’t recognize that even if majority of illegal wealth is in non-cash form, cash (means Rs 500 and Rs 1000 notes in India) is vital for the black economy to function.

We shall deal with ‘equity’ in a while.

Summers and his coauthor make sweeping and baseless allegation against Modi government

The duo says about Modi Government ‘ the temptation to expropriate is understandable’.  In effect, Summers and his colleague are accusing the government of giving in to the temptation of taking over someone’s property. This is a serious accusation and is completely baseless because any Indian citizen can deposit his old and useless notes in his or her bank account and get them credited without any limit. It remains citizen’s property. If questioned by Income Tax or other tax officers, citizens have to show that the amount is consistent with declared earnings and economic activity. Is the economist duo suggesting that things ought to work differently? Do the Income Tax people in US or Europe behave differently? So, how is this expropriation?  Summers and his colleague are wildly off the mark here.

Making legal ambiguity as a defense of the corrupt

The duo says ‘ Most free societies would rather let several criminals go free than convict an innocent man’  and the goes on to  ‘ Moreover, the definition of what is illegal or corrupt is open to debate given commercial practices that have prevailed in India for a long time’. Now innocents aren’t getting convicted nor is there any ambiguity in India about what is illegal and corrupt. Perhaps these ‘defenses’ have worked well for bosses of western financial institutions who were caught in various frauds and yet had no personal culpability despite tax payers bailing out their institutions.

The economist duo may note that the Indian legal system was available even for Kasab, a Pakistani terrorist captured in terror attack of 26/11 to defend himself for years.

Now, about the ‘equity’

The Big Bang demonetization announced by PM Narendra Modi caught many in a bind. The black money hoarders got a black eye. Parties like Congress, AAP, TMC, SP, BSP, RJD and yes, your neighborly Sena cousins got hit badly. Builders and Jewelers conducting illegal cash businesses got hit on head and saw stars. The stone pelters of Kashmir ended up jobless. The Naxalites got busy in scraping the bottom. The big bang detonated under seats power in Pakistan too.

Ordinary people complain about queues and inconvenience but they think it is a small price to pay to get rid of black money, mis-governance, and terror. Some cash dependent (black money) sectors like realty and jewelry have taken a hit. There may be a temporary slowdown. To more than balance the negative effect, if any, banks have received so much cash that they have started dropping lending rates. State Bank, India’s biggest lender is one of them. The fall in interest rates has taken place even though RBI hasn’t cut benchmark rates. Legitimate businesses will get boost.  We aren’t even talking about the illegal cash that doesn’t come out in open is now trash and its power to vitiate economic and social fiber is now Zero.    82% Indians favored the decision and 84% said Modi government was serious about the issue‘   It is a people’s movement. That’s equity.

Ill-willed prophecy?

The duo then offers a prophecy -‘ the ongoing chaos in India and the resulting loss of trust in government fortify us in this judgment’ -as a justification for its ‘judgment’!

There are baseless allegations against Modi government, legal ambiguity as defense of the corrupt, and an uncalled for (ill willed?) prophecy in Summers’ and his coauthor’s article.

 

Neither economics, nor logic

The quality of Summers’ and his coauthor’s  article reminds one of Arvind Kejriwal’s allegation The government expects to net 10-11 lakh crore rupees by asking people to surrender the spiked currency and write off the bad debts’ (read )  You can’t write off bank loans (assets) by using peoples’ deposits (liabilities) .

Do you find economics or logic anywhere?

Also read:

https://www.myind.net/silent-revolution-going-indias-noisy-democracy

This article was first published here: https://www.myind.net/ground-reports-about-indias-demonetization-suggest-it-success-rebuttal-lawrence-summers#.dpuf

Mumbai Marathon: You are a confirmed lunatic but you having a good time like them kids

This had to be a different Marathon for me. The signs were all there to see. For starters, this time we had no difficulty in locating our hotel in Ballard Estate despite Google Map showing it wrongly.

The Standard Chartered Mumbai Marathon 2017 of 15th January brought me back to the city of my childhood and early rebellious days- gulli cricket, of  IIT Powai hostel days, of journeys by crowded local trains and of roaming around Fort, Colaba, Marin Drive, Dadar’s Chabildas School for experimental theater.

The Saturday of 14th was spent in collecting race bib (Race Kit), holed up in a our hotel, and gingerly strolling around in the area. Gingerly because,  last year me, my friend, and my son had tired ourselves silly by walking for hours looking for our hotel and buying fruit in Crawford Market.

I was rewarded by the site of a beautifully bedecked VT (Now CST) station during the stroll on race day eve.img_20170114_1912131

On the 15th, we started the race on at 24 deg and 80+ % humidity. Now all my practice was in Pune in freezing 12 deg and dry weather of November and December.  I knew it was going to be tough. But getting to run in Fort, on  Marine Drive and Pedar Road all cleared exclusively for us runners more than compensated me.

Live bands were playing on side walks and enthusiastic early risers of Mumbai were there to cheer us. I tipped my running cap at them.

They -the pacers of Marathon – kept saying that only once in a year you a get chance to run on the Bandra Sealink.  I reached the sealink climb at 17th KM mark in good time and in good shape.  Another good sign and time for a selfie with my runner friend.img_20170115_0803081Last year, the Elite Runners -who start hours later than us slow runners – had overtaken us at this point. This year no sign of them yet. This confirmed the good sign. My smartphone’s Strava app had crashed at 10 KM but such experiential signs are way better than the numerical ones.

The run through the roads of Mahim was lined with people who cheered and kids who stuck out their hands at us. I responded to as many kids as possible.

But Km #30 to #35 tested my resolve. The stretch of Worli seaface upto Haji Ali bored me.
No pain but it didn’t feel good. Time for you mind to start messing up with you. ‘Why are you running if you are bored?’ ‘Walk like many others’. Time also to ignore it. Then came the Peddar road climb when I could overcome my frustration and get back in a groove. The challenge of running up the long climb did me good. It felt good that I was among very few who were running there. Practicing in Pune -where you can’t avoid the steep climbs of Symbiosis,  Chandani Chowk and many other less steep ones of University Road, Prabhat Road and those inside the University campus -helped me. One shouldn’t avoid them.

Peddar road descent to Marine Drive brought the first cramp in my calf. There were two more cramps. The last one was within 300 meters of the finish line. On all occasions, I felt immobilized but I fell back on my experience that cramps are best handled by making the affected muscles go through full range of movements. But they were scary. Mind you, I was well hydrated, electrolyted and fueled. These things happen despite all precautions. It is a lesson that comes to us now and then that each run is different and your body and mind are different at each time. They need to be respected as they are.

By this time my calculations showed that I could still finish under 6 hours even if I had walked the remaining 7 Kms. But walking was impossible. Running was easier! The return leg of Marine Drive passed.  I didn’t notice passing the the Ambassador Hotel, Brabourne Stadium and the Tea Board Lounge, so focused I was on reaching the finish line. I had sensed that I would finish under 6 hours and decided to run well.  I overcame the third cramp within 300 meters of the finish line. My timing 5:48.

While I waited for my friend at the finish line, I had time for another selfie 🙂

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Now a time of 5:48 is nothing to boast about when the race was won by Sibbu of Tanzania in 2:09 and several in my age group 60-65 finished it in under 5 hours. But I was happy because in the previous Marathon I needed 6:25. Actually,I would have been happy with anything under 6 hours. For someone who started running at the age of 56, running a second Marathon under 6 hours wasn’t bad at all.

So needed to pat myself after all 🙂

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A taxi driver had asked us about the prize money after he learned that we were spending our money and time just for running. He was a bit disappointed that I wouldn’t get any. Last year, an elderly Gujarati lady had asked me why we were running.

I could stand for an hour after all those 42.2 Kms of Marathon running and I could forget sleeping until well after we had our celebration. The recovery over next days was good and there was hardly any niggle. All good signs.

In morning after the race day, I strolled leisurely around the GPO near CST  taking in the race experience and thanking my stars for affording this luxury.

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Runners find it difficult to explain why they run such insane distances. But when the kids line up to give you hi-fives you know that you may be a confirmed lunatic but you are having a good time like them.

via Daily Prompt: Marathon