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What’s up in China?

Here is attempt to collate a bunch of links to know everything about what is happening in the Chinese Stock Market right now

This is a bubble of epic proportions. In 12 months, Chinese stock markets rose enough to create $6.5 trillion of value. It’s hard to picture, but that’s a stunning amount of money. It’s the equivalent of about 70 percent of China’s GDP in 2013, and about 40 percent of the total value of the New York Stock Exchange. It’s enough to pay off Greece’s debt 20 times over, circle the Earth250 times with $100 bills, or build 43 International Space Stations.

The stock market weakness, should it spread to the Chinese economy over the long term, could prompt Beijing to reassess its overseas loans and investments. Many countries, industries and companies have come to depend on Chinese money to fund their own growth. But Chinese outbound investment could still increase if companies and individuals seek safety overseas.

There are a few other interesting, potential casualties of the latest market drop. Some analysts say that the Chinese government’s repeated pledges to boost the market and subsequent failures to do so could damage its credibility and lead to a crisis of confidence. Even if that doesn’t happen, the government’s latest measures are definitely calling into question its 2013 pledge to let the market play a “decisive” role in governance — the central promise of its economic reform agenda.”

 it is (easy) to frame market data in a way that sounds either scary or benign, depending on your inclination. “The Chinese stock market has dropped 32 percent in a month” is scary. “The Chinese stock market is up 70 percent over the last year” sounds great. Both are true

Those market dynamics can create a chain reaction of selling. China’s major exchanges prevent a stock from falling more than 10 percent on any given day. When that happens, analysts say, many investors opt for selling other shares, broadening the sell-off. Then when the market opens the next day, they continue selling down the stock that was previously halted, effectively prolonging the turmoil.

But the boy was not of the timid kind. “Oh yeah,” he yelled back at Kennedy, “well, I got a tip for you too: buy Hindenburg!” Intrigued, Kennedy turned around and walked back. “What did you say?” – “Buy Hindenburg, they are a fine company,” said the boy. “How do you know that?” –- “A guy before you said he was gonna buy a bunch of their stocks, that’s how.” – “I see,” said Kennedy. “That’s a fine tip. I suppose, I was a little harsh on you earlier,” he said, pulling off a glove and reaching in his side pocket for some change. “Here, you’ve earned it.”

Little did the boy know that Kennedy, a cunning investor, thought to himself: “You know it’s time to sell when shoeshine boys give you stock tips. This bull market is over.


But that calculus would change if China’s economy crashes along with its markets. Now it’s important to remember that “crash” is a relative term for China. Its economy is supposed to grow around 7 percent this year, so anything less than 5 percent would push unemployment up enough to feel like a recession. This kind of “hard landing” would hit the commodity countries like Russia or Australia that have been feeding China’s insatiable appetite for raw materials, well, the hardest—although the ripple effects would also reach rich countries like the U.S. that actually sell $100 billion of goods to China each year. That really isn’t all that much in the context of our $16 trillion economy, but if you added up how much other countries being hurt would hurt us as well, it wouldn’t be nothing.

Update 2:

There are several reasons for this unusual behaviour: firstly, when I teach stock market investment to my Chinese students, I always remind them that the Shanghai stock exchange should be thought of more as a casino, rather than as a proper stock market. In normal stock markets, share prices are – or, at least, should be – linked to the economic performance of the underlying companies. Not so in China, where the popularity of the stock market directly correlated with the fall in casino popularity.

Varun Ramachandra is a policy analyst at Takshashila Institution and tweets@_quale

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ರಸ್ತೆ ಸದ್ಬಳಕೆ ಹಾಗು ಪಾದಚಾರಿ ಮಾರ್ಗ

ರಸ್ತೆಗಳ ಸಂಪೂರ್ಣ ಬಳಕೆಯಾಗಬೇಕೆಂದರೆ  ಅತಿ  ಹೆಚ್ಚು ಜನರು ಸಾರ್ವಜನಿಕ ಸಾರಿಗೆಯನ್ನ ಬಳಸಬೇಕು, ಹಾಗು ಇದರ ಸಲುವಾಗಿ ಸಾರ್ವಜನಿಕ ಸಾರಿಗೆಯ ಸಾಮರ್ತ್ಯವನ್ನೂ  ಬಲಿಷ್ಟಗೊಳಿಸಬೇಕು – ಕಾರ್ತಿಕ್ ಶಶಿಧರ್ 

ಇತ್ತೀಚೆಗೆ ಮುಖ್ಯಮಂತ್ರಿ ಸಿದ್ಧರಮಯ್ಯನವರು ಬೆಂಗಳೂರಿನಲ್ಲಿ ಟೆಂಡರ್ ಶೂರ್  ಪ್ರಯುಕ್ತ ನಿರ್ಮಾಣಮಾಡಿರುವ ಪಾದಚಾರಿ ಮಾರ್ಗಗಳು ರಸ್ತೆಗಿಂತಲೂ ಅಗಲವಾಗಿದೆ ಎಂದು ಟೀಕಿಸಿದರು. ಹೀಗೆ ಹೇಳಿ ಅವರು ಜನಾಭಿಪ್ರಾಯವನ್ನೇ ವ್ಯಕ್ತಪಡಿಸಿದರು, ಆದರೆ ತಂತ್ರಜ್ಞಾನದ ಮಾನದಂಡದಿಂದ ನೋಡಿದರೆ, ಈ ಅಭಿಪ್ರಾಯದಲ್ಲಿ ಬಹಳಷ್ಟು ದೋಷಗಳಿವೆ.

ಯಾವುದೇ ಊರಿನ ನಕ್ಷೆಯನ್ನು ನೋಡಿದರೆ, ಒಂದು ಕಡೆಯಿಂದ ಮತ್ತೊಂದೆಡೆಗೆ ಹೋಗಬೇಕಾದರೆ ಸತತವಾಗಿ ರಸ್ತೆಗಳು ಹಾಗು intersections (‘ಸರ್ಕಲ್’) ಗಳನ್ನ ದಾಟಿ ಹೋಗಬೇಕು. ಹೀಗಿರುವಾಗ ವಾಹನ ದಟ್ಟಣೆ ರಸ್ತೆಯಲ್ಲಾದರೂ ಆಗಬಹುದು ಸರ್ಕಲ್ ಅಥವ ಸಿಗ್ನಲ್ ನಲ್ಲಿಯೂ ಆಗಬಹುದು. ಸಮಸ್ಯೆಯನ್ನು ಸ್ಥಳೀಯವಾಗಿ ಬಗೆಹರಿಸಿದರೆ, ವಾಹನ ತಡೆ ಒಂದು ಕಡೆಯಿಂದ ಮತ್ತೊಂದೆಡೆ ತಳ್ಳಿದಂತಾಗುತ್ತದೆಯಷ್ಟೇ.  ಉದಾಹರಣೆಗೆ: ಮಲ್ಲೇಶ್ವರಂನ ಸರ್ಕಲ್ ಬಳಿ ಕೆಳರಸ್ತೆಯನ್ನು ಕಟ್ಟಿದ್ದರಿಂದ, ಅಲಿ ವಾಹನಸಂಚಲನೆ ಸುಗಮವಾಗಿದೆ, ಆದರೆ  ಸಂಪಿಗೆ ರಸ್ತೆ – ೮ನೇ ಕ್ರಾಸ್ ಸೇರುವ ಬಳಿ ಹಾಗು ಎಂಕೆಕೆ ರಸ್ತೆ ಮತ್ತು ಲಿಂಕ್ ರಸ್ತೆ ಸೇರುವ ಬಳಿ ವಾಹನ ತಡೆಗಳನ್ನ ಇಂದಿಗೂ ಕಾಣಬಹುದು.


Image courtesy: Greg Younger

ಬೆಂಗಳೂರಿನ ವಾಹನ ಓಡಾಟದ ಪರಿಯನ್ನು ನೋಡಿದರೆ ವಾಹನ ದಟ್ಟಣೆ ರಸ್ತೆಗಳಿಗಿಂತ, ರಸ್ತೆಗಳು ಸೇರುವ ಬಳಿ (“intersections”) ಹೆಚ್ಚಾಗಿರುತ್ತದೆ. ಹೀಗಿರುವಾಗ ರಸ್ತೆಗಳನ್ನ ಎಷ್ಟೇ ವಿಸ್ತಾರಗೊಳಿಸಿದರೂ, “intersections”ಗಳಲ್ಲಿ ವಾಹನಗಳ ನಿಬಿಡತೆ ಹೆಚ್ಚಾಗುತ್ತದೆ. ಪಾದಚಾರಿ ಮಾರ್ಗಗಳು ಅಗಲವಾದರೆ  ರಸ್ತೆಗಳ ಅಳತೆ ಕಡಿಮೆಯಾಗುವುದೇನೋ ನಿಜ ಆದರೆ ಕೇವಲ ಇದರಿಂದ  ವಾಹನ ತಡೆ ಹೆಚ್ಚಾಗುತ್ತದೆ  ಎಂದು ತಿರ್ಮಾನಕ್ಕೆ ಬರುವುದು ಉಚಿತವಲ್ಲ .

ಕೇವಲ ಮೇಲುಸೇತುವೆ(flyover) ಅಥವಾ ಕೆಳರಸ್ತೆ(underpass)ಗಳನ್ನ ಕಟ್ಟಿ ಈ ಸಮಸ್ಯೆಗೆ ಪರಿಹಾರ ಕಾಣಬಹುದೆಂದು  ತಿರ್ಮಾನಕ್ಕೆ ಬರುವುದು ಸಹಜ, ಆದರೆ ಇದು ಪೂರ್ಣ ಪರಿಹಾರವಲ್ಲ.  ಮೇಲುಸೇತುವೆ/ಕೆಳರಸ್ತೆಗಳಿದ್ದಲ್ಲಿ ವಾಹನ ಸಂಚಾರ ಸುಗಮವಾಗಿದ್ದರೂ, ಮುಂಚೆಯೇ ಹೇಳಿದಂತೆ ಇದು ಕೇವಲ ವಾಹನ ತಡೆಯನ್ನು ಬೇರೆಯ ಕಡೆ ವರ್ಗಾಯಿಸುತ್ತದೆ.  ಇದಕ್ಕೆ ಉತ್ತಮವಾದ ಉದಾಹರಣೆಯೆಂದರೆ ಮಾರ್ಥಹಳ್ಳಿ ಸೇತುವಯ ಅಗಲೀಕರಣ: ಇದರಿಂದ ಸೇತುವೆಯಮೇಲೆ ಸಂಚಾರ ಸುಗಮವಾಯಿತು ಆದರೆ  ಮಾರ್ಥಹಳ್ಳಿ-ಔಟರ್ ರಿಂಗ್ ರಸ್ತೆ ಸೇರುವೆಡೆ ವಾಹನ ದಟ್ಟಣೆ ಹೆಚ್ಚಾಗಿದೆ, ಜೊತೆಗೆ ಆ ಮುಂಚಿನ ರಸ್ತೆಯಲ್ಲಿ ಓಡಾಟದ ವಿನ್ಯಾಸವೇ ಬದಲಾಗಿದೆ(ಉದಾ: ಬಲಕ್ಕೆ ತಿರುಗುವುದು ಈಗ ನಿಷೇಧ)

ಇಂತಹ ಗೊಂದಲವನ್ನು ಸರಿಪಡಿಸುವುದಾದರೂ  ಹೇಗೆ?

ಪ್ರಥಮವಾಗಿ, ಕೇವಲ ಒಂದು ಅಥವಾ ಎರಡು ರಸ್ತೆಯನ್ನು ನೋಡಿ ವ್ಯವಸ್ತೆಗಳನ್ನ ಕಲ್ಪಿಸಬಾರದು, ಸಮಗ್ರ ರಸ್ತೆಯ ಜಾಲವನ್ನು(network) ನೋಡಿ, ಯೋಜನೆಗಳಿಗೆ ನಾಂದಿ ಹಾಡಬೇಕು. ರಸ್ತೆಗಳ ಸಂಪೂರ್ಣ ಬಳಕೆಯಾಗಬೇಕೆಂದರೆ  ಅತಿ  ಹೆಚ್ಚು ಜನರು ಸಾರ್ವಜನಿಕ ಸಾರಿಗೆಯನ್ನ ಬಳಸಬೇಕು, ಹಾಗು ಇದರ ಸಲುವಾಗಿ ಸಾರ್ವಜನಿಕ ಸಾರಿಗೆಯ ಸಾಮರ್ತ್ಯವನ್ನೂ  ಬಲಿಷ್ಟಗೊಳಿಸಬೇಕು.  ಸಾರ್ವಜನಿಕ ಸಾರಿಗೆಯ ಕುಂದೆಂದರೆ, ಮನೆಯಿಂದ ನಿಲ್ದಾಣನದವರೆಗಿನ ದೂರ ಹಾಗು ಅಲ್ಲಿಗೆ ಹೋಗುವ ಸೌಕರ್ಯ. ನಿಲ್ದಾಣವು ಅರ್ಧ ಕಿಮಿಗಿಂತಲೂ ಹೆಚ್ಚಿದ್ದು, ಪಾದಚಾರಿಮಾರ್ಗವೂ ಇಲ್ಲದಿದ್ದಾರೆ ನಮ್ಮದೇ  ಸ್ವಂತ ವಾಹನವನ್ನ ಉಪಯೋಗಿಸುವ ಅಭ್ಯಾಸ ಮಾಡಿಕೊಳ್ಳುವುದರಲ್ಲಿ ಆಶ್ಚರ್ಯವೇನಿಲ್ಲ. ಹೀಗಿರುವಾಗ ಟೆಂಡರ್ ಶೂರ್ ನಂತಹ ಯೋಜನೆಗಳು ನಗರ ಯೋಜನೆಗಳಲ್ಲಿ ಒಂದು ಹೊಸ ಆಯಾಮ ಕಲ್ಪಿಸಿದೆ. ಇದನ್ನ ತೆಗಳುವುದರ ಬದಲು ಇನ್ನೂ ಹೆಚ್ಚಾಗಿ ಪ್ರೋತ್ಸಾಹಿಸಿದರೆ ಬೆಂಗಳೂರಿನ ವಾಹನ ಸಮಸ್ಯೆಗೆ ಸ್ವಲ್ಪವಾದರೂ ಪರಿಹಾರ ಕಾಣಬಹುದು

ಜಗತ್ತಿನಾದ್ಯಂತ, ರಸ್ತೆಯ ಅಗಲ ಒಂದು ಕಾರು ಅಥವಾ  ಹಾಗು ಒಂದರ ಮಗ್ಗಿಯ ಪರಿಮಾಣದ ಕಾರಿನಷ್ಟೇ ಇರುತ್ತದೆ. ಉದಾಹರಣೆಗೆ ಕಾರಿನ ಅಗಲದ ಸರಾಸರಿ ೧೦ ಅಡಿ ಇದ್ದಾರೆ, ರಸ್ತೆಯ ಅಗಲ ೨೦,೩೦, ೪೦ ಇತ್ಯಾದಿ ಅಡಿಇರುತ್ತದೆ. ಸ್ವಲ್ಪ ಹೆಚ್ಚು ಅಗಲವಿದ್ದರೂ ಅಲ್ಲಿ ಮತ್ತೊಂದು ಕಾರು ಹೋಗುವಷ್ಟು ಜಾಗವಿರುವುದು ಬಹಳ ಕಡಿಮೆ.  ರಸ್ತೆಯ ವಿಸ್ತಾರವನ್ನ ೧ ಅಡಿ ಹೆಚ್ಚಿಸಿದರೆ ಹೆಚ್ಚು ಪರಿಣಾಮ ಕಂಡುಬರುವುದಿಲ್ಲ (ಲೇನ್ ಶಿಸ್ತಿನ ಉಲ್ಲಂಘನೆ ಹೆಚಾಗುವುದಷ್ಟೇ) ಆದರೆ ೧ ಅಡಿ ಪಾದಚಾರಿ ಮಾರ್ಗವು  ಹೆಚ್ಚಾದರೆ ಜನರಿಗೆ ನಡೆಯಲು ಪ್ರೋತ್ಸಾಹ ನೀಡಿದಂತೆ.  ಟೆಂಡರ್ ಶೂರ್ ರಸ್ತೆಗಳು ಈ ರೀತಿಯ ಜಾಗತಿಕ ಮಾದರಿಯನ್ನ ಅನುಸರಿಸಿ ವಿನ್ಯಾಸವಗೊಂಡಿವೆ.

ಈ ನಿಟ್ಟಿನಲ್ಲಿ ಮುಖ್ಯಮಂತ್ರಿಗಳ ಹೇಳಿಕೆ ಸೂಕ್ತವಲ್ಲ, ವೈಜ್ಞಾನಿಕವೂ ಅಲ್ಲ.  ಪಾದಚಾರಿ ಮಾರ್ಗಗಳಮೇಲೆ  ವಾಹನಗಳ ಅತಿಕ್ರಮಣ ಪ್ರವೇಶವೇ ಹೆಚ್ಚಿರುವ ಬೆಂಗಳೂರು ಮಹಾನಗರದಲ್ಲಿ  ಇನ್ನೂ ಹೆಚ್ಚಿನ ಆದ್ಯತೆ ವಾಹನ ಚಾಲಕರಿಗಲ್ಲ, ಪಾದಚಾರಿಗಳಿಗೇ ನೀಡಬೇಕು.

(ಕನ್ನಡಕ್ಕೆ ಅನುವಾದ: ವರುಣ್ ರಾಮಚಂದ್ರ)

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Wide footpaths in Bangalore

The following is a post by Karthik Shashidhar

In order to encourage use of public transport, it is important to provide good and safe footpaths – Karthik Shashidhar

Recently, Karnataka Chief Minister Siddaramaiah, following an inspection of projects around the city, made an announcement that the footpaths that are being built under the TenderSURE project are “too wide”, and that henceforth they will need to be narrower, allowing for greater road space. In making this statement, the chief minister betrays a lack of understanding of how traffic flows work, and the concept of thinking at the margin.

A journey between two points in a city can be modelled as an alternating sequence of intersections (“nodes” in graph theory parlance) and road segments (“edges” as per graph theory). It is intuitive to see that the total time taken for the journey is the total of the time taken to traverse each node and edge along the way. Thus, a city’s traffic can be modelled as a collection of such traversals across nodes and edges.


Image courtesy: Greg Younger

Elementary network theory tells us that the capacity of a network between two given points is defined by the capacity of the capacity of the “bottleneck” – that part of the network that has the least capacity. For those not well-versed with network theory, this is akin to the proverb that says that the strength of the chain is equal to the strength of the weakest link. Given the alternating flow though road segments and intersections, note that the bottleneck can occur at either a road or at an intersection.

An element of network design is that as long as bottlenecks remain, expanding capacity at non-bottleneck elements of a network is not going to increase capacity of the network – traffic will simply flow faster through the network element with expanded capacity, and then get stuck at the bottleneck.

Expanding capacity at bottlenecks is not a simple solution, either, for now the bottleneck can shift to a nearby network element whose lower capacity now becomes a new bottleneck! For example, after the Malleswaram circle underpass was built, new traffic hold-ups have been created at the Sampige Road – 8th Cross intersection, at the Margosa Road – MKK Road intersection and the MKK Road – Link road junction. When the Marathahalli Rail over-bridge was expanded (a necessary step, no doubt), traffic started piling up at the Marathahalli-Outer Ring Road junction, forcing a change in the topography of that junction (blocking off some right turns, etc.).

The extra-wide footpaths built under the TenderSURE project have no doubt reduced the capacity of the roads that they are adjacent to, which is what has prompted the adverse reaction from motorists, auto rickshaw drivers and now the Chief Minister. And looked at in isolation, they do seem like they have reduced the capacity of the network. However, if we take a holistic view, and look at these roads as simply edges in the traffic network of Bangalore, a reduction in capacity is not apparent.

A feature of Bangalore traffic, given the nature of the road network, is that bottlenecks are usually at the intersections, and not at the roads. As a consequence, irrespective of how much we widen the roads, the intersections will continue to constrain the flow of traffic in the city. In other words, making roads narrower will not have a material impact on the throughput of traffic in the city.

This might lead the reader to jump to the conclusion that if intersections are bottlenecks, their capacity should be eased, and thus grade separators (flyovers / underpasses) are the solution. Again, that demonstrates localised thinking, for, as described in examples above, while flyovers and underpasses might ease bottlenecks at those specific intersections, they simply end up shifting bottlenecks rather than eliminating them.

Given the network of roads in the city, and the consequent traffic flows, the best way to increase throughput of traffic is to improve utilisation of road space rather than getting rid of (currently existing) bottlenecks by means of road widening and grade separators. The obvious way to improve utilisation of road space is by getting more and more people to use public transportation, and increasing the capacity of the public transport network.

A feature (or perhaps “bug”) of public transport is that it doesn’t provide last mile connectivity, necessitating users to walk to/from the nearest bus or metro stops. Thus, in order to encourage use of public transport, it is important to provide good and safe footpaths, which is an objective of the current TenderSURE project. Existing footpaths in Bangalore are largely ineffective, given barriers such as trees, lampposts, transformers and parked vehicles. In this context, the footpaths that are being designed and built by the TenderSURE project are a landmark effort, and need to be encouraged.

Finally, where does thinking at the margin come in? The decision on how wide a footpath should be rests on a tradeoff between footpath space and road space, and this can be framed as follows – “given current road and footpath widths, is it beneficial to increase road width by a foot at the cost of footpath width?”

Globally, road width is governed by the width of a “car lane”, the width of road required to accommodate one passenger car. Efficient road usage comes out of making the width an integer multiple of this width of car lane – increasing width beyond that doesn’t increase road capacity.

Roads that are currently being developed under the TenderSURE project have been designed to allow for an integer number of “lanes” of traffic. Marginally increasing the width by a foot or two will not only have no impact on the number of lanes, but will also lead to inefficient usage of (increased) road space by providing road users room for breaking lane discipline. On the other hand, increase in footpath width directly translates to more available lanes for pedestrians, and thus directly increases capacity of the footpath.

Thus, the Chief Minister’s comments on footpath width are misguided and inappropriate. It is hoped that standards imposed by the current TenderSURE design prevail, and we will soon have a good network of footpaths in Bangalore city.

Karthik Shashidhar is the Resident Quant at Takshashila Institution.  He tweets @karthiks and blogs on NED

The Kannada translation of this post can be found here

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Are we prepared for disasters?

It is time for creating a scientifically validated profile of risk vulnerability for all Indian states

Different parts of India are prone to different kinds of environmental disasters. It is therefore imperative to understand the kind of threats that prevail across the country. The National Disaster Management Authority acknowledges this fact and states that

India is vulnerable, in varying degrees, to a large number of disasters. More than 58.6 per cent of the landmass is prone to earthquakes of moderate to very high intensity; over 40 million hectares (12%) of its land is prone to floods and river erosion; close to 5,700 kms, out of the 7,516 kms long coastline is prone to cyclones and tsunamis; 68% of its cultivable area is vulnerable to droughts; and, its hilly areas are at risk from landslides and avalanches. Moreover, India is also vulnerable to Chemical, Biological, Radiological and Nuclear (CBRN) emergencies and other man-made disasters.

The exercise of  creating a scientifically backed vulnerability profile precludes all the analysis and talk about disaster relief management, disaster response funds etc.  This point has been highlighted by many finance commissions, and the report of the 14th Finance commission(page 129)states the following

(…), they informed (us) that the index, which has been compiled by the Building Materials and Technology Promotion Council (BMTPC) under the Union Ministry of Housing and Poverty Alleviation, has not been validated by any scientific study. The Ministry of Home Affairs also concurred with their view that there is scope for further improvement by making use of a digital elevation model.

The NDMA website has a vulnerability profile, but the last update on the page was on 26th September 2013, much before the commission’s report was made public. Clearly, the scientific validation is still not in place(or the website is yet to be updated with the latest profile).

It is time that Finance commission’s recommendation (reproduced in full below) is taken seriously, for it is unpardonable to lose lives, during disasters, due to lack of fundamentals.

Considering the usefulness of a scientifically validated risk vulnerability indicator to measure the type, frequency and intensity of disasters, and in view of the very wide responsibility cast on governments at different levels by the statute, we recommend that the Union Government should expedite the development and scientific validation of the Hazard Vulnerability Risk Profiles of States.

Varun Ramachandra is a policy analyst at Takshashila Institution and tweets @_quale

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A primer on Atal Pension Yojana

Atal Pension Yojana is the latest example of schemes by the government of India to solve for the problem of old age pension in an increasingly ageing society — Devika Kher and Varun Ramachandra

Atal Pension Yojana (APY), a voluntary co-contributory pension initiative aimed at providing access to pension for individuals from across the income groups, was announced in the Union Budget 2015.

The scheme comes at an opportune time because the need for an economically viable and inclusive system to support an ageing population is rising. As per the UNFPA and Help Age India report, the elderly population (above 60 years) was 10 crore in 2012, which was 8% of India’s total population. The report claimed that the elderly population would increase by around 11% by 2050. The UN’s World Population Ageing 2013 report shows that India will have the second largest population of people above the age group of 80 with 37 million people by 2050.

In 2004, The National Pension Scheme(NPS) was introduced with the express intention of providing retirement benefits to all citizens. The initial launch was limited to new government employees (except armed forces), but this changed in 2009 when citizens on a voluntary basis could enroll in the scheme.  In 2010, “The Swavalamban Yojana” was set up with the objective of providing retirement benefits for the informal sector. Under this scheme, the government provided matching contribution worth ₹1000 for an NPS member making contributions between  ₹1,000 and ₹1,200 p.a. The payout, consisting of a lump sum payment and annuities, was scheduled to happen after the subscriber reached the age of 60.

In the recent budget, the NDA government has subsumed the Swavalamban Yojana under Atal Pension Yojana. All contributors under Swavalamban would automatically be transferred to APY unless they chose to opt out.


APY Characteristics:

Unlike Swavalamban, benefits under APY is guaranteed by the government in terms of fixed pension. The monthly contribution needed for the APY is pre-defined along with the monthly pension and the corpus amount that would be received at the end of 60 years. As per the scheme, to get a corpus between ₹1.7 Lakh and ₹8.5 Lakhs, the subscriber has to contribute between ₹42 and ₹210 on a monthly basis, that is if (s)he joins at the age of 18 years. For the same range of monthly contribution and the year of joining, the scheme ensures a monthly pension varying between ₹1000 to ₹5000. For instance, an individual would have to contribute ₹210 from the age of 18 years to 60 years in order to receive a corpus of ₹8.5 Lakhs and a monthly pension of ₹5000.

The range for the monthly contribution has been set in a manner that allows the subscriber to opt for the scheme based on income. For instance, a subscriber from a lower income group unable to spend ₹1,454 for 20 years to get the monthly returns of ₹5,000 can opt for the scheme which is compatible to his or her income. However, the ones who can afford a higher monthly contribution can opt for a scheme that guarantees a higher monthly pension.

An additional feature of APY is that the contributions can be made by individuals only between ages 18-40 years. The cost of exit is high as exit before 60 is allowed only in the case of exceptional circumstances such as death of the beneficiary or if (s)he suffers from a terminal disease. This allows for accumulation of funds for longer periods, resulting in higher returns thanks to compounding. The returns are further augmented by the government, which will contribute ₹1,000 or 50% of the contribution (whichever is less) for 5 years annually.

The organisational structure for APY will be regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The PFRDA consists of a three tier management system for all its pension schemes. It includes

  • The Point of Presence (PoPs) –  referring to banks that act as subscriber interface
  • The Pension Fund Managers (PFMs) – The asset managers responsible for offering investment options and making optimal decisions on behalf of the subscribers wherever  necessary
  • The Central Record Keeping Agencies (CRA) – Are communication channels that maintain the links between the PoP and PFM. The CRA is also tasked with maintaining the contribution records

The Pension fund managers are SBI pension funds, UTI retirement solutions and LIC pension fund, each managing a specific proportion of contributions. The Central government employees’ fund is invested in the proportion of up to 55% in Government Securities, up to 40% in Debt Securities and up to 5% in Money Market Instruments.

Scheme’s reach

NPS uses the existing network of banks and post offices to penetrate the rural areas. The postal and bank savings accounts provide the necessary platform for the government to transact with its subscribers.

A bank account is therefore a necessary prerequisite to join APY. The problem of identity proof that existed for long in rural India has been assuaged by the introduction of Aadhar – the unique identification project instituted by the Government of India to identify citizens.  SMS alerts are used to communicate the necessary details with the subscribers.

The challenge with most pension schemes is the continuity of contributions and in order to incentivise the subscribers to contribute regularly, a nominal ‘fine’(ranging from ₹1 to ₹10) is charged for any delay in contribution—interestingly, the amount collected as a ‘fine’ is added into the final accumulated balance of the subscriber.

The two key aspects that can potentially help reach a wide subscriber base for APY are the use of well infiltrated existing structure of NPS and the guarantee provided by government. It remains to be seen how efficiently the government can link the scheme with the Pradhan Mantri Jan-DhanYojana(a scheme to improve financial inclusion) to attain higher levels of efficiency


APY is the latest example of schemes by the government of India to solve for the problem of old age pension in an increasingly ageing society. That said, it will be interesting to see how the government will address the challenges of implementation of the scheme and inclusion of citizens with irregular streams of income.

Devika Kher is a research associate and the head of admin at The Takshashila Institution. She tweets @devikakher.

Varun Ramachandra is a policy analyst at The Takshashila Institution and tweets @_quale.

Image credits: Simon Cunningham


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Words in budget speech

Budget speech usually proposes multiple ideas and it is essential for analysts to followup on the actuals – Varun(@_quale)

As the current NDA government is about to finish first year in office, social media and traditional media is awash with analysis and comparisons with the previous government. The budget speech is usually a good barometer that indicates the priorities of the government and this post explores the text contained in budget speeches.

In order to undertake a rudimentary text analysis of the budget speech, the text of the first full-budget speech delivered by UPA  and NDA were used to obtain the following word clouds.

NDA year 1_17968

NDA budget speech for year 1 had 17,968 words

NDA interim budget_6595

The interim budget presented by NDA had 6,595 words

UPA year 1 budget_13148

UPA budget speech for year 1 had 13148 words

Word clouds are presented without any comment and it is left to the readers’ judgement to draw conclusions. It must however be noted that word clouds merely provide a pattern in the text and in a document like the budget speech  it is natural for the finance ministers to use terms like government, tax, per cent etc. One must also be cognisant of the fact that the budget speech is a combination of political and economic tools, with the scale tilted towards politics.

The following two images show the word clouds for all the budgets presented by UPA-I and UPA II between 2004-05 to 2013-14

UPA - I_72996

UPA I’s budget speeches had 72,996 words in total(inclusive of the interim budget in 2009-10)

UPA- II_65117

UPA II’s budget speeches had 65,117 words in total

The word “propose” features very highly in all the budgets, which signals the necessity to check the actual numbers that are published 2 years after the budget is presented.  Typically,  the budget estimates are presented for year n, along with the revised estimates for (n-1)th year and the actuals for (n-2)th year. Do read my colleague Pavan Srinath’s essay that outlines 5 broad ideas to read the budget commentary better.


The words “propose”, “government”, “tax”, “crore” ,”per cent”, “duty”,”lakh”, “year”, “http://indiabudget.nic”  were removed from the speech to obtain the following word clouds.

NDA budget 1 sans

NDA first full budget speech without the words “propose”, “government”, “tax”, “crore” ,”per cent”, “duty”,”lakh”, “year”, “http://indiabudget.nic”

UPA-I sans

UPA I speeches without the words “propose”, “government”, “tax”, “crore” ,”per cent”, “duty”,”lakh”, “year”, “http://indiabudget.nic”

UPA II sans

UPA II speeches without the words “propose”, “government”, “tax”, “crore” ,”per cent”, “duty”,”lakh”, “year”, “http://indiabudget.nic” .


Note:- The tool wordle was used to obtain word clouds. Hat-tip to @gkjohn for introducing this author to wordle.

Note 2- The complete text for UPA budgets can be found at UPA-I and UPA- II. NDA year 1 budget speech can be found here

Varun Ramachandra is a policy analyst at Takshashila Institution and tweets @_quale


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Unionisation of the IT industry

Unionisation of the IT workforce can potentially cause the Indian IT sector to fall behind other emerging markets – Varun Ramachandra and Gopal Devanahalli

In December 2014, Tata Consulting Services, India’s largest Information Technology (IT) services company, laid off 3,000 employees citing poor performance. This has triggered debates about unionisation in India’s IT & BPM industry. In fact, IT employees were seen protesting the actions of the TCS, a phenomenon not characteristic of an industry that currently employs 3.3 million people.

The Trade Unions Act, 1926, defines a ‘trade union’ as “any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workmen and employers.”

It can be said that these regulations are intended to achieve the following objectives:

  • Fair wages for employees.
  • Good working and living conditions.
  • A reasonable level of job security for union members.

Although they are created with the right objectives, trade unions have a checkered history of taking unyielding stances that result in the loss of valuable time and resources. Moreover, average wages in the IT and Business Process Management (BPM) industries are quite high, and employers also offer excellent working and living conditions. Retrenching employees is not ideal but most, if not all, IT employers offer excellent severance packages when they let go of their employees. Given that these industries reward their employees fairly well during good times, it is unsurprising that they move towards austerity when times get tough.  The case for unionisation in the IT industry is, therefore, weak.


Image credit: Pavan Srinath

In its short history in India, the IT industry has seen high growth that has added people, primarily college graduates, into the workforce at a rapid pace (10% Cumulative Average Growth Rate).  This growth has made it is easy for employees to switch jobs, and, contrary to popular perception, the demand for top quality experienced employees is much higher than the supply. This has resulted in firms coming up with different ways to retain employees – loyalty bonuses, flexible timings, relatively easy transfers, high quality training imparted ,extended ‘notice’ period in employee contracts(in some cases as high as 3 months).

With the advancement of technology, the number of employees required to perform a task has come down in all industries. Consequently, the growth of a firm’s workforce may not keep pace with the growth of its revenues, especially in the IT industry. For example, with the advent of Amazon’s web-services, the need to maintain physical servers has come down. In this context, the narrative of saving jobs is a strong and compelling one. But there is no conclusive evidence to show that technology will not continue to be a key lever for companies across the world to transform themselves. These transformations might occur in ways that are completely different from current methods and Indian IT firms therefore, must be highly adaptable to new technologies.



Indian IT firms also largely cater to clients working in other parts of the world. A majority of this work requires the management of the core technology systems of clients in the IT industry and the core operations in the BPM industry. In this construct, high organizational efficiency is a pre-requisite for the success of individual firms and the industries as a whole. India is still considered as the top destination for the outsourcing of IT work as it has a skilled workforce and relatively low operational costs. However, it is easy for Indian firms to lose this competitive edge as there are several low cost countries like Philippines and China that are building their IT & BPM capabilities.

The unionisation of the workforce could potentially cause the Indian IT sector to fall behind such countries. It could also lead to a further loss of jobs because it will not just create ‘interest-groups’— a select few who stand to gain disproportionately — but also hamper the efficiency of a sector that is fast evolving. With unionisation, there is a risk of creating situations where the incentives for employees to acquire new skills cease to exist and it becomes exceedingly difficult for firms to retrench employees rendered redundant by the advent of new technologies.

In an industry that already pays relatively higher wages and provides employees with good working conditions, there is a high aspirational value attached to IT jobs by a majority of the population. Unionisation will not only jeopardise the chances of several new aspirants entering the workforce, it risks creating an environment where skills are not given importance.Source: Respective quarterly statements Oct-Dec-2014

That being said, employees in the IT sector certainly have some genuine concerns. However, these can be redressed, by implementing one or more of the following recommendations and not necessarily by creating unions:

  • Actively encourage and reward skills upgradation. Currently, most of these activities are viewed as a mandatory requirement for a promotion into a managerial position that expects fungible people management skills as opposed to technical skills.
  • Ensure that the excellent working conditions are maintained.
  • Ensure proper severance schemes in the event of an employee’s contract being terminated. Currently, several firms expect new employees to sign contracts requiring them to pay a certain amount if they wish to leave the firm before the fixed period. Though such bonds are not always legally tenable, it is natural for employees to expect a similar reciprocal treatment if their employer terminates their contracts.
  • Enable Human Resources departments to deal with complex people issues rather than merely reducing them to recruitment engines

These ideas are not necessarily a comprehensive list of recommendations, but they provide a broad framework to address the valid concerns raised.

Gopal Devanahalli is a senior VP at Manipal Healthcare and is an alumni of the Takshashila Institution. He tweets at gops85

Varun Ramachandra is a policy analyst at the Takshashila Institution and tweets at  _quale

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Entrepreneurship and public policy

The Indian media is awash with news about technology startups and the rise of entrepreneurial activity. However, the hallmark of successful startup ecosystem is the number of other successful startups that spawn out of the existing ones. Individuals who work in firms that successfully exploit new market opportunities are usually innovators or have the potential to innovate. These individuals are characterised by a mindset that encourages new ideas, the taking of risks, and a penchant for success. The success of US startups can be traced to the creation of such an ecosystem — the ease of finding quality talent and the network effect of a tight knit ecosystem have positively impacted everyone involved.

India is on the verge of creating such an eco-sytem, but there is a lack of understanding, especially, among smaller startups about governments and its role in building such an environment. While there is a need to simplify regulatory aspects, startups themselves must start treating governments and policy makers as active stakeholders and not as mythical demagogues. Governments always play a catching up role in the technology curve, for a startup’s credo is to innovate, while the government’s primary motto is to provide basic public services and the two may not always overlap.

Quite often, firms merely focus on obtaining tax breaks or sops; instead, startups must engage with the government and prod for better civic amenities, push for reforms that enable ease of doing business and enact laws that are transparent. This is especially true for companies that wish to ‘disrupt’ the space they are working in, for a disruptive idea often operates within a gray area of existing law, and active engagement with lawmakers can help assuage regulatory chasms. Not doing this can lead to unnecessary hurdles in business and operations. It is understandable that lean startups cannot devote precious human resource to engage with the government, but the problem can be addressed by collective action. Several associations in India have played a pivotal role in shaping the IT-BPM industries’ footprint in India. Startups must actively engage with the existing organisations, or form new industry bodies that work in conjunction with the existing ones to engage in public affairs

As a thought experiment, the author would like to draw attention to a cultural characteristic. Many Indian startups are successful in B2B business models. However, there are very few successful B2C businesses, where the consumer pays for a service like an app, or a software that aids productivity(The exception to this are e-commerce sites). The author contends that this is a cultural challenge. Basic services in India like water, electricity, roads, fuel etc are highly subsidised or inappropriately priced and the consumer is not used to paying for these services, in such a scenario it is highly unlikely for a consumer to pay for individual technology services. It is in this context that an engagement between entrepreneurs and public affairs assumes a significant role.

Note: The post was inspired by a panel discussion that the author attended. Takshashila’s Pavan Srinath was a part of the panel. On a related note, he has also written about the eight fold path to good public engagement.

Varun Ramachandra is a policy analyst at Takshashila Institution and tweets @_quale

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Why is the Dollar the World’s Reserve Currency?

By Anupam Manur and Varun Ramachandra

Strength, stability, universal acceptability, and a lack of a viable alternative to the dollar makes it the global reserve currency. 

Global trade and businesses function best when there is a currency that is widely accepted. This doesn’t imply a common currency, instead, it refers to the usage of a widely acceptable currency for international transactions. Such a currency reduces the transaction costs of converting one currency to another and enables easy invoicing of traded goods and services. This common currency is referred to as the reserve currency.

The brief history of reserve currencies:

Historically, a reserve currency implied a currency that was in wide circulation even outside the issuing state’s borders. Currently, the US dollar is the world’s reserve currency but this hasn’t been the case forever. The silver Drachma issued by the ancient Athens was probably the first reserve currency. The Roman Aureus and Denarious coins, the Byzantine Solidius coins, the Arabian Dinar, the Florence Fiorino, and the Dutch Gulden have at various points had the status of being the world’s reserve currency.

History of money


In 1717, Britain adopted the gold standard – a system where central banks had to back each paper currency note they printed with an equal or proportional amount of gold — and simultaneously built a vast empire. At the height of its power, more than 60% of world trade was invoiced in pounds and this led to the pound sterling becoming the world’s reserve currency. At around the end of the 19th century, America’s economic significance rose and this resulted in the US dollar toppling the pound as the most sought-after currency. Today, more than two-thirds of foreign exchange reserves held by central banks around the world are in US dollars (see figure).



Why do central banks maintain reserves?

Two important reasons for holding reserves are as follows:

First, safety. Reserves act as savings, and central banks can benefit from this in hours of need. When a country faces a balance of payments crisis or some other form of financial crisis, the central bank can use its reserves to alleviate the situation. Typically, central banks manage enough reserves to cover for three months’ worth of imports to maintain continuity of trade in times of crises. Reserves also act as positive assurance to debtors.

Second, reserves are maintained to manage a country’s exchange rate policy (the previous post explored this aspect). Whenever a country’s currency appreciates or depreciates, and moves away from the target exchange rate set, the central bank steps in and uses its reserves to maintain exchange rate stability. The Reserve Bank of India has done this on numerous occasions when the rupee has appreciated or depreciated.

Why is the US dollar the reserve currency?

Since the United States boasts of the world’s largest economy (around $18 trillion) and has a stable political environment, most international trade is invoiced in dollars and about 50-60% of US dollars circulate outside US borders. Since there has been no default or major devaluation of the dollar in the past few decades, the USD and the US government’s treasury bonds are thought of as the safest assets in the world; this inherent stability and risk-free nature of the dollar is attractive to investors and has therefore ensured that the US dollar is the world’s reserve currency.

According to economist Ewe-Ghee Lim, there are five factors that facilitate international currency’s status: a large economic size, the existence of a well-developed financial system, confidence in the currency’s value, political stability, and network externalities. Additional features for currencies that assume reserve status are large-scale current account and financial account convertibility, an independent central bank, a high degree of capital mobility, surveillance of economic policies, and cooperation of monetary policymaking at regional and multilateral levels. The dollar checks almost all of these boxes.

The rise of China since the 80s has made the Chinese Yuan an important world currency, but since the Yuan has been deliberately undervalued to aid exports, the real exchange rate of Yuan is unknown. Japan and Britain are waning economic powers, the emerging markets are too volatile, the Euro has many internal problems, and gold is too static a commodity to be held as the reserve currency. This leaves the dollar as the only viable option for the time being, and probably for some more time to come.

Anupam Manur is a Policy Analyst at Takshashila Institution  and tweets @anupammanur

Varun Ramachandra is a Policy Analyst at Takshashila Institution and tweets   @_quale

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Net Neutrality is like Net Neutrality

Internet has been a disruptive(pardon the cliche) force for at least 3 generations now; it has created a knowledge revolution not seen since the invention of the press. India, due to various reasons, entered this disruptive realm a little late but the knowledge revolution has definitely kicked off here.

The recent “zero rating” debate has resulted in outrage-over-load on the internet, with people trying to explain the situation through analogies ranging from airports to public parks to roads to enter-your-pet-peeve-here. The net-neutrality debate has to be viewed, devoid of analogies, from the perspective of the users, telecom operators, content developers, and regulators.

As a user(data user, particularly), it is obvious to gravitate towards the cheapest and the most reliable telecom operator and choose to use data in any way possible. A proportion might opt for zero-rated products purely because it maximise the users’ interest; however, if such products result in disincentivising the users from accessing other content, the users are at a disadvantage. These products can potentially result in quasi-censorship, and in the extreme case can stall the knowledge revolution. Therefore, it is reasonable to expect that every packet of data is treated similarly and not be worried about the revenues or fortunes of the telecom operators.

As a telecom operator, it is natural to device strategies that maximise profits and acquire market share. In the Indian context, since the sector is regulated, such a behaviour(purely rational) has automatically created oligopolies which has in turn resulted in the regulator establishing rules that deny the operators several sources of revenue. In addition, content providers have created innovative products that are directly in competition with the basic services offered by the telcos. In such a muddied scenario, the operators are trying to create pricing strategies that help them benefit from the creativity/innovation of content developers, well within the regulatory framework, at the expense of the neutrality of the internet and in turn the consumer.

As content developers, it is natural to espouse the case for net-neutrality as a neutral internet benefits them. However, once the content developers acquire strategically large user-base, it is no longer in their interest to  vehemently vouch for net-neutrality. A neutral net has the potential to create competitors that can threaten these large players. The behaviour of Indian firms of initially tying up with these zero-rated products indicated the same(after the backlash on twitter and other social media, the firms are now purportedly trying to #savetheinternet).

Lastly, in a sector that is exceedingly important from the point of view of India’s national interest, the regulator plays a crucial role. In an ideal world we don’t need regulation, but in such a world the internet is also neutral. Therefore, the regulator’s two major tasks are to enhance social welfare by protecting the consumer interest and to create an environment that is conducive for business — that will further enhance social welfare. A neutral internet will definitely benefit the consumers’ interest; but since the regulatory framework is not conducive for business, it appears that net-neutrality is in conflict with business interests. The situation can change if the regulatory framework is eased and the markets are opened up. Easing of regulatory hurdles can grant existing operators the freedom to respond to market changes with positive or negative price changes, without impinging on the neutrality of the internet.  Opening up of the markets, can encourage new entrants and allow for mergers & acquisition(currently, both these tasks are nearly impossible) which will create real competition among these firms. This is not an easy problem to solve. The regulator has its work cut out and it will be interesting to see how things unfold.

Varun Ramachandra is a policy analyst at Takshashila Institution and tweets @_quale

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